Forged Arbitration Agreement Clause Voids Referral Jurisdiction: Madras High Court

The Madras High Court has dismissed a Section 11 petition, ruling that consent being the bedrock of arbitration, cannot be presumed when the very document containing the clause is credibly impeached as a fabricated instrument. The Bench affirmed that a forged arbitration agreement renders a dispute non-arbitrable at the threshold, stripping the court of its power to appoint an arbitrator.

Chief Justice Sushrut Arvind Dharmadhikari presided over the matter, which arose from an application under Section 11(6) of the Arbitration and Conciliation Act, 1996. The petitioner sought the appointment of a Sole Arbitrator based on an employment contract renewal and a subsequent letter allegedly incorporating an arbitration clause. The Madras High Court was tasked with determining whether it could exercise its administrative jurisdiction to appoint an arbitrator when the instrument conferring that jurisdiction was accused of being a product of institutional fraud.

Key Takeaways

Consent as Jurisdictional Bedrock

Arbitration is entirely founded upon mutual consent; if the document evidencing such consent is alleged to be forged, the dispute assumes a jurisdictional dimension that must be addressed by a court rather than a tribunal.

Threshold of Arbitrability

While minor allegations of fraud in the underlying contract do not stop arbitration, a well-founded challenge to the execution of the arbitration clause itself makes the matter non-arbitrable at the referral stage.

Institutional Sanction Requirement

Documents executed by high-ranking officers without board resolutions or institutional authority, especially those currently under criminal investigation for financial irregularities, cannot bind a corporation to an arbitral process.

Forged Arbitration Agreement Clause

The Madras High Court observed that the arbitration clause in question enjoyed no independent existence and was not part of the primary contract negotiated by the parties. It highlighted that the respondent's challenge was not a mere shield to avoid arbitration but was supported by a pre-existing FIR against the officer who purportedly authored the letter.

The Bench dismissed the petition with costs while explaining that "Arbitration, it bears reiteration, is founded upon consent. A party may be bound by the arbitral process only if it is first shown, even at a prima facie level, that such a party had agreed to submit disputes to arbitration. Where the arbitration agreement itself is alleged to be forged or fabricated, the disputes cease to be merely contractual and strikes at the very root of arbitral jurisdiction."

Ratio

Where a serious and well-founded allegation of forgery or fabrication is directed specifically at the instrument containing the arbitration clause, rather than the underlying commercial contract, the dispute becomes non-arbitrable. A court exercising jurisdiction under Section 11(6) of the Arbitration and Conciliation Act, 1996 cannot appoint an arbitrator if the prima facie existence of a valid, consensual arbitration agreement is credibly impeached by evidence of fraud.

Background

The petitioner was a long-term employee of the respondent school, serving as a Purchase Manager. Following his departure in August 2025, a dispute arose regarding severance benefits, including salary, retention bonuses, and leave encashment. The petitioner invoked an arbitration clause allegedly introduced via a letter dated May 13, 2023.

However, the school contested the petition, asserting that the former Chief Business Officer (CBO) who signed the letter had committed large-scale financial irregularities and was the subject of an FIR. The school argued the letter was a product of fraud and forgery, executed without authority. Relying on the precedent in Rajia Begum v. Barnali Mukherjee ( "(2026) 7 SCC 631": 2026 CaseBase(SC) 95), the Madras High Court found that because the arbitration clause was embedded in a document whose very existence was under a grave cloud of doubt, it could not be enforced. The petition was dismissed, granting the petitioner liberty to approach a civil court.

Case Details:
Case No.: Arb.O.P. No.44 of 2026
Neutral Citation: 2026:MHC:3933
Case Title: Chandramouli.V v. American International School Chennai
Appearances:
For the Petitioner(s): Mr.M.S.Seshadri
For the Respondent(s): Mr.Edward James

Source: 2026 CaseBase(MAD) 24089