In a significant ruling on arbitration law, the Supreme Court of India has held that once parties voluntarily consent to arbitration and a consent decree is passed, they cannot subsequently challenge the award on the ground of non-arbitrability of the subject matter. The Court emphasized the applicability of the doctrine of estoppel, observing that parties cannot approbate and reprobate by first accepting the arbitral award and later disputing its validity.
The decision, delivered by a Bench comprising Justice Augustine George Masih and Justice Atul S. Chandurkar in Sanjit Singh Salwan & Ors. v. Sardar Inderjit Singh Salwan & Ors., marks an important precedent for disputes concerning charitable trusts and arbitration proceedings.
Background of the Dispute
The case arose from disputes among trustees of the Guru Tegh Bahadur Charitable Trust. Initially, the respondents had filed a suit for perpetual injunction before the Trial Court. However, the plaint was rejected under Order VII Rule 11 of the Code of Civil Procedure (CPC), with the Court holding that such disputes fell within the scope of Section 92 CPC.
During the pendency of the appeal, the parties opted for arbitration. They executed a compromise deed and agreed to submit their disputes to arbitration. The award rendered by the arbitrator was thereafter incorporated into a consent decree by the District Court.
Pursuant to the decree, the appellants acted upon the terms of the settlement, including withdrawal of a First Information Report (FIR) and payment of certain amounts in accordance with the compromise. However, when the appellants later sought interim relief under Section 9 of the Arbitration and Conciliation Act, 1996, the respondents resisted enforcement. They argued that disputes relating to public charitable trusts were non-arbitrable under Indian law.
Both the Commercial Court and the High Court accepted this contention, holding the arbitral award to be a nullity. Aggrieved, the appellants approached the Supreme Court.
The Supreme Court’s Reasoning
Reversing the findings of the lower courts, the Supreme Court underscored that the principle of estoppel barred the respondents from raising objections after having willingly consented to arbitration and derived benefits under the consent decree.
Justice Chandurkar, writing for the Bench, observed:
- The respondents had voluntarily agreed to resolve the disputes through arbitration.
- They had accepted the award by executing a compromise deed.
- They derived benefits from the decree, including withdrawal of an FIR and financial adjustments.
Given these facts, the Court held that the respondents’ conduct amounted to approbation and reprobation, which is impermissible in law. The Bench stated that allowing such challenges would not only undermine the sanctity of arbitration but also prejudice the appellants who had altered their position to their detriment.
“The respondents by their conduct of accepting the compromise deed based on the award of the arbitrator are now precluded from questioning its validity. They cannot be permitted to first accept and act upon the award, and later turn around to dispute its validity,” the Court observed.
Legal Context: Arbitrability of Trust Disputes
The ruling comes against the backdrop of jurisprudence which has generally excluded certain categories of disputes from arbitration. In Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd. (2011), the Supreme Court classified disputes concerning rights in rem—such as criminal offences, matrimonial disputes, insolvency, and matters under trust law—as non-arbitrable.
Section 92 CPC also provides a specific mechanism for instituting suits concerning public charitable or religious trusts, thereby limiting the jurisdiction of private dispute resolution mechanisms.
Despite this legal position, the Court clarified in the present case that when parties voluntarily accept arbitration and a consent decree is passed, the doctrine of estoppel operates to bar them from later questioning arbitrability. The Court made it clear that what mattered here was not whether trust disputes were in principle arbitrable, but whether parties who had already consented could subsequently retract.
Implications of the Judgment
This ruling has important implications for arbitration law and trust-related disputes in India:
- Strengthening Consent in Arbitration: The judgment reinforces the binding nature of voluntary consent in arbitration. Once parties agree and act upon an arbitral award, they cannot resile on technical objections of arbitrability.
- Clarifying Estoppel in Arbitration: By applying estoppel, the Court underscores that legal certainty and finality of awards must prevail over belated challenges.
- Impact on Trust Disputes: While the decision does not categorically declare trust disputes arbitrable, it establishes that parties cannot exploit the doctrine of non-arbitrability after having benefited from an arbitral award.
- Enforcement of Consent Decrees: The ruling ensures stronger enforceability of consent decrees derived from arbitration, thereby encouraging parties to honour their commitments.
Possible Outcomes and Broader Significance
The Court’s decision revives the appellants’ execution proceedings in terms of the consent decree. Beyond the immediate case, it sets a precedent where courts will be reluctant to entertain challenges to arbitral awards on the ground of arbitrability if parties had earlier consented and acted upon them.
This approach promotes confidence in arbitration as a dispute resolution mechanism, particularly in cases where settlements are reached through mutual agreement. It prevents parties from engaging in tactical litigation to escape obligations after enjoying the benefits of a settlement.
Legal experts anticipate that the ruling will influence future trust-related disputes, narrowing the scope for objections under Section 92 CPC where parties have already chosen arbitration. At the same time, it leaves open the broader question of whether trust disputes are inherently arbitrable, a matter that may be addressed in future jurisprudence.
Conclusion
The Supreme Court’s judgment in Sanjit Singh Salwan & Ors. v. Sardar Inderjit Singh Salwan & Ors. is a clear affirmation of the principle that consent cannot be undermined by later objections. By applying the doctrine of estoppel, the Court has upheld the sanctity of arbitral settlements and consent decrees, sending a strong message against opportunistic litigation.
For practitioners and stakeholders in arbitration, the ruling underscores the importance of finality, certainty, and good faith in arbitral proceedings. For trust law, it highlights the delicate balance between statutory mechanisms under Section 92 CPC and party autonomy in dispute resolution.
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