Consent, Conduct, and Their Constraints: Why Estoppel Cannot Cure Non-Arbitrability
The Supreme Court’s (“SC”) judgment in Sanjit Singh Salwan v Sardar Inderjit Singh Salwan (“Sanjit Singh”) represents a significant doctrinal shift in the law of non-arbitrability. The dispute arose from the administration of a public charitable trust – an area that is naturally non-arbitrable under §92 of the Civil Procedure Code (“CPC”). Yet, the SC held that since the Respondents had accepted the arbitral award and even obtained a decree in their own appeal on the basis of that award (as a compromise), they were barred from later challenging it. They could now not argue that the award was a nullity under §92 CPC. In essence, estoppel justified an arbitral award on an issue that was, at its core, non-arbitrable.
In this essay, we critique Sanjit Singh, arguing that the Respondent could not have ‘opted into’ something that was a nullity and never existed. Through examining the nature of estoppel itself, we demonstrate how the SC’s conclusion rests on a doctrinal mistake. Thus, the SC may have drawn and overbroad position and the result of the arbitral award entered into between the parties in this case is at risk of being set aside due to §34(2)(b)(i) of the Arbitration & Conciliation Act, 1996 (“A&C Act”).
This piece is not a normative argument for or against the arbitrability of trust disputes; it is a doctrinal engagement with Sanjit Singh on the basis of existing Indian jurisprudence.
Facts and Background
The dispute concerned the Guru Tegh Bahadur Charitable Trust. The Respondents had initially asserted that the matter was not arbitrable and that the Trust Deed contained no arbitration clause.
After losing before the trial court, the Respondents shifted course. During the pendency of their appeal, both parties filed an application stating that they had appointed a sole arbitrator to decide all disputes relating to the Trust, that hearings had already taken place, and that the appeal should be disposed of in terms of the final award. When the award was passed, both sides jointly moved the appellate court, accepting the award in writing and unconditionally agreeing to abide by it. The appellate court adopted the award as a compromise decree.
This decree remained unchallenged. The Appellants, acting on the Respondents’ representations, withdrew FIRs and made significant payments required by the award. Only when the Appellants sought interim measures under §9 of the A&C Act did the Respondents revert to their original argument: trust disputes are non-arbitrable, the arbitrator lacked jurisdiction, and consequently, the award would be a nullity.
The SC, on appeal, framed the issue narrowly. It was not concerned with the validity of the award. Instead, it asked whether the Respondents – having repeatedly represented that arbitration was acceptable and having secured a decree on that basis – could now take a “diametrically opposite stand” (¶13) and leave the appellants without a remedy. It ultimately held that the Respondents could not approbate and reprobate.
For the SC, even if the award dealt with a non-arbitrable subject, the Respondents’ conduct – express consent to arbitration, active reliance on the award to secure disposal of their own appeal, and their inducement causing the Appellants to alter their position – barred them from challenging the decree. The focus shifted from the legality of the arbitration to the equities of behaviour.
Estoppel & Its Interaction With Non-Arbitrability
We argue that the SC’s conclusion is not sustainable. First, by establishing why public trust disputes are non-arbitrable. Based on this premise, second, by demonstrating that estoppel cannot then change that non-arbitrability, because estoppel’s operation is bounded by statute and regardless, it cannot be allowed to frustrate the policy of a statute. Taken together, these principles lead to the opposite of what the SC holds: where the subject matter is non-arbitrable, the very foundation on which estoppel must stand is missing.
Public Trust Disputes Are Non-Arbitrable
This piece deals with disputes involving public charitable trusts under §92 CPC, as in Sanjit Singh. While the Supreme Court in Vimal Kishor Shah v. Jayesh Dinesh Shah (“Vimal Kishor”) held that private trust disputes under the Trusts Act, 1882 are non-arbitrable, that reasoning is relevant here only in part.
Non-arbitrability may arise expressly or by necessary implication. In this case, it arises by necessary implication on two related grounds.
First, the Court in Vimal Kishor held that private trust disputes are non-arbitrable by necessary implication because the statutory framework is intended to be exhaustive. A similar logic applies to public trusts. §92 CPC envisages the courts as having a supervisory role to protect trust administration. In this vein, courts have recognized the purpose of the section as preventing vexatious litigation, such that funds which are meant for charitable/religious purposes are not wasted on litigation. This is also reflected in the section’s structure: suits can proceed only with the court’s leave or at the instance of the Advocate General, based on prima facie satisfaction of a breach or need for directions.
This shows that the provision intends to designate courts as the appropriate forum. Arbitration, which substitutes a privately appointed tribunal for that supervisory function, is structurally incompatible with the object of this provision and was not intended as an option.
Second, irrespective of the above reasoning, §92 disputes are non-arbitrable because they operate in rem, binding a class of beneficiaries beyond the immediate parties.
This is because courts have held that §92 suits are representative in nature. Even if brought by a few individuals, the outcome binds all beneficiaries, and res judicata applies to them. This gives such disputes an effect beyond the immediate parties.
For that reason, they fall within the SC’s test for non-arbitrability. In Vidya Drolia v. Durga Trading Corporation (relying on Booz Allen v. SBI Finance), the Supreme Court held that disputes involving rights in rem are non-arbitrable. In other words, disputes are non-arbitrable when their resolution has an erga omnes effect i.e. when the outcome determines rights or liabilities of persons who are not parties to the arbitration agreement (¶31, Vidya Drolia). Public trust disputes fall within this category. Since arbitration is suited to disputes in personam, it is structurally unsuited to such cases. Therefore, public trust disputes are not arbitrable by necessary implication.
Estoppel Cannot Operate to Make Such a Dispute Arbitrable
The Court’s reliance on estoppel is flawed for two reasons: first, because estoppel’s operation is bounded by statute; and second, regardless, estoppel cannot be used to defeat the policy of a statute.
As a preliminary point, it may be contested that the estoppel invoked in Sanjit Singh – being based on conduct – is distinct from estoppel by representation of fact. However, this distinction is immaterial here. Estoppel by representation arises where a party makes a statement of fact that another relies on, while estoppel by conduct prevents a party from taking inconsistent positions based on their conduct, leading to another party relying on such conduct to their own detriment. The distinction therefore lies in source – representation versus conduct. In the latter course, however, the representation is made as a result of conduct. Therefore, the only material distinction is in form – but not in the consequence itself. The distinction between the forms is therefore irrelevant to the central argument. Moreover, the SC in Sanjit Singh itself relied on precedents of estoppel by representation.
Thus, we shall demonstrate that both forms operate only where the law recognises an underlying right, and even estoppel by conduct cannot be against law. As an aside, it may be noted that estoppel can be barred by the parties altogether. For instance, the SC has recently held in Sepco Electric Power Construction Corporation v Kamalanga Energy Ltd that no claim based on estoppel can exist when a contract itself specifies a “No Oral Modification” clause.
We submit, first, that while estoppel may in certain circumstances give rise to substantive rights, its operation is necessarily bounded by statute. It cannot be invoked to sustain a position that the law itself does not permit. As courts have held in the context of promissory estoppel against the Government, it “cannot be used to compel the Government or a public authority to carry out a representation or promise which is contrary to law…” (¶13). The principle is not confined to public law: it reflects a broader limit that estoppel cannot override statutory prohibitions.
This limit is decisive here. Even if estoppel is capable of creating enforceable rights as between parties, it cannot do so where the underlying right is excluded, whether expressly or by necessary implication. In B.L. Sreedhar v. K.M. Munireddy, the SC recognised that estoppel cannot operate in the face of a statutory bar. §92 CPC, properly understood, constitutes such a bar. Its court-centred supervisory framework, coupled with the representative and in rem character of the proceedings, excludes private adjudication by necessary implication.
On that footing, estoppel cannot be used to validate or sustain an agreement to arbitrate disputes falling within §92. To hold otherwise would permit parties, through conduct, to achieve indirectly what the statute prohibits directly.
Even otherwise, estoppel cannot defeat statutory policy.1 The non-arbitrability of public trust disputes reflects a protective, supervisory framework under which only civil courts can adjudicate such matters. Permitting estoppel to validate arbitration in this context would undermine that framework, effectively allowing parties to bypass the very judicial control the statute is designed to ensure.
Moreover, bearing the above in mind, the SC’s reliance on Dhiyan Singh v. Jugal Kishore is misplaced since this case is distinguishable. There, estoppel operated because the parties’ conduct amounted to an admission of disputed facts – the true state of title and interests. The Court itself noted there was “considerable doubt” about the underlying facts, and estoppel attached to those factual admissions, not to the legal validity of the award. In Sanjit Singh, the supposed representation is entirely different. By acting on the award, the Respondents are taken to have admitted arbitrability – but arbitrability is not a fact that can be admitted through conduct at all.
Even if one accepts that the claim is based on a representation to abide by the award rather than the award itself, the Court’s conclusion does not follow. A claim in estoppel can only justify relief proportionate to the reliance-based detriment suffered; it compensates loss, not validates void instruments. By effectively enforcing the decree as such, the Court is treating the award as operative.
Consequently, §34(2)(b)(i) May Justify Setting Aside
If, as argued above, the award is a nullity due to non-arbitrability, §34(2)(b)(i) of the A&C Act would allow a court to set it aside. §34(2)(b)(i) allows the court to set aside an award that deals with a dispute “not capable of settlement by arbitration.” Since, the subject-matter of a trust dispute is non-arbitrable, the tribunal therefore lacks jurisdiction, triggering §34(2)(b)(i) as a ground for setting aside an award. However, the SC sidestepped this by focusing solely on the compromise decree, treating it as an independent basis for enforcement. In doing so, it avoided engaging with the invalidity of the award.
But this approach is difficult to sustain. The decree was not based on an independent judicial determination; it was a mechanical adoption of the arbitral award. Its content is inseparable from the award. If the award is void, the decree should ordinarily fall with it. This conclusion is reinforced by Order XXIII Rule 3 of the CPC, which permits a compromise decree only where the suit is adjusted by a lawful agreement. An arbitral award rendered without subject-matter jurisdiction cannot constitute a lawful basis for such adjustment. A decree that merely adopts such an award therefore lacks statutory foundation and cannot be sustained.
The Court’s position implies that any jurisdictionally defective award can nevertheless survive if the parties file a compromise decree based on it and act on it sufficiently. This effectively turns mandatory statutory fora into an optional avenue, since it can be sidestepped through conduct. The broader consequence is that nullity is now subject to equitable override, reducing certainty in dispute resolution.
Conclusion: Risks & Reflections
The decision is animated by a clear sense of recognising unfairness. The Appellants withdrew an FIR and transferred money in reliance on the respondents’ representations. The SC understandably did not want the Respondents to benefit from inconsistent positions. But the method used to prevent that injustice creates new problems.
First, it permits conduct to revive party autonomy where a statute has deliberately withdrawn it and allocated jurisdiction to civil courts. Second, it makes non-arbitrability porous: if parties act on an award, even a jurisdictionally void one, they may later be estopped from challenging it. Third, it creates uncertainty in how courts will treat consent decrees based on awards dealing with excluded subject matter.
Sanjit Singh expands the reach of estoppel into an area where it should not operate. It permits conduct to create consequences that the law otherwise prohibits. The judgment attempts to strike a balance between equity and statutory limitations, but its method blurs a line that previous cases from Booz Allen to Vidya Drolia have treated as non-negotiable. Sanjit Singh thus marks a troubling shift in the Court’s approach to the structural limits of arbitration in India.
[1] Snell’s Equity (34th edn, Sweet & Maxwell 2020) 12-029; Halsbury’s Laws of England (3rd edn, LexisNexis Butterworths 1964) vol 15, art 345.