Disputes Regarding Induction & Removal Of Trustees Are Not Arbitrable: Allahabad High Court
The Allahabad High Court held that the disputes regarding the induction and removal of Trustees are not arbitrable and hence, come within the purview of Section 92 of the Civil Procedure Code (CPC).
The Court held thus in an appeal filed under Section 37 of the Arbitration and Conciliation Act, 1996 (A&C Act), challenging an order of the Commercial Court by which the application for interim relief was rejected.
A Division Bench comprising Chief Justice Arun Bhansali and Justice Vikas Budhwar observed, “Though a feeble attempt was made by learned Senior Counsel for the appellants, while relying upon the judgments in the case Chairman Madappa (supra) and Narain Sahai Aggarwal (supra) while contending that it is not a hard and fast rule that all the disputes relating to or incidental to a Trust are to be dealt in terms of Section 92, as there are certain disputes, which though is of a Trust are beyond the scope of Section 92 of CPC. So far as the judgment in the case of Chairman Madappa (supra) is concerned, the same would not be of any aid or assistance to the appellants, particularly when in the said case, the dispute was relatable to disposal of a cattles for increasing the income of a Trust and it was held that for incidental trivial issues, no permission under Section 92 was required. However, in the present case in hand, the disputes are regarding the induction and removal of Trustees and also management, which obviously is within the purview of Section 92 of CPC.”
The Bench said that the disputes, which were adjudicated and which became the part and the parcel of the award falls within the purview and the rigours of Section 92 of the CPC, because the award touches the issue of removal and induction of members of the Trust and also directions for management of the Trust.
Senior Advocate Manish Goyal, Advocates Utkarsh Birla, and Aarushi Birla appeared for the appellants while Senior Advocate Navin Sinha, Advocates Nipun Singh, Vinayak Mitthal, and Naman Agarwal appeared for the respondents.
Factual Background -
There was a Trust engaged in charitable activities since 1970 which also managed a school having strength of almost 1700 students. The said Trust had an original Trust Deed which stood amended in the year 2019. The appellants and respondents claimed to be the Trustees and a dispute arose between the Trustees with regard to the membership and administration of the school. This led to filing of an original suit by the respondents before the Civil Judge seeking injunction against the appellants from interfering in the management and operation of the school by the respondents. However, the said suit was dismissed in 2022.
Hence, the respondents filed an appeal before the District Court and claimed that during the pendency of the appeal before the District Judge, the parties took recourse to arbitration and an Advocate was appointed as the Sole Arbitrator. Accordingly, an application was preferred with a prayer that since the Sole Arbitrator has entered into the reference and the proceedings are going on, the appeal be decided making it dependent upon the final award to be passed by the Sole Arbitrator. The Sole Arbitrator passed an award being aggrieved by which the appellants approached the High Court. They contended that the said Arbitrator without serving any notice or affording any opportunity of hearing to them, proceed to pass an award.
The High Court in the above regard noted, “As regards the submission of the learned Senior Counsel for the appellants that the respondents herein are estopped from raising the question of the competence of the arbitrator to adjudicate the disputes of the Trust is concerned, the same is neither here nor there. The Hon’ble Apex Court in the case of New Moga Transport Compay Ltd. Vs. United India Insurance Company Ltd., (2004) 4 SCC 677 had the occasion to consider the issue whether by consent, acquicience or wavier at the end of any party can create a jurisdiction.”
The Court further said that in this case, the issues which were referred to and adjudicated by the Arbitrator were the issues, which were triable by the Courts of law as per Section 92 of the CPC.
“The question regarding the maintainability of the proceedings under Section 9 of the A & C Act, 1996 is not being addressed by this Court in the present proceeding, particularly when the dispute relatable to the Trust itself was not arbitrable and the arbitrator had no competence to adjudicate the same”, it added.
The Court, therefore, concluded that the order of the Commercial Court rejecting the proceedings under Section 9 of A&C Act cannot be said to be suffering from any illegality or infirmity, warranting interference in the proceedings.
Accordingly, the High Court dismissed the appeal.
Cause Title- Sanjit Singh Salwan and 4 Others v. Sardar Inderjit Singh Salwan and 2 Others (Neutral Citation: 2024:AHC:139469-DB)
