Trust deed arbitration clause does not itself create a valid arbitration agreement between trustees; consent remains essential.

A clause in a deed of settlement directing arbitration did not, by itself, create a valid arbitration agreement between trustees. An arbitration agreement under the Arbitration Act, 1940 requires a written, consensual submission of present or future disputes to arbitration, and its existence depends on contract principles of proposal and acceptance. Mere acceptance of trusteeship under a deed containing such a clause was only acceptance of a trust term, not an inter se agreement to exclude the courts. The reference to arbitration was therefore invalid and the award was set aside.

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Issues: Whether the arbitration clause in the deed of settlement constituted a valid arbitration agreement between the trustees so as to support the reference and the award.

Analysis: An arbitration agreement under Section 2(a) of the Arbitration Act, 1940 must be a written agreement to submit present or future differences to arbitration. The existence of an agreement is governed by the law of contract, requiring proposal and acceptance under Section 2 of the Indian Contract Act. Acceptance of trusteeship under a deed containing an arbitration clause does not by itself amount to an agreement inter se between the trustees to refer disputes to arbitration. The clause imposed a term of the trust, but it did not establish that the trustees had entered into a consensual agreement to oust the jurisdiction of the courts.

Conclusion: There was no valid arbitration agreement between the trustees, the reference to arbitration was invalid, and the award was rightly set aside.

Ratio Decidendi: A contractual arbitration agreement requires a consensual written agreement between the parties, and a trust term directing arbitration does not become such an agreement merely because trustees accept the trust.

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