Friday, March 31, 2023

Modi Versus Modi

Businessman and former IPL head Lalit Modi’s mother Bina Modi, his sister Charu and brother Samir have filed a suit seeking to restrain the arbitration proceedings initiated by London-based Lait Modi in Singapore over property disputes in the family. The apex court may have found a way to ease the way for a settlement.

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Lalit Modi has been based in London ever since he fled the country over accusations of wrongdoing and financial irregularities. The founder of the Indian Premier League (IPL), who became a high-flying celebrity, is now a fugitive, and the latest case involving a property dispute among the family members of KK Modi, the late industrialist, and Lalit Modi’s father, brings him back into the limelight.

On December 16, the Supreme Court appointed two retired top court judges as mediators between Lalit Modi and his mother Bina Modi, the wife of KK Modi, to resolve a long pending property dispute in the family. Former apex court judges Justices Vikramjit Sen and Kurian Joseph were appointed as mediators.

Earlier, on December 6, the Supreme Court had suggested that the best way to solve the on-going family property dispute, mainly between Lalit Modi and Bina Modi, was through mediation in India. The three-judge bench, comprising Chief Justice of India NV Ramana and Justices Surya Kant and Hima Kohli, heard a petition filed by Lalit Modi against the judgment of a division bench of the Delhi High Court which had held that the anti-arbitration injunction lawsuit filed by Bina Modi against her son Lalit was maintainable. Bina Modi, Lalit’s sister Charu and brother Samir had filed a suit seeking to restrain the arbitration proceedings initiated by Lalit Modi in Singapore over property disputes in the family.

The apex court was of the view that it was a family dispute over property and money and suggested mediation or arbitration in India to resolve the case. Senior Advocate Harish Salve, appearing for Lalit Modi, submitted that the matter involves a legal question of construction of Section 5 of the Arbitration Act. A suit cannot be brought in to stop an arbitration, and a suit if filed, is barred by Section 5. Senior Advocate Kapil Sibal, appearing on behalf of Lalit Modi’s mother and siblings, asserted that they don’t have any problem with mediation and had suggested it earlier before the High Court.

Lalit Modi is no stranger to legal controversies. He was the founder and first chairman and Commissioner of the IPL, and ran the tournament for three years until 2010. After IPL 2010 ended, Modi was suspended from The Board of Control for Cricket in India (BCCI) for alleged financial irregularities. The BCCI launched an investigation and banned him for life in 2013 after a committee found him guilty of the charges. Modi denied any wrongdoing and blamed political rivalry as the reason for the charges. Shortly before the Enforcement Directorate launched an investigation against him for alleged financial irregularities, Modi moved to London.

A trust deed was executed in 2014 by KK Modi as the settler, and his family, comprising Bina Modi, Lalit Modi, Charu Modi and Samir Modi, were the designated trustees. Clause 36 of the trust deed provided that in the event disputes arose pertaining to the administration of the trust, these would be submitted to arbitration under the Rules of Arbitration of the International Chamber of Commerce (ICC) at Singapore. KK Modi died on November 2, 2019, after which the dispute emerged amongst the trustees.

Lalit Modi invoked the arbitration clause and preferred an application praying for the grant of certain emergency measures before the International Court of Arbitration of the ICC at Singapore. Bina Modi, Charu and Samir contended that the arbitral proceedings initiated by Lalit Modi before the ICC Court at Singapore were unenforceable and were in blatant violation of the public policy of India. They said that there was a trust deed between the family members and the KK Modi family trust matters cannot be settled through arbitration in a foreign country as per Indian laws. Bina Modi further contended that the law governing the arbitral proceedings was Indian law, and by virtue of that, the arbitrability of trust disputes under the Trusts Act, 1882 stood expressly barred by the recent judgments of the Supreme Court.

The single judge of the Delhi High Court had dismissed the suit filed by Bina Modi in limine (as a preliminary matter) without issuing summons. The Court observed that, in the light of its earlier decisions, it was not inclined to reconsider this position in law. Therefore, it was held that suits such as the one seeking a declaration of invalidity of the arbitration agreement and injunction of arbitral proceedings were not maintainable. The judge held that it was for the arbitral tribunal to decide the issue of arbitrability of the dispute as per Section 16 of the Arbitration and Conciliation Act (A&C Act).

The Supreme Court was quick to resort to the essence of Section 16 of the A&C Act that embodies the doctrine of kompetenz-kompetenz (that an arbitral tribunal is empowered and has the competence to rule on its own jurisdiction, including determining all jurisdictional issues and the existence or validity of an arbitration agreement). The Court held that the civil courts did not have the jurisdiction to determine the maintainability of arbitral proceedings even when there are contentions pertaining to the invalidity of the arbitration agreement.

Section 41(h) of the Specific Relief Act, 1963, bars courts from granting injunctions in cases where an equal and efficacious remedy could be obtained through any other mode of proceeding held by the court. Section 41(h) of the Specific Relief Act, 1963, bars the grant of any injunctive relief in those situations where the parties seeking the injunction can alternatively resort to an equally efficacious remedy that can be availed through another usual mode of proceeding.

Bina Modi, aggrieved by the judgment of the single judge had preferred an appeal before the division bench of the Delhi High Court. The division bench set aside the judgment of the single judge and held that it was settled law that the court would have jurisdiction to grant an 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 apex court observed that the single judge fundamentally erred by failing to take into consideration that the ratio propounded by the Supreme Court in the Kvaerner Cementation case was not attracted to the facts and circumstances of the present case and that it was not the relevant authority to determine the non-arbitrability contentions rightly raised by Bina Modi.

The Court noted that the single judge gravely erred by accepting Lalit Modi’s contention that the present case did not warrant the application of the judgments of the Supreme Court in Vimal Kishor Shah and Vidya Droli that expressly barred the arbitrability of disputes under the Trusts Act, 1882.

The division bench of the High Court had opined that it would be proper for the courts to interfere in cases where there is an express bar on the subject-matter arbitrability of certain disputes. It observed that subject-matter arbitrability is decided jurisprudentially and thus the relevant judgments warranted proper attention. Further the division bench held that the single judge refrained from determining prima facie the issues on merits that were contended by Bina Modi. It observed that the single judge failed to exercise jurisdiction that was vested with it and should have prima facie adjudicated the suit on merits. The division bench allowed the appeal, quashed and set aside the judgment of the single judge and remanded the matter back to the same bench for fresh adjudication in accordance with law from the stage of issuance of summons. Modi had challenged this in the apex court.

—By Shivam Sharma and India Legal Bureau

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