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

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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

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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

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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.  

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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

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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

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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,

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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

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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

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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.  

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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

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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;

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(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

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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

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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

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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

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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

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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,

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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

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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

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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)

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“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

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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

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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

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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

25

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

26

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

27

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

28

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

29

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

30

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

31

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

32

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

33

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

34

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

35

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

36

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

37

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

38

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

39

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).   

40

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

41

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

42

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

43

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 exclusion of  applicability  of  the Arbitration Act

for deciding the disputes relating to Trust, trustees and

44

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 be 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

45

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

46

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

47

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

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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 Judge.

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.  

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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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ITEM NO.1A               COURT NO.5               SECTION IX (For Judgment)                S U P R E M E  C O U R T  O F  I N D I A                        RECORD OF PROCEEDINGS Civil Appeal No...../2016 @  Petition(s) for Special Leave to Appeal (C)  No(s).  13369/2013

VIMAL KISHOR SHAH & ORS.                           Petitioner(s)                                 VERSUS JAYESH DINESH SHAH & ORS.                          Respondent(s) Date : 17/08/2016 This matter was called on for pronouncement of  

judgment today. For Petitioner(s) Mr. Jay Savla,Adv.

Ms. Renuka Sahu,Adv.                      For Respondent(s) Mr. Gaurav Agrawal,Adv.                              *****

Hon'ble Mr. Justice Abhay Manohar Sapre pronounced the judgment  of  the  Bench  comprising  of  Hon'ble  Mr.  Justice  J. Chelameswar and His Lordship.

Leave granted. The appeal is allowed in terms of the signed reportable

judgment.   (Madhu Bala)                (Suman Jain)   Court Master     Court Master

(Signed reportable reportable judgment is placed on the file)

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