Anti-Arbitration Injunction Suit of Bina Modi against son Lalit Modi maintainable: Delhi High Court The anti-arbitration injunction suit filed by the widow of late industrialist KK Modi against her son is maintainable, the Delhi HC has ruled The arbitration proceedings started in Singapore by Lalit Modi over property disputes in the family were sought to be contained by the suit. A Single...
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Anti-Arbitration Injunction Suit of Bina Modi against son Lalit Modi maintainable: Delhi High Court
The anti-arbitration injunction suit filed by the widow of late industrialist KK Modi against her son is maintainable, the Delhi HC has ruled
The arbitration proceedings started in Singapore by Lalit Modi over property disputes in the family were sought to be contained by the suit. A Single Judge bench of Justice Rajiv Sahai Endlaw in March set aside as non-maintainable the suits filed by Lalit Modi's mother Bina Modi, his brother Samir and his sister Charu.
On December 24, a division bench of Justices Siddharth Mridul and Talwant Singh set aside this ruling. Two separate lawsuits were filed by Bina, Samir and Charu who claimed the existence of a trust deed among family members and that arbitration in a foreign country could not settle KK Modi family trust matters according to Indian laws.
It was settled law that "the Court would have jurisdiction to grant anti-arbitration injunction, where the party seeking the injunction can demonstrably show that the agreement is null and void, inoperative or incapable of being performed," the division bench held.
On the face of it, the petitioners had raised a sound argument that family trust deed-related disputes were non-arbitrable which is why the single Judge bench should have proceeded with the suit. The division bench said, "… we are of the considered view that the learned Single Judge gravely erred by failing to exercise the jurisdiction vested in the Court, which statutorily required him to adjudicate, whether the disputes between the parties, in relation to the Trust Deed, were per se referable to arbitration. This, in our respectful view, is tantamount to wrong exercise of jurisdiction by the learned Single Judge. The impugned judgment cannot resultantly be sustained, since it failed to consider that, the Trust Deed is not an arbitration agreement in law."
Trusts Act issues do not fall within the realm of the Arbitral Tribunal and are not subject to arbitration as such, the division bench opined. The 103-page judgment read: "We are also of the view that, in the present case the Arbitral Tribunal lacks inherent subject matter jurisdiction; and the present is not a case of concurrent jurisdiction, in view of the settled legal position that, disputes under the Trusts Act raised herein, are prima facie, incapable of being submitted to arbitration. We are further of the view that, in the instant case, it is the Arbitral Tribunal that evidently lacks jurisdiction and not this Court, which has the inherent jurisdiction to determine whether the disputes are arbitrable, particularly when, as in the present case, the ends of justice would otherwise be defeated."
The Single Judge on the face of it should have adjudicated the said dispute. The Single Judge should have exercised the court's jurisdiction as all parties are Indian citizens and the location of immovable assets of the trust is in India.
The bench concluded: "We also hold that, inherent and substantive rights enure to the benefit of the Appellants, to urge that the disputes between the parties in relation to the Trust Deed were not arbitrable and that consequently, they were duly entitled to prosecute their claim for the substantive relief of declaration and permanent injunction, as prayed for."
It was for the arbitral tribunal to decide on arbitrability of the dispute according to the Arbitration and Conciliation Act Section 16, the single Judge bench took the view. The single bench's reliance on Section 16 was "misplaced", the division bench said.
"A fortiori the impugned judgement is erroneous for its misplaced reliance on the principles enunciated in the provisions of Section 16 of the Arbitration Act-- which in view of the Constitution Bench decision in SBP & Co. vs. Patel Engineering is only an enabling provision and does not confer exclusive jurisdiction on the Arbitration Tribunal--without rendering a decision on the issue of 'non-arbitrability' of the subject disputes. The learned Single Judge further fell into error in not appreciating the dictum of the Supreme Court in Vimal Kishor Shah (supra) wherein it was held that a Trust Deed is not in law an 'arbitration agreement'," the division bench held.
In cases where an equal and effective solution could be obtained through any other manner of proceeding, the Specific Relief Act, 1963, Section 41(h) prevented courts from giving injunctions, the single bench had also ruled. The division bench differed with this logic and said: "The reference to Section 41(h) of the Specific Relief Act, 1963 in the impugned judgment, is also fallacious, since the provisions of Section 16 of the Arbitration Act, cannot, in the facts and circumstances elaborated hereinabove, provide any relief in the present case, much less an equally efficacious relief. The provisions of Section 2(3) of the Arbitration Act, exclude the applicability thereof to the present case, as the disputes that have arisen under the Trusts Act, are in our considered view non-arbitrable disputes."
The Supreme Court decisions in Vimal Kishor Shah v. Jayesh Dinesh Shah, Kvaerner Cementation India Limited v. Bajranglal Agarwal and an earlier judgment of the High Court in Mcdonald's India Pvt. Ltd. v. Vikram Bakshi were referred to by the judgment. KK Modi had a trust deed in London before he died in November 2019 to document the terms of the 2006 verbal family settlement between Bina, Samir, Charu and Lalit. If the family members failed to reach a settlement within the obligatory 30 days from KK Modi's death, a trust deed clause allowed the assets' sale and proceeds' distribution, Lalit Modi argued. The heirs would get one year to complete the sale process, as per the trust deed.
While Bina, Samir and Charu said that no such sale had been activated upon true construction of the trust deed. The two suits have been listed before the single bench on January 8 by the division bench.