As rightly held in Bijoy Ballav Kundu (supra) to
which we agree that the clause in an agreement, which
provides for deciding the disputes arising out of such
agreement through private arbitration, affects the
jurisdiction of the Civil Court and the ouster of
jurisdiction of Courts cannot be inferred readily. The
Arbitration Act is one such law, which provides for
ouster of jurisdiction of the Civil Courts. The Act,
inter alia, provides a forum for deciding the disputes
inter se parties to an agreement through arbitration.
Such clause, in our opinion, requires strict rule of
interpretation to find out whether it provides an ouster
of jurisdiction and, if so, to which
Court/Tribunal/Authority as the case may be. In the
case at hand, when we apply this principle of
interpretation, we do not find that clause 20 enables
the arbitrator to assume the jurisdiction to decide the
disputes arising between the beneficiaries. In other
words, clause 20 does not satisfy the rigour of
2) This appeal is filed against the final judgment
and order dated 06.03.2013 of the High Court of
which we agree that the clause in an agreement, which
provides for deciding the disputes arising out of such
agreement through private arbitration, affects the
jurisdiction of the Civil Court and the ouster of
jurisdiction of Courts cannot be inferred readily. The
Arbitration Act is one such law, which provides for
ouster of jurisdiction of the Civil Courts. The Act,
inter alia, provides a forum for deciding the disputes
inter se parties to an agreement through arbitration.
Such clause, in our opinion, requires strict rule of
interpretation to find out whether it provides an ouster
of jurisdiction and, if so, to which
Court/Tribunal/Authority as the case may be. In the
case at hand, when we apply this principle of
interpretation, we do not find that clause 20 enables
the arbitrator to assume the jurisdiction to decide the
disputes arising between the beneficiaries. In other
words, clause 20 does not satisfy the rigour of
Sections 2(b), 2(h) and 7 of the Act.
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.8164 OF 2016
(ARISING OUT OF SLP(C) No. 13369 of 2013)
Shri Vimal Kishor Shah & Ors.
V
Mr. Jayesh Dinesh Shah & Ors
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.8164 OF 2016
(ARISING OUT OF SLP(C) No. 13369 of 2013)
Shri Vimal Kishor Shah & Ors.
V
Mr. Jayesh Dinesh Shah & Ors
Abhay Manohar Sapre, J.
Dated:August 17, 2016.
Citation:AIR 2016 SC3889,(2016) 8 SCC788,2017(1) MHLJ
36 SC
1) Leave granted.Dated:August 17, 2016.
Citation:AIR 2016 SC3889,(2016) 8 SCC788,2017(1) MHLJ
36 SC
2) This appeal is filed against the final judgment
and order dated 06.03.2013 of the High Court of
Judicature at Bombay in Arbitration Application No.
278 of 2012 whereby the High Court allowed the
arbitration application under Section 11 of the
Arbitration and Conciliation Act, 1996 (hereinafter
referred to as “the Act”) filed by respondent Nos. 1 to
3 herein and appointed Shri S.R. Shah, former Judge
of the Bombay City Civil Court, as sole Arbitrator to
arbitrate the disputes between the parties.
3) In order to appreciate the issue involved in this
appeal, which lies in a narrow compass, it is necessary
to set out the relevant facts in brief infra.
4) One Shri Dwarkadas Laxmichand Modi executed
a family Trust Deed called "Deed of Kaydee Family
Trust" on 06.04.1983 as author of the Trust
hereinafter called as "settlor" in relation to his
properties. The settlor formed this Trust out of love
and affection in favour of six minors (now major),
278 of 2012 whereby the High Court allowed the
arbitration application under Section 11 of the
Arbitration and Conciliation Act, 1996 (hereinafter
referred to as “the Act”) filed by respondent Nos. 1 to
3 herein and appointed Shri S.R. Shah, former Judge
of the Bombay City Civil Court, as sole Arbitrator to
arbitrate the disputes between the parties.
3) In order to appreciate the issue involved in this
appeal, which lies in a narrow compass, it is necessary
to set out the relevant facts in brief infra.
4) One Shri Dwarkadas Laxmichand Modi executed
a family Trust Deed called "Deed of Kaydee Family
Trust" on 06.04.1983 as author of the Trust
hereinafter called as "settlor" in relation to his
properties. The settlor formed this Trust out of love
and affection in favour of six minors (now major),
namely, 1) Master Vimal Kishor Shah, 2) Master
Nainesh Kishor Shah, 3) Kumar Grishma Kishor Shah,
4) Master Jayesh Dinesh Shah, 5) Master Utpal
Dinesh Shah and 6) Master Monil Dinesh Shah,
(hereinafter referred to as the “beneficiaries”) in the
Trust Deed. To manage the affairs of the Trust and its
properties, the settlor appointed two persons - Shri
Dinesh Nandlal Shah and Smt. Saryu Kishor Shah as
Managing Trustees.
5) Clause 20 of the Trust Deed, which is relevant for
the disposal of this case, provides that every dispute
or differences regarding the interpretation of any of the
clauses or provisions or the contents of the Trust Deed
or any dispute inter se trustees or disputes between
the trustees and beneficiaries or disputes between
beneficiaries inter se as and when arise, the same
would be resolved in pursuance of the provisions of
3Page 4
the Indian Arbitration Act, 1940 and the decision of
arbitrator(s) shall be final and binding on the parties
to the arbitration.
6) Unfortunately, as it appears from the record of
the case and from the conduct of the parties, the wish
of the settlor could not be fulfilled in letter and spirit
for which he had formed the Trust and soon after its
formation somewhere from 1989-90 onwards, the
differences cropped up inter se beneficiaries with
respect to the manner in which the affairs and the
business of the Trust were being carried on. This led
to tendering of the resignation by one trustee from
Trusteeship. It was followed by exchange of legal
notices inter se beneficiaries through their lawyers
making therein allegations and counter allegations
against each other about the manner of functioning of
the Trust, its affairs and demanding accounts of the
4Page 5
Trust etc. A demand was also made in the notice that
since parties have not been able to amicably resolve
their disputes/differences, therefore, all such
disputes/differences be referred to the arbitrator for
his decision as per clause 20 of the Trust deed.
7) Since the parties could not settle the
disputes/differences and nor could they agree for the
appointment of the arbitrator amicably, respondent
Nos. 1 to 3 (one set of beneficiaries) filed an
application under Section 11 of the Act being
Arbitration Application No. 278/2012 in the High
Court of Bombay against the appellants (other set of
beneficiaries) praying for referring all
disputes/differences, which had arisen between the
parties, to the arbitrator in terms of clause 20 of the
Trust Deed. The application was founded on the
aforementioned facts for claiming the reliefs.
5Page 6
8) The appellants herein (respondents before the
High Court) contested the application. Apart from
other grounds, the main legal ground of contest was
that the application filed under Section 11 of the Act is
not maintainable. It was contended that when
admittedly the appellants and the respondents are
neither parties to the Trust Deed and nor its
signatories having signed the Trust Deed, they cannot
be termed as “party” to such Trust Deed and nor can
such Trust Deed be termed as an “agreement” much
less an “arbitration agreement” within the meaning of
Section 2(b) and 2(h) read with Section 7 of the Act. It
was contended that the sine qua non for invoking the
jurisdiction under Section 11 of the Act is existence of
a valid and enforceable arbitration agreement, which
is lacking in this case, and hence the application filed
6Page 7
under Section 11 of the Act is not maintainable and is
liable to be dismissed on this ground alone.
9) The learned designated Judge, by impugned
judgment, allowed the application. He held that since
parties to the application were minors at the time of
execution of the Trust Deed, they were incapable of
signing the Trust Deed. He further held that now all
the parties have become major and have taken benefit
of the Trust Deed as beneficiaries throughout their
minority and then on attaining the majority, they
should be held as “party” to the Trust Deed within the
meaning of Section 2(h) of the Act. He also held that
once the beneficiaries are held parties to the Trust
Deed, they have a right to take recourse to
proceedings under Section 11 of the Act for
appointment of arbitrator by invoking clause 20 of the
7Page 8
Trust Deed for deciding the disputes arising between
them relating to the affairs of the Trust.
10) With these findings, the learned Judge proceeded
to invoke clause 20 of the Trust Deed and appointed
Shri S.R.Shah - former Mumbai City Civil Judge as a
sole arbitrator for deciding the disputes/differences
which had arisen between the parties to the
application. It is against this order, the respondents,
who as stated above, are other group of beneficiaries,
have felt aggrieved and filed this appeal by way of
special leave before this Court.
11) Heard Mr. Shekhar Naphade, learned senior
counsel for the appellants and Mr. Gaurav Agrawal,
learned counsel for the respondents.
12) Mr. Shekhar Naphade, learned senior counsel
appearing for the appellants while assailing the
8Page 9
legality and correctness of the impugned order has
made three-fold submissions.
13) In the first place, learned senior counsel
submitted that the learned designated Judge erred in
allowing the application filed under Section 11 of the
Act. In his submission, the application was liable to be
dismissed as not maintainable.
14) In the second place, learned senior counsel
submitted that when admittedly parties to the
application, who are beneficiaries of the Trust, did not
sign the Trust Deed, they could not be held parties to
such Trust Deed. Learned counsel urged that the first
and foremost requirement for filing an application
under Section 11 of the Act is that there has to be in
existence a valid and enforceable arbitration
agreement and such agreement, according to him,
should be reduced in writing and lastly, it must be
9Page 10
signed by the parties to the application as provided
under Section 2(h) read with Section 7(4) of the Act. It
was urged that since the respondents have not been
able to prove this basic requirement of law, the
application filed by the respondents under Section 11
of the Act was liable to be dismissed for want of
non-compliance of the requirement of Section 2(b) and
2(h) read with Section 7 of the Act.
15) In the third place, learned senior counsel
submitted that apart from what is urged above, since
the creation, affairs of the Trust, rights, obligations,
removal, duties and legal remedies to seek redressal of
grievances by the Settlor, Trustees and beneficiaries
are governed by the Indian Trust Act, 1882
(hereinafter referred to as “the Trust Act”), which is a
complete code in itself to deal with the aforementioned
matters, the provisions of the Arbitration Act for
10Page 11
deciding any dispute relating to affairs of the Trust
including dispute inter se the stakeholders mentioned
above are not applicable and the remedy of the
stakeholders would be to take recourse to the
provisions of the Trust Act for ventilating their
grievances in an appropriate forum specified in the
Trust Act.
16) It is these submissions, which were elaborated by
the learned senior counsel in his argument, with
reference to the Scheme of the Trust Act and its
various provisions and the decisions, which dealt with
these issues.
17) In reply, Mr. Gaurav Agrawal, learned counsel for
the respondents, supported the reasoning and the
conclusion arrived at by the designated Judge and
prayed for its upholding calling no interference therein
11Page 12
in this appeal. He also elaborated his submissions by
referring to some provisions of the Act and case law.
18) Having heard learned counsel for the parties and
on perusal of the record of the case, we find force in
the submissions of Mr. Shekhar Naphade, learned
senior counsel for the appellants.
19) The basic question, which arises for
consideration in this appeal, is whether a clause in a
Trust Deed, which provides for resolving the disputes
arising between the beneficiaries of the Trust through
arbitration, can constitute an “arbitration agreement”
within the meaning of Section 2(b) and 2(h) read with
Section 7 of the Act and whether the application filed
by the respondents under Section 11 of the Act can be
held as maintainable?
12Page 13
20) Section 2(b) and 2(h) and Section 7 of the Act are
relevant to examine the question involved in the case.
These Sections read as under:
2. Definitions.-(1)…………………………………..
(a)……………………………………………..
(b) “arbitration agreement” means an
agreement referred to in section7;
(h) “party” means a party to an arbitration
agreement.
7. Arbitration agreement.-(1) In this Part,
“arbitration agreement” means an agreement
by the 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.
(2) An arbitration agreement may be in the
form of an arbitration clause in a contract or
in the form of a separate agreement.
(3) An arbitration agreement shall be in
writing.
(4) An arbitration agreement is in writing if it
is contained in-
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or
other means of telecommunication which
provide a record of the agreement; or
13Page 14
(c) an exchange of statements of claim and
defence in which the existence of the
agreement is alleged by one party and not
denied by the other.
(5) The reference in a contract to a document
containing an arbitration clause constitutes
an arbitration agreement if the contract is in
writing and the reference is such as to make
that arbitration clause part of the contract.”
21) Section 2(b) defines "arbitration agreement" and
stipulates that arbitration agreement means
arbitration agreement referred to in Section 7 whereas
Section 2(h) defines the word "party" to mean a party
to an arbitration agreement.
22) Section 7 defines “arbitration agreement”. It has
five sub-sections. Sub Section (1) provides that
arbitration agreement means an agreement by the
parties to submit to arbitration all or certain disputes
which have arisen or may arise between them in
respect of a defined legal relationship, whether
contractual or not. Sub-section (2) provides that an
14Page 15
arbitration agreement may be in the form of an
arbitration clause in a contract or it may be in the
form of a separate agreement. Sub-section (3) says
that an arbitration agreement shall be in writing.
Sub- section (4) which has three clauses (a), (b) and (c)
says that a document which contains an arbitration
agreement is to be signed by the parties. Clause (b)
recognizes an arbitration agreement by exchange of
letters, telex, telegrams or other means of
telecommunication which provide a record of such
agreement and clause (c) also recognizes an
arbitration agreement by an exchange of statements of
claim and defence in which existence of the agreement
is alleged by one party and not denied by the other.
23) A reading of the aforementioned sections in
juxtaposition goes to show that in order to constitute a
valid, binding and enforceable arbitration agreement,
15Page 16
the requirements contained in Section 7 have to be
satisfied strictly. These requirements, apart from
others, are (1) there has to be an agreement (2) it has
to be in writing (3) parties must sign such agreement
or in other words, the agreement must bear the
signatures of the parties concerned and (4) such
agreement must contain an arbitration clause.
24) In other words, aforementioned four conditions
are sine qua non for constituting a valid and
enforceable arbitration agreement. Failure to satisfy
any of the four conditions would render the arbitration
agreement invalid and unenforceable and, in
consequence, would result in dismissal of the
application filed under Section 11 of the Act at its
threshold.
25) The question as to what are the conditions which
are necessary for constituting a valid and enforceable
16Page 17
arbitration agreement came up for consideration
before this Court in Vijay Kumar Sharma Alias
Manju vs. Raghunandan Sharma Alias Baburam &
Ors., 2010 (2) SCC 486. In this case, a question arose
in the context as to whether a clause in a Will, which
provides that in the event of any dispute arising in
relation to the properties bequeathed by the testator
would be settled by named arbitrator, can such a
clause or/and the Will be considered as an arbitration
agreement within the meaning of Section 2(b) read
with Section 7 of the Act for the purpose of invoking
the jurisdiction of the High Court under Section 11 for
appointment of an arbitrator for resolving the
disputes. This question arose on the following facts.
26) The father executed a Will in favour of his one
son whereby he bequeathed to him his one house. He
had another son to whom he did not give any share in
17Page 18
the said house. In the Will, father appointed two
executors and expressed that if any dispute arises in
relation to the bequeathed property, one named
arbitrator will decide such dispute. On the death of
the father, one son filed a suit for declaration of his
1/6th share in the bequeathed property and also
demanded partition whereas the other son filed a suit
on the strength of the Will and claimed his exclusive
ownership to the exclusion of all his brothers and
sisters. The suits were clubbed for trial.
27) The two executors, who were also made parties to
the suits, filed an application under Section 8 of the
Act contending therein that the testator had declared
in the Will as also in one separate declaration that in
the event of any dispute arising in relation to the
bequeathed house, the same will be referred to a
named arbitrator for his decision. It was, therefore,
18Page 19
contended that in the light of this, the two civil suits
filed by the parties are liable to be dismissed as being
not maintainable with a liberty to be granted to the
parties to submit themselves to the jurisdiction of the
named arbitrator so as to enable the arbitrator to
decide the disputes as per arbitration clause contained
in the Will/declaration.
28) The Trial Court allowed the application filed by
the executors under Section 8 of the Act and, in
consequence, dismissed the suits with a liberty
granted to the parties to approach the named
arbitrator. One party, accordingly, submitted himself
to the jurisdiction of the named arbitrator and filed his
claim whereas the other party objected to the
jurisdiction of the arbitrator. He contended that there
was neither any arbitration agreement between the
parties for appointment of any arbitrator and nor he
19Page 20
ever signed the Will or any declaration, if made, by his
late father and nor gave his consent for appointment
of any named arbitrator. He, therefore, challenged the
very initiation of arbitration proceedings before the
arbitrator as being without jurisdiction.
29) This led to named arbitrator withdrawing from
the arbitral proceedings which, in turn, gave rise to
the filing of the application by one son under Section
11 of the Act before the High Court of Rajasthan. He
prayed therein for appointment of new arbitrator in
place of earlier named arbitrator. The application was
contested by other son reiterating the same objection,
which he had raised earlier, namely, that there is no
valid and enforceable arbitration agreement between
the parties and neither the Will and nor the
declaration constitute any arbitration agreement for
20Page 21
deciding any dispute between them in relation to the
house in suit.
30) The learned designate of Chief Justice overruled
the objection and allowed the application and
appointed new arbitrator for deciding the disputes
arising between the parties to the application in
relation to the house. It is this order, which was
impugned in the special leave to appeal before this
Court. Allowing the appeal and setting aside of the
order of the High Court, this Court held that firstly,
the Will did not contain any such clause; Secondly,
even assuming that it had any such clause then also it
was merely an expression of the wish by the testator
that the disputes relating to bequeathed property
should be settled by the arbitrator and nothing more.
It was held that in no case the Will could be
considered as constituting an arbitration agreement;
21Page 22
Thirdly, even if there was some declaration made by
the testator subsequent to the execution of Will to this
effect yet since it was a unilateral declaration made by
the father and hence by no stretch of imagination
such declaration could be considered as an arbitration
agreement among his children. It was further held that
at best such declaration could be taken as an
expression of a fond hope of a father that his children
should get the disputes settled in case if they arise
between them by means of arbitration but certainly it
did not partake the nature of an arbitration agreement
within the meaning of Section 2(b) read with Section 7
of the Act. Justice Raveendran, speaking for the
Bench, succinctly dealt with this issue in paras 18 to
22 and held as under:
“18. In this case, admittedly, there is no
document signed by the parties to the
dispute, nor any exchange of letters, telex,
telegrams (or other means of
22Page 23
telecommunication) referring to or recording
an arbitration agreement between the
parties. It is also not in dispute that there is
no exchange of statement of claims or
defence where the allegation of existence of
an arbitration agreement by one party is not
denied by the other. In other words, there is
no arbitration agreement as defined in
Section 7 between the parties.
19. In Jagdish Chander v. Ramesh Chander,
(2007) 5 SCC 719, this Court held: (SCC p.
726, para 11)
“11. The existence of an arbitration
agreement as defined under Section 7 of the
Act is a condition precedent for exercise of
power to appoint an arbitrator/Arbitral
Tribunal, under Section 11 of the Act by the
Chief Justice or his designate. It is not
permissible to appoint an arbitrator to
adjudicate the disputes between the parties,
in the absence of an arbitration agreement or
mutual consent.”
20. While the respondents rely upon the will,
the appellant denies the existence of any
such will. The validity of the will is pending
consideration in the two civil suits filed by
the appellant and the first respondent,
referred to above. The alleged will,
admittedly, does not contain any provision
for arbitration, though the learned designate
has proceeded on an erroneous assumption
that the will provides for arbitration. Even if
the will had provided for reference of
disputes to arbitration, it would be merely an
expression of a wish by the testator that the
disputes should be settled by arbitration and
23Page 24
cannot be considered as an arbitration
agreement among the legatees.
21. In this case, according to the
respondents, the provision for arbitration is
not in the will but in a subsequent
declaration allegedly made by Durganarayan
Sharma, stating that if there is any dispute in
regard to his will dated 28-12-2003, it shall
be referred to his friend, U.N. Bhandari,
Advocate, as the sole arbitrator whose
decision shall be final and binding on the
parties. A unilateral declaration by a father
that any future disputes among the sons
should be settled by an arbitrator named by
him, can by no stretch of imagination be
considered as an arbitration agreement
among his children, or such of his children
who become parties to a dispute. At best,
such a declaration can be an expression of a
fond hope by a father that his children, in the
event of a dispute, should get the same
settled by arbitration. It is for the children, if
and when they become parties to a dispute,
to decide whether they would heed to the
advice of their father or not. Such a wish
expressed in a declaration by a father, even if
proved, cannot be construed as an agreement
in writing between the parties to the dispute
agreeing to refer their disputes to arbitration.
22. We are therefore of the view that there is
no arbitration agreement between the parties
and the learned designate committed a
serious error in allowing the application
under Sections 11 and 15(2) of the Act and
holding that there is an arbitration
agreement between the parties to the dispute
and appointing an arbitrator.”
24Page 25
31) When we examine the facts of the case at hand
keeping in view the facts and the law laid down in the
case of Vijay Kumar Sharma (supra), we find
similarity on facts and law.
32) Though case of Vijay Kumar Sharma dealt with
a case relating to execution of a "Will" whereas the
case at hand deals with execution of the "Trust Deed”
yet, in our considered view, it does not make any
significant difference so far as the applicability of the
principle of law laid down in Vijay Kumar Sharma to
the facts of the case at hand is concerned.
33) The reasons are not far to seek. In the case of a
Will, the testator executes the Will in favour of
legatee(s) whereas in the case of a Trust, the settlor
executes the deed in favour of the beneficiaries. In
both the cases, it is the testator/settlor who signs the
document alone. That apart, both the deeds convey
25Page 26
the interest in the estate in favour of the legatees
or/and beneficiaries. However, since
legatee/beneficiaries do not sign the document or we
may say are not required to sign such document, they
are not regarded as party to such deed despite
legatee/beneficiaries/trustees accepting the deed.
Such deed, therefore, in our opinion, does not partake
the nature of an agreement between such parties.
34) We are, therefore, of the view that if the Will is
held not to constitute an arbitration agreement despite
containing an arbitration clause therein - a fortiori, the
Trust Deed can also not be held to constitute an
agreement much less an arbitration agreement despite
containing an arbitration clause therein.
35) In the light of foregoing discussion, we hold that
the Trust Deed including the arbitration clause (clause
26Page 27
20) does not satisfy the requirements of Section 2(b)
and 2(h) read with Section 7 of the Act and hence, the
Trust Deed cannot be construed as an “arbitration
agreement” within the meaning of Section 7 of the Act.
36) The aforesaid issue can be examined from yet
another angle as was examined by the High Court of
Calcutta in Bijoy Ballav Kundu & Anr. Vs. Tapeti
Ranjan Kundu, AIR 1965 Calcutta 628.
37) The facts of the Bijoy Ballav Kundu’s case
(supra) were that One Dhananjay Kundu, a resident of
Calcutta was the owner of a house. He executed a
trust/settlement deed wherein he nominated two
trustees to manage the affairs of the Trust. He
conveyed his house together with Rs.500/- to the
trustees as the corpus of the Trust to carry on its
activities for the benefit of the beneficiaries. The Trust
Deed had several clauses providing therein as to how
27Page 28
trustee and beneficiaries should carry out the
activities of the Trust, how they should manage the
Trust affairs and maintain its accounts etc. Clause 12
provided that in the event of any dispute/differences
arising between the trustees concerning management
and the affairs of the Trust, the same shall be referred
to named arbitrator who would decide the disputes in
accordance with the provisions of Indian Arbitration
Act, 1940.
38) After some time, the disputes arose between the
trustees concerning the affairs and the management of
the Trust. They were accordingly referred to the
arbitrator in terms of clause 12 for his decision. One
trustee, however, objected to making of the reference
to the arbitrator. The arbitrator, however, delivered the
award. One trustee, who had objected to making of
the reference to the arbitrator, challenged the legality
28Page 29
of the award in the civil Court inter alia on the ground
that since there was no arbitration agreement between
the parties (trustees) to make reference to the
arbitrator and hence the award passed by the
arbitrator is rendered without jurisdiction and is,
therefore, liable to be set aside. The Court upheld the
objection and set aside the award. The aggrieved
trustee appealed to the Calcutta High Court.
39) The Division Bench of the High Court, by their
well-reasoned judgment, examined the issue thread
bear in the context of the provisions of the Trust Act
and the Arbitration Act 1940 and while upholding the
order of the Trial Court dismissed the appeal. It is
apposite to mention the reasoning of Their Lordships
hereinbelow:
“5. ………………… The question however in
this case is, as to whether the trustees can be
said to be a party to any agreement at all for
referring their disputes to arbitration. The
way Mr. Basak argues is this: He says that
29Page 30
the deed of settlement directs that there
shall be such a reference to arbitration and
the trustees by their conduct in accepting
the trusteeship and agreeing to act as
trustees must be said to be parties to that
agreement or to have become parties to the
agreement by their conduct. In other words,
once they accept the trust, they must be
deemed to be parties to the agreement for
reference to arbitration, which according to
the learned counsel is contained in the
arbitration clause. In my opinion, this
contention is not sound. In order to become
an agreement there must be a proposal and
an acceptance. If we are to hold that the
arbitration clause constitutes the written
agreement, then we must hold that each
trustee has, at some point of time, made a
proposal to the other trustee or trustees as to
whether the disputes should be referred to
arbitration and each of them has accepted
the same. In the circumstances of this case,
it can never be said that any such incident
has ever happened. By accepting a trust, a
trustee merely undertakes to carry out the
terms of the trust, in so far as the same may
be in accordance with law. The reference to
arbitration is only one of the many terms of
the deed of settlement. There are other
directions, for example, directions as to the
amount that should be expended upon
diverse matters or diverse acts done. It can
never be said that in accepting the trust
there is any question of the trustees agreeing
among themselves that such amount should
be expended or such acts done. Being
trustees, they are bound to carry out the
provisions of the deed of settlement. There
can be no question of any agreement
amongst themselves; otherwise we are faced
30Page 31
with this absurd situation that with regard to
every provisions in the deed of trust we have
to visualize the trustees agreeing among
themselves to carry it out by making a
proposal and an acceptance. The learned
Judge has pointed out that in order to accept
a trust it is not necessary to signify to the
other trustees any willingness to do so or to
enter into any agreement to do or abstain
from doing anything. In other words, no
question of any proposal by one trustee or
acceptance of the same by another arises. It
may be an attractive argument to say that
trustees having consented to accept
trusteeship under a deed of trust must have
agreed to carry out each and every term
contained in it. That however is quite
different from saying that they have entered
into a written agreement amongst themselves
to do so. The provision as to reference of
disputes to arbitration is a matter that
concerns the jurisdiction of courts.
Ordinarily, the Courts are zealous of their
jurisdiction and can only allow it to be
curtailed by some provision of law. The
provisions of the Indian Arbitration Act
constitute such a law, but the provision must
be strictly construed. In order that there may
be a reference to arbitration which ousts the
jurisdiction of Courts, the parties must enter
into an arbitration agreement. That is a
matter that must be governed by the law and
in a given case it must be shown that the
parties have lawfully entered into such an
agreement and there is in existence a lawful
agreement. Nothing short of it can support
such an agreement and any reference to
arbitration or an award consequent thereon,
in contravention of the provisions of the law
cannot be supported and must be declared
31Page 32
invalid. In our opinion, the conclusions
reached by the learned Judge are correct on
that point and must be upheld. In the facts of
this case it must be held that there was no
arbitration agreement and no valid reference
to arbitration…….”
40) We find that the facts of the case at hand and the
one involved in the case of Bijoy Ballav Kundu (supra)
are identical. We are in agreement with the aforesaid
reasoning of Their Lordships which, in our opinion,
lays down the correct principle of law on the subject.
Indeed, Their Lordships examined the issue in the
context of definition of “arbitration agreement” as
defined in Section 2(a) of Arbitration Act, 1940
whereas the case at hand is required to be examined
in the context of definition of “arbitration agreement”
as defined in Section 2(b) and 2(h) read with Section 7
of the Act 1996, which is quite different from the
earlier definition.
32Page 33
41) As rightly held by the Calcutta High Court in the
case of Bijoy Ballav Kundu (supra), there is always a
proposal and then its acceptance in the case of every
agreement, which is not required in the case of
creation of the Trust because in the case of a Trust,
the trustee and beneficiary though accept its creation
but by such acceptance, they merely undertake to
carry out the terms of the Trust Deed in so far as the
same may be in accordance with law. The clause
relating to arbitration in the Trust Deed is one of the
several clauses. The other clauses which deal with
several types of directions to the trustees and
beneficiaries such as how the Trust should be
managed, how the amount of the Trust should be
spent etc. are not in the nature of agreement between
the trustees or/and beneficiaries. In other words, by
accepting the Trust Deed, it cannot be said that the
33Page 34
trustees or beneficiaries have agreed amongst
themselves as to how they should spend the money or
how they should manage the affairs of the Trust or
receive any benefit.
42) Indeed, in such case, the trustees or/and
beneficiaries are only required to carry out the
provisions of the Trust Deed. There cannot, therefore,
be any agreement inter se trustees or beneficiaries to
carry out any such activity. If that were to be so then
the trustees/beneficiaries would have to give proposal
and acceptance in respect of each clause of the Trust
Deed inter se. It would be then a sheer absurdity and
hence such situation, in our view, cannot be
countenanced.
43) As rightly held in Bijoy Ballav Kundu (supra) to
which we agree that the clause in an agreement, which
provides for deciding the disputes arising out of such
agreement through private arbitration, affects the
jurisdiction of the Civil Court and the ouster of
jurisdiction of Courts cannot be inferred readily. The
Arbitration Act is one such law, which provides for
ouster of jurisdiction of the Civil Courts. The Act,
inter alia, provides a forum for deciding the disputes
inter se parties to an agreement through arbitration.
Such clause, in our opinion, requires strict rule of
interpretation to find out whether it provides an ouster
of jurisdiction and, if so, to which
Court/Tribunal/Authority as the case may be. In the
case at hand, when we apply this principle of
interpretation, we do not find that clause 20 enables
the arbitrator to assume the jurisdiction to decide the
disputes arising between the beneficiaries. In other
words, clause 20 does not satisfy the rigour of
Sections 2(b), 2(h) and 7 of the Act.
44) In the light of what we have discussed above, we
are of the considered opinion that clause 20 in the
Trust Deed, which provides for settlement of
disputes/differences arising between the beneficiaries
of the Trust, does not constitute an arbitration
agreement inter se beneficiaries within the meaning of
Section 7 of the Act.
45) This takes us to consider the third argument of
Mr. Shekhar Naphade, learned senior counsel for the
appellants. Though in view of what we have held
above, it may not be necessary to consider this
argument yet we feel that since it arises out of this
case and being a pure legal question, the same can be
decided in this appeal.
46) The argument of learned counsel was that any
dispute relating to the management and affairs of the
36Page 37
Trust including the disputes inter se trustees and the
beneficiaries in relation to the Trust, its affairs,
management and properties cannot be decided by the
arbitrator under the Act even though there may be a
clause to that effect in the Deed. It was his submission
that the remedy to get such disputes decided through
arbitration is impliedly barred, if not, expressly by
virtue of the scheme and the elaborate provisions of
the Trust Act. Learned counsel pointed out that the
Trust Act is a complete Code in itself and provides a
comprehensive machinery to deal with all issues
relating to Trust, the trustees and the beneficiaries
including providing adequate forum (Civil Court) for
adjudication of all such disputes arising between them
and the Trust, and hence, the jurisdiction of the Civil
Court should be given overriding effect to the
exclusion of jurisdiction of private arbitration under
37Page 38
the Act by applying implied bar of jurisdiction
recognized in law.
47) Though learned counsel for the respondents
countered the aforesaid submission of learned senior
counsel for the appellants but we find merit in the
submission of the learned counsel for the appellants
for the reasons mentioned infra.
48) Before we examine the Scheme of the Trust Act,
we consider it apposite to take note of the case law,
which has bearing on this issue. The question came
up for consideration before this Court in the case of
Booz Allen & Hamilton Inc. vs. SBI Home Finance
Ltd. & Ors. (2011) 5 SCC 532 as to what is the
meaning of the term "arbitrability" and secondly,
which type of disputes are capable of settlement by
arbitration under the Act. Their Lordships framed
three questions to answer the question viz., - (1)
38Page 39
whether the disputes having regard to their nature
could be resolved by a private forum chosen by the
parties (arbitral Tribunal) or whether such disputes
exclusively fall within the domain of public Fora
(Courts); (2) Whether the disputes are covered by the
arbitration agreement; and (3) whether the parties
have referred the disputes to arbitrator?
49) This Court speaking through Justice Raveendran
answered the questions. While answering question No.
1 with which we are concerned here, Their Lordships
carved out six categories of cases. These six categories
of cases were held as not capable for being decided by
private arbitration under the Arbitration Act even
though parties agreed for their settlement through
private arbitration. This is what Their Lordships held
in Paras 35 and 36:
“35. The Arbitral Tribunals are private fora
chosen voluntarily by the parties to the
39Page 40
dispute, to adjudicate their disputes in place
of courts and tribunals which are public fora
constituted under the laws of the country.
Every civil or commercial dispute, either
contractual or non-contractual, which can be
decided by a court, is in principle capable of
being adjudicated and resolved by arbitration
unless the jurisdiction of the Arbitral
Tribunals is excluded either expressly or by
necessary implication. Adjudication of
certain categories of proceedings are reserved
by the legislature exclusively for public fora
as a matter of public policy. Certain other
categories of cases, though not expressly
reserved for adjudication by public fora
(courts and tribunals), may by necessary
implication stand excluded from the purview
of private fora. Consequently, where the
cause/dispute is inarbitrable, the court where
a suit is pending, will refuse to refer the
parties to arbitration, under Section 8 of the
Act, even if the parties might have agreed
upon arbitration as the forum for settlement
of such disputes.
36. The well-recognised examples of
non-arbitrable disputes are: (i) disputes
relating to rights and liabilities which give
rise to or arise out of criminal offences; (ii)
matrimonial disputes relating to divorce,
judicial separation, restitution of conjugal
rights, child custody; (iii) guardianship
matters; (iv) insolvency and winding-up
matters; (v) testamentary matters (grant of
probate, letters of administration and
succession certificate); and (vi) eviction or
tenancy matters governed by special statutes
where the tenant enjoys statutory protection
against eviction and only the specified courts
are conferred jurisdiction to grant eviction or
decide the disputes.”
40Page 41
50) The question to be considered in this appeal is
whether the disputes relating to affairs and
management of the Trust including the disputes
arising inter se trustees, beneficiaries in relation to
their appointment, powers, duties, obligations,
removal etc. are capable of being settled through
arbitration by taking recourse to the provisions of the
Act, if there is a clause in the Trust Deed to that effect
or such disputes have to be decided under the Trust
Act with the aid of forum prescribed under the said
Act.
51) Keeping in view the aforesaid principle of law, let
us now examine the Scheme of the Trust Act. The
Trust Act was enacted much prior to independence
with an object to define and amend the law relating to
private Trusts and the trustees. The Act consists of 93
Sections, which are divided, in IX chapters.
41Page 42
52) Chapter I deals with short title, commencement,
repeal of enactments and interpretation of words
(Sections 1 to 3). Chapter II deals with the creation of
a Trust (Sections 4 to 10). Chapter III deals with the
duties and liabilities of the Trustees (Sections 11 to
30). Chapter IV deals with the rights and powers of the
Trustees (Sections 31 to 45). Chapter V deals with the
disabilities of the Trustees (Sections 46 to 54). Chapter
VI deals with the rights and liabilities of the
beneficiaries (Sections 55 to 69). Chapter VII deals
with vacating the office of the Trustee (Sections 70 to
76). Chapter VIII deals with extinction of the Trusts
(Sections 77 to 79) and Chapter IX deals with certain
obligations in the nature of Trust (Sections 80 to 93).
53) Even cursory perusal of the headings of each
Chapter including what is provided in the Sections
would go to show that the legislature has dealt with
42Page 43
and taken care of each subject comprehensively and
adequately. It starts from the creation of the Trust,
how it is required to be created (deed), who can create
(author of the Trust/settlor), who can
manage(trustees), for whose benefit it can be created
(beneficiaries), their qualifications for appointment,
grounds for removal, rights and duties, restrictions on
their exercise of powers, obligations and legal remedies
available to get the grievances settled etc. are all
specified in the Trust Act.
54) So far as legal remedies available to the author of
the Trust/settlor, Trustees and the beneficiaries for
ventilating their several grievances in respect of their
rights duties, removal and obligations under the Trust
Deed and the Trust Act are concerned, they are
specifically provided in Sections 7, 11, 34, 36, 41, 45,
46, 49, 53, 71, 72, 73 and 74 of the Trust Act. These
43Page 44
sections, in specific terms, confer jurisdiction on Civil
Court and provides that an aggrieved person may
approach the principal Civil Court of Original
Jurisdiction for adjudication of his grievances. This
clearly shows the intention of the legislature that the
legislature intended to confer jurisdiction only on Civil
Court for deciding the disputes arising under the
Trust Act.
55) The Constitution Bench of this Court in a leading
case of Dhulabhai etc. vs. State of Madhya Pradesh
& Anr., AIR 1969 SC 78 examined the question as to
how the exclusion of jurisdiction of Civil Court in the
context of express or implied bar created in any
special law should be decided. Their Lordships
examined the question in the context of Section 9 of
the Code of Civil Procedure, 1908 and the bar created
in special law.
44Page 45
56) Justice Hidayatullah, the learned Chief Justice
speaking for the Bench laid down 7 conditions for
determining the question of bar for prosecuting the
remedies in the Civil Court or judicial
Tribunals/authorities constituted under any special
law. Though the issue examined in Dhulabhai's case
(supra) pertained to bar created in special law vis-a-vis
filing of the civil suit by an aggrieved party, yet the
decision, in our view, lays down the general principle
as to how the courts should decide the issue of
express or/and implied bar in the context of the
remedies available in law.
57) So far as the question involved in the case at
hand is concerned, it is governed by condition No. 2 of
Dhulabhai’s case (supra) which reads as under:
“(2) Where there is an express bar of the
jurisdiction of the court, an examination of
the scheme of the particular Act to find the
adequacy or the sufficiency of the remedies
45Page 46
provided may be relevant but is not decisive
to sustain the jurisdiction of the civil court.
Where there is no express exclusion the
examination of the remedies and the scheme
of the particular Act to find out the
intendment becomes necessary and the
result of the inquiry may be decisive. In the
latter case it is necessary to see if the statute
creates a special right or a liability and
provides for the determination of the right or
liability and further lays down that all
questions about the said right and liability
shall be determined by the Tribunals so
constituted, and whether remedies normally
associated with actions in civil courts are
prescribed by the said statute or not.”
58) When we examine the Scheme of the Trust Act in
the light of the principle laid down in condition No. 2,
we find no difficulty in concluding that though the
Trust Act do not provide any express bar in relation to
applicability of other Acts for deciding the disputes
arising under the Trust Act yet, in our considered
view, there exists an implied bar of exclusion of
applicability of the Arbitration Act for deciding the
disputes relating to Trust, trustees and beneficiaries
Nainesh Kishor Shah, 3) Kumar Grishma Kishor Shah,
4) Master Jayesh Dinesh Shah, 5) Master Utpal
Dinesh Shah and 6) Master Monil Dinesh Shah,
(hereinafter referred to as the “beneficiaries”) in the
Trust Deed. To manage the affairs of the Trust and its
properties, the settlor appointed two persons - Shri
Dinesh Nandlal Shah and Smt. Saryu Kishor Shah as
Managing Trustees.
5) Clause 20 of the Trust Deed, which is relevant for
the disposal of this case, provides that every dispute
or differences regarding the interpretation of any of the
clauses or provisions or the contents of the Trust Deed
or any dispute inter se trustees or disputes between
the trustees and beneficiaries or disputes between
beneficiaries inter se as and when arise, the same
would be resolved in pursuance of the provisions of
3Page 4
the Indian Arbitration Act, 1940 and the decision of
arbitrator(s) shall be final and binding on the parties
to the arbitration.
6) Unfortunately, as it appears from the record of
the case and from the conduct of the parties, the wish
of the settlor could not be fulfilled in letter and spirit
for which he had formed the Trust and soon after its
formation somewhere from 1989-90 onwards, the
differences cropped up inter se beneficiaries with
respect to the manner in which the affairs and the
business of the Trust were being carried on. This led
to tendering of the resignation by one trustee from
Trusteeship. It was followed by exchange of legal
notices inter se beneficiaries through their lawyers
making therein allegations and counter allegations
against each other about the manner of functioning of
the Trust, its affairs and demanding accounts of the
4Page 5
Trust etc. A demand was also made in the notice that
since parties have not been able to amicably resolve
their disputes/differences, therefore, all such
disputes/differences be referred to the arbitrator for
his decision as per clause 20 of the Trust deed.
7) Since the parties could not settle the
disputes/differences and nor could they agree for the
appointment of the arbitrator amicably, respondent
Nos. 1 to 3 (one set of beneficiaries) filed an
application under Section 11 of the Act being
Arbitration Application No. 278/2012 in the High
Court of Bombay against the appellants (other set of
beneficiaries) praying for referring all
disputes/differences, which had arisen between the
parties, to the arbitrator in terms of clause 20 of the
Trust Deed. The application was founded on the
aforementioned facts for claiming the reliefs.
5Page 6
8) The appellants herein (respondents before the
High Court) contested the application. Apart from
other grounds, the main legal ground of contest was
that the application filed under Section 11 of the Act is
not maintainable. It was contended that when
admittedly the appellants and the respondents are
neither parties to the Trust Deed and nor its
signatories having signed the Trust Deed, they cannot
be termed as “party” to such Trust Deed and nor can
such Trust Deed be termed as an “agreement” much
less an “arbitration agreement” within the meaning of
Section 2(b) and 2(h) read with Section 7 of the Act. It
was contended that the sine qua non for invoking the
jurisdiction under Section 11 of the Act is existence of
a valid and enforceable arbitration agreement, which
is lacking in this case, and hence the application filed
6Page 7
under Section 11 of the Act is not maintainable and is
liable to be dismissed on this ground alone.
9) The learned designated Judge, by impugned
judgment, allowed the application. He held that since
parties to the application were minors at the time of
execution of the Trust Deed, they were incapable of
signing the Trust Deed. He further held that now all
the parties have become major and have taken benefit
of the Trust Deed as beneficiaries throughout their
minority and then on attaining the majority, they
should be held as “party” to the Trust Deed within the
meaning of Section 2(h) of the Act. He also held that
once the beneficiaries are held parties to the Trust
Deed, they have a right to take recourse to
proceedings under Section 11 of the Act for
appointment of arbitrator by invoking clause 20 of the
7Page 8
Trust Deed for deciding the disputes arising between
them relating to the affairs of the Trust.
10) With these findings, the learned Judge proceeded
to invoke clause 20 of the Trust Deed and appointed
Shri S.R.Shah - former Mumbai City Civil Judge as a
sole arbitrator for deciding the disputes/differences
which had arisen between the parties to the
application. It is against this order, the respondents,
who as stated above, are other group of beneficiaries,
have felt aggrieved and filed this appeal by way of
special leave before this Court.
11) Heard Mr. Shekhar Naphade, learned senior
counsel for the appellants and Mr. Gaurav Agrawal,
learned counsel for the respondents.
12) Mr. Shekhar Naphade, learned senior counsel
appearing for the appellants while assailing the
8Page 9
legality and correctness of the impugned order has
made three-fold submissions.
13) In the first place, learned senior counsel
submitted that the learned designated Judge erred in
allowing the application filed under Section 11 of the
Act. In his submission, the application was liable to be
dismissed as not maintainable.
14) In the second place, learned senior counsel
submitted that when admittedly parties to the
application, who are beneficiaries of the Trust, did not
sign the Trust Deed, they could not be held parties to
such Trust Deed. Learned counsel urged that the first
and foremost requirement for filing an application
under Section 11 of the Act is that there has to be in
existence a valid and enforceable arbitration
agreement and such agreement, according to him,
should be reduced in writing and lastly, it must be
9Page 10
signed by the parties to the application as provided
under Section 2(h) read with Section 7(4) of the Act. It
was urged that since the respondents have not been
able to prove this basic requirement of law, the
application filed by the respondents under Section 11
of the Act was liable to be dismissed for want of
non-compliance of the requirement of Section 2(b) and
2(h) read with Section 7 of the Act.
15) In the third place, learned senior counsel
submitted that apart from what is urged above, since
the creation, affairs of the Trust, rights, obligations,
removal, duties and legal remedies to seek redressal of
grievances by the Settlor, Trustees and beneficiaries
are governed by the Indian Trust Act, 1882
(hereinafter referred to as “the Trust Act”), which is a
complete code in itself to deal with the aforementioned
matters, the provisions of the Arbitration Act for
10Page 11
deciding any dispute relating to affairs of the Trust
including dispute inter se the stakeholders mentioned
above are not applicable and the remedy of the
stakeholders would be to take recourse to the
provisions of the Trust Act for ventilating their
grievances in an appropriate forum specified in the
Trust Act.
16) It is these submissions, which were elaborated by
the learned senior counsel in his argument, with
reference to the Scheme of the Trust Act and its
various provisions and the decisions, which dealt with
these issues.
17) In reply, Mr. Gaurav Agrawal, learned counsel for
the respondents, supported the reasoning and the
conclusion arrived at by the designated Judge and
prayed for its upholding calling no interference therein
11Page 12
in this appeal. He also elaborated his submissions by
referring to some provisions of the Act and case law.
18) Having heard learned counsel for the parties and
on perusal of the record of the case, we find force in
the submissions of Mr. Shekhar Naphade, learned
senior counsel for the appellants.
19) The basic question, which arises for
consideration in this appeal, is whether a clause in a
Trust Deed, which provides for resolving the disputes
arising between the beneficiaries of the Trust through
arbitration, can constitute an “arbitration agreement”
within the meaning of Section 2(b) and 2(h) read with
Section 7 of the Act and whether the application filed
by the respondents under Section 11 of the Act can be
held as maintainable?
12Page 13
20) Section 2(b) and 2(h) and Section 7 of the Act are
relevant to examine the question involved in the case.
These Sections read as under:
2. Definitions.-(1)…………………………………..
(a)……………………………………………..
(b) “arbitration agreement” means an
agreement referred to in section7;
(h) “party” means a party to an arbitration
agreement.
7. Arbitration agreement.-(1) In this Part,
“arbitration agreement” means an agreement
by the 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.
(2) An arbitration agreement may be in the
form of an arbitration clause in a contract or
in the form of a separate agreement.
(3) An arbitration agreement shall be in
writing.
(4) An arbitration agreement is in writing if it
is contained in-
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or
other means of telecommunication which
provide a record of the agreement; or
13Page 14
(c) an exchange of statements of claim and
defence in which the existence of the
agreement is alleged by one party and not
denied by the other.
(5) The reference in a contract to a document
containing an arbitration clause constitutes
an arbitration agreement if the contract is in
writing and the reference is such as to make
that arbitration clause part of the contract.”
21) Section 2(b) defines "arbitration agreement" and
stipulates that arbitration agreement means
arbitration agreement referred to in Section 7 whereas
Section 2(h) defines the word "party" to mean a party
to an arbitration agreement.
22) Section 7 defines “arbitration agreement”. It has
five sub-sections. Sub Section (1) provides that
arbitration agreement means an agreement by the
parties to submit to arbitration all or certain disputes
which have arisen or may arise between them in
respect of a defined legal relationship, whether
contractual or not. Sub-section (2) provides that an
14Page 15
arbitration agreement may be in the form of an
arbitration clause in a contract or it may be in the
form of a separate agreement. Sub-section (3) says
that an arbitration agreement shall be in writing.
Sub- section (4) which has three clauses (a), (b) and (c)
says that a document which contains an arbitration
agreement is to be signed by the parties. Clause (b)
recognizes an arbitration agreement by exchange of
letters, telex, telegrams or other means of
telecommunication which provide a record of such
agreement and clause (c) also recognizes an
arbitration agreement by an exchange of statements of
claim and defence in which existence of the agreement
is alleged by one party and not denied by the other.
23) A reading of the aforementioned sections in
juxtaposition goes to show that in order to constitute a
valid, binding and enforceable arbitration agreement,
15Page 16
the requirements contained in Section 7 have to be
satisfied strictly. These requirements, apart from
others, are (1) there has to be an agreement (2) it has
to be in writing (3) parties must sign such agreement
or in other words, the agreement must bear the
signatures of the parties concerned and (4) such
agreement must contain an arbitration clause.
24) In other words, aforementioned four conditions
are sine qua non for constituting a valid and
enforceable arbitration agreement. Failure to satisfy
any of the four conditions would render the arbitration
agreement invalid and unenforceable and, in
consequence, would result in dismissal of the
application filed under Section 11 of the Act at its
threshold.
25) The question as to what are the conditions which
are necessary for constituting a valid and enforceable
16Page 17
arbitration agreement came up for consideration
before this Court in Vijay Kumar Sharma Alias
Manju vs. Raghunandan Sharma Alias Baburam &
Ors., 2010 (2) SCC 486. In this case, a question arose
in the context as to whether a clause in a Will, which
provides that in the event of any dispute arising in
relation to the properties bequeathed by the testator
would be settled by named arbitrator, can such a
clause or/and the Will be considered as an arbitration
agreement within the meaning of Section 2(b) read
with Section 7 of the Act for the purpose of invoking
the jurisdiction of the High Court under Section 11 for
appointment of an arbitrator for resolving the
disputes. This question arose on the following facts.
26) The father executed a Will in favour of his one
son whereby he bequeathed to him his one house. He
had another son to whom he did not give any share in
17Page 18
the said house. In the Will, father appointed two
executors and expressed that if any dispute arises in
relation to the bequeathed property, one named
arbitrator will decide such dispute. On the death of
the father, one son filed a suit for declaration of his
1/6th share in the bequeathed property and also
demanded partition whereas the other son filed a suit
on the strength of the Will and claimed his exclusive
ownership to the exclusion of all his brothers and
sisters. The suits were clubbed for trial.
27) The two executors, who were also made parties to
the suits, filed an application under Section 8 of the
Act contending therein that the testator had declared
in the Will as also in one separate declaration that in
the event of any dispute arising in relation to the
bequeathed house, the same will be referred to a
named arbitrator for his decision. It was, therefore,
18Page 19
contended that in the light of this, the two civil suits
filed by the parties are liable to be dismissed as being
not maintainable with a liberty to be granted to the
parties to submit themselves to the jurisdiction of the
named arbitrator so as to enable the arbitrator to
decide the disputes as per arbitration clause contained
in the Will/declaration.
28) The Trial Court allowed the application filed by
the executors under Section 8 of the Act and, in
consequence, dismissed the suits with a liberty
granted to the parties to approach the named
arbitrator. One party, accordingly, submitted himself
to the jurisdiction of the named arbitrator and filed his
claim whereas the other party objected to the
jurisdiction of the arbitrator. He contended that there
was neither any arbitration agreement between the
parties for appointment of any arbitrator and nor he
19Page 20
ever signed the Will or any declaration, if made, by his
late father and nor gave his consent for appointment
of any named arbitrator. He, therefore, challenged the
very initiation of arbitration proceedings before the
arbitrator as being without jurisdiction.
29) This led to named arbitrator withdrawing from
the arbitral proceedings which, in turn, gave rise to
the filing of the application by one son under Section
11 of the Act before the High Court of Rajasthan. He
prayed therein for appointment of new arbitrator in
place of earlier named arbitrator. The application was
contested by other son reiterating the same objection,
which he had raised earlier, namely, that there is no
valid and enforceable arbitration agreement between
the parties and neither the Will and nor the
declaration constitute any arbitration agreement for
20Page 21
deciding any dispute between them in relation to the
house in suit.
30) The learned designate of Chief Justice overruled
the objection and allowed the application and
appointed new arbitrator for deciding the disputes
arising between the parties to the application in
relation to the house. It is this order, which was
impugned in the special leave to appeal before this
Court. Allowing the appeal and setting aside of the
order of the High Court, this Court held that firstly,
the Will did not contain any such clause; Secondly,
even assuming that it had any such clause then also it
was merely an expression of the wish by the testator
that the disputes relating to bequeathed property
should be settled by the arbitrator and nothing more.
It was held that in no case the Will could be
considered as constituting an arbitration agreement;
21Page 22
Thirdly, even if there was some declaration made by
the testator subsequent to the execution of Will to this
effect yet since it was a unilateral declaration made by
the father and hence by no stretch of imagination
such declaration could be considered as an arbitration
agreement among his children. It was further held that
at best such declaration could be taken as an
expression of a fond hope of a father that his children
should get the disputes settled in case if they arise
between them by means of arbitration but certainly it
did not partake the nature of an arbitration agreement
within the meaning of Section 2(b) read with Section 7
of the Act. Justice Raveendran, speaking for the
Bench, succinctly dealt with this issue in paras 18 to
22 and held as under:
“18. In this case, admittedly, there is no
document signed by the parties to the
dispute, nor any exchange of letters, telex,
telegrams (or other means of
22Page 23
telecommunication) referring to or recording
an arbitration agreement between the
parties. It is also not in dispute that there is
no exchange of statement of claims or
defence where the allegation of existence of
an arbitration agreement by one party is not
denied by the other. In other words, there is
no arbitration agreement as defined in
Section 7 between the parties.
19. In Jagdish Chander v. Ramesh Chander,
(2007) 5 SCC 719, this Court held: (SCC p.
726, para 11)
“11. The existence of an arbitration
agreement as defined under Section 7 of the
Act is a condition precedent for exercise of
power to appoint an arbitrator/Arbitral
Tribunal, under Section 11 of the Act by the
Chief Justice or his designate. It is not
permissible to appoint an arbitrator to
adjudicate the disputes between the parties,
in the absence of an arbitration agreement or
mutual consent.”
20. While the respondents rely upon the will,
the appellant denies the existence of any
such will. The validity of the will is pending
consideration in the two civil suits filed by
the appellant and the first respondent,
referred to above. The alleged will,
admittedly, does not contain any provision
for arbitration, though the learned designate
has proceeded on an erroneous assumption
that the will provides for arbitration. Even if
the will had provided for reference of
disputes to arbitration, it would be merely an
expression of a wish by the testator that the
disputes should be settled by arbitration and
23Page 24
cannot be considered as an arbitration
agreement among the legatees.
21. In this case, according to the
respondents, the provision for arbitration is
not in the will but in a subsequent
declaration allegedly made by Durganarayan
Sharma, stating that if there is any dispute in
regard to his will dated 28-12-2003, it shall
be referred to his friend, U.N. Bhandari,
Advocate, as the sole arbitrator whose
decision shall be final and binding on the
parties. A unilateral declaration by a father
that any future disputes among the sons
should be settled by an arbitrator named by
him, can by no stretch of imagination be
considered as an arbitration agreement
among his children, or such of his children
who become parties to a dispute. At best,
such a declaration can be an expression of a
fond hope by a father that his children, in the
event of a dispute, should get the same
settled by arbitration. It is for the children, if
and when they become parties to a dispute,
to decide whether they would heed to the
advice of their father or not. Such a wish
expressed in a declaration by a father, even if
proved, cannot be construed as an agreement
in writing between the parties to the dispute
agreeing to refer their disputes to arbitration.
22. We are therefore of the view that there is
no arbitration agreement between the parties
and the learned designate committed a
serious error in allowing the application
under Sections 11 and 15(2) of the Act and
holding that there is an arbitration
agreement between the parties to the dispute
and appointing an arbitrator.”
24Page 25
31) When we examine the facts of the case at hand
keeping in view the facts and the law laid down in the
case of Vijay Kumar Sharma (supra), we find
similarity on facts and law.
32) Though case of Vijay Kumar Sharma dealt with
a case relating to execution of a "Will" whereas the
case at hand deals with execution of the "Trust Deed”
yet, in our considered view, it does not make any
significant difference so far as the applicability of the
principle of law laid down in Vijay Kumar Sharma to
the facts of the case at hand is concerned.
33) The reasons are not far to seek. In the case of a
Will, the testator executes the Will in favour of
legatee(s) whereas in the case of a Trust, the settlor
executes the deed in favour of the beneficiaries. In
both the cases, it is the testator/settlor who signs the
document alone. That apart, both the deeds convey
25Page 26
the interest in the estate in favour of the legatees
or/and beneficiaries. However, since
legatee/beneficiaries do not sign the document or we
may say are not required to sign such document, they
are not regarded as party to such deed despite
legatee/beneficiaries/trustees accepting the deed.
Such deed, therefore, in our opinion, does not partake
the nature of an agreement between such parties.
34) We are, therefore, of the view that if the Will is
held not to constitute an arbitration agreement despite
containing an arbitration clause therein - a fortiori, the
Trust Deed can also not be held to constitute an
agreement much less an arbitration agreement despite
containing an arbitration clause therein.
35) In the light of foregoing discussion, we hold that
the Trust Deed including the arbitration clause (clause
26Page 27
20) does not satisfy the requirements of Section 2(b)
and 2(h) read with Section 7 of the Act and hence, the
Trust Deed cannot be construed as an “arbitration
agreement” within the meaning of Section 7 of the Act.
36) The aforesaid issue can be examined from yet
another angle as was examined by the High Court of
Calcutta in Bijoy Ballav Kundu & Anr. Vs. Tapeti
Ranjan Kundu, AIR 1965 Calcutta 628.
37) The facts of the Bijoy Ballav Kundu’s case
(supra) were that One Dhananjay Kundu, a resident of
Calcutta was the owner of a house. He executed a
trust/settlement deed wherein he nominated two
trustees to manage the affairs of the Trust. He
conveyed his house together with Rs.500/- to the
trustees as the corpus of the Trust to carry on its
activities for the benefit of the beneficiaries. The Trust
Deed had several clauses providing therein as to how
27Page 28
trustee and beneficiaries should carry out the
activities of the Trust, how they should manage the
Trust affairs and maintain its accounts etc. Clause 12
provided that in the event of any dispute/differences
arising between the trustees concerning management
and the affairs of the Trust, the same shall be referred
to named arbitrator who would decide the disputes in
accordance with the provisions of Indian Arbitration
Act, 1940.
38) After some time, the disputes arose between the
trustees concerning the affairs and the management of
the Trust. They were accordingly referred to the
arbitrator in terms of clause 12 for his decision. One
trustee, however, objected to making of the reference
to the arbitrator. The arbitrator, however, delivered the
award. One trustee, who had objected to making of
the reference to the arbitrator, challenged the legality
28Page 29
of the award in the civil Court inter alia on the ground
that since there was no arbitration agreement between
the parties (trustees) to make reference to the
arbitrator and hence the award passed by the
arbitrator is rendered without jurisdiction and is,
therefore, liable to be set aside. The Court upheld the
objection and set aside the award. The aggrieved
trustee appealed to the Calcutta High Court.
39) The Division Bench of the High Court, by their
well-reasoned judgment, examined the issue thread
bear in the context of the provisions of the Trust Act
and the Arbitration Act 1940 and while upholding the
order of the Trial Court dismissed the appeal. It is
apposite to mention the reasoning of Their Lordships
hereinbelow:
“5. ………………… The question however in
this case is, as to whether the trustees can be
said to be a party to any agreement at all for
referring their disputes to arbitration. The
way Mr. Basak argues is this: He says that
29Page 30
the deed of settlement directs that there
shall be such a reference to arbitration and
the trustees by their conduct in accepting
the trusteeship and agreeing to act as
trustees must be said to be parties to that
agreement or to have become parties to the
agreement by their conduct. In other words,
once they accept the trust, they must be
deemed to be parties to the agreement for
reference to arbitration, which according to
the learned counsel is contained in the
arbitration clause. In my opinion, this
contention is not sound. In order to become
an agreement there must be a proposal and
an acceptance. If we are to hold that the
arbitration clause constitutes the written
agreement, then we must hold that each
trustee has, at some point of time, made a
proposal to the other trustee or trustees as to
whether the disputes should be referred to
arbitration and each of them has accepted
the same. In the circumstances of this case,
it can never be said that any such incident
has ever happened. By accepting a trust, a
trustee merely undertakes to carry out the
terms of the trust, in so far as the same may
be in accordance with law. The reference to
arbitration is only one of the many terms of
the deed of settlement. There are other
directions, for example, directions as to the
amount that should be expended upon
diverse matters or diverse acts done. It can
never be said that in accepting the trust
there is any question of the trustees agreeing
among themselves that such amount should
be expended or such acts done. Being
trustees, they are bound to carry out the
provisions of the deed of settlement. There
can be no question of any agreement
amongst themselves; otherwise we are faced
30Page 31
with this absurd situation that with regard to
every provisions in the deed of trust we have
to visualize the trustees agreeing among
themselves to carry it out by making a
proposal and an acceptance. The learned
Judge has pointed out that in order to accept
a trust it is not necessary to signify to the
other trustees any willingness to do so or to
enter into any agreement to do or abstain
from doing anything. In other words, no
question of any proposal by one trustee or
acceptance of the same by another arises. It
may be an attractive argument to say that
trustees having consented to accept
trusteeship under a deed of trust must have
agreed to carry out each and every term
contained in it. That however is quite
different from saying that they have entered
into a written agreement amongst themselves
to do so. The provision as to reference of
disputes to arbitration is a matter that
concerns the jurisdiction of courts.
Ordinarily, the Courts are zealous of their
jurisdiction and can only allow it to be
curtailed by some provision of law. The
provisions of the Indian Arbitration Act
constitute such a law, but the provision must
be strictly construed. In order that there may
be a reference to arbitration which ousts the
jurisdiction of Courts, the parties must enter
into an arbitration agreement. That is a
matter that must be governed by the law and
in a given case it must be shown that the
parties have lawfully entered into such an
agreement and there is in existence a lawful
agreement. Nothing short of it can support
such an agreement and any reference to
arbitration or an award consequent thereon,
in contravention of the provisions of the law
cannot be supported and must be declared
31Page 32
invalid. In our opinion, the conclusions
reached by the learned Judge are correct on
that point and must be upheld. In the facts of
this case it must be held that there was no
arbitration agreement and no valid reference
to arbitration…….”
40) We find that the facts of the case at hand and the
one involved in the case of Bijoy Ballav Kundu (supra)
are identical. We are in agreement with the aforesaid
reasoning of Their Lordships which, in our opinion,
lays down the correct principle of law on the subject.
Indeed, Their Lordships examined the issue in the
context of definition of “arbitration agreement” as
defined in Section 2(a) of Arbitration Act, 1940
whereas the case at hand is required to be examined
in the context of definition of “arbitration agreement”
as defined in Section 2(b) and 2(h) read with Section 7
of the Act 1996, which is quite different from the
earlier definition.
32Page 33
41) As rightly held by the Calcutta High Court in the
case of Bijoy Ballav Kundu (supra), there is always a
proposal and then its acceptance in the case of every
agreement, which is not required in the case of
creation of the Trust because in the case of a Trust,
the trustee and beneficiary though accept its creation
but by such acceptance, they merely undertake to
carry out the terms of the Trust Deed in so far as the
same may be in accordance with law. The clause
relating to arbitration in the Trust Deed is one of the
several clauses. The other clauses which deal with
several types of directions to the trustees and
beneficiaries such as how the Trust should be
managed, how the amount of the Trust should be
spent etc. are not in the nature of agreement between
the trustees or/and beneficiaries. In other words, by
accepting the Trust Deed, it cannot be said that the
33Page 34
trustees or beneficiaries have agreed amongst
themselves as to how they should spend the money or
how they should manage the affairs of the Trust or
receive any benefit.
42) Indeed, in such case, the trustees or/and
beneficiaries are only required to carry out the
provisions of the Trust Deed. There cannot, therefore,
be any agreement inter se trustees or beneficiaries to
carry out any such activity. If that were to be so then
the trustees/beneficiaries would have to give proposal
and acceptance in respect of each clause of the Trust
Deed inter se. It would be then a sheer absurdity and
hence such situation, in our view, cannot be
countenanced.
43) As rightly held in Bijoy Ballav Kundu (supra) to
which we agree that the clause in an agreement, which
provides for deciding the disputes arising out of such
agreement through private arbitration, affects the
jurisdiction of the Civil Court and the ouster of
jurisdiction of Courts cannot be inferred readily. The
Arbitration Act is one such law, which provides for
ouster of jurisdiction of the Civil Courts. The Act,
inter alia, provides a forum for deciding the disputes
inter se parties to an agreement through arbitration.
Such clause, in our opinion, requires strict rule of
interpretation to find out whether it provides an ouster
of jurisdiction and, if so, to which
Court/Tribunal/Authority as the case may be. In the
case at hand, when we apply this principle of
interpretation, we do not find that clause 20 enables
the arbitrator to assume the jurisdiction to decide the
disputes arising between the beneficiaries. In other
words, clause 20 does not satisfy the rigour of
Sections 2(b), 2(h) and 7 of the Act.
44) In the light of what we have discussed above, we
are of the considered opinion that clause 20 in the
Trust Deed, which provides for settlement of
disputes/differences arising between the beneficiaries
of the Trust, does not constitute an arbitration
agreement inter se beneficiaries within the meaning of
Section 7 of the Act.
45) This takes us to consider the third argument of
Mr. Shekhar Naphade, learned senior counsel for the
appellants. Though in view of what we have held
above, it may not be necessary to consider this
argument yet we feel that since it arises out of this
case and being a pure legal question, the same can be
decided in this appeal.
46) The argument of learned counsel was that any
dispute relating to the management and affairs of the
36Page 37
Trust including the disputes inter se trustees and the
beneficiaries in relation to the Trust, its affairs,
management and properties cannot be decided by the
arbitrator under the Act even though there may be a
clause to that effect in the Deed. It was his submission
that the remedy to get such disputes decided through
arbitration is impliedly barred, if not, expressly by
virtue of the scheme and the elaborate provisions of
the Trust Act. Learned counsel pointed out that the
Trust Act is a complete Code in itself and provides a
comprehensive machinery to deal with all issues
relating to Trust, the trustees and the beneficiaries
including providing adequate forum (Civil Court) for
adjudication of all such disputes arising between them
and the Trust, and hence, the jurisdiction of the Civil
Court should be given overriding effect to the
exclusion of jurisdiction of private arbitration under
37Page 38
the Act by applying implied bar of jurisdiction
recognized in law.
47) Though learned counsel for the respondents
countered the aforesaid submission of learned senior
counsel for the appellants but we find merit in the
submission of the learned counsel for the appellants
for the reasons mentioned infra.
48) Before we examine the Scheme of the Trust Act,
we consider it apposite to take note of the case law,
which has bearing on this issue. The question came
up for consideration before this Court in the case of
Booz Allen & Hamilton Inc. vs. SBI Home Finance
Ltd. & Ors. (2011) 5 SCC 532 as to what is the
meaning of the term "arbitrability" and secondly,
which type of disputes are capable of settlement by
arbitration under the Act. Their Lordships framed
three questions to answer the question viz., - (1)
38Page 39
whether the disputes having regard to their nature
could be resolved by a private forum chosen by the
parties (arbitral Tribunal) or whether such disputes
exclusively fall within the domain of public Fora
(Courts); (2) Whether the disputes are covered by the
arbitration agreement; and (3) whether the parties
have referred the disputes to arbitrator?
49) This Court speaking through Justice Raveendran
answered the questions. While answering question No.
1 with which we are concerned here, Their Lordships
carved out six categories of cases. These six categories
of cases were held as not capable for being decided by
private arbitration under the Arbitration Act even
though parties agreed for their settlement through
private arbitration. This is what Their Lordships held
in Paras 35 and 36:
“35. The Arbitral Tribunals are private fora
chosen voluntarily by the parties to the
39Page 40
dispute, to adjudicate their disputes in place
of courts and tribunals which are public fora
constituted under the laws of the country.
Every civil or commercial dispute, either
contractual or non-contractual, which can be
decided by a court, is in principle capable of
being adjudicated and resolved by arbitration
unless the jurisdiction of the Arbitral
Tribunals is excluded either expressly or by
necessary implication. Adjudication of
certain categories of proceedings are reserved
by the legislature exclusively for public fora
as a matter of public policy. Certain other
categories of cases, though not expressly
reserved for adjudication by public fora
(courts and tribunals), may by necessary
implication stand excluded from the purview
of private fora. Consequently, where the
cause/dispute is inarbitrable, the court where
a suit is pending, will refuse to refer the
parties to arbitration, under Section 8 of the
Act, even if the parties might have agreed
upon arbitration as the forum for settlement
of such disputes.
36. The well-recognised examples of
non-arbitrable disputes are: (i) disputes
relating to rights and liabilities which give
rise to or arise out of criminal offences; (ii)
matrimonial disputes relating to divorce,
judicial separation, restitution of conjugal
rights, child custody; (iii) guardianship
matters; (iv) insolvency and winding-up
matters; (v) testamentary matters (grant of
probate, letters of administration and
succession certificate); and (vi) eviction or
tenancy matters governed by special statutes
where the tenant enjoys statutory protection
against eviction and only the specified courts
are conferred jurisdiction to grant eviction or
decide the disputes.”
40Page 41
50) The question to be considered in this appeal is
whether the disputes relating to affairs and
management of the Trust including the disputes
arising inter se trustees, beneficiaries in relation to
their appointment, powers, duties, obligations,
removal etc. are capable of being settled through
arbitration by taking recourse to the provisions of the
Act, if there is a clause in the Trust Deed to that effect
or such disputes have to be decided under the Trust
Act with the aid of forum prescribed under the said
Act.
51) Keeping in view the aforesaid principle of law, let
us now examine the Scheme of the Trust Act. The
Trust Act was enacted much prior to independence
with an object to define and amend the law relating to
private Trusts and the trustees. The Act consists of 93
Sections, which are divided, in IX chapters.
41Page 42
52) Chapter I deals with short title, commencement,
repeal of enactments and interpretation of words
(Sections 1 to 3). Chapter II deals with the creation of
a Trust (Sections 4 to 10). Chapter III deals with the
duties and liabilities of the Trustees (Sections 11 to
30). Chapter IV deals with the rights and powers of the
Trustees (Sections 31 to 45). Chapter V deals with the
disabilities of the Trustees (Sections 46 to 54). Chapter
VI deals with the rights and liabilities of the
beneficiaries (Sections 55 to 69). Chapter VII deals
with vacating the office of the Trustee (Sections 70 to
76). Chapter VIII deals with extinction of the Trusts
(Sections 77 to 79) and Chapter IX deals with certain
obligations in the nature of Trust (Sections 80 to 93).
53) Even cursory perusal of the headings of each
Chapter including what is provided in the Sections
would go to show that the legislature has dealt with
42Page 43
and taken care of each subject comprehensively and
adequately. It starts from the creation of the Trust,
how it is required to be created (deed), who can create
(author of the Trust/settlor), who can
manage(trustees), for whose benefit it can be created
(beneficiaries), their qualifications for appointment,
grounds for removal, rights and duties, restrictions on
their exercise of powers, obligations and legal remedies
available to get the grievances settled etc. are all
specified in the Trust Act.
54) So far as legal remedies available to the author of
the Trust/settlor, Trustees and the beneficiaries for
ventilating their several grievances in respect of their
rights duties, removal and obligations under the Trust
Deed and the Trust Act are concerned, they are
specifically provided in Sections 7, 11, 34, 36, 41, 45,
46, 49, 53, 71, 72, 73 and 74 of the Trust Act. These
43Page 44
sections, in specific terms, confer jurisdiction on Civil
Court and provides that an aggrieved person may
approach the principal Civil Court of Original
Jurisdiction for adjudication of his grievances. This
clearly shows the intention of the legislature that the
legislature intended to confer jurisdiction only on Civil
Court for deciding the disputes arising under the
Trust Act.
55) The Constitution Bench of this Court in a leading
case of Dhulabhai etc. vs. State of Madhya Pradesh
& Anr., AIR 1969 SC 78 examined the question as to
how the exclusion of jurisdiction of Civil Court in the
context of express or implied bar created in any
special law should be decided. Their Lordships
examined the question in the context of Section 9 of
the Code of Civil Procedure, 1908 and the bar created
in special law.
44Page 45
56) Justice Hidayatullah, the learned Chief Justice
speaking for the Bench laid down 7 conditions for
determining the question of bar for prosecuting the
remedies in the Civil Court or judicial
Tribunals/authorities constituted under any special
law. Though the issue examined in Dhulabhai's case
(supra) pertained to bar created in special law vis-a-vis
filing of the civil suit by an aggrieved party, yet the
decision, in our view, lays down the general principle
as to how the courts should decide the issue of
express or/and implied bar in the context of the
remedies available in law.
57) So far as the question involved in the case at
hand is concerned, it is governed by condition No. 2 of
Dhulabhai’s case (supra) which reads as under:
“(2) Where there is an express bar of the
jurisdiction of the court, an examination of
the scheme of the particular Act to find the
adequacy or the sufficiency of the remedies
45Page 46
provided may be relevant but is not decisive
to sustain the jurisdiction of the civil court.
Where there is no express exclusion the
examination of the remedies and the scheme
of the particular Act to find out the
intendment becomes necessary and the
result of the inquiry may be decisive. In the
latter case it is necessary to see if the statute
creates a special right or a liability and
provides for the determination of the right or
liability and further lays down that all
questions about the said right and liability
shall be determined by the Tribunals so
constituted, and whether remedies normally
associated with actions in civil courts are
prescribed by the said statute or not.”
58) When we examine the Scheme of the Trust Act in
the light of the principle laid down in condition No. 2,
we find no difficulty in concluding that though the
Trust Act do not provide any express bar in relation to
applicability of other Acts for deciding the disputes
arising under the Trust Act yet, in our considered
view, there exists an implied bar of exclusion of
applicability of the Arbitration Act for deciding the
disputes relating to Trust, trustees and beneficiaries
through private arbitration. In other words, when the
Trust Act exhaustively deals with the Trust, Trustees
and beneficiaries and provides for adequate and
sufficient remedies to all aggrieved persons by giving
them a right to approach the Civil Court of principal
original jurisdiction for redressal of their disputes
arising out of Trust Deed and the Trust Act then, in
our opinion, any such dispute pertaining to affairs of
the Trust including the dispute inter se Trustee and
beneficiary in relation to their right, duties,
obligations, removal etc. can not decided by the
arbitrator by taking recourse to the provisions of the
Act. Such disputes have to be decided by the Civil
Court as specified under the Trust Act.
59) The principle of interpretation that where a
specific remedy is given, it thereby deprives the person
who insists upon a remedy of any other form of
Trust Act exhaustively deals with the Trust, Trustees
and beneficiaries and provides for adequate and
sufficient remedies to all aggrieved persons by giving
them a right to approach the Civil Court of principal
original jurisdiction for redressal of their disputes
arising out of Trust Deed and the Trust Act then, in
our opinion, any such dispute pertaining to affairs of
the Trust including the dispute inter se Trustee and
beneficiary in relation to their right, duties,
obligations, removal etc. can not decided by the
arbitrator by taking recourse to the provisions of the
Act. Such disputes have to be decided by the Civil
Court as specified under the Trust Act.
59) The principle of interpretation that where a
specific remedy is given, it thereby deprives the person
who insists upon a remedy of any other form of
remedy than that given by the statute, is one which is
very familiar, and which runs through the law, was
adopted by this Court in the case of The Premier
Automobiles Ltd. vs. Kamlakar Shantaram Wadke
& Ors., AIR 1975 SC 2238 while examining the
question of bar in filing Civil suit in the context of
remedies provided under the Industrial Disputes Act
(See G.P. Singh, Principles of Statutory
Interpretation, 12th Edition, Pages 763-764). We
apply this principle here because, as held above, the
Trust Act creates an obligation and further specifies
the rights and duties of the settlor, Trustees and the
beneficiaries apart from several conditions specified in
the Trust Deed and further provides a specific remedy
for its enforcement by filing applications in Civil Court.
It is for this reason, we are of the view that since
sufficient and adequate remedy is provided under the
very familiar, and which runs through the law, was
adopted by this Court in the case of The Premier
Automobiles Ltd. vs. Kamlakar Shantaram Wadke
& Ors., AIR 1975 SC 2238 while examining the
question of bar in filing Civil suit in the context of
remedies provided under the Industrial Disputes Act
(See G.P. Singh, Principles of Statutory
Interpretation, 12th Edition, Pages 763-764). We
apply this principle here because, as held above, the
Trust Act creates an obligation and further specifies
the rights and duties of the settlor, Trustees and the
beneficiaries apart from several conditions specified in
the Trust Deed and further provides a specific remedy
for its enforcement by filing applications in Civil Court.
It is for this reason, we are of the view that since
sufficient and adequate remedy is provided under the
Trust Act for deciding the disputes in relation to Trust
Deed, Trustees and beneficiaries, the remedy provided
under the Arbitration Act for deciding such disputes
is barred by implication.
60) Though learned counsel for the respondents
made attempt to support the reasoning and the
conclusion arrived at by the High Court by making
some submissions but we find no merit in them
especially in the light of what we have held above. We,
therefore, do not consider it necessary to give our
detailed reasoning for rejection of his submission and
nor consider it necessary to deal with the decision
cited by him (M.C. Chacko vs State Bank of
Travancore Trivandrum, (1970) 1 SCC 658) which
is distinguishable on facts.
Deed, Trustees and beneficiaries, the remedy provided
under the Arbitration Act for deciding such disputes
is barred by implication.
60) Though learned counsel for the respondents
made attempt to support the reasoning and the
conclusion arrived at by the High Court by making
some submissions but we find no merit in them
especially in the light of what we have held above. We,
therefore, do not consider it necessary to give our
detailed reasoning for rejection of his submission and
nor consider it necessary to deal with the decision
cited by him (M.C. Chacko vs State Bank of
Travancore Trivandrum, (1970) 1 SCC 658) which
is distinguishable on facts.
61) We, accordingly, hold that the disputes relating
to Trust, trustees and beneficiaries arising out of the
Trust Deed and the Trust Act are not capable of being
decided by the arbitrator despite existence of
arbitration agreement to that effect between the
parties. A fortiori – we hold that the application filed by
the respondents under Section 11 of the Act is not
maintainable on the ground that firstly, it is not based
on an "arbitration agreement" within the meaning of
Sections 2(b) and 2(h) read with Section 7 of the Act
and secondly, assuming that there exists an
arbitration agreement (clause 20 of the Trust Deed) yet
the disputes specified therein are not capable of being
referred to private arbitration for their adjudication on
merits.
62) We thus add one more category of cases, i.e.,
category (vii), namely, cases arising out of Trust Deed
to Trust, trustees and beneficiaries arising out of the
Trust Deed and the Trust Act are not capable of being
decided by the arbitrator despite existence of
arbitration agreement to that effect between the
parties. A fortiori – we hold that the application filed by
the respondents under Section 11 of the Act is not
maintainable on the ground that firstly, it is not based
on an "arbitration agreement" within the meaning of
Sections 2(b) and 2(h) read with Section 7 of the Act
and secondly, assuming that there exists an
arbitration agreement (clause 20 of the Trust Deed) yet
the disputes specified therein are not capable of being
referred to private arbitration for their adjudication on
merits.
62) We thus add one more category of cases, i.e.,
category (vii), namely, cases arising out of Trust Deed
and the Trust Act, in the list of (vi) categories of cases
specified by this Court in Para 36 at page 547 of the
decision rendered in the case of Booz Allen &
Hamilton Inc. (supra) which as held above can not be
decided by the arbitrator(s).
63) In the light of foregoing discussion, we are unable
to agree with the reasoning and the conclusion arrived
at by the learned designated arbitrator.
64) Before parting with the case, we consider it
apposite to mention that we have not examined the
merits of the case set up by the parties in these
proceedings and hence parties would be at liberty to
take recourse to any legal remedies, as may be
available to them, for adjudication of their rights.
65) The appeal thus succeeds and is hereby allowed.
The impugned order is set aside. As a result, the
specified by this Court in Para 36 at page 547 of the
decision rendered in the case of Booz Allen &
Hamilton Inc. (supra) which as held above can not be
decided by the arbitrator(s).
63) In the light of foregoing discussion, we are unable
to agree with the reasoning and the conclusion arrived
at by the learned designated arbitrator.
64) Before parting with the case, we consider it
apposite to mention that we have not examined the
merits of the case set up by the parties in these
proceedings and hence parties would be at liberty to
take recourse to any legal remedies, as may be
available to them, for adjudication of their rights.
65) The appeal thus succeeds and is hereby allowed.
The impugned order is set aside. As a result, the
application filed by the respondents under Section 11
of the Act is dismissed as not maintainable.
.……...................................J.
[J. CHELAMESWAR]
………..................................J.
[ABHAY MANOHAR SAPRE]
New Delhi,
August 17, 2016.
of the Act is dismissed as not maintainable.
.……...................................J.
[J. CHELAMESWAR]
………..................................J.
[ABHAY MANOHAR SAPRE]
New Delhi,
August 17, 2016.
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