Bina Modi and Ors. v. Lalit Modi & Ors.

Bina Modi and Ors. v. Lalit Modi & Ors.
04 November 2020

Bina Modi and Ors. v. Lalit Modi & Ors.

A trust deed dated 9th April 2014 (Restated Trust Deed) executed by K.K Modi as the settlor or managing trustee and Bina Modi, Lalit Modi, Charu Modi, and Samir Modi as the trustees (collectively the "Trustees") of the K.K Modi Family Trust. Clause 36 of the Restated Trust Deed provided for the resolution of disputes arising under the Restated Trust Deed by arbitration under the Rules of Arbitration of the International Chamber of Commerce, Singapore (ICC).

At a meeting of the Trustees held in Dubai, disputes arose in regard to the implementation and interpretation of the Restated Trust Deed, and one of the trustees, Lalit Modi invoked the arbitration provision and filed an application seeking emergency measures before the International Court of Arbitration of the ICC in Singapore, against Bina Modi, Charu Modi, and Samir Modi. During the arbitral proceedings, an emergency arbitrator was appointed.

Meanwhile, in regard to the arbitration proceedings initiated in Singapore, Bina Modi, Charu Modi and Samir Modi (Plaintiffs) commenced anti-arbitration injunction suits, seeking a declaration of the arbitration proceedings as unenforceable and contrary to the public policy of India and sought a permanent injunction restraining the contesting defendant, Lalit Modi (Defendant) from proceeding with the pending arbitral proceedings. The Plaintiffs further alleged that as held by the Apex Court of India in Vimal Kishor Shah v. Jayesh Dinesh Shah, disputes inter se trustees or between trustees on the one hand and beneficiaries on the other hand or between beneficiaries inter se, are not arbitrable and are subject to the exclusive jurisdiction of courts under the Indian Trusts Act, 1882.

Issue

The primary issue in the present case was whether the arbitrability of the trust dispute is to be decided by the ICC arbitral tribunal in spite of the bar on granting anti-arbitration injunction suits imposed by the Supreme Court in Kvaerner.

Judgment

The High Court of Delhi, while examining the scope and meaning of anti-arbitration injunction suits in India, referred to the judgment passed by the Apex Court in Kvaerner Cementation India Limited v. Bajranglal Agarwal as well as an earlier judgment passed by the High Court in Mcdonald's India Pvt. Ltd. v. Vikram Bakshi, and observed that increasingly, courts in India have themselves refrained from dealing with or interfering in matters within the competence and jurisdiction of the arbitral tribunal and instead have relegated parties to agitate the same before the respective arbitral tribunals. Accordingly, the High Court of Delhi held that, ordinarily, under Section 16 of the Arbitration Act, an arbitral tribunal had jurisdiction and competence to decide the issue of the validity of the underlying arbitration agreement. Further, the High Court of Delhi held that as such, civil courts ought not to restrain an arbitral tribunal from exercising its statutory jurisdiction under Section 16 of the Arbitration Act in such cases.

The High Court of Delhi further held that the principles governing anti-suit injunction suits could not be applied to anti-arbitration injunction suits since the principle of autonomy of the arbitral tribunal to deal with a challenge to its jurisdiction under Section 16 of the Arbitration Act differentiated anti-arbitration injunctions suits from anti-suit injunction suits. While doing so, the High Court of Delhi also reiterated the principle of party autonomy under the Arbitration Act and held that since the parties were from business backgrounds and had knowingly entered into and executed the Restated Trust Deed, they were bound by the terms thereof including the specific form of arbitration in Singapore. The High Court of Delhi further held that Section 41(h) of the Specific Relief Act, 1963, barred courts from granting injunctions in cases where an efficacious and equal remedy could be obtained through any other mode of proceeding, like proceedings under Section 16 of the Arbitration Act, in the instant case.

Lastly, the High Court of Delhi held that the amended Section 8 of the Arbitration Act did not change the bar on Indian courts to interfere in arbitration matters and therefore, would not allow a judicial authority to decide the existence of a valid arbitration agreement. In light of the above, the High Court of Delhi rejected the Suits and ordered the parties to agitate the jurisdictional issues before the arbitral tribunal, including the non-arbitrability of disputes arising out of trust deeds under Indian law.