Vimal Kishor Shah & Ors vs Jayesh Dinesh Shah & Ors

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,

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 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.

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 decide the disputes in accordance with the provisions of Indian Arbitration Act, 1940.

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, therefore, challenged the very initiation of arbitration proceedings before the arbitrator as being without jurisdiction.

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 award. The aggrieved trustee appealed to the Calcutta High Court.

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 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 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

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 application filed by the respondents under Section 11 of the Act is dismissed as not maintainable.