Source: Allahabad High Court

Why in News?

Recently, the Allahabad High Court in the matter of Sanjit Singh Salwan and 4 Others v. Sardar Inderjit Singh Salwan and 2 Others has held that the disputes related to trust as mentioned under Section 92 of the Code of Civil Procedure, 1908 (CPC) are not arbitrable in nature. The Court further added that Section 89 of CPC which states the provisions regarding outside the court settlement shall not have overriding effect over Section 92 of CPC.

What was the Background of Sanjit Singh Salwan and 4 Others v. Sardar Inderjit Singh Salwan and 2 Others Case?

• In the present case, a trust named, Guru Teg Bahadur Trust used to manage the Guru Teg Bahadur school.
• Appellants and defendants claimed themselves trustees by amending the original trust deed in 2019.
• A dispute arose over management and membership of the school.
• The respondent filed a suit seeking injunction for restraining the appellant from interfering in the management and control of the school.
• The suit was dismissed by the trial court, against which an appeal was filed.
• During the pending appeal the parties entered arbitration.
• Two awards were passed by the sole arbitrator, one in the year 2022 and the other one was in the year 2023.
• The appellant pleaded that the award passed by the arbitrator in the year 2023 was an ex parte award.
• Appellant filed an execution case for 2022 award. However, the same was withdrawn due to insistence of Arbitrator
• Thereafter the appellant filed an application under Section 9 of the Arbitration & Conciliation act, 1996 (ArC) before the Commercial Court.
• The appellants were seeking injunction for restraining the respondent from interfering in the management and control of the school.
• It was argued by the appellant that the first time they came to know about the award passed in the year 2023 was by way of the objections filed by the respondents in Section 9 of ArC proceedings.
• The respondent again approached the arbitrator to restrain the appellant from interfering in the management of the school for which an award was passed in the year 2024.
• The appellant challenged the awards passed in the year 2023 and in the year 2024 under Section 37 and section 34 of Arc respectively.
• The commercial court held that the matters related to trust are not arbitrable and therefore the awards passed by the arbitrator are null and void.
• The commercial court also rejected the application of the appellant under Section 9 of ArC.
• Aggrieved by the decision to reject the application, the appellant filed the appeal before the Allahabad High Court.

What were the Court’s Observations?

• The Allahabad High court observed that provisions of Section 92 of CPC which states the provisions regarding trust.
• The Allahabad High Court further added that the clause (2) of Section 92 of CPC specifically states that any dispute or reliefs mentioned under Clause (1) of the said provision can only be sought as per the procedure given under its Clause (2).
• The High Court held that Guru Teg was a public trust and therefore the arbitration proceedings commenced, and awards passed hold no value as the same to be sough under Section 92 of CPC.
• The Allahabad High Court therefore confirmed the order of the Commercial Court.

What is Section 92 of CPC?

• Filing a Lawsuit for Public Trusts
  • This section explains who can file a lawsuit related to public charitable or religious trusts.
  • The Advocate-General or at least two people interested in the trust can file a suit in a civil court.
  • They need the court's permission first. The lawsuit can be about various issues related to managing the trust.
• Possible Court Orders
  • The court can make different types of orders, including:

a) Removing a trustee

b) Appointing a new trustee

c) Transferring property to a trustee

d) Ordering a removed trustee to hand over trust property

e) Asking for financial reports and investigations

f) Deciding how to use trust property or income

g) Allowing trust property to be rented, sold, mortgaged, or exchanged

h) Creating a plan for the trust

i) Granting any other necessary relief

• Restrictions on Filing Lawsuits
  • This part says that lawsuits about these trusts must follow the rules mentioned earlier.
  • There are some exceptions based on specific laws for religious endowments.
• Changing Trust Purposes
  • The court can change the original purposes of a public charitable or religious trust in certain situations.
  • This is called applying the trust property or income "cy pres" (as near as possible to the original purpose).
  • The situations include:

a) When the original purposes have been fulfilled or can't be carried out

b) When only part of the trust property is being used

c) When the trust property can be used more effectively with other similar property

d) When the original purpose was tied to an area that's no longer relevant

e) When the original purposes have become unnecessary, harmful, illegal, or ineffective