2016 Supreme(SC) 648

SUPREME COURT OF INDIA
J. CHELAMESWAR, ABHAY MANOHAR SAPRE, JJ.
Shri Vimal Kishor Shah & Ors. – Appellants
VERSUS
Mr. Jayesh Dinesh Shah & Ors. – Respondents
CIVIL APPEAL NO.8164 OF 2016 (ARISING OUT OF SLP(C) No. 13369 of 2013)
Decided On : 17-08-2016

IMPORTANT POINTS
Trust deed is not an agreement between the beneficiaries. Trust Deed containing arbitration clause is not an arbitration agreement.
Any dispute pertaining to affairs of Trust including the dispute inter se Trustee and beneficiary in relation to their right, duties, obligations, removal etc. cannot decided by the arbitrator under Arbitration Act, 1940.

Headnote:(a) Arbitration Act, 1940 – Section 2(b) and 2(h) r/w section 7 – Four conditions sine qua non for constituting valid and enforceable arbitration agreement – Existence of an agreement, in writing, signed by the parties concerned, and containing an arbitration clause – Instantly, Trust deed showing wish of the settlor – Beneficiaries not required to sign the deed – Cannot be held to be parties – Trust deed therefore not an agreement between the beneficiaries – Deed containing arbitration clause, held, not an arbitration agreement – Application under section 11 not maintainable. (Para 24, 33, 34, 35, 59)

       (2010) 2 SCC 486 – Relied upon

       (b) Arbitration Act, 1940 – Section 2(b) and 2(h) r/w section 7 – A proposal and its acceptance constitutes agreement – In trust deed beneficiaries by accepting creation of trust, but not by agreement, merely undertake to carry out terms of trust deed – Clauses of trust deed including arbitration clause not in nature of agreement of the parties (beneficiaries) – Instantly, clause 20 of trust deed (arbitration clause) does not satisfy rigour of Sections 2(b), 2(h) and 7. (Para 41, 43, 44)

       AIR 1965 Calcutta 628 – Cited with approval

       (c) Indian Trust Act, 1882 – Sections 7, 11, 34, 36, 41, 45, 46, 49, 53, 71, 72, 73 and 74 – Code of Civil Procedure, 1908 – Section 9 – Arbitration Act, 1940 – Section 2(b) and 2(h) r/w section 7 –Trust Act exhaustively dealing with Trust, Trustees and beneficiaries and providing for adequate and sufficient remedies for redressal of disputes arising out of Trust Deed and the Trust Act – Remedy through a Civil court – Therefore any dispute pertaining to affairs of Trust including the dispute inter se Trustee and beneficiary in relation to their right, duties, obligations, removal etc. cannot decided by the arbitrator under Act, 1940 – Such disputes have to be decided by the Civil Court in terms of Act, 1882 – A specific remedy given in a statute bars any other form of remedy than that given by the statute. (Para 58, 59)

       (2011) 5 SCC 532; AIR 1969 SC 78; AIR 1975 SC 2238 – Relied upon

       (d) Arbitration Act, 1940 – Section 11 – Instantly, application u/s 11 held not maintainable – Firstly, being not based on an "arbitration agreement" within the meaning of Sections 2(b) and 2(h) read with Section 7 – Secondly, disputes specified in clause 20 of trust deed being not capable of being referred to private arbitration for their adjudication on merits. (Para 61)

       Facts of the case:

       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 ("settlor"). 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, (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.

       Clause 20 of the Trust Deed 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.

       Soon after its formation somewhere from 1989-90 onwards, 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. 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.

       Respondent Nos. 1 to 3 (one set of beneficiaries) filed an Arbitration application 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 learned designated Judge, by impugned judgment, allowed the application.

       Finding of the Court:

       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.

       Result: Appeal allowed.