DELHI HIGH COURT DENIES INTERIM RELIEF IN K.K. MODI FAMILY TRUST DISPUTE

In a recent ruling, the Delhi High Court, led by Hon’ble Justice Navin Chawla, addressed a critical series of interim applications concerning the K.K. Modi Family Trust (Trust). The Court evaluated applications filed under Order XXXIX Rules 1 & 2 of the Code of Civil Procedure, 1908 (CPC), including I.A. 31728/2024, I.A. 32679/2024, I.A. 35675/2024, I.A. 37374/2024, I.A. 37401/2024, and I.A. 37402/2024, which pertain to urgent management and oversight issues of the Trust.

The dispute arises from a lawsuit initiated by Ruchir Modi, a beneficiary of the K.K. Modi Family Trust, against his grandmother, Bina Modi, and other family members. The contention revolves around the management and potential dissolution of the Trust, which oversees assets, including a substantial stake in Godfrey Phillips India Ltd. (GPIL).

Facts of the Case:

The Plaintiff, Ruchir Modi, a beneficiary of the K.K. Modi Family Trust, initiated a suit against his grandmother, Bina Modi, and other family members. The dispute centered on the management and dissolution of the family Trust, which controlled several businesses, including a significant stake in Godfrey Phillips India Ltd. (GPIL).

Ruchir Modi alleged that Bina Modi, the Managing Trustee, had breached her fiduciary duties by continuing to manage the Trust’s assets against the provisions of the Trust Deed. The Trust Deed stipulated that if the Trustees did not unanimously agree to continue managing the Trust, it would be dissolved, and the assets would be sold. The Plaintiff claimed that his father, Lalit Modi (defendant no. 4), had opposed the continuation of the Trust, thereby triggering the dissolution clause.

The Plaintiff sought interim relief under Order XXXIX Rules 1 & 2 of the Code of Civil Procedure, 1908. He requested the appointment of an administrator to manage the Trust’s affairs, specifically to vote on behalf of the Trust at the AGM of GPIL, which was scheduled for September 6, 2024. Additionally, he sought an injunction restraining Bina Modi from voting on behalf of the Trust at the meeting.

Issues:

• Whether Bina Modi had violated the terms of the Trust Deed by continuing to manage the Trust without unanimous consent from the Trust
• Whether an administrator should be appointed to oversee the Trust’s affairs, particularly in the AGM of GPIL.
• Whether Bina Modi should be restrained from exercising voting rights at the GPIL AGM.

Judgment:

The Court dismissed the Plaintiff’s application for interim relief, ruling that Bina Modi, as the Managing Trustee, had the authority to manage the Trust’s assets without requiring unanimous consent from the Trustees. The Court noted that the Trust Deed explicitly provided that Bina Modi would assume the role of Managing Trustee upon the demise of K.K. Modi and would have final decision-making authority over the Trust’s assets during her tenure.

The Court further held that the Plaintiff’s claim that the Trust should be dissolved based on Lalit Modi’s opposition did not hold merit, as Bina Modi had the right to continue managing the Trust. The requirement for unanimous consent among Trustees applied only after Bina Modi ceased to be the Managing Trustee, which had not occurred.

Regarding the Plaintiff’s request for an administrator, the Court found no justification for such an appointment at this stage, as Bina Modi was fulfilling her role as Managing Trustee in accordance with the Trust Deed. The Court also rejected the request to restrain Bina Modi from voting at the GPIL AGM, reasoning that any alleged breach of fiduciary duty could be addressed at a later stage if proven.

Conclusion:

The Court denied the Plaintiff’s request for interim relief, allowing Bina Modi to continue managing the Trust and exercise her voting rights at the GPIL AGM. However, the Court directed Bina Modi to file an affidavit every six months disclosing any remuneration she received in her role as Managing Director of GPIL. Any final decision regarding her removal as Managing Trustee or Director would be taken after further hearings.

Shikha Pandey

Associate

The Indian Lawyer & Allied Services