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Section 34 in The Arbitration Act, 1940
Sopan Sukhdeo Sable & Ors vs Assistant Charity Commissioner & ... on 23 January, 2004
K.K. Modi And Ors. vs K.N. Modi And Ors. on 11 May, 2005
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S.K. Gupta vs . Rakesh Sachdeva & Ors. on 5 February, 2015

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Delhi High Court
Dr. D.K. Modi vs Y.K. Modi And Ors. on 24 September, 2013
Author: S. Muralidhar

CS (OS) No. 991 of 2009 & IA Nos. 7153 of 2009 (u/O 39 R 1 & 2 CPC),
9774 of 2009 (fled by D-3 u/O 39 R 4 CPC), 10024 of 2009 (u/S 151
CPC), 10123 of 2009 (u/O 39 R 4 CPC), 10542 of 2009 (u/O 39 R 4
CPC), 10122, 11660, 11663, 11714 and 14274 of 2009 (u/O 7 R 11 CPC),
7047 of 2013 (u/O 11 R 14 CPC)

                                             Reserved on: August 27, 2013
                                             Decision on: September 24, 2013

DR. D.K. MODI                                              ..... Plaintiff
                                  Through:     Dr. A.M. Singhvi, Senior
                                               Advocate, Mr. U.K.
                                               Chaudhary, Senior Advocate
                                               with Mr. Saurabh Kirpal,
                                               Ms. Jayashree Shukla, Mr.
                                               Nilesh Kumar and Ms. Sadhvi
                                               Shahi, Advocates.


Y.K. MODI AND ORS                                          ..... Defendants
                                  Through:     Mr. Pravin Bahadur,
                                               Mr. Kishan Rawat & Mr. Rajan
                                               Narain, Advocates for D-3 & 4.
                                               Mr. Rajive Sawhney, Senior
                                               Advocate with Mr. Salil Seth &
                                               Mr. Debarshi Dutta, Advocates
                                               for D-5.
                                               Ms. Archana Lakhotia,
                                               Advocate for D-6.
                                               Mr. Ravikesh K. Sinha &
                                               Mr. Rakesh K. Sinha,
                                               Advocates for D-7.
                                               Mr. Vijoy Gupta and
                                               Mr. Chetan Swarup, Advocates
                                               for D-8.
                                               Mr. Amit Mahajan with
CS(OS) No. 991 of 2009                                           Page 1 of 14
                                             Mr. Siddhartha Das, Advocates
                                            for D-10.




1. The background to these applications is that the aforementioned suit has been filed by the Plaintiff, Dr. D.K. Modi son of Late Dr. K.N. Modi against his brothers, Mr. Y.K. Modi and Mr. M.K. Modi [Defendants 1 and 2 respectively] and his cousins Mr. K. K. Modi, Mr. S.K. Modi, Mr. U.K. Modi, Mr. V.K. Modi and Mr. B.K. Modi [Defendants 3 to 7 respectively], all sons of late Mr. Gujjar Mal Modi as well as Modi Rubber Limited ('MRL'), Modi Industries Limited ('MIL') and Modi Spinning and Weaving Mills Limited ('MSWML') [Defendants 7 to 10 respectively] for permanent and mandatory injunction and declaration.

2. It is stated that late Mr. Multani Mal Modi had two sons, Dr. K.N. Modi and late Mr. Gujjar Mal Modi. Dr. K.N. Modi passed away on 27th May 2005 and Mr. Gujjar Mal Modi passed away in 1976. Dr. K.N.Modi's sons, Dr. D.K. Modi, i.e., the Plaintiff and his two brothers Mr. Y.K. Modi and Mr. M.K. Modi, i.e., Defendants 1 and 2 constituted Group A. The sons of late Mr. Gujjar Mal Modi, i.e., Defendants 3 to 7 constituted Group B. It is further stated that the united Modi Family has been in control of a large number of public limited companies, which hold various properties, assets, trusts, subsidiaries, shares, businesses and another assets. Both Groups A and B were jointly controlled and managed by late Dr. K.N. Modi.

CS(OS) No. 991 of 2009 Page 2 of 14

Subsequently, there arose disputes and differences between groups A and B with respect to the business of the Modi Group, leading to a split.

3. By mutual consent of late Dr. K.N. Modi and his Hindu Undivided Family ('HUF') on the one side and the HUF of late Mr. Gujjar Mal Modi on the other side, a Memorandum of Understanding ('MOU') was entered into between the two groups which was reduced in writing and signed on 24th January 1989. In terms of the MOU, the various companies of the Modi Group were divided between Group A and Group B along with complete rights of management, ownership and/or control. All non-productive assets including share properties, guest houses held by the Modi Group Companies were agreed to be valued and divided in the ratio of 40:60 between Group A and Group B.

4. Clause 4 of the MOU stated that the houses occupied by each Modi would continue with them. The expenses of the houses which were on lease were to "be met by the companies in which that Modi is managing and the houses owned by the company will be transferred at price fixed by the valuer to the company in which that Modi is managing." The trust and societies managed by each Group prior to the MOU was agreed to be managed by the respective Groups. Three of the companies, MIL, Modipon Limited and MSWML, were to be jointly managed by both the Groups. Clause 9 of the MOU read as under:

"Implementation will be done in consultation with the financial institutions. For all disputes, clarifications etc. in respect of implementation of this agreement, the same shall be referred to the Chairman, IFCI or his nominees whose decisions will be final and binding on both the Groups."

CS(OS) No. 991 of 2009 Page 3 of 14

5. According to the Plaintiff, the MOU was duly acted upon not only by the members of both Groups A and B, but also by the financial institutions and the Board of Directors ('BoDs') of the Modi Group of Companies. It is stated that the BoDs of various Modi Group Companies passed resolutions recording the resignations and appointments in terms of the last part of Clause 6 of the MOU. It is further stated that in pursuance of the MOU, M/s. S.B. Billimoria & Company proceeded to prepare a valuation report in respect of the various companies. M/s. Bansi S. Mehta & Company also prepared Schemes of Arrangement for splitting up Modipon Limited, MSWML and MIL. The Plaintiff states that a number of disputes arose amongst the various constituents of the Modi family with respect to the implementation/interpretation of the terms of the MOU, valuation report of M/s. S.B. Billimoria and Co. and the Scheme of Arrangement of M/s. Bansi S. Mehta & Co. The disputes were referred to the Chairman, IFCI in terms of the Clause 9 of the MOU.

6. A decision was rendered on 8th December 1995 by the Chairman, IFCI. In terms of the said decision of the Chairman, IFCI, a sum of Rs. 2135 lakhs was to be paid as group differential by Group B to Group A. The contention of the Plaintiff is that the decision of the Chairman, IFCI was finally binding on the Groups A and B. However, Mr. K.K. Modi filed an Arbitration Petition being OMP No. 58 of 1996 in this Court under Section 34 of the Arbitration Act, 1940 ('AA 1940') as well as CS (OS) No. 1394 of 1996 challenging the decision dated 8th December 1995 of the Chairman, IFCI. By an order dated 6th September 1997 the High Court dismissed the suit holding that it was an abuse of the process of law. An order was passed in OMP No. CS(OS) No. 991 of 2009 Page 4 of 14 58 of 1996 on 11th December 1997 holding that the decision dated 8th December 1995 of the Chairman, IFCI was not an Award within the meaning of the AA 1940.

7. The Special Leave Petition arising out of the both orders were jointly heard and disposed of by the Supreme Court by its judgment dated 4th February 1998. The above decision in K.K. Modi v. K.N. Modi AIR 1998 SC 1297 held that:

(i) The MOU including Clause 9 has to be looked upon as a family settlement between various members of the Modi family. It is a complete settlement, providing how assets are to be valued, how a scheme for dividing some of the specified companies has to be prepared and who has to do this work.

(ii) There is no agreed reference of disputes to the Chairman, IFCI. But looking at the nature of the functions expected to be performed by the Chairman IFCI, the decision is not an arbitration Award. The High Court was, therefore, right in coming to the conclusion that proceedings before the Chairman IFCI were neither arbitration proceedings nor his decision was an Award.

8. As a result of the above judgment of the Supreme Court, CS (OS) No. 1394 of 1996 filed by Group B was revived. It was clarified that the aforesaid suit [CS (OS) No. 1394 of 1996], to the extent of challenging the decision of the Chairman IFCI as an Award, or seeking to prevent the enforcement of that Award, would be an abuse of the process of the Court. It was noted that "in the present case, from 1989 to 1995 the Memorandum of Understanding has been substantially acted upon and hence the parties must be held to the settlement which is in the interest of the family and which avoids disputes between the members of the family. Such settlements have CS(OS) No. 991 of 2009 Page 5 of 14 to be viewed a little differently from ordinary contracts and their internal mechanism for working out the settlement should not be lightly disturbed. The Respondents may make appropriate submissions in this connection before the High Court. We are sure that they will be considered as and when the High Court is required to do so whether in interlocutory proceedings or at the final hearing." It was further directed that all the Defendants who are supporting the Plaintiffs would be transposed as Plaintiffs along with the original Plaintiffs since they have a common cause of action. For this purpose, necessary amendments were to be carried out by the Plaintiffs.

9. Apart from the above suit, there were three other suits, i.e., CS (OS) Nos. 434 of 1998, 2694 of 1998 and 2712 of 1998 filed by Group B in relation to the various other issues. However, in terms of the Agreement dated 28th October 2006 executed between Mr. M.K. Modi and Mr. K.K. Modi, CS (OS) Nos. 1394 of 1996 and 434 of 1998 were withdrawn. There also was an agreement entered into by Mr. M.K. Modi and Mr. U.K. Modi on 17th November 2006. Proceedings in relation thereto are stated to be pending before the Supreme Court and the Board for Industrial and Financial Reconstruction ('BIFR').

10. As a result of the withdrawal of the two suits, i.e., CS (OS) No. 1394 of 1996 by Mr. K.K. Modi and CS(OS) No. 434 of 1998 by Mr. N.K. Modi, the two suits that are pending are CS(OS) No. 2694 of 1998 filed by Mr.V.K. Modi of Group B and CS(OS) No. 2712 of 1998 by Mr. U.K. Modi, also of Group B. Both these two suits relate to the MoU dated 24th January 1989. Mr. D.K. Modi is also a party to the suits. What is significant, however, is CS(OS) No. 991 of 2009 Page 6 of 14 that neither of these two suits involve any question of challenge to the validity of the Agreement dated 28th October 2006 between Mr. M.K. Modi and Mr. K.K. Modi concerning Modipon India Limited ('MIL') or the Agreement dated 17th November 2006 between Mr. U.K. Modi and Mr. M.K. Modi concerning MIL.

11. The second point to be noted is that at the time of withdrawal of the aforementioned two suits, i.e., CS(OS) No. 1394 of 1996 and CS(OS) No. 434 of 1998 by Mr. K.K. Modi and Mr. N.K. Modi respectively, Dr. D.K. Modi, the Plaintiff herein, did voice his opposition thereto. The learned Single Judge, by the order dated 5th October 2007, while allowing the suits to be withdrawn, rejected the pleas of Dr. D.K. Modi by observing as under: "36. The defendants own stand is that none of the parties have till date sought to challenge the MOU and all have been seeking its implementation. A person claiming a right before a court of law must stand on his own legs and cannot be permitted to ride piggy back on the shoulders of his adversary. If the defendants were keen on determination of any of their rights under the MOU dated 24th January 1989, nothing preclude them from filing their own suit or from seeking transposition as plaintiffs in the present suits. Having so failed to get themselves arrayed as plaintiffs, when the opportunity was granted to them, they cannot now turn around and claim that they have a right to force the plaintiff to continue to prosecute the same, which the plaintiff is no longer interested in pursuing."

12. When the matter was taken up in the appeal before the Division Bench ('DB') by the Plaintiff herein, the following order was passed in LPA No. 31 of 2008:

"After some arguments, counsel appearing for the appellant seeks permission to withdraw this appeal in order to enable the appellant to file an independent suit. Permission is granted.

CS(OS) No. 991 of 2009 Page 7 of 14

The appeal is dismissed as withdrawn with the liberty as prayed for. If and when any such suit is filed by the appellant, the same shall be considered in accordance with law and in terms of the material placed before the Court. Any objection taken by the respondent No.1 in respect of the suit shall also be considered in accordance with law."

13. In other words, the DB reserved the right of the Plaintiff to file an independent suit. The DB further observed that an objection taken by Respondent No.1 would also be considered in accordance with law. That is how the present applications have been filed under Order VII Rule 11 CPC by Defendant No.2 (Mr. M.K. Modi), Defendants 3 and 4 (Mr. K.K. Modi and Mr. S.K. Modi), Defendant No.5 (Mr. U.K. Modi) and Defendant No.8 (MRL).

14. At the outset, it must be noted that the Plaintiff herein, Dr. D.K. Modi, had filed another suit, being CS (OS) No. 974 of 2007, concerning the property at Friends Colony, New Delhi, which was given on lease to MRL (Defendant No.8 herein). One of the objections raised by MRL in its application under Order VII Rule 11 CPC is that the contentions of the Plaintiff herein in that suit is no different from the contentions in this suit, as far as MRL is concerned and, therefore, the present suit would not be maintainable against MRL. It needs to be noted that by the order dated 11th September 2013, this Court had rejected the application in CS (OS) No. 974 of 2007. Therefore, as of now, the said objection does not survive.

15. One of the points raised in the applications under Order VII Rule 11 CPC is that the present suit by the Plaintiff is barred by limitation. The applicants refer to an 'Aide Memoire' dated 22nd March 2003 signed CS(OS) No. 991 of 2009 Page 8 of 14 between Mr. M.K. Modi and Mr. K.K. Modi, whereby they decided to divide Modipon Limited. The contention is that the agreement dated 28th October 2006 is nothing but a reproduction of the aforementioned Aide Memoire; that Dr. D.K. Modi had himself pleaded before the Court in response to an application filed in CS(OS) No. 1394 of 1996 that the aforementioned Aide Memoire should be acted upon and, therefore, he was estopped now from questioning the Agreement dated 28th October 2006; that, in any event, since he was aware of the Aide Memoire dated 22nd March 2003 at the time when it was entered into, the limitation for filing the present suit should be reckoned from that date.

16. As far as the Aide Memoire is concerned, the Court finds that the question whether Dr. D.K. Modi actually expressed his unequivocal support for the Aide Memoire would require a detailed examination for two reasons

- one is that the order dated 11th May 2005 passed by the Court in CS (OS) No. 1394 of 1996 records in para 29 that Dr. D.K. Modi objected to the Aide Memoire. Secondly, the context in which the reply was filed to the application in CS (OS) No. 1394 of 1996 by Dr. D.K. Modi requires to be examined in some detail before simply concluding that he had no objection to the said Aide Memoire. Also whether in fact the Aide Memoire has been reproduced as such in the Agreement dated 28th October 2006 would also be a matter of evidence. The present suit challenges the validity of the agreement dated 28th October 2006 and if the limitation were to be construed from that date, then clearly the present suit, which was filed on 25th May 2009, cannot be said to be barred by limitation. In any event, the suit definitely also questions the agreement dated 17th November 2006 and if that CS(OS) No. 991 of 2009 Page 9 of 14 date were to be reckoned, then again the suit cannot be said to be barred by limitation. In any event the question of limitation, as has emerged in the pleadings in the present suit, would be a mixed question of fact and law and would have to await trial.

17. The other broad set of objections concerns the matters said to be pending before the BIFR in relation to three of the Modi Group companies viz., MIL, MRL and MSWL. While it is arguable that the claims concerning the revival of the aforementioned companies would entail the transfer of shares and the change of management and control of the companies and, therefore, involve a departure from the MoU, it is quite a different thing to say that all questions concerning the working of the MoU would therefore have to be resolved only in those proceedings before the BIFR. While issues concerning Defendants 8 to 10 would certainly be subject matter of the BIFR proceedings and further proceedings arising therefrom, there are several other aspects of the MoU which may not be limited to the aforementioned three companies. The rights and interests of the parties to the MoU would obviously not be limited to the said three companies. Also, the proceedings pending before the BIFR may not involve the question whether the Agreements dated 28th October 2006 and 17th November 2006, which are under challenge in the present suit, constitute a departure from the MoU. In fact the Division Bench in its order dated 20th May 2010 in FAO (OS) No. 323 of 2010 required the Single Judge to specifically examine this question even while it clarified that properties of Defendants 8 to 10 would be "within the exclusive domain of BIFR."

CS(OS) No. 991 of 2009 Page 10 of 14

18. What also is important to note is that the two other suits that have been filed by Mr. U.K. Modi and Mr. V.K. Modi, which are pending consideration. They too involve examination of the MoU and whether it can and should be worked out. Consequently, the plea that the present plaint must be rejected in toto as a result of the three of the Modi Group companies being the subject matter of the BIFR proceedings cannot be accepted. The Supreme Court has in Sopan Sukhdeo Sable v. Assistant Charity Commissioner AIR 2004 SC 1801 held that there cannot be a partial rejection of a plaint under Order VII Rule 11 CPC. In para 15 of the said decision, it was observed as under:

"15. There cannot be any compartmentalization, dissection, segregation and inversions of the language of various paragraphs in the plaint. If such a course is adopted it would run counter to the cardinal canon of interpretation according to which a pleading has to be read as a whole to ascertain its true import. It is not permissible to cull out a sentence or a passage and to read it out of the context in isolation. Although it is the substance and not merely the form that has to be looked into, the pleading has to be construed as it stands without addition or subtraction or words or change of its apparent grammatical sense. The intention of the party concerned is to be gathered primarily from the tenor and terms of his pleadings taken as a whole. At the same time it should be borne in mind that no pedantic approach should be adopted to defeat justice on hair-splitting technicalities."

19. The other objection is that Dr. D.K. Modi cannot claim any individual rights as such and has to advance his claims only together with other members of Group A. The fact remains that there are two other pending suits by individuals who are part of Group B. This objection would equally hold in those two suits, if at all. Given that the MoU is in the nature of a family CS(OS) No. 991 of 2009 Page 11 of 14 settlement, it is not possible to reject the plaint at this stage only because it is brought forth by an individual forming part of one of the groups.

20. The other objection is that the Modi Group companies themselves are not bound by the MoU. Since the working of the MoU would involve change in the management and control as well as shareholding of these companies, they are nevertheless necessary and proper parties. Yet, barring Defendants 8 to 10, the other Modi Group companies have not been made parties to the present suit which is, on that score, bad for non-joinder of parties.

21. In the other pending suits some of the Modi Group of companies are parties. If the three suits were to be consolidated and the evidence were led in common, then it is possible that these objections may not survive. In any event, as already pointed out, the plaint cannot be rejected in part. Many of these contentions raise triable issues, which cannot be decided at this stage.

22. For the aforementioned reasons, this Court is not inclined to reject the plaint for the aforementioned grounds and in exercise of the powers under Order VII Rule 11 CPC.

23. I.A. Nos. 10122, 11660, 11663, 11714 and 14274 of 2009 are accordingly dismissed.

IA No. 7153 of 2009 (u/O 39 R 1 & 2 CPC)

24. By an order dated 27th May 2009, while directing summons to issue in the suit, the Court passed an interim order in this application, i.e., I.A. No. CS(OS) No. 991 of 2009 Page 12 of 14 7153 of 2009, directing status quo to be maintained "as of today in relation to the properties belonging to the Modi Group of Companies mentioned in MoU 1989."

25. Subsequently by an order dated 9th September 2009, the above interim order was vacated. However, the Plaintiff filed FAO (OS) No. 323 of 2010 which was disposed of by the Division Bench by an order dated 20th May 2010 formulating two questions on which submissions were to be heard by the Single Judge and appropriate orders passed in this application in accordance with law.

26. This application will accordingly be heard on the next date in terms of the aforementioned order dated 20th May 2010 in FAO (OS) No. 323 of 2010.

I.A. Nos. 9774 of 2009 (filed by D-3 u/O 39 R 4 CPC), 10123 of 2009 (u/O 39 R 4 CPC), 10542 of 2009 (u/O 39 R 4 CPC)

27. These applications do not survive in view of the orders dated 9th September 2009 read with the order dated 20th May 2010 of the Division Bench in FAO (OS) No. 323 of 2010 and are accordingly disposed of.

I.A. No.7047 of 2013 (u/O 11 R 14 CPC)

28. By this application, the Plaintiff prays for a direction to the Defendants to produce the originals of the documents mentioned in para 19 of the application. Despite notice issued in the application on 1st May 2013 till date no replies have been filed.

CS(OS) No. 991 of 2009 Page 13 of 14

29. The application is disposed of with a direction to the Defendants to produce before the Joint Registrar (JR) on the next date originals of the documents in para 19, to the extent available, with any of the Defendants.

I.A. No. 10563 of 2009

30. This application does not survive in view of the fact that the order dated 27th May 2009 has been vacated. It is disposed of as such.

I.A. No. 10024 of 2009

31. Orders in this application will be passed at the time of framing of issues.

CS (OS) No.991 of 2009

32. List before the JR on 11th February 2014 for admission/denial of the documents. By that date, the parties will file their affidavits of admission/denial and produce the originals of the documents relied upon by them respectively.

33. List before the Court on 16th April 2014 for hearing on the pending applications and for framing of issues.


SEPTEMBER 24, 2013 Rk/tp CS(OS) No. 991 of 2009 Page 14 of 14