This post has been written by Parishkriti Atri, a first year law student pursuing LL.B. (H) from Amity Law School, Noida.
Date: 4 February, 1998
Number of Judges: Two
Bench: Sujata V. Manohar, D.P. Wadhwa
Act: The arbitration act, 1940
Citation: AIR 1998 SC 1297
FACTS OF THE CASE
The Modi family divided into GROUP A (KN Modi, Younger brother of Mai Modi and his sons) and GROUP B (Mai Modi’s sons,including KK Modi), owned a number of public limited companies.
Disputes arose between the two groups and to resolve these conflicts, many financial institutions were called, including the one who invested in the companies.
A memorandum of agreement was signed specifying that the consultation of all matters will be done by the Chairman of IFCI (Industrial Finance Corporation of India) Or his nominees, whose decision will be final and binding.
Both the groups were dissatisfied with the report that was submitted to them which mentioned details of splitting of all the assets for which the groups sought the help of chairman and managing director of IFCI. The latter formed a committee and discussed all the problems arising Out of the report.
The Chairman of IFCI gave out its final report, claiming it as its final decision in the matter. He also gave out some directions to both the groups in the same report. While this report was not filed in the court, a series of directions were given for the implementation of the same by the nominated chairman.
On 18th May, 1996 Group B filed an arbitration petition in the Delhi High Court Under section 33 of the arbitration act, 1940. They challenged the legality and validity of the directions issued by the chairman and managing director of IFCI. They also filed a civil suit in the Delhi High Court with similar arguments, except for one paragraph Where they stated That they sought relief because the directions of the chairman and managing director of IFCI were a decision and not an arbitration award.
- Whether clause 9 in the memorandum of agreement Constituted an arbitration clause?
- Whether the decision of IFCI constituted an arbitration award?
- Whether the Civil suit was an abuse of the court process?
The court declared that the clause did not constitute an arbitration clause because there is no mention of the disputes being referred to the “arbitration” of an “arbitrator”.
The court mentioned a set of guidelines which would help ascertain whether the parties involved agreed for arbitration or not. Following those guidelines, it was concluded that this decision did not constitute an arbitral award.
It was also declared that the civil suit was an abuse of process since the same issue was being addressed through two different proceedings. However, the council of the Appellants mentioned that since the memorandum of understanding did not have an arbitration clause, and the decision did not constitute an arbitration award,they were allowed to file a suit challenging the decision of IFCI. The court partly accepted these arguments and declared the civil suit as not being abusive of the court process, Except for the reliefs which were sought similar to the arbitration petition.
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