Siddharth Nigotia & Agnish Aditya comments on the case of A. Ayyasamy v. A. Paramasivam and attempts to clarify the law in this regard.

Abstract

The question of arbitrability has puzzled courts across the
world. Arbitrability of fraud in particular has generated a lot
of discussion in India, because Courts never settled the matter
conclusively. The absence of certainty in this regard enabled
parties to delay arbitration proceedings by alleging fraud. The
case of A. Ayyasamy v. A. Paramasivam has attempted to
clarify the law in this regard.
In Ayyasamy, the Court settled the issue by holding that “mere
allegations of fraud” are arbitrable, whereas “serious
allegations of fraud” are not. The Court supported the well recognized principles of arbitration embodied in the
Arbitration and Conciliation Act, like minimum judicial
intervention, kompetenz-kompetenz and party autonomy.
However, the authors shall argue that the Court merely
indulged in a pro-arbitration rhetoric and still seems to
harbour apprehensions towards the arbitral process.
In this comment, the authors will argue that although
Ayyasamy attempted to clarify the law with regards to
arbitrability of fraud, it failed to do so. In the first part of this
comment, we look at the Supreme Court cases dealing with the
issue of arbitrability of fraud, and argue that the approach in
the Swiss Timings case should be adopted in this regard. In the
second part, we analyse the judgment in Ayyasamy, and argue
that its dicta cannot be applied uniformly. Lastly, we conclude
by arguing that the remedy to this problem is the principle of
negative kompetenz-kompetenz which would entail that the
jurisdiction of deciding matters of arbitrability will rest with
the tribunal.