Shri Vimal Kishor Shah v. Jayesh Dinesh Shah, CIVIL APPEAL NO.8164 OF 2016

SHRI VIMAL KISHOR SHAH V. JAYESH DINESH SHAH

Whether disputes arising out of trust deeds, governed under the Trust Act,1882 are, arbitrable disputes?

Although there is no express prohibition against the Arbitration Act, there is an implied prohibition against the Arbitration Act’s application to the resolution of trust-related disputes through private arbitration because the remedies provided by the Trusts Act are adequate and sufficient.

In 1983, Vimal Kishor Shah and Jayesh Dinesh Shah were two of the six minors included in a trust created by a family trust deed signed by Shri Dwarkadas Laxmichand Modi. According to Clause 20 of the Trust Deed, any disputes would be settled in accordance with the Indian Arbitration Act, and the arbitrators’ ruling would be legally binding on all parties involved.
However, issues arose between the beneficiaries soon after the trust was established, and one of the trustees resigned from his position.
Finally, a request was made for the disagreements to be amicably resolved by being sent to the arbitrator in accordance with Clause 20 of the Trust Deed.
One group of beneficiaries filed a petition in the High Court pursuant to Section 11 of the Arbitration and Conciliation Act after the parties were unable to resolve their disagreements and designate an arbitrator.
The designated Judge granted the application and ruled that the parties, who were minors at the time of the Trust Deed’s execution but have become major, should be considered parties for purposes of Section 2(h) and that they have the right to initiate proceedings for the appointment of an arbitrator under Section 11 of the Act.
One group of beneficiaries (the appellants) submitted the petition by special leave to the Supreme Court in opposition to this order of the Single Judge.

The Hon’ble Apex Court allowed the appeal and held that the application for arbitration under Section 11 of the Act was not maintainable and, dismissed the said application and set aside the impugned order of the High Court.
According to the Supreme Court, there was no legitimate arbitration agreement.
According to the court’s analysis of the Sections, an agreement must meet the following criteria in order to be deemed valid: (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.
The requirements of Section 2(b) and 2(h), read with Section 7, were not met because there was no agreement and the arbitration clause was inserted unilaterally by the “settlor.” Hence, it is held to not be a valid arbitration agreement.