How a 2014 trust deed has split the KK Modi family

A trust deed formulated by KK Modi in April 2014 has become the epicentre of a family dispute between Lalit Modi and his mother Bina Modi, backed by her other two children, Charu and Samir Modi.

The trust deed was executed in London by KK Modi as settlor/managing trustee of the KK Modi Family Trust, with Bina, Lalit, Charu and Samir as trustees. This followed an Oral Family Settlement dated February 10, 2006. KK Modi passed away on November 2, 2019, following which a dispute has broken out among the trustees of the Trust.

The trust deed spells out that in the event of KK Modi ceasing to be the managing trustee on his demise, Bina Modi shall succeed him. Within 30 days of her assuming charge, a meeting of the board of trustees shall be convened to decide on whether to continue to own and manage all the assets of the trust fund or sell the entire trust fund, comprising various assets including family-controlled businesses. If the board of trustees is unable to take any decision, the entire trust fund including all the family-controlled businesses shall be sold.

KK Modi’s demise

On KK Modi’s demise, and in accordance with the trust deed, Bina, on November 5, wrote to the secretary of the trust, asking that the equity and preference shares jointly held by KK Modi as the sole holder of those shares be transferred to her name. She also asked that the equity and preference shares held by KK Modi jointly with others also be transferred to her name, to be jointly held with the existing second holder, on behalf of the Trust.

Lalit Modi, in a letter dated November 13 to Bina, Charu and Samir, requested that a meeting of the board of trustees be convened. A meeting was called for on November 30 at the Waldorf Astoria, Dubai, where Lalit expressed a desire to sell the whole of the trust fund comprising various assets, including family-controlled businesses. But Bina, Charu and Samir decided to continue to own and manage all the assets of the trust fund.

The draft minutes of the meeting recorded that no unanimous decision was reached regarding the sale of assets of the trust. Bina, in an attempt to amicably settle the issue, asked Lalit for a fair proposal. Lalit, in response, disputed the appointment of Bina as the President and Managing Director of Godfrey Philips India Ltd and Indofil Industries Ltd in the place of KK Modi, and also insisted on the sale of assets of the trust.

Lack of unanimity

Lalit contends that after the demise of KK Modi, in view of the lack of unanimity among the trustees regarding the sale of assets, a sale of all assets of the trust has been triggered, and the distribution to beneficiaries has to occur within a year thereof. Bina, Charu and Samir, on the other hand, contend that on a true construction of the trust deed, no such sale has been triggered.

On February 18 this year, Lalit filed an Application for Emergency Measures before the International Court of Arbitration (ICA) of the International Chambers of Commerce (ICC), impleading Bina, Charu and Samir as respondents. His plea was to restrain Bina from holding herself out as Managing Trustee of the KK Modi Family Trust and, in the alternative of suspension of powers and authority of Bina to hold the office of Managing Trustee, the appointment of an administrator for the trust fund.

The plea also sought to restrain Bina, Charu and Samir from acting in relation to the KK Modi Family Trust and from transferring, alienating or creating any encumbrance in relation to the assets, businesses and investments of the trust fund, and from exercising voting rights in the KK Modi Family Trust-controlled businesses forming part of the trust fund. Additionally, it sought the suspension of Titus & Company as the Secretary of the KK Modi Family Trust.

Emergency Arbitrator

The ICC has appointed Matthew Sccomb as the Emergency Arbitrator. He scheduled a preliminary call/meeting for February 22, and Bina, Charu and Samir participated in it.

Bina, Charu, and Samir, meanwhile, filed a separate plea in the Delhi High Court, asking for the arbitration to be shifted to India. Their stand was that since all the signatories to the trust deed containing the impugned arbitration clause were Indian nationals, having permanent residence in India, the choice of a foreign seat of arbitration was null and void, unenforceable and contrary to public policy.

They also argued that Lalit was accused of several gross violations of Indian law, and proceedings under the Prevention of Money Laundering Act, 2002, were also pending against him. Therefore, Lalit may be interested in keeping the proceedings outside the country, to be able to reap the benefits of his share in the trust fund outside India, to escape the liability from the proceedings already pending in this country against him, they said.

The Delhi High Court, however, set aside these allegations and ruled that Lalit could go ahead with the arbitration proceedings in Singapore. The arbitrator has set March 7 for physical hearing of Lalit’s application.

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