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Bina Modi’s plea against son Lalit’s Singapore arbitration move is maintainable: Delhi HC

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Mumbai: In a relief for Bina Modi, the widow of industrialist KK Modi, a division bench of the Delhi High Court has clarified that the court has jurisdiction to decide on her plea to challenge her son Lalit Modi’s move to initiate arbitration proceedings in Singapore over the family’s assets.

In March, a single-judge bench had dismissed her plea saying that the Delhi HC did not have jurisdiction to restrain Lalit Modi on his decision to initiate arbitration proceedings in Singapore for settling the estate of her late husband. Her two other children, Charu Bharti and Samir Modi, had also joined her in the petition.

“The subject dispute ought to have been prima facie adjudicated by the single judge, who had to exercise the jurisdiction vested in the court,” said the division bench comprising Justices Siddharth Mridul and Talwant Singh. “(a) all parties are Indian citizens, (b) situs of immovable assets of the Trust is in India and (c) in the restated trust deed itself, it is categorically stipulated that the same will be governed in accordance with the laws in India,” it 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,” the court said in its 103-page order.

The division bench has directed the single-judge bench to hear the case and directed the court registry to list the matter before the judge for January 8.

The bone of contention between the two factions in the high court was over the legal forum for the family to settle the issue of the sale of the estate and distribution of proceeds.

Bina Modi and her two children, Charu Bharti and Samir Modi, argued that there was a trust deed between the family members and that the trust matters cannot be settled through arbitration in a foreign country as per Indian laws.

“It is well settled in India, that any dispute which arises inter se between the trustees or the trustees on the one hand and the beneficiaries on the other or between beneficiaries inter se is not arbitrable,” argued lawyers for Bina Modi. “The reason provided for non-arbitrability is that such disputes are subject to the exclusive jurisdiction of “courts” under the Trusts Act, which is a complete code for the purpose of the said disputes.”

Lawyers for Lalit Modi had argued that the restated trust deed was executed in the UK, and at the time of its execution Singapore was opted as the seat of arbitration. The question of arbitrability would be governed by Singaporean law and not Indian law and any limitations on arbitration of such disputes in Indian law would thus be irrelevant, he had claimed.

Lalit Modi, now based in London, is opposing his mother and siblings’ argument and appears keen to sell family stakes in group companies including flagship Godfrey Phillips, and distribute the proceeds among the heirs and their family.

Lalit Modi’s lawyers also argued that the family trust deed had been signed by all family members. If the family members failed to reach a settlement within the mandatory 30 days from the demise of KK Modi, a clause in the trust deed allowed the assets to be sold and the proceeds to be distributed as per the trust agreement. According to the trust deed, the beneficiaries will get one year to complete the sale process.

The dispute emerged among the trustees after the demise of KK Modi in November 2019.

The family controls Modi Enterprises and owns a substantial stake in tobacco firm Godfrey Philip India, speciality chemical company Indofil Industries and convenience store chain 24 seven among other assets.

Senior counsels Mukul Rohatgi and Kapil Sibal, along with law firm Cyril Amarchand Mangaldas, represented Bina Modi and her two children in the court, while Lalit Modi was represented by senior counsel Harish Salve along with law firm DMD Advocates.

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