Case Note & Summary
The applicants, beneficiaries of the first respondent trust (a private family trust created by a Deed of Trust dated 6th April 1983), filed an application under Section 11 of the Arbitration and Conciliation Act, 1996, seeking appointment of an arbitrator invoking Clause 20 of the Trust Deed. The applicants alleged that the respondents had leased out trust premises and were not paying the applicants' due share of lease rent or compensation. After a dispute arose, the applicants sent a notice dated 23rd October 2012 requesting appointment of a sole arbitrator. The respondents replied on 31st October 2012 raising issues about control and management but did not deny the right to invoke arbitration. When the respondents refused to appoint an arbitrator, the applicants filed the present application. The respondents opposed the application, arguing that the applicants were not signatories to the Trust Deed and therefore not 'parties' to the arbitration agreement as defined under Section 2(h) read with Section 7 of the Act. The court considered the definition of 'party' and the requirement of a written arbitration agreement. It held that the arbitration clause in the trust deed is an agreement in writing and that the beneficiaries, though not signatories, are parties to the trust and can invoke the arbitration clause. The court allowed the application and appointed a sole arbitrator to adjudicate the disputes between the parties.
Headnote
A) Arbitration Law - Appointment of Arbitrator - Non-Signatory Beneficiaries - Section 11, Arbitration and Conciliation Act, 1996 - Trust Deed - The applicants, beneficiaries of a private family trust, sought appointment of an arbitrator under Clause 20 of the Trust Deed. The respondents opposed on the ground that applicants were not signatories to the deed. The court held that the arbitration agreement in the trust deed is binding on the beneficiaries as they are parties to the trust and can invoke the arbitration clause. The application under Section 11 was allowed. (Paras 1-10) B) Arbitration Law - Arbitration Agreement - Definition of Party - Section 2(h), Section 7, Arbitration and Conciliation Act, 1996 - The court interpreted 'party' under Section 2(h) and the requirement of a written arbitration agreement under Section 7. It held that the arbitration clause in the trust deed is an agreement in writing and the beneficiaries, though not signatories, are parties to the trust and thus to the arbitration agreement. The court distinguished the case from a mere third-party beneficiary. (Paras 5-10)
Issue of Consideration
Whether beneficiaries who are not signatories to a trust deed can invoke the arbitration clause contained therein and maintain an application under Section 11 of the Arbitration and Conciliation Act, 1996.
Final Decision
The court allowed the application and appointed a sole arbitrator to adjudicate the disputes between the parties.
Law Points
- Arbitration agreement in trust deed binding on beneficiaries
- non-signatory can invoke arbitration clause
- Section 7 of Arbitration and Conciliation Act
- 1996 does not require signature of beneficiary
- Section 11 application maintainable
