Trust deed arbitration clauses are invalid where beneficiaries lack mutual agreement, and trust disputes remain non-arbitrable.

A unilateral arbitration clause in a trust deed does not amount to an arbitration agreement under the Arbitration and Conciliation Act, 1996 because beneficiaries are not parties to the deed in the contractual sense and there is no mutual submission to arbitration. Disputes arising from a trust deed and governed by the Indian Trusts Act, 1882 are also not arbitrable, as that Act provides a comprehensive statutory scheme and contemplates civil court adjudication; the trust deed cannot override this implied exclusion. The Court therefore held that appointment of an arbitrator was not maintainable, set aside the appointment order, and rejected the application.

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Issues: (i) Whether a trust deed clause providing for arbitration of disputes between beneficiaries constitutes an arbitration agreement within the meaning of the Arbitration and Conciliation Act, 1996. (ii) Whether disputes arising out of a trust deed and the Indian Trusts Act, 1882 are capable of reference to private arbitration under Section 11 of the Arbitration and Conciliation Act, 1996.

Issue (i): Whether a trust deed clause providing for arbitration of disputes between beneficiaries constitutes an arbitration agreement within the meaning of the Arbitration and Conciliation Act, 1996.

Analysis: An arbitration agreement must satisfy the statutory requirements of agreement, writing, signature by the parties, and a submission of disputes to arbitration in respect of a defined legal relationship. A trust deed is executed by the settlor for the benefit of trustees and beneficiaries, but the beneficiaries are not parties to it in the contractual sense merely because they accept the trust. A unilateral stipulation by the settlor in the trust deed that disputes among beneficiaries shall be resolved by arbitration does not amount to mutual agreement between the beneficiaries themselves.

Conclusion: The trust deed clause did not constitute a valid arbitration agreement under the Act.

Issue (ii): Whether disputes arising out of a trust deed and the Indian Trusts Act, 1882 are capable of reference to private arbitration under Section 11 of the Arbitration and Conciliation Act, 1996.

Analysis: The Indian Trusts Act, 1882 provides a comprehensive scheme governing creation, administration, duties, rights, liabilities, removal, and remedies relating to trusts, trustees, and beneficiaries, and confers jurisdiction on the civil court for adjudication of grievances. Applying the principle of implied exclusion and the test of arbitrability, such disputes are matters for the statutory forum and not for private adjudication by arbitrator. The existence of a clause in the trust deed does not override this statutory scheme.

Conclusion: Such disputes are not arbitrable and cannot be referred under Section 11 of the Arbitration and Conciliation Act, 1996.

Final Conclusion: The challenge succeeded, the order appointing the arbitrator was set aside, and the application for appointment of arbitrator was rejected as not maintainable.

Ratio Decidendi: A unilateral arbitration stipulation in a trust deed is not an arbitration agreement between beneficiaries, and disputes governed comprehensively by the Indian Trusts Act, 1882 are excluded by implication from private arbitration.

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