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Wednesday, August 17, 2016

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?= parties must sign such agreement or in other words, the agreement must bear the signatures of the parties concerned = in order to constitute a valid, binding and enforceable arbitration agreement, 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.= 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). - 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.



                                                                  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.                Appellant(s)


                             VERSUS


      Mr. Jayesh Dinesh Shah & Ors.          Respondent(s)




                               J U D G M E N T


Abhay Manohar Sapre, J.
1)    Leave granted.
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), 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  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 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.
      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 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  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 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 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  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 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?
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

(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 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, 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 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 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,
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
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  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;  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  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 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.”

      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

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  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 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  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 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 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  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.
 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 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  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  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)  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 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.”

      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.
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 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 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.
      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 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 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 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.

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 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 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.
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