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Non-arbitrable disputes - the law in India

Thursday 3 June 2021

Kingshuk Banerjee
Khaitan & Co, Mumbai

​​​​​​​Under the current legal framework in India, arbitrability is the norm and non-arbitrability the exception. The Arbitration and Conciliation Act 1996 (Indian Arbitration Act/the Act), which is largely premised on the UNCITRAL Model Law on International Commercial Arbitration 1985 (Model Law), adopts the globally preferred approach of minimal judicial intervention.[1]

That said, non-arbitrability is, undoubtedly, a thorn in the side of arbitration. While the expression non-arbitrability has different connotations,[2] this paper focuses on ‘disputes that are not capable of settlement by arbitration’.

Part I of the Indian Arbitration Act expressly provides[3] that it will not affect any other law by virtue of which certain disputes may not be submitted to arbitration. It also provides for an arbitral award to be set aside by Indian courts if the subject matter of the dispute is found to be incapable of settlement by arbitration under the law for the time being in force.[4]

Under the Indian Arbitration Act, enforcement of a foreign award can be refused if the subject matter of the dispute is not capable of settlement by arbitration under the law of India.[5] The impediment to enforcement of a foreign award on the ground of non-arbitrability is not unique to India. In fact, Indian law on this subject is based on the provisions of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (the New York Convention)[6] and the Convention on the Execution of Foreign Arbitral Awards, 1927 (the Geneva Convention).[7]

Thus, though there is an implicit reference to non-arbitrability in the Indian Arbitration Act, like the Model Law, the Indian Arbitration Act does not define arbitrability nor does it specify any set of disputes to be non-arbitrable. The law in this regard has developed, largely, through judicial pronouncements.

While the judgment of the Supreme Court of India in the case of Booz Allen was considered the leading authority on this subject, it is the recent decision of the Supreme Court in the case of Vidya Drolia and others v Durga Trading Corporation[8] that prompted a fresh look at this issue. This paper attempts to summarise, albeit broadly, the classes of disputes that are currently considered non-arbitrable in India.

The Booz Allen list

Before discussing Vidya Drolia, I will briefly allude to the Supreme Court’s decisions in Booz Allen and Vimal Kishor Shah & others v Jayesh Dinesh Shah and others[9] which are apposite to the subject under discussion.

In Booz Allen, the Supreme Court was faced with a question as to whether an action for the enforcement of a mortgage is arbitrable in India. The Court answered this question in the negative. But while doing so, it clarified, in general terms, that the following two broad classes of disputes are incapable of being resolved in arbitration. First, matters that are reserved by the lawmakers to be determined exclusively by public fora. Second, matters which, by necessary implication, stand excluded from the purview of private fora.[10] Within the second category fell actions for enforcement of rights in rem, which the Court held, are ‘unsuited for arbitration’ and can only be adjudicated by courts or public tribunals.

A right in rem, the Court explained, is a right exercisable against the world at large. In contrast, a right in personam is one exercisable against specific individuals. In personam proceedings, thus, decide the personal rights and interests of the parties named in the action whereas actions in rem are directed against a property itself and determine the rights of the parties exercisable against the public at large. The latter has an erga omnes effect.

The Court concluded that traditionally all disputes relating to rights in personam are considered amenable to arbitration; and all disputes relating to rights in rem are required to be adjudicated by courts and public tribunals. The Court did clarify that this is not an inflexible rule and that subordinate rights in personam arising from rights in rem have always been considered arbitrable.[11]

In the course of its analysis, the Court also cited examples of various matters which it considered non-arbitrable,[12] namely:

  • disputes relating to rights and liabilities which give rise to or arise out of criminal offences;
  • matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody;
  • guardianship matters;
  • insolvency and winding up matters;
  • testamentary matters (grant of probate, letters of administration and succession certificate); and
  • eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction.

On the specific issue before the Court concerning mortgage actions, the Court held that such proceedings are not arbitrable as they involve the enforcement of a right in rem. The Court also analysed the provisions of the Transfer of Property Act 1882 (TP Act) and the Civil Procedure Code 1908 (CPC) to conclude that these statutes make it clear that mortgage enforcement actions are required to be decided by public fora (courts) as opposed to private fora (arbitrators).

The Supreme Court’s judgment in Booz Allen is a landmark one and reinforced the importance of assessing the arbitrability of a dispute before signing up for arbitration. The ratio and list of non-arbitrable disputes set out in Booz Allen are frequently relied on in matters involving the questions around non-arbitrability.

The Supreme Court’s decision in the case of Vimal Kishor Shah & others v Jayesh Dinesh Shah and others[13] is one such example, which I propose to discuss in brief.

In Vimal Shah, the issue of arbitrability arose in the context of a dispute inter se amongst the beneficiaries of a deed of trust[14]. The trust deed contained an arbitration clause, which was invoked by some of the beneficiaries. The counter parties opposed the invocation on the ground that the beneficiaries were not parties or signatories to the trust deed and, accordingly, that the arbitration clause in the deed cannot bind them. The Supreme Court agreed and found that disputes between the beneficiaries of a trust are non-arbitrable. The decision was based on two reasons.

First, the Court found that the arbitration clause contained in the trust deed does not satisfy the requirements of Sections 2(b), 2(h), and 7 of the Indian Arbitration Act,[15] mainly because the beneficiaries are neither parties nor signatories to the deed nor is there any separate arbitration agreement amongst them. The Court, in reaching this conclusion, relied on its earlier decision in Vijay Kumar Sharma Alias Manju v Raghunandan Sharma Alias Baburam and others.[16] 

The Court also relied on the Calcutta High Court’s decision in Bijoy Ballav Kundu and another v Tapeti Ranjan Kundu[17] to hold that a trust deed is not strictly a contract between the trustees and/or the beneficiaries. The trustees and beneficiaries are only required to carry out the provisions of the trust deed. There cannot, therefore, be any agreement inter se between trustees or beneficiaries to carry out any such activity.[18] Affirming the legal position articulated in Bijoy Ballav, the Court noted that an arbitration clause must be strictly construed as it has the effect of ousting the jurisdiction of civil courts. Such ouster, the Court held, cannot be readily inferred.

Secondly, the Court found that the grievances involving the rights, duties and obligations of the settlor, trustees and the beneficiaries are specifically governed by the provisions of the Trusts Act.[19] The Court noted that these sections, in specific terms, confer jurisdiction on a civil court for adjudication of the grievances. This, the Court explained, demonstrated the intention of the legislature that disputes arising under the Trusts Act can be adjudicated upon by a civil court alone. There is, therefore, an implied exclusion of the Arbitration Act for adjudication of disputes relating to Trusts, trustees and beneficiaries through private arbitration.[20] Thus, another class of disputes – namely those arising out of a trust deed and covered by the Trusts Act – was added to the Booz Allen list of non-arbitrable disputes.[21]

The Vidya Drolia rejig

The Supreme Court has delved into the issue of arbitrability in several cases after Booz Allen – especially those relating to allegations of fraud. However, Vidya Drolia is the Supreme Court’s latest, and perhaps, the most comprehensive, decision on the topic.

In Vidya Drolia, a three-judge bench of the Supreme Court was required to determine the arbitrability of landlord-tenant disputes governed solely by the TP Act. Earlier, a two-judge bench of the Supreme Court in Himangni Enterprises v Kamaljeet Singh Ahluwalia[22] had answered this question in the negative. On 28 February 2019, another two-judge bench of the Supreme Court[23] disagreed with the ratio laid down in Himangni and referred the issue for determination by a larger bench.[24]

It was in these circumstances that the matter was taken up by a three-judge bench of the Supreme Court. On considering the order of reference, the Court framed two issues it deemed necessary to answer:[25]

  • the meaning of non-arbitrability and when the subject matter of the dispute is not capable of being resolved through arbitration; and
  • the conundrum – ‘who decides’ – whether the court at the reference stage or the arbitral tribunal in the arbitration proceedings would decide the question of non-arbitrability.

This paper is concerned with the first issue. After a detailed analysis and discussion on the subject, the Court propounded a fourfold test for determining when a dispute is non-arbitrable. The four elements of the test are:[26]

  1. when the cause of action and the subject matter of the dispute relates to actions in rem, that do not pertain to subordinate rights in personam that arise from rights in rem.
  2. when the cause of action and the subject matter of the dispute affects third party rights; have erga omnes effect; require centralised adjudication, and mutual adjudication would not be appropriate and enforceable;
  3. when the cause of action and the subject matter of the dispute relates to inalienable sovereign and public interest functions of the state and hence mutual adjudication would be unenforceable; and
  4. when the subject matter of the dispute is expressly or by necessary implication non-arbitrable as per mandatory statute(s).

The Court clarified that ‘these tests are not watertight compartments. They dovetail and overlap’ but when applied holistically and pragmatically will help determine as to whether a dispute is non-arbitrable.[27] A brief discussion and comments on the Court’s findings follow.

Actions in rem and/or involving third parties

Vidya Drolia firstly re-emphasises that, save and except subordinate rights in personam which arise out of rights in rem, actions in rem per se are not capable of being resolved in arbitration. Likewise, actions affecting the rights of third parties under certain circumstances (as set out above) are also excluded from the purview of arbitration. This was based on the Court’s view that arbitration is a private dispute resolution mechanism, binding on the parties to the arbitration agreement. Courts established by law, on the other hand, enjoy jurisdiction by default and do not require mutual agreement for conferring jurisdiction.

Arbitral tribunals, not being courts of law or established under the auspices of the state, cannot act judicially to affect those who are not bound by the arbitration clause.[28] Thus, the Court extended the non-arbitrability of rights in rem to include matters involving third parties and non-signatories to arbitration agreements. At a time when there is considerable discussion on consolidation of and joinder of third parties in arbitrations, especially in view of the increasing number of multi-party and multi-contract disputes, the observations of the Supreme Court are significant.

Sovereign functions

The Court has, perhaps for the first time, after the enactment of the Indian Arbitration Act, held that sovereign functions of the state being inalienable and nondelegable are non-arbitrable as the state alone has the exclusive right and duty to perform such functions. The Court has categorically held that the correctness or validity of state or sovereign functions cannot be made a direct subject matter of a private adjudicatory process.

As to the expression ‘sovereign functions’, the Court has helpfully explained that it includes, inter alia, exercise of executive powers relating to commerce and economics, legislations in all forms and taxation.[29] These observations, though made in the context of the domestic law of arbitration in India[30], will undeniably have a far-reaching effect.

It will be interesting to see, in particular, if the Supreme Court’s observations will have any bearing on the enforcement of the arbitral awards obtained by Vodafone Plc[31] and Cairn Energy[32] against the Government of India; the subject matters of which are, in essence, the legality and applicability of certain amendments made by the legislators to Indian tax laws. The awards were issued in arbitrations which arose out of India’s bilateral investment treaties with the Netherlands (Vodafone Plc award) and the United Kingdom (Cairn Energy award), respectively.

Implicit non-arbitrability in case of special statutes

The next class of matters which the Court clarified as not arbitrable are those relating to special rights or liabilities which are (1) created under a statute; or (2) the determination of which lies within the exclusive jurisdiction of specific courts or tribunals (other than regular civil courts).

The Court observed that it is not sufficient to merely designate a specific forum as a substitute for a civil court. The statute must provide a remedy which extends beyond the jurisdiction of ordinary domain of civil courts.[33]  Non-arbitrability may be implied only if the relevant statute bars the parties from contracting out of the designated court or tribunal. Simply put, the scheme of the statute should be such that a party has no choice but to approach the designated forum or tribunal for enforcement of her rights or liabilities under such statute or other law.[34]

Notably, based on the aforesaid principle, the Court overruled the decision of a three-judge bench (full bench) of the Delhi High Court in HDFC Limited v Satpal Singh Bakshi.[35] It was held in HDFC Limited that matters covered under the Recovery of Debts Due to Banks and Financial Institutions Act 1993 (RDDB Act) are arbitrable. However, given that the Debt Recovery Tribunal (DRT) is specially empowered to deal with disputes under the RDDB Act, the Court in Vidya Drolia held that parties are prohibited by necessary implication from opting out of the jurisdiction of the DRT. Claims covered by the RDDB Act were therefore held to be non-arbitrable.

While the Court’s decision is premised on upholding the special rights and interests conferred by the RDDB Act on banks and financial institutions[36], it remains to be seen if the banking and financial sector will truly benefit from this ruling.  

The RDDB Act was enacted to establish the DRT, a special tribunal for expediting the recovery and adjudication of debts due to banks[37] and specified financial institutions.[38] While most banks and financial institutions did, in any case, resort to the recovery mechanism provided under the RDDB Act, they continued to have the option of incorporating arbitration clauses in their contracts with borrowers, leaving open the possibility of taking recourse to arbitration for recovery of debts in a given case. After Vidya Drolia, this option is now no longer available.

While the RDDB Act is a well-intended legislation, it is debatable whether the formation of DRTs has truly served its purpose of expediting the recovery of debt. On the other hand, due to recent legislative changes,[39] arbitration in India is by far the most effective and efficacious dispute resolution mechanism, particularly for settlement of commercial disputes. 

Landlord–tenant disputes

On the specific issue as to whether a dispute between a landlord and a tenant is arbitrable when the relationship between the persons is governed solely by the TP Act as opposed to any special rent control legislation, the Court, expectedly, answered this question in the affirmative.[40] The Court held that such actions are not in rem but pertain to subordinate rights in personam that arise from rights in rem.

The Court rightly noted that provisions of the TP Act do not expressly or by necessary implication bar arbitration. The Court clarified, however, that landlord-tenant relationships and disputes governed by special rent control legislations – which designate specific courts or fora to adjudicate upon disputes between landlord and tenants – can only be decided by the designated courts or tribunals. They cannot be settled by arbitration.[41]

Other instances of non-arbitrability

Apart from the specific disputes referred above, applying the tests propounded by it, Vidya Drolia highlighted and re-emphasised that certain specific classes or categories of disputes are non-arbitrable[42]. These are summarised as follows:

  • Insolvency or intra-company disputes, the Court held, must be addressed by a ‘centralised forum’, be it a court or a special forum, which would be able to dispose of such matters both efficiently and completely.
  • Grant and issue of patents and registration of trademarks are matters falling exclusively within the sovereign or government functions and have erga omnes effect. Such grants confer monopoly rights. They are, therefore, non-arbitrable.
  • Criminal cases, the Court reiterated, are not arbitrable as they relate to sovereign functions of the state. Violations of criminal laws constitute offenses against the state and not just against the victim.
  • Matrimonial disputes relating to the dissolution of marriage, restitution of conjugal rights etc. are not arbitrable as they fall within the ambit of sovereign functions and do not have any commercial and economic value. The decisions have erga omnes effect.
  • Matters relating to probate and testamentary matters are actions in rem and hence are non-arbitrable.

Allegations of fraud

In the Indian context, a discussion on arbitrability is not complete without alluding to the fate of disputes involving allegations of fraud. While this was a vexed question for many years, with discussions originating in the judgment of the Supreme Court in the case of Abdul Kadir v Madhav Prabhaka[43], the contentious decision of the Supreme Court in the case N. Radhakrishnan v Maestro Engineers[44] was considered a serious setback. This judgment excluded from the purview of arbitration cases involving serious allegations of fraud and which required a detailed investigation and production of elaborate evidence. The Court in Radhakrishnan found that such matters are best decided by a civil court as they cannot be properly dealt with by an arbitrator.

However, consistent with the recent pro-arbitration developments in India, a series of decisions of the Supreme Court in the past five years, including the most recent ones in Vidya Drolia and Global Mercantile Private Limited v Indo Unique Flame Limited and others,[45]  have clarified and, hopefully, settled the position on arbitrability of disputes involving allegations of fraud.

While Vidya Drolia has, in express terms, overruled the ratio in N Radhakrishnan, clarifying that allegations of fraud can be made a subject matter of arbitration when they relate to a civil dispute, it may be useful to also note the observations of the Supreme Court in some of the other judgments – including the judgment in Global Mercantile which was pronounced shortly after Vidya Drolia.

In A. Ayyasamy v Parmasivam and others,[46] the Supreme Court clarified that mere allegations of fraud without much more would not be sufficient to oust the jurisdiction of an arbitral tribunal. The ratio is summarised in paragraph 25 of the judgment, authored by Justice Sikri.

‘25. In view of our aforesaid discussions, we are of the opinion that mere allegation of fraud simplicitor may not be a ground to nullify the effect of arbitration agreement between the parties. It is only in those cases where the Court, while dealing with Section 8 of the Act, finds that there are very serious allegations of fraud which make a virtual case of criminal offence or where allegations of fraud are so complicated that it becomes absolutely essential that such complex issues can be decided only by civil court on the appreciation of the voluminous evidence that needs to be produced, the Court can sidetrack the agreement by dismissing application under Section 8 and proceed with the suit on merits. It can be so done also in those cases where there are serious allegations of forgery/fabrication of documents in support of the plea of fraud or where fraud is alleged against the arbitration provision itself or is of such a nature that permeates the entire contract, including the agreement to arbitrate, meaning thereby in those cases where fraud goes to the validity of the contract itself … which contains the arbitration clause or the validity of the arbitration clause itself.’

Justice Chandrachud, while concurring with Justice Sikri, delivered a separate judgment adding his own views. It would be apposite to reproduce an extract from the judgment if only to highlight the prevailing sentiment of the Indian judiciary on this subject:

‘45.2 Allegations of fraud are not alien to ordinary civil courts. Generations of judges have dealt with such allegations in the context of civil and commercial disputes. If an allegation of fraud can be adjudicated upon in the course of a trial before an ordinary civil court, there is no reason or justification to exclude such disputes from the ambit and purview of a claim in arbitration. Parties who enter into commercial dealings and agree to a resolution of disputes by an arbitral forum exercise an option and express a choice of a preferred mode for the resolution of their disputes. Parties in choosing arbitration place priority upon the speed, flexibility and expertise inherent in arbitral adjudication. Once parties have agreed to refer disputes to arbitration, the court must plainly discourage and discountenance litigative strategies designed to avoid recourse to arbitration. Any other approach would seriously place in uncertainty the institutional efficacy of arbitration. Such a consequence must be eschewed.’

Following the ratio in Ayyasamy, the Supreme Court in Rashid Raza v Sadaf Akhtar[47] rearticulated the tests for determination of arbitrability in the context of allegations of fraud as follows:

‘4. …Two working tests laid down in paragraph 25 are: (1) does this plea permeate the entire contract and above all, the agreement of arbitration, rendering it void, or (2) whether the allegations of fraud touch upon the internal affairs of the parties inter se having no implication in the public domain.’ 

In Avitel Post Studioz Ltd. and others v HSBC PI Holdings (Mauritius Limited),[48] the Supreme Court once again dealt with the issue of fraud, this time in the context of an international commercial contract. The Court alluded to the tests laid down in Ayyasamy and Rashid Raza and explained when these would be considered satisfied. The following extract from the judgment is relevant in this context:  

‘34. After these judgments, it is clear that ‘serious allegations of fraud’ arise only if either of the two tests laid down are satisfied, and not otherwise. The first test is satisfied only when it can be said that the arbitration clause or agreement itself cannot be said to exist in a clear case in which the court finds that the party against whom breach is alleged cannot be said to have entered into the agreement relating to arbitration at all. The second test can be said to have been met in cases in which allegations are made against the State or its instrumentalities of arbitrary, fraudulent, or malafide conduct, thus necessitating the hearing of the case by a writ court in which questions are raised which are not predominantly questions arising from the contract itself or breach thereof, but questions arising in the public law domain.’

In Booz Allen, as also in Afcons Infrastructure Limited v Cherian Varkey Construction Co (P) Limited[49], the Supreme Court had held that cases arising out of criminal offenses were non-arbitrable. In this context, the Court in Avitel noted that the same set of facts may have criminal as well as civil consequences. After referring to various decisions dealing with the potential overlap of civil and criminal proceedings, the Court held as follows:

‘42. In the light of the aforesaid judgments, paragraph 27(vi) of Afcons (supra) and paragraph 36(i) of Booz Allen (supra), must now be read subject to the rider that the same set of facts may lead to civil and criminal proceedings and if it is clear that a civil dispute involves questions of fraud, misrepresentation, etc. which can be the subject matter of such proceeding under section 17 of the Contract Act, and/or the tort of deceit, the mere fact that criminal proceedings can or have been instituted in respect of the same subject matter would not lead to the conclusion that a dispute which is otherwise arbitrable, ceases to be so. [Emphasis added]

The views of the Supreme Court in Avitel were affirmed in Deccan Paper Mills Co. Ltd. v. Regency Mahavir Properties[50] as well as in Vidya Drolia. As stated above, Vidya Drolia expressly overruled the law laid down in Radhakrishan and clarified that so long as the dispute is of a civil nature, allegations of fraud can be settled in arbitration.

The latest decision on this subject is the case of Global Mercantile. In this case, the Supreme Court was dealing with a question as to whether an allegation of fraudulent invocation of a bank guarantee is an arbitrable dispute. After analysing the law and discussing judicial precedents, some of which are referred above, the Court held in no uncertain terms that the civil aspect of fraud is arbitrable. The only exception is where the allegation is that the arbitration agreement itself is vitiated by fraud or fraudulent inducement, or the fraud goes to the validity of the underlying contract and impeaches the arbitration clause itself.[51]

Notably, the Court emphasised that, in contemporary arbitration practice, tribunals are used to examining voluminous documents. The Court made this statement in the backdrop of the earlier view that civil courts alone are best placed to deal with complex matters involving voluminous evidence. The Court in the strongest terms held that allegations of fraud as a ground to assert non-arbitrability is ‘a wholly archaic view, which has become obsolete, and deserves to be discarded’[52].

The Court concurred with earlier decisions to observe that the criminal aspect of fraud, forgery, or fabrication, which would be visited with penal consequences and criminal sanctions, can be adjudicated only by a court of law. Since it may result in a conviction, these matters fall within the realm of public law.

On the specific question of invocation of bank guarantee, the Court held the dispute to be arbitrable since it arose out of disputes between parties inter se and did not fall in the realm of public law.

Concluding remarks

While it is not possible to exhaustively list out all classes or categories of disputes that are non-arbitrable, applying the test in Vidya Drolia and on examination of the various judicial precedents, the following are some of the disputes, which, in India, would not be capable of settlement in arbitration:

  • criminal offenses visited with penal consequences;
  • offenses pertaining to bribery and corruption;
  • matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody and guardianship matters which pertain to the status of a person;
  • testamentary matters which pertain to disputes relating to the validity of a will, grant of probate, letters of administration, and succession certificate;
  • disputes between landlord and tenants governed by special legislations which confer jurisdiction on specific courts or tribunal for determination of special rights or liabilities under such statute;
  • cases for which specific remedies are provided under the Trusts Act;
  • insolvency proceedings;[53]
  • intracompany proceedings under the Companies Act 2013 for which the National Company Law Tribunal or other fora is conferred with exclusive jurisdiction;
  • grant of patents and registration of trademarks; and
  • correctness or validity of state or sovereign functions.

The above list is by no means exhaustive nor is it rigid. The law on arbitrability is fluid and will, no doubt, continue to evolve with time.

It is important, though, to be conscious of the legal position especially when drafting arbitration agreements or before commencing arbitrations. With increasing use of arbitration as a preferred dispute resolution mechanism, questions around arbitrability assume importance for both Indian and international stakeholders. While the broader principles are quite helpfully enunciated in various decisions of the Supreme Court, for the time being, the tests laid down in Vidya Drolia should suffice and guide those keen to unravel the Indian law on arbitrability.

[1] See section 5 of the Arbitration & Conciliation Act 1996; Also see, paragraph 52 of Global Mercantile Private Limited v Indo Unique Flame Limited and others 2021 SCC OnLine SC 13.

[2] Booz Allen & Hamilton Inc v SBI Home Finance Ltd (2011) 5 SCC 532, see paragraph 34.

[3] Section 2(3) of the Indian Arbitration Act.

[4] Section 43(2)(b)(i) of the Indian Arbitration Act.

[5] Sections 48(2)(a) and 57(1)(b) the Indian Arbitration Act.

[6] Article V(2)(a) of the New York Convention.

[7] Article 1(b) of the Geneva Convention.

[8] 2020 SCC OnLine SC 1018.

[9] (2016) 8 SCC 788  .

[10] See paragraph 35 of Booz Allen.

[11] See paragraph 38 of Booz Allen.

[12] See paragraph 36 of Booz Allen.

[13] (2016) 8 SCC 788

[14] In the context of this decision (and paper), ‘trust’ is an obligation annexed to the ownership of property, and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner. See Section 3 of the Indian Trusts Act 1882.

[15] 2(b) ‘arbitration agreement’ means an agreement referred to in section 7;

 2(h) ‘party’ means a party to an arbitration agreement;

 7. Arbitration agreement –

(1) In this Part, ‘arbitration agreement’ means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.

(3) An arbitration agreement shall be in writing.

(4) An arbitration agreement is in writing if it is contained in— (a) a document signed by the parties; (b) an exchange of letters, telex, telegrams or other means of telecommunication 1 [including communication through electronic means] which provide a record of the agreement; or (c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.

(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.

[16]  2010 (2) SCC 486. In this case the question before the Court was whether an arbitration clause in a will meant to resolve disputes, if any, in relation to the bequest can bind the executors and beneficiaries. The Supreme Court answered in the negative, holding that a unilateral declaration of this nature by a testator in a will does not satisfy the requirements of section 7 of the Indian Arbitration Act. See paragraphs 18-22.

[17] AIR 1965 Cal 628

[18] See paragraph 34 of Vimal Shah

[19] See sections 7, 11, 34, 36, 41, 45, 46, 49, 53, 71, 72, 73 and 74 of the Trusts Act

[20] Paragraph 50 of Vimal K Shah

[21] Paragraph 54 of Vimal K Shah

[22] (2017) 10 SCC 706

[23] Vidya Drolia and Others v. Durga Trading Corporation 2019 SCC OnLine SC 358

[24] For a discussion on this judgment see www.barandbench.com/news/reconsidering-the-arbitrability-of-tenancy-disputes-in-india. Accessed 17 May 2021.

[25] See paragraph 2 of Vidya Drolia

[26] See paragraph 60 of Vidya Drolia

[27] See paragraph 61 of Vidya Drolia

[28] See paragraph 37 of Vidya Drolia

[29] Paragraph 38 of Vidya Drolia

[30] Paragraph 6 of Vidya Drolia

[31] For a discussion on the Vodafone case, see ‘India: Vodafone Arbitration Agreement & Rights of Investors to Claim under Treaties’ (The National Law Review, 27 October 2020), see www.natlawreview.com/article/vodafone-investment-treaty-arbitration-award-implications-vodafone-arbitration-award#:~:text=The%20Republic%20of%20India%20(Vodafone,(India%20–%20Netherlands%20BIT.

[32] For a discussion on the Cairn case, see ‘Cairn Energy v India: Retroactive Taxation, Fair and Equitable Treatment and the General Principles Method’ (EJIL: Talk!, 13 January 2021), see www.ejiltalk.org/cairn-energy-v-india-retroactive-taxation-fair-and-equitable-treatment-and-the-general-principles-method/.

[33] See paragraph 43 of Vidya Drolia

[34] See paragraphs 41 and 42 of Vidya Drolia

[35] (2013) 134 DRJ 566 (FB)

[36] See paragraph 46 of Vidya Drolia

[37] Section 2 (d) of the RDDB Act defines ‘bank’ to mean (1) banking company; (2) a corresponding new bank; (3) State Bank of India; (4) a subsidiary bank; or (5) a regional rural bank

[38] Section 2 (h) of the RDDB Act defines ‘financial institution’ to mean (1) a public financial institution within the meaning of Section 4A of the Companies Act, 1956 (1 of 1956); (2) such other institution as the Central Government may, having regard to its business activity and the area of its operation in India by notification, specify.

[39] See, the Arbitration & Conciliation (Amendment) Act 2015 at https://lawmin.gov.in/arbitration-and-conciliation-amendment-act-2015, accessed 17 May 2021.

   Arbitration & Conciliation (Amendment) Act 2019 at https://legalaffairs.gov.in/actsrulespolicies/arbitration-and-conciliation-amendment-act-2019, accessed 17 May 2021.

[40] See paragraphs 65 of Vidya Drolia

[41] See paragraph 66 of Vidya Drolia

[42] See paragraph 63 of Vidya Drolia

[43] AIR 1962 SC 406 Note: This was a judgment under the Arbitration Act 1940

[44] (2010) 1 SCC 72

[45] 2021 SCC OnLine SC 13

[46] (2016) 10 SCC 386 

[47] (2019) 8 SCC 710

[48] (2020) SCC OnLine SC 656

[49] 2010 8 SCC 24

[50] (2020) SCC OnLine SC 655

[51] See paragraph 110 of Global Mercantile

[52] See paragraph 116 of Global Mercantile

[53] See Indus Biotech v Kotak India Ventures [order dated 26 March 2021 in Arbitration Petition (Civil) 48 of 2019]. The Supreme Court has clarified that if an application seeking referral of a dispute to arbitration is filed before an adjudicating authority (AA) which is due to hear an Insolvency Petition under section 7 of the Insolvency & Bankruptcy Code, the AA must first consider the Insolvency Petition and decide whether there is a default by the corporate debtor. If the AA is satisfied that there is a default and, the Petition is, therefore, admitted, the application for referral of the dispute to arbitration will not be maintainable. Once admitted, an insolvency action is considered a proceeding in rem and, therefore, not arbitrable. On the other hand, if the AA concludes that a default has not occurred and consequently the insolvency petition is not admitted, it is open for the AA to refer the dispute to arbitration.