"You're Family Members Ultimately": Supreme Court Suggests Lalit Modi, His Mother Bina Modi & Siblings Solve Property Dispute Through Mediation In India

The Supreme Court of India on Monday suggested businessman Lalit Modi, his mother Bina Modi, and his brother and sister to solve their ongoing family property dispute through mediation in India.

Lalit Modi had initiated arbitration proceedings in Singapore over property disputes in the family. The same was opposed by Lalit Modi's mother Bina Modi, his sister Charu and brother Samiras who filed a suit seeking to restrain those proceedings

A Bench comprising Chief Justice of India NV Ramana, Justice Surya Kant and Justice Hima Kohli was hearing a petition filed by businessman Lalit Modi challenging a Delhi High Court judgment which held as maintainable the anti-arbitration injunction suit filed by his mother and siblings against him.

While the Bench initially stated that being family members, the parties may agree to Arbitration or Mediation in India, it later suggested that they should resort to mediation. The Bench also at the outset clarified that it is only a suggestion and the parties can choose to not agree to the same.

"What we feel is, it is a dispute of family members apart from trust etc. There's a provision in your deed also about resorting to mediation, or arbitration. This is only a suggestion. Why don't you agree for mediation or arbitration in India?" CJI told the Counsels appearing for both parties.

The Bench made suggestion after Senior Advocate Harish Salve appearing for petitioner Lalit Modi agreed that while they are ready for arbitration the other side is not.

However, Senior Advocate Kapil Sibal appearing for respondents (Lalit Modi's mother and siblings) submitted that they don't don't have a problem with mediation and had in fact suggested mediation even before the High Court.

"We had said we're ready to settle the matter. We're ready to give son the share." Mr Sibal said.

Addressing Mr Salve, the Bench said, "The impression one may get is, you (Lalit Modi) are not in India. The other family members are here. You want International arbitration to be decided by Singapore centre etc. You are family members ultimately, whatever money or property you'll ultimately get according to trust deed. We don't suggest arbitration, we suggest mediation."

Both Senior Advocate Harish Salve and Senior Advocate Kapil Sibal agreed to decide on one venue for mediation and come back to the Court with the same, so a formal final order can be passed. The Bench will take up the matter on 13th December next.

Courtroom Exchange:

During the hearing, Senior Advocate Harish Salve submitted that the present matter involves a legal question of construction of Section 5 of the Arbitration act. He submitted that a suit was filed to injunct an arbitration, which was dismissed by the single judge stating that section 5 is an absolute bar, and whatever are the objections they have to be raised before the arbitrators.

He submitted that, "The Division Bench in appeal reversed the order saying that by not compelling me to file a written statement and apply under section 8, single judge made a mistake. Since if I had filed a section 8, they'd have had opportunity of arguing that arbitration clause is void."

Mr Salve submitted that their case before the High Court was simple, that section 5, as also interpreted by Supreme Court, is an absolute bar. A suit cannot be brought in to stop an arbitration and a suit if filed, it is barred by section 5 . Therefore the suit was rightly dismissed by the Single Judge as the suit wasn't filed on merits, it was filed only to injunct arbitration.

He submitted that the present case is one where admittedly there is an arbitration clause, that clause relates to a deed of trust of a private family. According to the petitioner , the trust has now been executed as upon death of the father, property was to be distributed amongst the three heirs.

"We argued out 2-3 defences, to say these are all matters to be decided by arbitration. The Single bench said you have defences to go to arbitration," Salve said.

" So you want arbitration & the other side doesn't," the Bench asked.

"Yes. 2-3 years this dispute has been going on. The deed of trust is very simple, the settler has died and parties haven't agreed on how to continue so property has to be sold and distributed. Last 2-3 hearings we've been dancing around, some preliminary objection is being raised about some power of attorney, etc," Mr Salve said.

Senior Advocate AM Singhvi, also appearing for the petitioner submitted that the suit was an injunction suit against initiation of arbitration, a suit unknown to the law. A suit to injunct initiation of arbitration isn't maintainable is what the Single Bench of the High Court had held.

Mr Singhvi argued that the matter has been distorted to suggest its a matter of Trust Act, to take unfair advantage of principles that actual enforcement of trust matters under trust act are not arbitrable. However, it is actually a family settlement, where patriarch who died said, if there's lack of unanimity, everything including all assets shall be sold. This had been created as a trust with all people as trustees, and even though the word trust is used, it is a family settlement

The Bench asked Mr Salve's response to the preliminary objection raised by Mr Sibal that the power of attorney holder has nothing to do with present litigation, he was not authorised to file the special leave petition.

Mr Salve informed the Bench that a new power of attorney has been filed. However Senior Advocates Kapil Sibal and Mukul Rohatgi appearing for the respondents submitted that they still have an objection with the new power of attorney.

Mr Sibal submitted that they don't don't have a problem with mediation and had infact suggested mediation even before the High Court.

"We had said we're ready to settle the matter. We're ready to give son the share," Mr Sibal said.

Addressing Mr Salve, the Bench said " The impression one may get is, you (Lalit Modi) are not in India. The other family members are here. You want International arbitration to be decided by Singapore centre etc. You are family members ultimately, whatever money or property you'll ultimately get according to trust deed. We don't suggest arbitration, we suggest mediation."

"In India you choose some venue, wherever you want. settle it. Why fight." CJI said.

"Mumbai or Delhi," Mr Salve suggested

"You may consider Hyderabad also, we just started" CJI said referring to the International Arbitration and Mediation Centre at Hyderbard which was inaugurated by him last week.

"Alright. I agree right away." Mr Salve said

"I suggest let it go to mediator first. Let us come back to Your Lordship." Mr Sibal said

Background:

In January this year, Supreme Court had directed Lalit Modi to serve a copy of the power of attorney on the respondents, after an objection was raised by Senior Advocate Kapil Sibal, appearing on caveat for the respondents

He had submitted the respondents did not have the power of attorney used to file the petition in the Supreme Court.

The present special leave petition has been filed challenging the judgment of a division bench of the Delhi High Court, which 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 by Lalit Modi's mother Bina Modi, his sister Charu and brother Samiras 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 the as non-maintainable.

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.

Division Bench Order:

The division bench of the High Court in the impugned order dated On December 24, 2020, had 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.

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.

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.

Single Bench Order:

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".

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

According to the plaintiffs, KK Modi had trust deed in London before his death in November 2019 to record the terms of the oral family settlement between Bina, Lalit, Charu and Shamir made in 2006.

Lalit Modi's argument is that a clause in the trust deed permitted the sale of assets and distribution of proceeds if the family members failed to reach a settlement within the mandatory 30 days from the demise of KK Modi. According to the trust deed, the beneficiaries will get one year to complete the sale process.

His mother and the two siblings contended that on a true construction of the trust deed, no such sale has been triggered.

Case Title: Lalit Kumar Modi vs Dr Bina Modi & Ors 

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