Arbitration clause in a Will

Can arbitrators have testamentary jurisdiction?

A testator left behind a Will with an arbitration clause stipulating that if there is any dispute among the legal heirs, that shall be resolved by the arbitration.

The legal heirs were not consenting or confirming party to the Will. As it turns out, the Will did not contain arbitration agreement but a subsequent declaration had directed the heirs to resort to arbitration by a named arbitrator if there is a dispute. The legal heirs were not consenting or confirming party to this declaration as well.

Validity of arbitration clause:

In this case, admittedly, there is no document signed by the parties to the dispute, nor any exchange of letters, telex, telegrams (or other means of telecommunication) referring to or recording an arbitration agreement between the parties. It is also not in dispute that there is no exchange of statement of claims or defence where the allegation of existence of an arbitration agreement by one party is not denied by the other. In other words, there is no arbitration agreement (as defined in section 7 of Arbitration and Conciliation Act, 1996) between the parties.

Even if the Will had provided for reference of disputes to arbitration, it would be merely an expression of a wish by the testator that the disputes should be settled by arbitration and cannot be considered as an Arbitrator agreement among the legatees. In this case, according to the respondents, the provision for arbitration is not in the Will but in a subsequent declaration allegedly made by Durganarayan Sharma, stating that if there is any dispute in regard to his Will dated 28.12.2003, it shall be referred to his friend, U.M. Bhandari, Advocate, as the sole arbitrator whose decision shall be final and binding on the parties. A unilateral declaration by a father that any future disputes among the sons should be settled by an arbitrator named by him, can by no stretch of imagination, be considered as an arbitration agreement among his children, or such of his children who become parties to a dispute. At best, such a declaration can be expression of a fond hope by a father that his children, in the event of a dispute, should get the same settled by arbitration. It is for the children, if and when they become parties to a dispute, to decide whether they would heed to the advice of their father or not. Such a wish expressed in a declaration by a father, even if proved, cannot be construed as an agreement in writing between the parties to the dispute agreeing to refer their disputes to arbitration.

Held that there is no arbitration agreement between the parties

Source:  Vijay Kumar Sharma @ Manju vs Raghunandan Sharma @ Baburam

Note: The question posed first above is not yet resolved. The undecided question is: “Can a testator create an arbitration clause with the consent of legal heirs?” The fluid situation is that legal heirs keep changing and there is always a chance that some legal heir is born later who would not be party to such Will/Declaration containing arbitration clause. Another consideration would be: “Whether testamentary jurisdiction which is called ‘Court of conscious’ can be conferred on an arbitrator? and Would it not be opposed to public policy?”

A similar question arose in respect of an arbitration clause in a Trust Deed. Click to read it.

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