Forgery Allegation Not a Bar to Arbitration: Delhi High Court Slams “Mini-Trial” by Commercial Court

“Forgery needs evidence — let the Arbitral Tribunal decide” – In a significant judgment reaffirming the pro-arbitration ethos of Indian law, the Delhi High Court held that allegations of forgery in a commercial contract containing an arbitration clause do not, by themselves, make the dispute non-arbitrable.

Overruling a lower court order that had refused to refer the parties to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996, the Division Bench comprising Justice C. Hari Shankar and Justice Om Prakash Shukla allowed the appeal in M/s Triom Hospitality v. M/s J.S. Hospitality Services Pvt. Ltd., holding that the Commercial Court had exceeded its jurisdiction by conducting a detailed “mini-trial” on forgery allegations at the referral stage.

The Court ruled, “Once a commercial relationship and an agreement in writing are admitted, and the document contains an arbitration clause, the question of forgery becomes a matter for substantive examination by the Arbitral Tribunal — not the referral court.”

“Referral Courts must not cut into the Arbitral Tribunal’s domain” – Allegation of forgery not sufficient to reject arbitration

At the centre of the dispute was a Memorandum of Understanding dated 22.06.2022, which allegedly conferred rights to the appellant (Triom Hospitality) to run a restaurant under the brand name “Pind Balluchi”, a trademark owned by the respondent (J.S. Hospitality Services Pvt. Ltd.).

The MOU contained an arbitration clause, but the respondent denied having ever signed the agreement and alleged that the MOU was forged. The Commercial Court, treating the forgery claim as serious, refused to refer the dispute to arbitration and held that the civil court alone could adjudicate the matter.

Reversing this view, the High Court emphatically stated:

“Even if the allegation of forgery is to be accepted at face value, determining the genuineness of signatures and the authenticity of the agreement requires detailed evidence — a task squarely within the domain of the Arbitral Tribunal under Section 16 of the Act.”

“Prima facie examination under Section 8 does not mean adjudication on evidence” – High Court criticises trial court for conducting “mini-trial”

Invoking a long line of precedents, including Vidya Drolia v. Durga Trading, Pravin Electricals, and Cox & Kings, the High Court reiterated that courts at the referral stage under Section 8 are limited to prima facie review to determine formal existence and validity of the arbitration agreement.

The Court ruled:

“Referral courts are not expected to undertake forensic analysis or weigh evidence at the Section 8 stage. The Commercial Court, however, went far beyond its jurisdiction by analysing stamps, affidavits, and other circumstantial inconsistencies to hold the MOU forged — this amounts to conducting a mini-trial.”

It added:

“The purpose of Section 8 is not to resolve evidentiary disputes, but to determine whether the matter should proceed to arbitration — and if there is any doubt, the arbitrator must decide.”

“Forgery Allegation Does Not Oust Arbitrability” – Court relies on Mangayarkarasi and Glencore rulings

Rejecting the respondent’s claim that forgery allegations rendered the dispute non-arbitrable, the High Court relied on the Supreme Court’s judgment in K. Mangayarkarasi v. N.J. Sundaresan (2024), which held that fraud, forgery or criminal allegations do not oust the jurisdiction of an arbitral tribunal when the dispute is fundamentally civil or contractual in nature.

The Court also invoked the recent ruling in Glencore International v. Shree Ganesh Metals (2025 SCC OnLine SC 1815), which clarified that “absence of signature on the arbitration agreement is not fatal if intention to arbitrate can be gleaned from conduct and written communication.”

“The MOU was in writing. A pre-existing commercial relationship is not denied. Whether the signature is forged or not is a matter for expert analysis, not judicial guesswork,” the Court held.

“Section 8(2) Objections are Procedural – Cannot Defeat Arbitration” – Court calls out hyper-technicality

One of the grounds raised to defeat the arbitration reference was that the original MOU had not been produced, violating Section 8(2) of the Arbitration Act.

However, the Court dismissed this as a procedural objection, noting that the appellant had applied for exemption, stating the document was with the plaintiff. The Court ruled:

“Section 8(2) is procedural. Disputes over non-production of the original or certified copy do not go to the root of the arbitration clause’s validity. This too is for the arbitral tribunal to consider.”

“Non-signatory firm still bound under group of companies doctrine” – Court rejects hyper-technical plea on party status

The Commercial Court had also held that since Triom Hospitality (the defendant partnership firm) was not a signatory to the MOU, it could not be referred to arbitration.

The High Court rejected this view as "hyper-technical and contrary to settled law", citing Cox & Kings v. SAP India (2024). It held:

“Non-signatories may be bound to arbitration where their conduct, relationships, or roles indicate intent. The group of companies doctrine applies. To say a firm is not bound merely because it was not named, while one of its partners was, would defeat the commercial intent.”

“Forgery Claim Needs Evidence – Arbitration Is the Right Forum” – High Court declares Civil Suit not maintainable

The Court concluded that the allegations of forgery, even if serious, require detailed examination of signatures, cross-examination, expert reports, and contextual interpretation of multiple agreements — tasks best suited for arbitration.

Justice Om Prakash Shukla, writing for the Bench, observed:

“The issue at the heart of this dispute is whether an MOU exists and binds the parties. This is not a matter that can be resolved through summary examination. It demands a full evidentiary record. The Arbitration Act provides sufficient procedural safeguards for this process.”

Holding the Commercial Court’s order unsustainable in law, the High Court dismissed the civil suit as not maintainable and directed the parties to proceed to arbitration under the MOU.

Judicial Endorsement of Arbitration Regime Continues – Lawyers hail ruling as reaffirming kompetenz-kompetenz

From a legal and practitioner’s standpoint, the ruling reinforces three critical aspects of arbitration law:

1. Referral courts cannot adjudicate forgery allegations at Section 8 stage – doing so invades the arbitral tribunal’s domain.

2. Non-production of original arbitration agreements is not fatal, if explained.

3. Non-signatories can still be bound under the group of companies doctrine.

This judgment bolsters the intent behind the 2015 Arbitration Amendment Act, which sought to minimize judicial intervention at the referral stage and protect the tribunal’s competence to decide its own jurisdiction under Section 16.

By drawing a firm line between prima facie review and substantive adjudication, the Delhi High Court has once again shown that party autonomy and minimal court interference are the touchstones of modern arbitration law in India.

Date of Decision: 24 November 2025