Court Clears Path for Arbitration Despite Pending Criminal Proceedings and Joinder Issues
In a significant decision, the Allahabad High Court has appointed Hon'ble Mr. Justice Harsh Kumar (Retd.) as the arbitrator to resolve disputes between Yashodhan Shetty and M/S Sarang Enterprises, amidst allegations of forgery and ongoing criminal proceedings. The judgment underscores the court's stance that criminal proceedings do not impede the invocation of arbitration clauses.
The case involves an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitrator due to disputes arising from partnership agreements. The application was contested by opposite party no. 5, who alleged forgery of her signatures on the partnership reconstitution deed and claimed that the arbitration agreement was invalid.
Despite these allegations, the court emphasized its limited role in examining intricate factual disputes at the stage of appointing an arbitrator, asserting that such matters should be addressed by the arbitrator after evidence is presented. The court highlighted that the mere filing of a criminal application or FIR does not preclude arbitration proceedings.
Additionally, the court addressed concerns regarding the joinder of parties, stating that while non-joinder of necessary parties can lead to dismissal, the inclusion of unnecessary parties does not affect the application's maintainability.
After multiple adjournments and hearings, the court rejected the application for recall of its previous order dated 04.11.2025, which had proposed the appointment of an arbitrator. It cited the absence of valid reasons for the opposite party no. 5's non-appearance and lack of objections against the application.
The court reaffirmed the appointment of Mr. Justice Harsh Kumar (Retd.) as the arbitrator, after obtaining his consent in accordance with statutory requirements. This decision marks a crucial step in resolving the disputes under the arbitration clause present in the partnership agreements dated 10.02.2014 and 25.07.2020.
The judgment signifies the court's commitment to upholding arbitration as a viable dispute resolution mechanism, even amidst complex legal challenges.
Bottom Line:
Arbitration and Conciliation Act, 1996 - Application under Section 11(6) for appointment of arbitrator - Court cannot delve into intricate questions of fact at this stage; such disputes to be determined by the arbitrator after parties lead evidence.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Sections 11(6), 12(1), Schedule II; Cr.P.C. Section 156(3)
Yashodhan Shetty v. M/S Sarang Enterprises, (Allahabad)(Lucknow) : Law Finder Doc id # 2871329
