Disputes relating to Trust and Trustees cannot be settled by way of arbitration even if arbitration agreement exists to that effect

Supreme Court

Supreme Court: The bench of J. Chelameswar and Abhay Manohar Sapre, JJ, hearing the matter regarding settlement of disputes arising from Trust deeds by way of arbitration, held that the disputes relating to Trust, trustees and beneficiaries arising out of the Trust Deed and the Trust Act, 1882 are not capable of being decided by the arbitrator despite existence of arbitration agreement to that effect between the parties.

Examining the provisions under the Trust Act, it was held that 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, 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. cannot 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 and the settlement of such disputes by way of arbitration is barred by implication.

The Court also added the cases arising out of Trust Deed and the Trust Act as the seventh category to the list of six categories enumerated by the Court in Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., (2011) 5 SCC 532 that were held to be not capable for being decided by private arbitration under the Arbitration Act even though parties agreed for their settlement through private arbitration. These six categories are as follows: (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. [Vimal Kishor Shah v. Jayesh Dinesh Shah, 2016 SCC OnLine SC 825, decided on 17.08.2016]

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