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TMI Blog2016 (8) TMI 1315X X X X Extracts X X X X X X X X Extracts X X X X ..... fied therein are not capable of being referred to private arbitration for their adjudication on merits. 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. (2012 (10) TMI 459 - SUPREME COURT) which as held above can not be decided by the arbitrator(s). In the light of foregoing discussion, we are unable to agree with the reasoning and the conclusion arrived at by the learned designated arbitrator. - CIVIL APPEAL NO.8164 OF 2016 (ARISING OUT OF SLP(C) No. 13369 of 2013) - - - Dated:- 17-8-2016 - J. Chelameswar, Abhay Manohar Sapre Judgement 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 N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arties 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 term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 (hereina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. (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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 sui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eclaration 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ip 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich 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 no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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/sett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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