1964 (12) TMI 64 - HC - Indian Laws

Summary

Issues:
1. Validity of the arbitration agreement between trustees
2. Interpretation of the written agreement in the deed of settlement
3. Requirements for an arbitration agreement under the Indian Contract Act
4. Jurisdiction of courts in arbitration matters

Analysis:

The case involved an appeal against a lower court order regarding an arbitration agreement between trustees of a property. The dispute arose when two trustees referred a matter to an arbitrator as per a clause in the deed of settlement, but the third trustee did not concur. The lower court held that there was no valid arbitration agreement, leading to the appeal. The key issue was whether the trustees had entered into a valid arbitration agreement. The appellant argued that the agreement was established through the conduct of the trustees in accepting the trusteeship and acting accordingly. However, the court disagreed, emphasizing that for an agreement to exist, there must be a proposal and acceptance among the parties. Mere acceptance of a trust does not imply an agreement to all terms within the deed. The court cited previous judgments to support the position that a valid arbitration agreement must be in place to oust the jurisdiction of courts. As such, it was concluded that there was no valid arbitration agreement between the trustees in this case, rendering the arbitration award invalid and properly set aside.

The court delved into the requirements for an arbitration agreement under the Indian Contract Act, emphasizing the need for a proposal and acceptance to form an agreement. It was noted that the trustees accepting the trusteeship did not equate to an agreement on all terms within the deed, including the arbitration clause. The court highlighted that the provision for arbitration must be strictly construed, and parties must lawfully enter into such an agreement for it to be valid. The judgment underscored that any reference to arbitration or resulting award must comply with the law to be upheld, and any deviation renders the award invalid.

The judgment also addressed the interpretation of the written agreement in the deed of settlement, focusing on the specific arbitration clause. The court rejected the argument that the trustees' conduct in accepting the trusteeship constituted an agreement to refer disputes to arbitration. It was clarified that the trustees' acceptance of the trust did not imply an agreement amongst themselves to all terms within the deed, including the arbitration clause. The court emphasized the necessity of a formal agreement for arbitration, distinct from merely accepting a trust.

Regarding the jurisdiction of courts in arbitration matters, the judgment reiterated the importance of upholding the law and ensuring that parties have lawfully entered into arbitration agreements. It was emphasized that any reference to arbitration must be supported by a valid agreement to be enforceable, and courts must strictly adhere to the legal requirements for arbitration. The judgment concluded that the appeal failed, and costs would be borne by the estate.