Calcutta High Court Refers Sunita Gupta v. UGRO Capital Limited Dispute to Arbitration
Allegations of Fraud and Misuse of Digital Signatures to be Addressed by Arbitrator, Court Rules
In a significant ruling, the Calcutta High Court has directed the arbitration of disputes arising from the case of Sunita Gupta and others versus M/s. UGRO Capital Limited, despite allegations of fraud and misuse of digital signatures. The plaintiffs, Sunita Gupta and others, claimed that their digital signatures were misused without consent in a loan agreement dated July 25, 2023, which purportedly made them co-borrowers of a Rs. 2 crore facility extended to Vedanta Limited, the principal borrower.
Justice Krishna Rao presided over the case, which revolved around whether disputes under the loan agreement containing an arbitration clause could be referred to arbitration amid allegations of fraud. The plaintiffs argued that they were never parties to the loan agreement and sought its cancellation, alongside a declaration that it was null and void. They also requested the removal of their names from the defaulter list maintained by CIBIL, citing negative impacts on their credit scores.
The court, however, emphasized that mere allegations of fraud are insufficient to avoid arbitration, pointing out that the plaintiffs had not initiated criminal proceedings against the defendants. The court held that the disputes raised by the plaintiffs were covered under the arbitration clause of the facility agreement, and therefore, the plaintiffs must present their claims before an arbitrator.
The judgment further clarified that while the plaintiffs named CIBIL in their suit, no independent relief against CIBIL was necessary at this stage. If the plaintiffs succeed in arbitration, they can request CIBIL for rectification. The decision aligns with previous rulings by the Supreme Court, which state that allegations of fraud do not preclude arbitrability unless they involve serious issues of criminal wrong doing.
The case references include Avitel Post Studioz Limited v. HSBC PI Holdings (Mauritius) Limited, where the Supreme Court held that parties bound by an arbitration agreement should not use fraud allegations to avoid arbitration.
With this ruling, G.A. (Com) No. 2 of 2025 was allowed, referring the parties to arbitration, while G.A. (Com) No. 1 of 2025 and C.S. (Com) No. 55 of 2025 were dismissed, paving the way for arbitration proceedings to address the disputes.
Bottom Line:
Arbitration - Allegations of fraud and misuse of digital signatures by co-borrowers - Whether disputes arising under the loan agreement containing an arbitration clause can be referred to arbitration.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Sections 8, 9
Sunita Gupta v. M/s. UGRO Capital Limited, (Calcutta) : Law Finder Doc Id # 2777320
