Supreme Court: Allegations of Simple Fraud Don’t Bar Arbitration in ₹1500 Cr Bihar PDS Scam

The Supreme Court has upheld arbitration proceedings in the ₹1,500-crore Bihar PDS scam, ruling that criminal cases involving simple fraud like cheating or breach of trust do not bar arbitration.

Dismissing Bihar State Food and Supply Corporation’s plea, the Court emphasised the existence of a valid arbitration agreement. It clarified that only "serious fraud" involving forgery or public interest issues renders a dispute non-arbitrable.

Since the case involved "simple fraud" within a contractual context, arbitration must proceed. The Court relied on Avitel v. HSBC and a recent 7-judge bench ruling In Re Interplay on arbitrability.

[Managing Director, Bihar State Food & Civil Supply Corporation Ltd & Anr V Sanjay Kumar]