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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

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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),

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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

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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

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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.

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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

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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

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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

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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

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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

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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

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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?

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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  

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(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

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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,

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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

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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,

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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

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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

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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;

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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

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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

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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.”

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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  

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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

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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

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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

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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

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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

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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

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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.  

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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

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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

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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.

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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

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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

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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)

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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

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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.”

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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.  

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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

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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

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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.  

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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

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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  beneficiaries  through  private

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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

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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

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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.

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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

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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

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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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