M K MODI Vs. U K MODI

JUDGEMENT

(1.) This common order will dispose of three proceedings - an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereafter called the Act, being A.A. 287/2007), and two petitions under Section 9 of the Act, bearing OMP 411/2007 and 95/2010. The parties in all the proceedings are common, i.e. Sh. M.K. Modi (hereafter referred to as M.K.) being the petitioner and Sh. U.K. Modi (hereafter referred to as U.K.) being the respondent.

(2.) The undisputed common facts emerging from the pleadings are as follows. M/s. Modi Industries Limited (hereafter referred to as MIL), a company in which both the parties, i.e. M.K. and U.K. have significant equity shareholdings, applied for reference under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), before the Board for Industrial and Financial Reconstruction (BIFR) in 1990. On 14.03.1991, the BIFR declared MIL to be a sick company. The MIL thereafter explored various options for its revival. Apparently, a scheme was prepared in 1993 and approved by the MILs Board of Directors and submitted to BIFR. However, the BIFR issued a Show Cause Notice for the winding-up of the company, in 2005. That order was impugned before this Court, which suspended its operation. The order was appealed against, to the Appellate Authority for Industrial Reconstruction (AIFR).

(3.) In the background of these proceedings, M.K. and U.K. entered into a Memorandum of Understanding (MoU) on 17.11.2006. The primary concern of the MoU was the liquidation of liabilities of MIL and the future course of action for its revival, and management. It is not disputed that in terms of the MoU, two units, called as the SPV-I and SPV-II were to be created; they were to be exclusively administered by one party each, i.e. M.K. and U.K. These units, SPV-I and SPV-II were entrusted with 3 and 6 units of the MIL. In terms of the MoU, six of such units were to be managed by M.K, and three were to be managed by U.K. The other broad features of the MoU were that U.K. and M.K. were to be the Managing Directors of MIL; (60% of the said companys, (i.e MILs) corporate assets were to be controlled by U.K. and 40% were to be controlled by M.K). The share of liabilities was also to devolve in the same ratio.