Dispute Relating To Members And Management Of Public Trusts Not Arbitrable, Must File Suit U/S 92 CPC : Allahabad High Court

The Allahabad High Court has held that disputes relating to public trusts which are enlisted under Section 92 of the Civil Procedure Code are not arbitrable under the Arbitration and Conciliation Act, 1996.

The bench comprising of Chief Justice Arun Bhansali and Justice Vikas Budhwar further held that Section 89 of CPC which provides for settlement of disputes outside Court does not override Section 92 as Section 92 is a specific provision dealing with disputes regarding Trusts.

The Court held that “..Section 89 provides for settlement of disputes outside the Court either through arbitration, conciliation, mediation or judicial settlement including settlement through Lok Adalat, however, it is subject to the disputes which would not fall under the said category. Section 89 does not override Section 92, particularly when Section 92 CPC exclusively deals with the dispute relating to Trust.”

Factual Background

Guru Tegh Bahadur Charitable Trust manages an institution, Guru Tegh Bahadur Public School, in Meerut imparting education from Ist to XIIth classes. The original Trust Deed of 1979 was amended in 2019 and the appellants as well as respondents, claimed themselves to the be trustees. When disputes arose regarding management and membership of the school, a suit was filed by the respondents seeking injunction against the appellants from interfering in the management and operation of the School.

The suit was dismissed, and an appeal was filed. During pendency of the appeal, parties entered arbitration. The Sole Arbitrator passed an award on 30.12.2022 pursuant to which the appellants filed an affidavit withdrawing their complaints. However, the respondents filed an application before the Arbitrator stating that due to non-fling of the closure report, they were unable to secure the funds. The appellants pleaded that the award dated 30.10.2023 passed on the application filed by the respondents was ex-parte.

Appellants sought execution of the 2022 award, however the execution case withdrawn at the insistence of the arbitrator. Thereafter, the appellants filed an application under Section 9 of the Act before the Commercial Court, Meerut seeking injunction against the opposite party from interference in School and Trust management. It was argued by the appellant that the first time they came to know about the award dated 30.10.2023 was by way of the objections filed by the respondents in Section 9 proceedings.

Meanwhile, the respondents approached the Arbitrator seeking a restrain on the appellant from interfering with the operations of the school. The same was granted by order dated 21.01.2024 which was challenged by the appellant under Section 37 of the Arbitration Act before the Commercial Court along with an appeal under Section 34 of the Act against the order dated 30.10.2023. The Commercial Court passed orders in all the appeals and Section 9 application holding that the disputes relating to Trust are not arbitrable and that the awards passed by the Arbitrator are a nullity.

Appellant challenged the order of the Commercial Court rejecting its application under Section 9 of the Act.

High Court Verdict

Section 92(1) CPC provides specific procedure for suit for removal of trustee, appointment of trustee and vesting any property in trustee, any other relief as may be required provided the Trust is charitable or religious nature, and there was a breach of trust, or a direction of Court is necessary in the administration of said Trust. Section 92(2) provides that any relief mentioned in Section 92(1) can only be sought in accordance with the procedure prescribed therein.

Holding that Guru Tegh Bahadur Charitable Trust is a public trust, the Court observed that disputes decided by the Sole Arbitrator relating to removal and appointment of trustees, right to run institution, and manage the day to day operations were beyond the scope of arbitration and could only be adjudicated under Section 92 of the CPC. It was further held that dispute after lodging FIR was not arbitrable as investigation had already commenced.

“Plainly and simply, 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, as it is beyond shadow of doubt that the award touches the issue of removal and induction of members of the Trust and also directions for management of the Trust.”

The Court held that the arbitral award could not be sustained in lieu of the specific provisions of Section 92(2) which specifically provides that the disputes enumerated under sub-Section (1) ought to be adjudicated before Courts in accordance with the procedure prescribed therein.

Accordingly, the orders of the Commercial Court holding that the dispute was non-arbitrable was upheld.

Case Title: Sanjit Singh Salwan And 4 Others v. Sardar Inderjit Singh Salwan And 2 Others [APPEAL UNDER SECTION 37 OF ARBITRATION AND CONCILIATION ACT 1996 No. - 356 of 2024]

Counsel for Appellant : Manish Goyal, Sr. Advocate assisted by Utkarsh Birla, Aarushi Birla

Counsel for Respondent : Navin Sinha, Sr. Advocate assisted by Nipun Singh, Naman Agarwal

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