Trust deed arbitration clauses do not bind non-signatory beneficiaries without independent consent; arbitrator appointment application was dismissed.

Beneficiaries who are not signatories to a trust deed and have not independently consented to arbitration are not bound by an arbitration clause inserted in that deed. Section 7 of the Arbitration and Conciliation Act, 1996 requires an arbitration agreement based on party consent; a settlor and trustees cannot unilaterally create binding arbitration between beneficiaries through the trust instrument alone. In the absence of an independent arbitration agreement, an application for appointment of an arbitrator by such beneficiaries was held not maintainable and was dismissed.

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Issues: Whether beneficiaries under a trust deed, who are not signatories to the trust deed, are bound by the arbitration clause contained in the trust deed so as to make an application for appointment of an arbitrator maintainable.

Analysis: An arbitration agreement under Section 7 of the Arbitration and Conciliation Act, 1996 requires an agreement by the parties to submit disputes to arbitration. The trust deed was executed by the settlor and trustees, while the beneficiaries were not signatories and had not independently agreed to arbitrate. Benefits received under a trust arise from the trust arrangement and not from a contract between the beneficiaries inter se or between the beneficiaries and the settlor and trustees for dispute resolution. A settlor and trustees cannot create a binding arbitration agreement between beneficiaries merely by inserting an arbitration clause in the trust deed. The absence of an independent arbitration agreement between the beneficiaries meant that the clause could not bind them.

Conclusion: The arbitration clause in the trust deed was not binding on the beneficiaries, and the application for appointment of an arbitrator was not maintainable and was dismissed.

Ratio Decidendi: A beneficiary who is not a party to, and has not independently consented to, the arbitration agreement in a trust deed is not bound by that clause; a settlor and trustees cannot impose arbitration between beneficiaries without an independent arbitration agreement.

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