Disputes relating to trust deed not amenable to arbitration: SC

In an important ruling, the Supreme Court of India held 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 Division Bench of the Court, thus, said that an application filed under Section 11 of the Arbitration and Conciliation Act, 1996 (“Act”) is not maintainable as 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.

“……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”, the Court opined.

The Court added one more category of cases, i.e., category (vii), namely, cases arising out of Trust Deed and the Trust Act, in the list of six categories of cases that cannot be decided by the arbitrator(s). These other 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.

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