Case BriefsSupreme Court

Supreme Court: The bench of R. Subhash Reddy and Hrishikesh Roy*, JJ has held that retrospective seniority cannot be claimed from a date when an employee is not even borne in service.

Factual Background

  • The father of the respondent was working as a Home guard and after he died in harness, the respondent applied for compassionate appointment.
  • On 20.11.1985, order was issued by the Commandant, Bihar Home Guard forwarding the name of the respondent as one of the persons shortlisted for appointment on compassionate basis.
  • The appointment was conditional upon physical fitness certificate issued by the Civil Surgeon and the respondent was denied appointment as he was found deficient in the physical standards.
  • The recommended persons appeared in the Home Guard Headquarter as directed, but aggrieved, the respondent moved and obtained relief from the Patna High Court for appointment in Class IV post.
  • As the respondent was shortlisted for the post of Adhinayak Lipik, directed that the respondent be appointed to the post of ‘Adhinayak Lipik’ in the Homeguard Department, State of Bihar.
  • Following the above direction of the Supreme Court, the respondent was appointed on 27.2.1996.
  • Six years after joining service, an application was made on 10.9.2002 by the respondent claiming seniority from 1985 but the same was rejected by the authorities on the ground that the respondent was appointed in 1996 and not in 1985.


Noticing that the respondent entered service only on 10.2.1996, the Court made clear that,

“The jurisprudence in the field of service law would advise us that retrospective seniority cannot be claimed from a date when an employee is not even borne in service. It is also necessary to bear in mind that retrospective seniority unless directed by court or expressly provided by the applicable Rules, should not be allowed, as in so doing, others who had earlier entered service, will be impacted.”

Stating that the respondent was claiming seniority benefit for 10 years without working for a single day during that period, the Court held that precedence was being claimed over other regular employees who had entered service between 1985 to 1996.

It was, hence, held,

“In this situation, the seniority balance cannot be tilted against those who entered service much before the respondent. Seniority benefit can accrue only after a person joins service and to say that benefits can be earned retrospectively would be erroneous.”

Important rulings

Shitla Prasad Shukla vs. State of UP, (1986)(Supp.) SCC 185

“The late comers to the regular stream cannot steal a march over the early arrivals in the regular queue. On principle the appellant cannot therefore succeed. What is more in matters of seniority the Court does not exercise jurisdiction akin to appellate jurisdiction against the determination by the competent authority, so long as the competent authority has acted bona fide and acted on principles of fairness and fair play. In a matter where there is no rule or regulation governing the situation or where there is one, but is not violated, the Court will not overturn the determination unless it would be unfair not to do so…”

Ganga Vishan Gujrati And Ors. Vs. State of Rajasthan, (2019) 16 SCC 28

“… retrospective seniority cannot be granted to an employee from a date when the employee was not borne on a cadre. Seniority amongst members of the same grade has to be counted from the date of initial entry into the grade.”

[State of Bihar v. Arbind Jee, 2021 SCC OnLine SC 821, decided on 28.09.2021]



For appellant: Advocate Abhinav Mukerji

For respondent: Advocate Satvik Misra

*Judgment by: Justice Hrishikesh Roy

Know Thy Judge | Justice Hrishikesh Roy

Op EdsOP. ED.


“We live in a world measured by piracy because, piracy means access.”[1]

The internet came into existence in the early 1980’s, and since its inception everything around has become easily accessible. The experience of watching a film has changed dramatically over the last 100 years. Earlier, people would frequent their local film theatre and watch films, but with the evolution of the internet this has decreased tremendously. There are various online film service platforms which upload the films within a few weeks or even within a few days of its release and people can watch them in the comfort of their homes saving them the trouble of going to the theatre. The over-the-top media services (OTT) platforms have become very popular these days.  With the digital platforms like Netflix, Amazon Prime, Hotstar gaining popularity, people now stream films and download them at a minimal amount or sometimes for no cost at all. These platforms obtain a requisite licence in advance from the distributors. However, there are other online film platforms too, where a film is uploaded without obtaining any licence, these are called pirated films.

A recent example of a pirated film that was circulating was of Angrezi Medium (2020). The film was running in the theatres when the corona virus lockdown was announced by the Hon’ble Prime Minister. At the beginning of the lockdown there were number of pirated copies of the film that was circulated in various platforms. But, recently Hotstar bought the licence of the film and it is been view legally by a number of people since then. John Doe orders are based on the principle, “if litigating finger is directed at unknown defendants, the inability to identify him by name is a mere misnomer”. The underlying principle behind this being that the enigma of defendant’s identity should not be an impediment in implementation of justice.

According to the Dictionary, piracy is “the unauthorised use or reproduction of other’s work”.[2] Piracy is an infringement of copyright and one of the civil remedies that are given in such situations is the John Doe order. This article will discuss the future of John Doe jurisprudence in India, focusing on copyright infringement and Bollywood.

The Ascent of Copyright Piracy in Bollywood

Mukesh Bhatt, a well-known Bollywood producer in an interview said –“Digital piracy is the biggest menace, which the producers face and the amount of revenue that the filmmaker loses is huge.”[3] The Bollywood industry is one of the worst victims of piracy in the world.[4] Statistically, India is ranked amongst the top five countries worldwide for piracy.[5] In a study conducted, it was found that Indians are the largest users of the torrent sites.[6] A large section of people upload films illegally i.e. without having any authorisation or licence, catering to an equally large section of viewers who download and stream these films on illegal platforms. This makes us the culprits and the victims at the same time.

Despite stringent security checks at movie theatres, there is still a reported 91% leakage through camcording[7] i.e. camera recording in the theatres. Films releasing overseas before the Indian market can also be a contributing factor to piracy.

Movie producers and filmmakers end up paying a heavy price at the end of it all. As per data, each time a link is opened with a pirated film, there is a loss of INR 25, which later totals to an amount of INR 3 crores lost against the producer.[8] Due to the rampant mushrooming of platforms hosting pirated films, the Indian Government along with internet service providers (ISPs) has taken the necessary steps to curb piracy, by banning several websites and uniform resource locators (URLs).

Despite putting a ban, thereby making it a punishable offence to download copyrighted products illegally, the practice of illegal streaming and downloading has not completely stopped. In 2017, there was a very interesting online consumer survey on India by Irdeto, the world leader in digital platform security. It was found that 71% of consumers are well acquainted with the fact that sharing or producing pirated video is felonious, and 64% are aware that streaming or downloading pirated content is felonious and nevertheless, 66% still choose to watch the pirated content.[9]  Keeping supply and demand in mind, piracy is still rampant only because there is a readily available mass of viewers for whom this medium is economical and easily accessible.

Piracy is an infringement of copyright. It is to be noted that all piracy is copyright infringement but all copyright infringement is not piracy. Infringement of copyright has been mentioned in Section 51 of the Copyright Act, 1957. It includes acts of a person, when he does anything in absence of a licence from the owner or Registrar of the copyright, and the exclusive right of which is conferred upon the copyright owner under the Act.[10] An unauthorised person, allowing a place to be used for public infringing communication of work is also sectioned under infringement of copyright.[11] The Act also provides the owner of copyright exclusive rights of communication of a film.[12] Therefore, piracy of a film is illegal as the film is being uploaded without obtaining any licence or without the permission of the filmmaker and hence is an infringement of copyright.

The Act provides various remedies for infringement of copyright to the copyright owners.[13] Section 55 of the Act gives the owners whose copyright has been infringed (including exclusive licensees)[14] to obtain all civil remedies, through injunctions, damages and disgorgement.[15] In the context of Bollywood, the civil remedy that is popularly used is the John Doe order, also known as Rolling Anton Pillar order[16] or Ashok Kumar orders[17]. John Doe orders are granted under Order 39 Rules 1, 2 and read with Section 151 CPC.[18] Thus, the same principles are applied for John Doe orders as applied under Order 39 for interim injunctions.

The Arrival of the Hero: John Doe Order

John Doe is the common classification of persons who are unknown to the world at large. John Doe orders in simple terms are, temporary ex parte injunctions used by the copyright owners as an impediment to the unknown infringers.[19] These orders proscribe infringing activities by unknown people and along with that it also averts any probable infringing activities. It is used when the producer or the filmmaker anticipates that there is going to be piracy of their film, but, they do not know who may cause the piracy or is the infringer. These orders arise out of quia timet actions, which are actions by a party looking for the court’s help to avert an injury to the party’s rights or interest in the future.[20] The order acts as armour and grants pre-emptive and quick remedy to the copyright owners.[21] As per Order 7 CPC, identification of the defendant’s name and address is required[22], but, in cases where the identification is not possible, the courts have allowed John Doe orders. A “John Doe” in Bollywood productions copyright, case is initiated under Order 39 Rule 1 and 2 read with Section 161 CPC.[23]

The US Supreme Court case of Roe v. Wade[24] was where the anonymous entity to a criminal suit was referred to as Doe for the first time. The jurisprudence of the John Doe order in India goes way back to 2003 in Taj Television v. Rajan Mandal[25] where the court restrained the transmission of FIFA World Cup by unlicensed cable operators and the plaintiff was allowed to search and seize devices of unknown defendants. In recent times, we see that the amount of cases where John Doe was granted has increased tremendously, especially when it comes to piracy of new films. This can be attributed to the digital age and the internet. There has been a shift of the physical sale of films to the availability of movies from the online portals where the film can be easily streamed or downloaded from. With respect to Bollywood, the first case to use John Doe orders was for the movie Singham (2011).[26] In this case, the Delhi High Court included the term “internet” for the first time.

In the case of the movie Great Grand Masti (2016), the Bombay High Court allowed implementation of the John Doe order against the ISPs.  The court provided “sufficient service” to the defendants and allowed them to apply against the grant of injunction in a period of four days.[27]

The banning of the whole website because of an infringing content is archaic and with this the piracy rate increases rather than decreasing, as violators find other means for infringement. With the High Court order in case of the film Dishoom (2016) this has changed too. Justice Patel in this case extended the guidelines given in the case of Great Grand Masti. He instructed that blocking of the whole website is not allowed, unless it can be proved that the whole website contains only pirated or illicit content.[28] Thus, with the case of Dishoom it was seen that the court maintained a balance between the protection of constitutional rights and the freedom of ISPs.  This way one could check the legitimacy of the plaintiff’s claims and ISPs could be protected.

Year 2018 saw many instances in Bollywood where John Doe order was granted. The biggest movie of the year i.e. Padmaavat directed by Mr Sanjay Leela Bhansali sought a John Doe order from Madras High Court to avert any copyright infringement and piracy. To prevent any further losses, keeping in mind the controversies surrounding it, the makers of the movie sought a John Doe order. The other movies of the past year that got a John Doe order were, Hichki, Pad Man, Pari, Qarib Qarib Singlle, Soorma, Don 2 and Masaan.

The Good, Bad and Ugly of the John Doe Order

There is a lot of debate surrounding the John Doe jurisprudence in India. There are many issues and arguments relating to the “Ashok Kumar orders” as they call it in India. As we have already discussed, the order overrides Order 7 of the Civil Procedure Code, 1908 that specifies identification of the defendant’s name and address and failure to do so results in rejecting the plaint. Another reason is that the order takes no notice of the principle of inherent powers that the Supreme Court has expressed in times only to as an enhancement or to monitor the mechanism adopted by courts, without any connection to the litigant’s substantive rights for which courts have to be specially empowered.[29] The order is very ambiguous in nature. Its ambiguous nature aggravated in the case of the movie Singham (2011) when it included the word “internet” in context of the John Doe orders. The irony when we talk about John Doe orders increasing with the new internet age is that there is no substantial information available related to success of John Doe jurisprudence anywhere else except for the internet. Another issue with the John Doe order is in regards to the ISPs i.e. there is no standardised set of laws which determine blocking of websites and blocking of the same. As a result ISPs are blocking the websites without the sanction and in absence of any directives from the Department of Information Technology.[30] In the film Bodyguard (2011) the police were asked to assist the copyright owners by the court to curb piracy without any guidelines thereby giving them redundant discretion power which may further lead to constitutional scrutiny.[31] The courts also grant injunctions in the form of John Doe orders to curb piracy. The John Doe orders as a measure should be kept in check and be used during exceptional conditions where the injury of the copyright owner is superior to the compromise of the larger public goal of defending and protecting the internet freedom and constitutional rights of ISPs.[32]

There is a conflict between the copyright protection and public consumption of cultural goods. In this context we can look into Article 27 of the Universal Declaration of Human Rights, which states that everyone has the right to participate in the cultural life of the community and enjoy the arts. Also, it states that the interests of the author of a literary or artistic work should be protected. Therefore, we see that there is a conflict between the public consumption of cultural goods and the interest of the copyright owner. Some scholars argue that through piracy the cultural goods are made affordable and it ensures a larger access.[33] Whereas, on the other hand people believe in the protection of interest of the copyright owners in this context the filmmakers and the producers who incur financial loss due to piracy.

After the order issued with the film Dishoom, it has been noted that the entire website cannot be banned, as they also contain a sizeable portion of legitimate content. In order to overcome issues relating to the John Doe jurisprudence, there should be a distinction made between the websites that incidentally commit copyright infringement and those that intend to commit the same.  It should be noted that despite the intention, the Ashok Kumar order cannot be enforced unless there is an actual act of infringement.

Nowadays, long before the release of a film the makers release the teaser and the trailer online. There is also that one song of the film that is released by them online and people download it and share it across everywhere. But, as the date of the release of the same film comes near, the same makers procure a John Doe order to prohibit their film to be available on various mediums. This is the double standard of the filmmakers.[34] In a bid to contest the unbridled piracy, there has been a mounting craze among Bollywood producers to obtain John Doe orders before the release of their films. The rationale behind this is that since films have a limited shelf life, the producers of these films cannot wait until the identity of infringer is determined.


The extent of piracy has only increased in the recent times with the availability of links on various platforms. Despite the measures taken by the courts, this issue still persists.  With films being available on digital platforms such as Netflix, Amazon Prime, Hotstar, etc., one can stream films at a nominal cost at the comfort of their homes. It is believed by some that the level of piracy has decreased due to these platforms. Having said that, these platforms do not stream new films, as a result people find illegal platforms to view movies.

The jurisprudence of John Doe orders is still at a nascent stage in India. With piracy increasing, the numbers of John Doe orders that are granted have also increased. As has been mentioned, the courts are trying their best to curb the problem of piracy. However, the courts have to take stricter actions to determine and to take necessary measures in cases of internet blocking. There is still a high number of people who enjoy going to the theatres and watching films. As long as there are people willing to go to the theatre and watch the film, the producers and filmmakers will continue to earn profits piracy cannot diminish overnight; it will have to be a gradual process. With no piracy, the need for John Doe orders can decrease along with unnecessary removal and blocking of websites.

The future of the John Doe order will be determined by the way in which these orders are granted and at the same time by ensuring that there is no over blocking. It should also be important to protect the rights of those whose intellectual property has been infringed.

* BA LLB (Hons.), National Law University and Judicial Academy, Assam, e-mail:

[1] Dr Kalyan C. Kankanala, Pirates of Bollywood  (2015).

[2] Oxford Dictionary of English (3rd Edn. Angus Stevenson, 2010).

[3] Indo-Asian News Service, Muklesh Bhatt: Digital Piracy is the Biggest Menace, NDTV Movies (28-12-2019, 3:31 P.M.), <>.

[4] Aadya Chawla, John Doe Orders: Prevention of Copyright Infringement of Cinematograph Films, 2 ILILR 64, 65 (2017).

[5] Ibid.

[6] Arul George Scaria, Online Piracy of Indian Movies: Is the Film Industry Firing at the Wrong Target, 21:3 MSILR 647, 649 (2013).

[7] Maryam Farooqui, YRF Files John Doe to Protect Hichki from Piracy; A Menace that Made Film Industry Lose 30% Revenue in 2017, Money Control (11-1-2020, 12:00 P.M.), <>.

[8] R.K. Productions (P) Ltd. v. BSNL, 2012 SCC OnLine Mad 4184

[9] Irdeto, Building a Secure Future, Irdeto Research: Despite High Levels of Awareness in India that Piracy is Illegal, 66% of Consumers Polled still Access Pirated  Content (2017), <>.

[10] S. 51(a)(i), Copyright Act, 1957 .

[11] S. 51(a)(ii), Copyright Act, 1957 .

[12] S. 14(d), Copyright Act, 1957

[13] Ch. XII, Copyright Act,  1957.

[14] S. 54, Copyright Act,  1957

[15] S. 55, Copyright Act,  1957 .

[16] David Barron, Roving Anton Piller Orders: Yet to be Born, Dead or Alive, 18 EIPR 183 (1996).

[17] ESPN Software India Pvt. Ltd. v. Tudu Enterprise, 2011 SCC OnLine Del 5710 

[18] Civil Procedure Code, 1908.

[19] Quentin  Cregan, Roving Injunctions and John Doe Orders against Unidentifiable Defendants in IP Infringement Proceedings,  6(9) JIPLP, 623-631 (2011).

[20] Juhi Gupta, John Doe Copyright Injunctions in India, 18 JIPR 351, 351(2013).

[21] Ibid.

[22] Civil Procedure Code, 1908.

[23] Ibid.

[24] 35 L Ed 2d 147 :  410 US 113 (1973)

[25] (2003) FSR 22.

[26] Reliance Big Entertainment Pvt. Ltd. v. Jyoti Cable Network, 2011 SCC OnLine Del 5709 

[27] Balaji Motion Pictures Ltd. v. BSNL, 2016 SCC OnLine Bom 4636

[28] Eros International v. BSNL, 2016 SCC OnLine Bom 10315

[29] Gupta, supra note  21, 352.

[30] Ibid.

[31] Reliance Big Entertainment Pvt. Ltd. v. Jyoti Cable Network, 2011 SCC OnLine Del 5709

[32] Chawla, supra note 5, 70.

[33] Pradip Thomas, Copyright and Emerging Knowledge Economy in India, 36(4) Economic & Political Weekly, 2147 (2011).

[34] Achal Prabhala and Lawrence Liang, A

Ludicrous Ban, The Open Magazine (27-1-2020, 1:30 P.M.), <>.

Op EdsOP. ED.

I. Introduction

Arbitration has evolved as the most preferred form of alternate dispute resolution method mostly owing to a surge in commercial disputes and intent of parties to resolve them expeditiously before a private forum. However, it has not been immune from contentious and debatable issues which are witnessed from time to time, leading to considerable amount of judicial intervention and delay in adjudication. One such issue that has plagued arbitration is whether allegations of fraud can be adjudicated under the regime of arbitration. This issue arises because arbitration is restricted to deciding only the rights in personam (against a particular person) and excludes rights in rem (affecting other persons such as matters involving crimes, matrimony, insolvency, winding-up, testamentary matters, trust[1], etc.).[2] Whereas fraud is an issue which may not solely be inter se between the parties but also permeates into the realm of public law in certain occasions. In other words, it possesses dual characteristic, capable of being decided as a right in personam as well as a right in rem. The element of ‘fraud’ goes into the root of the intention of the parties to enter into a contract[3]. This very idiosyncrasy of fraud has led to a major conundrum in the arbitration regime, resulting into diverse views.

Recently, the Supreme Court in  Avitel Post Studioz Ltd. v. HSBC PI Holdings (Mauritius) Ltd. [4] dated 19 August 2020 (Avitel) had the occasion to deal with this issue. Before discussing the recent decision by the Supreme Court, it is important to set out the jurisprudence surrounding arbitrability of fraud.

II. Evolution of jurisprudence on arbitrability of fraud

The line of decisions on arbitrability of fraud started with the judgment by a three-Judge Bench of the Supreme Court in Abdul Kadir Shamsuddin Bubere v. Madhav Prabhakar Oak[5] (Abdul Kadir”). In Abdul Kadir, the Supreme Court while placing reliance on various English judgments such as Russel v. Russel[6], held that the Court will, in general, refuse to refer a dispute to arbitration if the party charged with fraud desires a public inquiry, but where the objection to arbitration is by the party charging the fraud, the Court will not necessarily accede to it, and will never do so unless a prima facie case of fraud is proved[7].

However, in N. Radhakrishnan v. Maestro Engineers[8], (Radhakrishnan), which involved allegations of malpractices in account books and manipulation of records of the partnership firm, the Supreme Court sought to rely on its ruling[9] of Abdul Kadir judgment. While doing so, it held that wherever serious allegations of fraud are raised, it would necessarily mean that they should be tried in a court of law and therefore, rejected the application filed under Section 8 of the Arbitration & Conciliation Act, 1996 (as amended) (“the Arbitration Act”).  This simpliciter rejection to refer the parties to arbitration shifted the course of this issue. Not only did the Supreme Court overlook its own judgment in  Hindustan Petroleum Corp. Ltd. v. Pink City Midway Petroleums[10], and P. Anand Gajapathi Raju v. P.V.G. Raju[11], but also did not consider the aspect where a party can subterfuge the arbitration agreement on simpliciter allegations of fraud. The Court in Radhakrishnan[12] also overlooked the fact that in contrast to Arbitration Act, 1940, the scheme of reference under Section 8 of Arbitration Act, 1996 was radically different where reference to arbitration was mandatory upon existence of arbitration agreement.

The decision in Radhakrishnan[13] set the clock backwards on the approach qua arbitration in India, as it led to arbitration clauses being rendered redundant and increased the scope for judicial interference.

III. Attempted course correction by adopting pro-arbitration approach

The course adopted in Radhakrishnan’s[14] judgment was sought to be corrected by the Supreme Court in  Swiss Timing Ltd. v. Commonwealth Games Organizing Committee[15], (Swiss Timing) and World Sport Group (Mauritius) Ltd.  v. MSM Satellite (Singapore) Pte Ltd.[16], (World Sport Group)  where the Court made bold and remarkable attempts to rectify the past precedents while dealing with applications filed under Sections 11 and 45 of the Arbitration Act respectively, which were resisted primarily on the grounds of fraud being alleged.

In Swiss Timing case[17], where the appointment of the arbitrator under Section 11 was resisted on grounds of pendency of criminal proceedings nullifying the arbitration clause, the Court appointed the arbitrator by keeping in the line with the spirit of the Arbitration Act. It was held that, when a judicial authority is faced with an arbitration clause in an agreement, it is mandatory for the authority to refer parties to arbitration. The Court notably applied the doctrine of severability of arbitration agreement.The Court also dealt with  Radhakrishnan[18]  judgment and rightly held the same to be per incuriuam[19]. The Court also observed that, it is only when the contract is ex facie void, from a meaningful reading of the contract without requirement of further proof, that the appointment cannot be made under Section 11 of the Arbitration Act. However, as this   judgment was made by a Single Judge in an application filed under Section 11, Radhakrishnan[20] judgment could not be overruled in Swiss Timing.[21]

The Supreme Court in World Sport Group[22] was faced with a similar question while dealing with reference to foreign seated arbitration under Section 45 of the Arbitration Act. The Supreme Court not only allowed the application but also went a step further and observed that where allegations of fraud in the procurement or performance of a contract are alleged, there is no reason for arbitral tribunal to decline jurisdiction.

IV. Recommendations by the 246th Law Commission Report on the issue

The 246th Report of the Commission on ‘Amendment to the Arbitration and Conciliation Act, 1996[23] (“the Law Commission Report”) attempted to resolve the issue of arbitrability of fraud by legislative mechanism while attempting to achieve pro–arbitration approach. In the Law Commission Report, it was suggested to introduce a blanket provision after sub-section (6) to Section 16 of the Arbitration Act bestowing upon the tribunal, the power to make an award despite allegations of fraud.[24]

However, this amendment was not brought in by the Legislature and the issue pertaining to arbitrability of fraud persisted before the courts of law. The Supreme Court in  Ayyasamy[25] (cited hereinafter) observed that Parliament may have felt, as was mentioned by Lord Reid in British Railways Board and Herrington[26], that it was unable to make up its mind and instead, leave it to the courts to continue, case by case, deciding upon what should constitute an exception to fraud.[27]

Although the Law Commission Report took note of the conundrum surrounding the arbitrability of cases involving allegations of fraud, the recommended provision was clouded with ambiguity and elusiveness, which is evident from the use of the phrases “serious question of law, complicated questions of fact or allegations of fraud, corruption etc.

V. Arbitrability of disputes – Rights in personam[28]and rights in rem[29]

The Arbitration Act is silent on exclusion of disputes of any category of disputes from its purview, which renders them non–arbitrable. Nonetheless, the Arbitration Act recognises the power of the court to set aside the award if the subject- matter is not arbitrable under the law for the time being in force.[30] Generally and traditionally, all disputes relating to rights in personam are considered to be amenable to arbitration; and all disputes relating to rights in rem are required to be adjudicated by courts and public tribunals, being unsuited for private arbitration. This is not however a rigid or inflexible rule.

Arbitrability of dispute is dependent upon the nature of rights involved in the disputes – right in personam and rights in rem. The Supreme Court, in  Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd.[31] (“Afcons”) and Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd.[32] (“Booz Allen”)  have made an attempt to categorise the disputes which are non–arbitrable, which includes, inter alia, cases involving serious and specific allegations of fraud and prosecution of criminal offences.[33] The rationale for such categorisation is that such matters relate to actions in rem and hence, cannot be subject to arbitration which is a private forum for the parties. However, this broad categorisation of the cases must be read in light of the judgment laid down in the Ayyasamy case[34] (cited hereinafter).

VI. Twin test to determine “seriousness of fraud” evolved in Ayyasami case

VII. The judgement passed by the Supreme Court in Ayyasamy v. A. Paramasivam[35], (Ayyasamy) proved to be a greeting respite in the arena of fraud relating disputes arising under a contract containing an arbitration clause.

The Supreme Court in  Ayyasamy case, was dealing with an application preferred by the appellants (i.e. the original applicants) under Section 8 of the Arbitration Act, which faced resistance on the ground that acts of fraud were attributable to the applicants and the dispute was not arbitrable[36]. The lower courts, placing reliance on  Radhakrishnan case[37], rejected the reference to arbitration observing that there were allegations of fraud. The Supreme Court reversed the finding of the lower courts by holding that mere allegation of fraud cannot be a ground to nullify the effect of arbitration agreement between the parties. The Court laid emphasis on whether its jurisdiction has been ousted rather than determining if it has jurisdiction. It was held that a reference to arbitration is to be rejected only when the allegations are of serious and complicated nature, which requires extensive evidence and trial before a court. The decision of the Supreme Court was in consonance with the principle of kompetenz kompetenz (embodied in Section 16 of the Act) under which the arbitral tribunal has the power to decide on its own jurisdiction.

It is noteworthy that  Ayyasamy case[38] (passed by a Bench of same strength as that of Radhakrishnan case[39]), did not overrule the judgment in  Radhakrishnan case expressly, but laid down the criteria for sifting of cases involving serious allegations of fraud and simpliciter allegations of fraud, the former being non–arbitrable. The Supreme Court propounded the twin test in order to assess the ‘seriousness’ of fraud, viz. “(1) does this plea permeate the entire contract and above all, the agreement of arbitration, rendering it void, or (2) whether the allegations of fraud touch upon the internal affairs of the parties inter se having no implication in the public domain.“

The principles evolved in the judgment in  Ayyasamy[40] judgment were thereafter applied by the Supreme Court in  Rashid Raza v. Sadaf Akhtar[41], (Rashid  Raza), which has been passed by a Full Bench. By doing so, the Supreme Court has impliedly, overruled the decision passed in Radhakrishnan case[42].

VIII. Supreme Court’s decision in Avitel Post Studioz Ltd. HSBC PI Holdings (Mauritius) Ltd.

The test underlying the determination of arbitrability of fraud has evolved significantly in the judgments passed by the Supreme Court in  Ayyasamy[43] and Rashid Raza[44]. However, the issue came up once again before the Supreme Court in Avitel case[45], from an order passed under Section 9 of the Arbitration Act for interim measures applied by a foreign party award-holder. In Avitel case[46], HSBC alleged fraudulent inducement while entering into contract with Avitel Group. The award was passed in favour of HSBC, upholding its contentions. Thereafter, HSBC applied for interim measures before the courts in India, when Avitel set up a defense that there were serious allegations of fraud and certain criminal cases were also pending and therefore, no orders should be passed.

After due consideration of the facts, the Court applied the twin test laid down in Ayyasamy case[47] and (as also applied in Rashid Raza case[48]), and held that the allegations of impersonation, false representation and diversion of funds were inter parties and did not have any ‘public flavour’. In view of the same, the Supreme Court dismissed the appeal, and upheld the orders passed under Section 9 of the Arbitration Act. In Avitel case[49], the Court reiterated the position of law pertaining to arbitrability of fraud and applied the same while dealing with the application for interim measures.

The Supreme Court in Avitel[50] also clarified that the criteria of arbitrability as laid down in Booz Alllen[51] and Afkons[52] cases cannot be read in bereft of the twin test laid down in  Ayyasamy case[53] while considering the arbitrability issue of fraud. It is not a rarity that the same set of facts can give rise to civil as well as criminal action under law[54]. Therefore, any dispute involving ‘fraud’ either under Section 17 of the  Contract Act, 1872 and/or tort of deceit, the mere fact that criminal proceedings have been initiated in respect of the same subject-matter would not lead to the conclusion that a dispute which is otherwise arbitrable (by applying the twin test), ceases to be so.


Although the judgment in  Ayyasamy case[55] had a pivotal role to play in the arena of cases involving the determination of arbitrability of fraud, the conundrum revolving around the issue still lingered. This appears to be mostly because the judgment in  Radhakrishnan[56]  was not overruled and continued to be heavily relied upon by the parties resisting the reference of disputes to arbitration on mere allegation of fraud.

The non-adoption of the recommendation of the Law Commission Report to introduce sub–section (7) in Section 16 of the Arbitration has left it to the courts to apply the test while dealing with the applications filed under the provisions of the Arbitration Act, whenever faced with resistance to the arbitrability of the dispute on the basis of the allegations of fraud. In any event, the introduction of such a provision would have been repugnant in cases where the allegations of fraud possess ‘public flavour’, which makes such disputes non–amenable to arbitration. Not to mention that the suggested provision was¸ prima facie, obscure and would have unleashed another line of litigation.

The Supreme Court, in Avitel case[57], has negated the precedential value of  Radhakrishnan case[58] and has made sincere efforts through its judgments in  Ayyasamy[59] and Rashid Raza[60] to demystify the arbitrability of fraud. However, the responsibility of the courts to determine if the allegations of fraud are serious or simpliciter in nature and if they attract ‘public flavour’ continue to be intact with them. As much as the intent of the courts have been to take a pro–arbitration approach, it appears that the judicial interference is inevitable, since the courts are burdened to go into the merits of the case in order to scrutinise if the allegation of fraud negates the existence of the arbitration clause itself or renders the dispute incapable of being arbitrable.

*Partner,  IndusLaw

**Senior Associate, IndusLaw

***Associate, IndusLaw

[1]Vimal Kishor Shah v. Jayesh Dinesh Shah, (2016) 8 SCC 788

[2]Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., (2011) 5 SCC 532

[3]Section 17 of the  Contract Act, 1872

[4] 2020 SCC OnLine SC 656

[5] AIR 1962 SC 406

[6] [1880] 14 Ch D 471

[7] See Abdul Kadir, AIR 1962 SC 406  at p. 713

[8] (2010) 1 SCC 72

[9]Abdul Kadir, AIR 1962 SC 406.  “13. 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.”

[10] (2003) 6 SCC 503 

[11](2000) 4 SCC 539

[12] (2010) 1 SCC 72

[13] Ibid

[14] Ibid

[15](2014) 6 SCC 677

[16] (2014) 11 SCC 639

[17] (2014) 6 SCC 677

[18] (2010) 1 SCC 72

[19]See Footnotes 10 and 11

[20] (2010) 1 SCC 72

[21]Also clarified in State of W. B. v. Associated Contractors, (2008) 6 SCC 740

[22] (2014) 11 SCC 639 

[23] Report No. 246 on  Amendments to the Arbitration and Conciliation Act, 1996 (August 2014)   

[24]Amendment to Section 16, 246th Law Commission Report at p. 50 – After sub-section (6), insert sub-section “(7). The arbitral tribunal shall have the power to make an award or give a ruling notwithstanding that the dispute before it involves a serious question of law, complicated questions of fact or allegations of fraud, corruption etc.”

[25] Ayyasamy v. A. Paramasivam, (2016) 10 SCC 386

[26] 1972 AC 877 [House of Lords]

[27] This case is referred to in Lord Brandon’s judgment in La Pintada (supra) and distinguished at p. 130 of his judgment.

[28] A right or interest protected solely against the specific individuals

[29]A right exercisable against the world at large such as actions determining the title to property

[30]Sections 34(2) (b) and  48 (2) of the Arbitration Act

[31] (2010) 8 SCC 24

[32] (2011) 5 SCC 532

[33]Para 27 in Afcons case and para36 in  Booz Allen case and new category of disputes arising under the Trust Deeds governed by the Trust Act, 1882 have been added in  Vimal Kishor Shah v. Jayesh Dinesh Shah, (2016) 8 SCC 788

[34] (2016) 10 SCC 386

[35] Ibid5

[36]Reliance was placed on Radhkrishnan case

[37] (2010) 1 SCC 72

[38] (2016) 10 SCC 386

[39] (2010) 1 SCC 72

[40] (2016) 10 SCC 386

[41] (2019) 8 SCC 710

[42] (2010) 1 SCC 72

[43] (2016) 10 SCC 386

[44] (2019) 8 SCC 710

[45] 2020 SCC OnLine SC 656 

[46] Ibid

[47] (2016) 10 SCC 386

[48] (2019) 8 SCC 710

[49] 2020 SCC OnLine SC 656

[50] Ibid

[51] (2011) 5 SCC 532

[52] (2010) 8 SCC 24

[53] (2016) 10 SCC 386

[54]Guru Grant Saheb SthanMeerghatVanaras v. Ved Prakash,  (2013) 7 SCC 622

[55] (2016) 10 SCC 386

[56] (2010) 1 SCC 72

[57] 2020 SCC OnLine SC 656 

[58] (2010) 1 SCC 72

[59] (2016) 10 SCC 386

[60] (2019) 8 SCC 710