A case involving allegations of fraudulent tender submissions has led the Delhi High Court to reaffirm that serious fraud disputes, especially those entangling public authorities and international entities, belong in civil courts rather than arbitration panels.
The dispute originated from a 2017 Airports Authority of India (AAI) tender for the supply and maintenance of 4,000 baggage trolleys at various airports. Bentwood Seating System, which claimed to be the Indian affiliate of Chinese manufacturer Suzhou Jinta Metal Working (SJM), submitted performance certificates allegedly issued by Heathrow Airport in the UK and Noi Bai International Airport in Vietnam.
However, a complaint filed by Gilco Exports India alleged that these documents were forged. Investigations confirmed that neither Heathrow nor Noi Bai had issued the certificates, and SJM denied any connection with Bentwood Seating. This revelation led the AAI to terminate the contract and blacklist the company in 2018.
Bentwood Seating challenged this decision through arbitration, initially winning a ruling in its favor. However, the High Court later overturned the decision, citing the arbitrator’s failure to fully consider the fraud allegations. A second arbitrator then ruled the dispute non-arbitrable due to the complexity and international scope of the case.
Challenging this ruling, Bentwood Seating invoked Section 37(2)(a) of the Arbitration Act, which allows appeals against orders refusing arbitration. The High Court, however, upheld the arbitrator’s stance, emphasizing that the case involved fabricated documents from foreign entities—beyond an arbitrator’s jurisdiction to investigate effectively. The Court highlighted that summoning international witnesses and securing governmental cooperation required a level of authority that only civil courts could provide.
Dismissing the company’s appeal, the Court concluded that the fraud allegations tainted the entire contract, rendering arbitration unsuitable for resolution.