Are Tortious Claims Arbitrable in India?

A tortious claim connected to a contract is arbitrable in India if resolving it requires reference to the contract, under the wide definition of arbitration agreement in Section 7 of the Arbitration and Conciliation Act, 1996, covering disputes arising from a defined legal relationship whether contractual or not. It is not arbitrable where the claim is a right in rem, enforceable against persons outside the arbitration agreement. This article examines the statutory basis for that rule, the Supreme Court of India authority that shaped it, the connection test Indian courts apply, and the comparable position under English and American law.

Section 7 and the Statutory Basis for Arbitrating Non-Contractual Disputes

The starting point is not case law but the text of the Arbitration and Conciliation Act, 1996. Section 7(1) of the Act defines an "arbitration agreement" as an agreement by parties to submit to arbitration all or certain disputes which have arisen or which may arise between them "in respect of a defined legal relationship, whether contractual or not." That phrase is doing real work. Parliament did not confine arbitration agreements to disputes about the performance of a contract; it extended them to any dispute arising out of a defined legal relationship between the parties, which necessarily includes the tortious obligations that attach to a contracting relationship, such as the duty to exercise reasonable care, the duty not to make fraudulent representations, and the duty not to injure the other party's reputation or business interests.

Section 8 of the Act obliges a judicial authority to refer parties to arbitration where an action is brought in a matter which is the subject of an arbitration agreement, unless it finds that no valid arbitration agreement exists. Section 16 embeds the kompetenz-kompetenz principle, under which the arbitral tribunal itself rules on objections to its own jurisdiction, including whether a particular claim, tortious or otherwise, falls within the scope of the arbitration agreement. Section 34(2)(b)(i) permits a court to set aside an award only if the subject matter of the dispute is not capable of settlement by arbitration under the law in force, a ground that has generated the bulk of the case law on arbitrability. Section 45, the equivalent provision for foreign-seated arbitrations governed by Part II of the Act, applies the same logic to disputes falling within the New York Convention framework. None of these provisions singles out tort claims for exclusion. The exclusion, where it exists, is judge-made, and it turns on the nature of the right asserted rather than the label the claimant gives it.

The Booz Allen Framework: Rights In Personam and the Categories Beyond Arbitration

The most cited authority on arbitrability in India remains Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd. [(2011) 5 SCC 532]. The Supreme Court was asked whether a suit for enforcement of a mortgage by sale could be referred to arbitration under Section 8. It held that it could not, because the relief sought, sale of mortgaged property free of encumbrances, was a right in rem enforceable against the world, not merely against the mortgagor. In reaching that conclusion, the Court set out the governing principle in terms that go well beyond mortgages: every dispute that a civil court is competent to try, whether it arises out of contract or otherwise, is capable in principle of being resolved by arbitration, unless the statute or the nature of the right involved excludes it. The Court then listed categories that are ordinarily treated as non-arbitrable: disputes relating to rights and liabilities that give rise to or arise out of criminal offences, matrimonial disputes, guardianship matters, insolvency and winding-up proceedings, testamentary matters, and eviction or tenancy matters governed by special statutes that confer exclusive jurisdiction on specified fora.

Ordinary tortious claims, such as negligence, nuisance, defamation between contracting parties, or inducement of breach of contract, do not appear on that list. The Court's own formulation, that the touchstone is whether the right asserted is a right in personam, arising from and enforceable against a specific party, or a right in rem, enforceable against the world, applies with equal force to claims framed in tort as to claims framed in contract. A claim for damages for negligent performance of a service contract is, in substance, a claim by one party against the other for breach of a duty of care that arose out of their relationship; it does not bind or affect anyone outside that relationship, and there is no structural reason it should be treated differently from a claim for breach of an express term.

Vidya Drolia's Fourfold Test and the Subordinate Right In Personam

A decade after Booz Allen, a three-judge bench in Vidya Drolia v. Durga Trading Corporation [(2021) 2 SCC 1] reformulated the test for arbitrability into four limbs. A dispute is non-arbitrable where the cause of action and subject matter relate to actions in rem that do not give rise to subordinate rights in personam; where the dispute affects third-party rights, has an erga omnes effect, requires centralised adjudication, and mutual adjudication would be inefficacious; where the dispute relates to the inalienable sovereign or public interest functions of the State; or where arbitrability is expressly or by necessary implication excluded by statute. The Court cautioned that this is not a rigid formula to be applied mechanically but a set of considerations to guide the inquiry.

The first limb is the one that matters most for tortious claims, because it is here that the Court, for the first time, squarely addressed the possibility that a right in rem can generate a subordinate right in personam that remains arbitrable even though the underlying right is not. Tort law is the clearest illustration of this idea. The general duty not to defame, not to be negligent, or not to deceive is owed to the world at large and is, in that sense, a right in rem. But when that duty is breached in the course of a specific contractual relationship, and the breach gives rise to a claim by one contracting party against the other, the claim that results is a personal one: it binds only the two parties, and its resolution does not touch the rights of anyone else. Vidya Drolia's contribution was to make explicit what Booz Allen had implied, namely that this transformation from an in rem obligation to an in personam claim is what makes a tort arising within a contractual relationship arbitrable, while a tort committed against a stranger, where no such subordinate personal right can be identified, remains outside the reach of any arbitration agreement between other parties.

The Connection Test: When a Tort Claim "Arises Out Of" the Contract

Establishing that a tortious claim is capable in principle of arbitration does not answer the second, more practical question: does the particular arbitration clause in the particular contract actually cover it? That is a separate inquiry. Indian courts apply what can fairly be called a connection test, asking whether the tort claim is intimately, directly, or inextricably connected with the contract, such that determining the claim requires recourse to the terms of the contract itself.

An early and still influential articulation came from the Guwahati High Court in Bharat Heavy Electricals Ltd. v. Assam State Electricity Board [(1990) 2 Gau LR 130], decided under the 1940 Act but consistently cited under the current regime. Stripped of its several sub-parts, the Court's reasoning comes down to a single working test: look at what the claimant would actually have to prove, and ask whether proving it means going back to the contract. If the contract has to be read and interpreted to work out whether the tort claim succeeds, the claim is treated as arising out of, or at least related to, that contract, and the arbitrator gets to hear it. If the claim can stand on its own two feet without any reference to the contract's terms, it generally cannot.

The Delhi High Court applied this reasoning directly to a claim for punitive damages in Krishan Gopal v. Parveen Rajput [CS(OS) 523/2018]. The plaintiff sued for mandatory injunction and exemplary and punitive damages following breach of a collaboration agreement, and argued that a tortious claim of this kind could not be decided by an arbitrator and therefore fell outside the arbitration clause. The Court rejected that argument. A tortious claim framed as exemplary damages, it held, gives a party no basis to sidestep an arbitration clause it has otherwise agreed to; an arbitrator sits with much the same remedial powers as a civil judge, and can grant injunctions and damages once a claimant has made out its case. Whether the plaintiff was actually entitled to punitive damages was, in the Court's view, a merits question for the tribunal to work through, not a jurisdictional gate for the court to police at the threshold. Thus, where partners of a partnership firm or LLP have harassed a partner in relation to the functioning of the LLP or firm or to dissuade one from pursuing their claim, and the partnership deed or LLP Agreement contain arbitration clause, the aggrieved partner can sustain a claim of damages in the arbitration arising therefrom.

How Far Does Arbitrability Extend to Fraud and Deceit Claims?

Fraud occupies a special place in this analysis because an allegation of fraud is, in substance, an allegation of the tort of deceit, and Indian courts have had to work out separately how far that particular tort can be arbitrated. The starting point used to be N. Radhakrishnan v. Maestro Engineers [(2010) 1 SCC 72], which held that allegations of fraud between partners, involving detailed evidence of financial malpractice, could only be gone into by a court and were not arbitrable. That position did not survive scrutiny for long.

In A. Ayyasamy v. A. Paramasivam [(2016) 10 SCC 386], the Supreme Court drew a distinction between "mere allegations" of fraud, which remain arbitrable, and "serious allegations" of fraud, which do not, on the reasoning that serious fraud requires the kind of detailed, multi-witness examination that a court is better placed to conduct. The distinction proved difficult to apply with consistency, and in Rashid Raza v. Sadaf Akhtar [(2019) 8 SCC 710], arising from a partnership dispute in which one partner had lodged a criminal complaint alleging siphoning of funds, the Supreme Court refined the test into two limbs: whether the plea of fraud permeates the entire contract and renders it void, and whether the allegations of fraud touch the internal affairs of the parties inter se with no implication in the public domain. Where fraud allegations are confined to the parties' own dealings and have no public dimension, the dispute remains arbitrable notwithstanding the seriousness of the allegations.

Bombay High Court: The "Inextricably Linked" Test for Non-Contractual Claims

The Bombay High Court has applied closely related reasoning to a dispute resolution clause outside the strict arbitration context, and the case is instructive precisely because it was not about arbitration at all. In Chowgule Industries Pvt. Ltd. v. ICRA Ltd. [Appeal from Order No. 1523 of 2025, 2025:BHC-GOA:1764], decided by the High Court of Bombay at Goa on 19 September 2025, Chowgule Industries had filed a defamation suit against the credit rating agency ICRA Limited, alleging that credit rating reports published under their Multi-Product Rating Agreement contained incorrect and defamatory statements about the company's shareholdings and financial standing. The trial court returned the plaint for want of territorial jurisdiction, applying an exclusive jurisdiction clause contained in the rating agreement even though the suit was framed entirely in tort.

The Bombay High Court dismissed the appeal. It held that an exclusive jurisdiction clause in a commercial agreement governs non-contractual claims, including defamation, where the claim is inextricably linked to the contract from which the parties' relationship arose. The case did not concern an arbitration clause, and it should not be read as one. But its reasoning tracks the same principle that governs arbitration clauses: courts in Maharashtra and Goa treat the character of a dispute resolution clause, whether it confers exclusive jurisdiction on a named court or refers disputes to arbitration, as extending to tortious claims that are inextricably bound up with the contractual relationship in which the clause appears. Thus, claims of damages for mental agony, harassment or torture arise from wrongdoings or breaches of a contract containing an arbitration clause, the same are arbitrable as the same are inextricably linked to the contract.

The Position in England: From Heyman to Fiona Trust

English authority, on which much of the Indian case law draws, moved through several stages before arriving at its current broad approach. In Heyman v. Darwins Ltd [[1942] AC 356], the House of Lords held that an arbitration clause covering disputes "arising hereout" survived even a repudiatory breach of the underlying contract. The arbitration agreement, the House of Lords reasoned, is a separable agreement in its own right, distinct from the contract that contains it, and it can outlive that contract's destruction. In Woolf v. Collis Removal Service [[1948] 1 KB 11], the Court of Appeal held that an alternative claim framed in negligence fell within the words "in connection with" the agreement, an early instance of a tort claim being drawn into an arbitration clause because of its closeness to the underlying transaction. The Court of Appeal went further still in Astro Vencedor Compania Naviera S.A. v. Mabanaft G.m.b.H. [[1971] 2 QB 588]: where a contractual issue must be resolved before a tortious claim can be decided, and the two are closely knitted together on the facts, an agreement to arbitrate the contractual dispute extends to the tortious one as well.

The most significant modern restatement came in Fiona Trust & Holding Corp v. Privalov [[2007] UKHL 40], where the House of Lords was asked whether an arbitration clause in a set of charterparties extended to a claim that the charterparties themselves had been procured by bribery. Lord Hoffmann, giving the leading speech, held that the time had come for a fresh start in construing arbitration clauses. Rational business parties, he reasoned, are likely to have intended any dispute arising out of their relationship to be decided by the same tribunal, so the scope of an arbitration clause should no longer turn on fine distinctions between the words "arising out of" and "arising under" the contract. The House of Lords also reaffirmed that an arbitration clause is a distinct agreement, separable from the matrix contract, so that even an allegation that the main contract was procured by fraud or bribery does not, without more, take the dispute outside the arbitration clause. Fiona Trust's approach to construction is now the standard starting point in England for deciding whether a tort claim connected to a contract falls within an arbitration clause, and Indian courts applying the connection test have followed a materially similar path.

The Position in the United States: Separability and Statutory Torts

American law reaches a similar destination by a different statutory route. In Prima Paint Corp. v. Flood & Conklin Manufacturing Co. [388 U.S. 395 (1967)], the United States Supreme Court, construing the Federal Arbitration Act, held that a claim of fraudulent inducement of the contract as a whole must go to the arbitrator. Only a claim that the arbitration clause itself was specifically and separately induced by fraud can be resolved by a court instead. That distinction is the American version of the separability doctrine, and the practical effect is that most tort-based challenges to a contract, including deceit going to the formation of the entire agreement, end up in arbitration rather than before a judge.

The Supreme Court extended the reach of arbitration further in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc. [473 U.S. 614 (1985)], holding that statutory antitrust claims arising out of an international commercial transaction were arbitrable under a broad arbitration clause, notwithstanding the strong public interest ordinarily associated with antitrust enforcement. The Court reasoned that so long as the arbitral forum could adequately vindicate the substance of the statutory claim, the international character of the transaction and the federal policy favouring arbitration justified enforcing the clause as written. Mitsubishi Motors concerns a statutory cause of action rather than a common law tort, but the underlying logic, that even claims with a public interest dimension can be arbitrated provided the tribunal can give effect to the policy behind them, runs parallel to the Avitel public-flavour exception in Indian law. The pro-arbitration trend on tortious and quasi-tortious claims is not confined to any one jurisdiction.

What Should Drafters Do to Ensure Tort Claims Fall Within an Arbitration Clause?

An arbitration clause relating to "disputes arising under this Agreement" or "arising out of or in connection with this Agreement or the relationship established by it" would naturally include tortious claims arising from wrongdoings committed in capacities as those under the underlying contract. Parties negotiating dispute resolution clauses, including multi-tier clauses that require negotiation or mediation before arbitration can be invoked, should keep this in mind. The same drafting choices that determine whether a multi-tier dispute resolution clause has been properly triggered also determine how far the arbitration obligation at the end of that tier extends to non-contractual claims.

The table below summarises how Indian courts have generally treated recurring categories of tortious claims connected to a contractual relationship, subject always to the language of the specific arbitration clause in question.

Category of Tortious Claim	General Treatment	Leading Authority
Negligence in performance of contractual duties	Arbitrable if connected to the contract	Bharat Heavy Electricals Ltd. v. Assam State Electricity Board
Claim for exemplary or punitive damages	Arbitrable; tribunal decides entitlement on merits	Krishan Gopal v. Parveen Rajput
Tort claim outside a sketchy or undetailed contract	Not arbitrable if unconnected to contractual terms	Bougainvillea Multiplex v. Shankar Rai
Simple or mere allegations of fraud (deceit)	Arbitrable	A. Ayyasamy v. A. Paramasivam; Rashid Raza v. Sadaf Akhtar
Serious fraud with public flavour, or fraud vitiating the arbitration agreement itself	Not arbitrable	Avitel Post Studioz Ltd. v. HSBC PI Holdings
Defamation or reputational tort linked to a commercial agreement	Governed by the dispute resolution clause where linked to the contract	Chowgule Industries Pvt. Ltd. v. ICRA Ltd.
Mental harassment, torture and agony	Arbitrable if linked even remotely to the contract	Chowgule Industries Pvt. Ltd. v. ICRA Ltd.

Frequently Asked Questions

Are tort claims arbitrable in India?

Yes, a tort claim is arbitrable if it is connected closely enough to the underlying contract that resolving it requires recourse to the contract's terms, and if there is no bar in the arbitration clause itself.

Can an arbitral tribunal award punitive or exemplary damages for a tortious claim?

Yes. Indian courts have held that an arbitral tribunal has the same powers as a civil court to award damages of every kind, including exemplary and punitive damages, where the claim is otherwise within the scope of the arbitration agreement. The entitlement to such damages is a question the tribunal decides on the merits, not a threshold jurisdictional objection.

Does an allegation of fraud automatically remove a dispute from arbitration?

No. Mere or simple allegations of fraud, including allegations confined to the internal affairs of the contracting parties, remain arbitrable. A dispute becomes non-arbitrable only where the fraud allegation goes to the existence of the arbitration agreement itself or where the fraud has implications extending into the public domain rather than being confined to the parties inter se.

Is the Indian approach to arbitrability of torts different from the approach in England or the United States?

The underlying analysis is broadly similar across all three jurisdictions. English courts, following Fiona Trust, ask whether the parties, as rational business people, are likely to have intended the dispute to be resolved by the same tribunal as their contractual disputes. American courts, applying the separability doctrine from Prima Paint, generally send fraud-based and even statutory claims to arbitration where a broad clause exists. Indian courts apply a similar connection test.

What should a party do if it believes a tort claim raised against it is not covered by the arbitration clause?

The objection should ordinarily be raised before the arbitral tribunal itself in the first instance, since Section 16 of the Arbitration and Conciliation Act, 1996 vests the tribunal with the power to rule on its own jurisdiction, including the scope of the arbitration agreement. Such objection must be raised before filing of the Statement of Defence.

Is a claim for defamation between contracting parties arbitrable in India?

It can be, where the defamatory statement is inextricably linked to the contractual relationship between the parties, as the Bombay High Court recognised in the ICRA defamation dispute, though that case concerned an exclusive jurisdiction clause rather than an arbitration clause. A defamation claim against a stranger to the contract falls outside any arbitration agreement between other parties.

Can a claim in tort against a company's director be arbitrated under a contract the director never signed?

Generally not, unless the director is shown to be bound by the arbitration agreement through the group of companies doctrine or a similar principle. An arbitration agreement ordinarily binds only its signatories, and a tort claim against a non-signatory typically has to be pursued in court unless a recognised exception applies.

Does the seriousness of a fraud allegation alone make a dispute non-arbitrable?

No. Following Rashid Raza v. Sadaf Akhtar, the test is not the seriousness of the allegation by itself but whether the fraud plea permeates the entire contract so as to render it void, and whether the allegations touch only the parties' internal affairs or carry a public dimension.

Who decides at the outset whether a particular tort claim falls within an arbitration clause?

Under Section 16 of the Arbitration and Conciliation Act, 1996, the arbitral tribunal itself has the power to rule on its own jurisdiction, including whether a specific tortious claim falls within the scope of the arbitration agreement, subject to limited court review at the referral or award-challenge stage.

Are tort claims arising from a motor vehicle accident arbitrable in India?

No. Claims for compensation arising from a motor vehicle accident fall within the exclusive jurisdiction of the Motor Accidents Claims Tribunal constituted under the Motor Vehicles Act, 1988, a special statutory forum created for that specific category of claim. Even where the parties to a related commercial contract have an arbitration clause, a third-party accident victim's claim for compensation is not a matter the parties to that contract can remove from the Tribunal's jurisdiction by private agreement.

Is a claim for medical negligence against a hospital arbitrable if the treatment relationship involves no arbitration clause?

No, since arbitration requires an arbitration agreement between the parties, and Section 7 of the Arbitration and Conciliation Act, 1996 makes that agreement the foundation of any reference. Absent such a clause, a patient's medical negligence claim proceeds as an ordinary tort action before a civil court, or before the appropriate consumer commission under the Consumer Protection Act, 2019 where the treatment qualifies as a service for consideration. Even where a hospital agreement does contain an arbitration clause, courts have shown reluctance to compel a patient into arbitration for a personal injury claim.

If a suit combines both contractual and tortious claims, can a court refer only the arbitrable part to arbitration and retain the rest?

Indian courts have generally been reluctant to split a single suit into arbitrable and non-arbitrable portions. Where the tortious and contractual claims are inseparably connected and the core relief sought is founded on the contract, courts applying Section 8 of the Arbitration and Conciliation Act, 1996 tend to refer the entire dispute to arbitration rather than retaining part of it, since bifurcated proceedings before two different forums risk inconsistent findings on overlapping facts.

Does the arbitrability analysis for tort claims differ between purely domestic arbitration and arbitration involving a foreign party seated in India?

Not materially. Section 34(2)(b)(i), which governs domestic awards, and Section 48(2)(b), which governs foreign awards, both use the same touchstone: whether the subject matter is capable of settlement by arbitration under the law in force in India. The Booz Allen and Vidya Drolia framework for identifying non-arbitrable rights in rem applies regardless of whether the arbitration is purely domestic or involves a foreign party, since Indian public policy on arbitrability does not shift based on the nationality of the parties.

Vikrant D. Shetty | Vikrant D. Shetty leads the Insolvency and Arbitration Practice at the Mumbai-based law firm Vikrant D. Shetty & Associates, Advocates & Solicitors and represents parties in domestic and international commercial arbitrations seated in India and abroad, including enforcement and challenge proceedings before the Bombay High Court.

This article is for general informational purposes only and does not constitute legal advice. For advice specific to your situation, please seek direct consultation with an advocate.