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TMI Blog2011 (9) TMI 1158X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the defalcation had continued over a substantial period of time, as the petitioners had placed complete trust in him and did not suspect the same. The reality having dawned later, the petitioners had called for a meeting to confront the respondents with the circumstances and to call for verification of the true accounts. A notice in writing was issued, dated 9-6-2009. 2. The respondents had reluctantly called for a meeting on 7-7-2009 and 22-8-2009. But the petitioners were never allowed to verify the records and were only given vague replies to their queries. On the other hand it is alleged that the petitioners were compelled to sign certain blank papers. It is also alleged that the respondents threatened the petitioners that the first petitioner would be framed in a false case, if they did not co-operate. The first petitioner is said to have issued a legal notice to the respondents calling upon them to furnish accounts of the firm as per notice dated 16-7-2009. The petitioner is said to have received a reply informing him that he has been expelled from the firm, as on 21-10-2009. The second petitioner is also said to have issued a similar notice dated 23-02-2010, and on rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tration and Conciliation Act, 1996, two things are to be kept in view: a) that there exists a dispute between the parties to the agreement and that the dispute is alive; b) and that an arbitrator must be appointed as per the terms and conditions of the agreement and as per the need of the dispute. In the case of N. Radhakrishnan v. Maestro Engineers, supra, the Apex court took note of the following peculiarities of that case, and other cases involving similar circumstances in the following words: 21. In our opinion, the contention of the respondents relating to the jurisdiction of the arbitrator to decide a dispute pertaining to a matter of this proportion should be upheld, in view of the facts and circumstances of the case. The High Court in its impugned judgment has rightly held that since the case relates to allegations of fraud and serious malpractices on the part of the respondents, such a situation can only be settled in court through furtherance of detailed evidence by either parties and such a situation can not be properly gone into by the arbitrator. 22. Reliance was placed by the learned counsel for the appellant on a decision of this court in Hindustan Pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under para 4 observed: (SCC. p689) 4. Subsection (1) of Section 8 provides that the judicial authority before whom an action is brought in a matter, will refer the parties to arbitration the said matter in accordance with the arbitration agreement. This, however, postulates, in our opinion, that what can be referred to the arbitrator is only that dispute or matter which the arbitrator is competent or empowered to decide, 25. The learned counsel for the respondents further elaborated his contention citing the decision of the High Court of Judicature at Madras in H.G.Oomor Sait v. O.Aslam Sait wherein it was held: (CTC pp. 269-70). Power of civil court to refuse to stay of suit in view of arbitration clause on existence of certain grounds available under the 1940 Act continues to be available under the 1996 Act as well and the civil court is not prevented from proceeding with the suit despite an arbitration clause if dispute involves serious questions of law or complicated questions of fact adjudication of which would depend upon detailed oral and documentary evidence. The civil court can refuse to refer matter to arbitration if complicated question of fact or law is inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant under the original deed dated 07.04.2003, still the Court would not be empowered to refer the matter to an arbitrator due to the non-compliance with the provisions mentioned under section 8(2) of the Act. 6. However, it is also to be kept in view that mere allegations of fraud would not by itself require that the matters be relegated to the civil courts for a formal trial. This is taken note of in the earliest authority referred to by the apex court in the above decision itself, namely, in the case of Abdul Kadir Shamsuddin Bubere, as under: 17. There is no doubt that where serious allegations of fraud are made against a party and the party who is charged with fraud desires that the matter should be tried in open court, that would be a sufficient cause for the court not to order an arbitration agreement to be filed and not to make the reference. But it is not every allegation imputing some kind of dishonesty, particularly in matters of accounts, which would be enough to dispose a court to take the matter out of the forum which the parties themselves have chosen. This to our mind is clear even from the decision in Russell's case (1880) 14 Ch D 471. In that case the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot complete and did not appear to be correct; and (iii) the whole stock of goods was not to be found therein and the debit items appeared to be exaggerated and incorrect. These were the only allegations with respect to the accounts in the application and they do not in our opinion amount to serious allegations of fraud against the appellant which would necessitate that there should be a trial in open court. Such allegation as to the correctness or otherwise of entries in the accounts are often made in accounts suits; but they in our opinion are not such serious allegations of fraud as to induce a court to order that the arbitration agreement should not be filed and no reference should be made. Besides these allegations as to accounts the respondents also said that an injunction should be granted restraining the appellant from removing the stock so as to avoid misappropriation thereof pending the appointment of a receiver. That was not an actual allegation of misappropriation; it merely said that the respondents were afraid that there might be misappropriation in future unless an injunction was issued and a receiver appointed. Further in the affidavit in support of the application f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other might be referred to arbitration. It seeks to us that every allegation tending to suggest or imply moral dishonesty or moral misconduct in the matter of keeping accounts would not amount to such serious allegation of fraud as would impel a court to refuse to order the arbitration agreement to be filed and refuse to make a reference. Looking to the allegations which have been made in this case we are of opinion that there are no such serious allegations of fraud in this case as would he sufficient for the court to say that there is sufficient cause for not referring the dispute to arbitration. This contention of the appellant must also therefore fail. 7. The allegations of fraud made in the present case on hand are vague and not relatable to any complicated fact situation. On the other hand it is a dispute pertaining to the accounts of the firm, pure and simple. The mere exaggerated allegations of the petitioners would not give it the colour of a complicated case involving profound questions of law and serious questions of fact. Therefore the ratio of the decisions referred to herein above would not advance the case of the respondents. A more recent decision of the apex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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