Bina Modi's Anti-Arbitration Injunction Suit Against Her Son Lalit Modi Maintainable : Delhi High Court

The Delhi High Court has held that the anti-arbitration injunction suit filed by late industrialist KK Modi's wife Bina Modi against her son Lalit Modi is maintainable. The suit was filed seeking to restrain the arbitration proceedings initiated by Lalit Modi in Singapore over property disputes in the family. In March, a single bench of Justice Rajiv Sahai Endlaw had dismissed the suits filed by Lalit Modi's mother Bina, his sister Charu and brother Samiras non-maintainable. This verdict was set aside by a division bench of Justices Siddharth Mridul and Talwant Singh on December 24. Bina, Charu and Samir, in two separate suits, contended 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.The division bench held that 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 observed that the appellants had raised a prima facie valid argument that disputes arising out of the family trust deed was not arbitrable and hence held that the single bench ought to have proceeded with the suit."..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", the division bench observed. The division bench expressed the view that issues under the Trusts Act cannot be the subject matter of arbitration since the same are excluded from the purview of the Arbitral Tribunal by necessary implication."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 103-page judgment observed.It was held that the subject dispute ought to have been prime facie adjudicated by the single judge, who had to exercise the jurisdiction vested in the court as all the parties are Indian citizens and situs of immovable assets of the trust is in India."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", the bench said in conclusion. The single bench had taken the view 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. The division bench held that the reliance placed by the single bench on Section 16 was "misplaced"."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 single bench had also held that Section 41(h) of the Specific Relief Act, 1963, barred courts from granting injunctions in cases where an equal and efficacious remedy could be obtained through any other mode of proceeding. The division bench disagreed with this reasoning as well observing :"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...

Bina Modi's Anti-Arbitration Injunction Suit Against Her Son Lalit Modi Maintainable : Delhi High Court

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