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PETITIONER: K.K. MODI

       Vs.

RESPONDENT: K.N. MODI & ORS.

DATE OF JUDGMENT:       04/02/1998

BENCH: SUJATA V. MANOHAR, D.P. WADHWA

ACT:

HEADNOTE:

JUDGMENT: [WITH C.A.No.  614 Of  1998 (Arising  out of  S.L.P. (C) No. 18711 of 1997} and T.C.{C} No. 13.97]                       J U D G M E N T Mrs. Sujata V.Manohar. J.      Leave granted  in Special Leave Petition Nos. 14905 and 18711 of 1997.      The present litigation has arisen on account of dispute between Seth  Gujjar Mal  Modi’s five  sons - K.K.Modi, V.K. Modi, S.K.Modi.  B.K.Modi  and  U.K.Modi  on  the  one  hand (hereinafter referred  to as ‘Group B’) and Kedar Nath Modi, the younger  brother of  Seth Gujjar  Mal Modi and his three sons -  M.K.Modi and  D.K.Modi (hereinafter  referred to  as ‘Group A’)  on the other hand. The Modi family owns or has a controlling  interest   in  a   number  of   public  limited companies. They  also own  various assets.  Differences  and disputes have  arisen between  Kedar Nath  Modi and his sons constituting Group  A and  the sons  of late Gujjar Mal Modi constituting Group  B on  the other  hand. To  resolve these differences, negotiations  tool place  with the  help of the financial  institutions   which  had  lent  money  to  these companies, and through whom substantial public funds had ben invested in  the companies  owned and/or controlled by these two groups.  Representatives of  several banks, Reserve Bank of India  and financial  institutions were  also invited  to participate.  Ultimately,   on  24th  of  January,  1989,  a Memorandum of  Understanding was  arrived at between Group A and Group  B.  Under  the  Memorandum  of  Understanding  so arrived at,  it is  agreed between  the parties that Group A will manage  and/or control the various companies enumerated in Clause  1. One  of the  companies so  included is Modipon Ltd. minus  Indofil (chemical  division) and selling agency. Under Clause  2, Group  B is  entitled to manage, own and/or control the  companies enumerated in that clause. One of the companies so  included is  Modipon Ltd.  minus Modipon Fibre Division. The agreement also provides for division of assets which are  to be valued and divided in the ration of 40:60 - Group A getting 40% of the assets and Group B getting 60% of the assets.  The shares  of the companies are required to be transferred to  the respective groups after their valuation. Under Clause  3, valuation  has  to  be  done  by  M/s  S.B.

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Billimoria  &   Company,  Bombay.   Clause  5  provides  for companies which  are to  be split  between the two groups as per the  Memorandum of Understanding. The division has to be done under  Clause 5  by  a  scheme  of  arrangement  to  be formulated by  M/s Bansi  S. Mehta  & Company,  Bombay after taking into  consideration the  valuation done  by M/s. S.B. Billimoria &   Company,  Bombay. Units  of a  company to  be given to  each group  are to  be given  along with assets ad liabilities. Clause  6  provides  for  interim  arrangements which are to be made in respect of the three companies which are being sp[lit - these being Modi Industries Ltd., Modipon Ltd. and Modi Spinning and Weaving Mills Company Ltd. We are not concerned  with the  other clauses,  except to note that the date  for carrying  out valuation,  the date of transfer the appointment  of independent  Chairmen of these companies which are to be split and certain other matters specified in the Memorandum  of Understanding  shall be done consultation with the  Chairman, Industrial  Finance Corporation of India (IFCI).      Clause 9 provides as follows:-      "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." Pursuant  to  the  Memorandum  of  Understanding,  M/s  S.B. Billimoria &  Company gave reports between January and March 1991. M/s  Bansi S.  Mehta &  Company who  were required  to provide a  scheme for  splitting of  the three  companies by taking  into   account  the  valuation  fixed  by  M/s  S.B. Billimoria &  Company, also  sent  various  reports  between November 1989  and December,   1994. The members of both the Groups were  dissatisfied  with  these  reports.  They  sent various  representations   to  the   Chairman  and  Managing Director of the Industrial Finance Corporation of India Ltd. in view of Clause 9 of the Memorandum of Understanding.      The Chairman  and Managing Director, Industrial Finance Corporation of India formed a Committee of experts to assist him in  deciding the  questions that arose. The Committee of Experts and the Chairman, IFCI had discussions with both the groups. Meetings  were also  held with  the Chairman  of the concerned  companies  who  were  independent  Chairmen.  The discussions took  place form  12th of  March 1995  to 8th of December, 1995.      On 8th  of December  1995, the  Chairman, IFCI gave his detailed decision/report.  In his  covering letter of 8th of December,  1995,   the  Chairman   and  Managing   Director, Industrial Finance  Corporation of  India Ltd. has described this report  as his  decision  on  each  dispute  raised  or clarification sought.  He has  quoted in his covering letter that since that memorandum of Understanding has already been implemented to  a large extent during 1989 to 1995, with the decisions on the disputes/clarifications gives by him now in the enclosed  report, he has hoped that it would be possible to  implement  the  remaining  part  of  the  Memorandum  of Understanding. He  has drawn attention to paragraph 9 of his report where  he has said that it is now left to the members of Groups  A and  B to  settle amongst themselves the family matter without  any further  reference to  the Chairman  and Managing Director  of the  Industrial Finance Corporation of India. In  paragraph 7  of the  letter he has stated that on

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the basis  of the  total valuation  of Modi Group assets and liabilities and  allocation thereof  between Groups  A and B the decisions given by him in dated 8.12.1995. The averments and prayers  in this  suit were  substantially the  same  as those  in   the  arbitration  petition.  In  one  paragraph, however, in  the plaint, it was stated that the same reliefs were being  claimed in  a suit in the event of it being held that the  decision of  the Chairman  and Managing  Director, IFCI was not an arbitration award but was just a decision.      In arbitration  petition O.M.P.  No.  58  of  1996  the present appellants  also applied  for interim  relief by I.A 4550 of  1996. By  an ad-interim  order in  O.M.P. No. 58 of 1996 and I.A 4550 of 1996 dated 24th of May, 1996, the Delhi High  Court  stated  the  operation  of  the  "award"  dated 8.12.1995 and  directions of  the Chairman,  Modipon Ltd. as set out  in the  said order.  The High Court also restrained respondents  6   and  7   (Group  A)   from  selling  and/or transferring and/or  disposing of, in any manner, the shares held by them in Godfrey Phillips India Limited until further orders. From  this ad-interim order a special leave petition was preferred by the respondents which was dismissed by this Court on  3.6.1996 on  the   ground that  it was  only an ad interim order.      Interim application  I.A 4550  of 1996  in  Arbitration Petition O.M.P. No. 58 of 1996 was heard and disposed of  by the Delhi  High Court by its impugned judgment dated 11th of February, 1997.  A learned  Single of  the Delhi  High Court held b y the said judgment that the decision of the Chairman and  Managing  Director,  IFCI  dated  8.12.1995  cannot  be considered as  an  award  in  arbitration  proceedings.  The parties did  not have any intention to refer any disputes to arbitration. All the disputed were settled by the Memorandum of Understanding  dated  24th  of  January,  1989  and  what remained was  only the  valuation of  shares and division of the three  companies as  agreed  to  in  the  Memorandum  of Understanding. In  order to  avoid any disputes, the parties had agreed  that the  Chairman and  Managing Director,  IFCI would issue  all clarifications  and give  his  decision  in relation to  the  valuation under Clause 9 of the Memorandum of Understanding. The arbitration petition, according to the learned Single Judge, was, therefor, not maintainable, since the decision  impugned was  not award  within the meaning of the  Arbitration  Act,  1940.  Under  the  circumstances  he dismissed the  interim  application  I.A  4550  of  1996  in arbitration petition  O.M.P. No.58  of 1996.  By t  he  said order he posted the hearing of a similar interim application I.A 5112  of 1996 in Suit No. 1394 of 1996 on 26th of March, 1997.      Another interim  application being  I.A 2293 of 1997 in arbitration petition  O.M.P. No. 58 of 1996 was heard by the learned Single  Judge on  13th of  March, 1997.  The learned Single Judge  passed an  interim order  to the  effect  that until further  orders, no testing of the Modipon Board shall be held for considering any matter.      On 6th  of September,  1997 Suit No. 1394 of 1996 filed by Group  B, interim application in the suit being I.A. 5112 of 1996  in arbitration  petition O.M.P. No. 58 of 1996 were heard together  and decided  by the learned Single Judge b y his judgment  and  order  of  the  same  date  i.e.  6th  of September, 1997.  The learned  Single Judge  held  that  the entire exercise of filling Suit No. 1394 was an abuse of the process of  the Court.  According to  him the allegations in the arbitration  petition and in the plaint in the suit were identical. Both  proceedings were  instituted  on  the  same date. The  learned Single Judge struck down the plaint under

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order VI  Rule XVI  of  the  code  of  Civil  Procedure  and dismissed the  suit. By  the same  order, he  also dismissed I.A. 5112  of 1996  in the suit and I.A. 2293 of 1997 in the arbitration petition.      Being aggrieved  b y the above judgment and order dated 6th of  September, 1997,  the present  appellants  filed  an appeal before  the Division  Bench of  the Delhi  High Court being R.F.A.  (OS) 41  of 1997.  The appellants also made an interim application being C.M. 1270 of 1997 in R.F.A (OS) 41 of 1997.  The Division Bench of the Delhi High Court, by its order dated  15th of  September, 1997,  admitted the  appeal being R.F.A (OS) 41 of 1997. It also disposed of by the same order, C.M.  1270 of  1997 by  passing an order reviving the order passed  by the   learned  Single Judge on 13.3.1997 by which the  learned Single  Judge had  directed that  pending further orders  no meeting  of the  Modipon Board should b e held to consider any matter.      S.L.P.(Civil) No.  18711/1997 is  filed before  us from this impugned order of 15th of September, 1997. Thus we have before us  S.L.P. (Civil)  No. 14905/1997  from the judgment and order  of the  learned Single  Judge of   the Delhi High Court dated  11.2.1997 in  I.A 4550  of 1996  in arbitration petition O.M.P.  No. 58  of 1996.  We h  ave also  before us S.L.P. (Civil)  No. 18711  of   1997 from  the order  of the Division Bench  of the  Delhi High  Court dated 15.9.1997 in C.M. 1270 of 1997 under which the interim order of 13.3.1997 is revived.  By consent  of parties,  R.F.A. (OS) 41 of 1997 has also  been transferred to us being T.C.(civil) No. 30 of 1997 for  consideration. All  these three  proceedings  have been heard  together. During  the pendency of S.L.P. (Civil) No. 18711  of 1997,  in I.A. No.3 we have b y our ad-interim order dated  18.11.1997 varied t he interim order of 13th of March, 1997 to the following effect:      "Until further orders no meeting of      the Modipon Board shall be held for      considering any  matter relating to      decision of  the C.M.D., IFCI dated      8.12.1995 or concerning the sale of      shares held in Godfrey Philip India      Limited." Thereafter, on  7th of  January,  1998  after  hearing  both sides, the  following order  has been  passed in I.A.No.3 in S.L.P (Civil) No. 18711/97, in terms of the minutes :-           "For a  period of  eight weeks      from today,  neither Mr.  K.K. Modi      nor  Mr.  M.K.  Modi  will  acquire      directly or  indirectly any further      shares of  Modipon Limited nor take      any steps  that would  in  any  way      directly or  indirectly  destablise      the control  and management  of the      Fibre Division  of Modipon  Limited      by Mr. K.K.Modi and of the Chemical      Division of  Modipon Limited by Mr.      M.K.Modi.      Liberty to  apply for  variation if      circumstances change."      The present proceedings raise two main question :      Question 1:   Whether  Clause 9  of the  Memorandum  of Understanding dated  24th of  January, 1989  constitutes  an arbitration agreement;  and  whether  the  decision  of  the Chairman, IFCI  dated  8th  December,  1995  constituted  an award? and      Question 2:   Whether Suit No. 1394/1996 is an abuse of the process of court?

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Question No.1:      Mustill  and   Boyd  in   their  book   on  "Commercial Arbitration", 2nd  Edition, at  page 30, point out that in a complex  modern   State  there  is  an  immense  variety  of tribunals,  differing   fundamentally   as   regards   their compositions, their  functions and  the sources  from  which their powers  are  derived.  Dealing  with  tribunals  whose jurisdiction is derived from consent of parties, t hey list, apart from  arbitral tribunals, persons (not properly called Tribunals) entrusted by consent with the power to affect the legal rights  of two  parties inter see in a manner creating legally enforceable  rights, but  intended to  do  so  by  a procedure of  ministerial and  not a  judicial, nature  (for example, persons  appointed by contract to value property or to  certify   the  compliance   of  building  works  with  a specification).  There  are  also  other  tribunals  with  a consensual jurisdiction  whose  decisions  are  intended  to affect the  private rights of two parties inter see, but not in a  manner which creates a legally enforceable remedy (for example,   conciliation   tribunals   of   local   religious communities,  or  persons  privately  appointed  to  act  as mediators between  two disputing persons or groups). Mustill and Boyd  have listed  some of  he attributes  which must be present for  an agreement to be considered as an arbitration agreement, though  these attributes in themselves may not be sufficient.   They    have   also   listed   certain   other consideration which  are relevant to this question, although not conclusive on the point.      Among the  attributes which  must  be  present  for  an agreement to be considered as an arbitration agreement are :      (1) The arbitration agreement must contemplate that the           decision of  the tribunal  will be  binding on the           parties to t he agreement,      (2) That the jurisdiction of the tribunal to decide the           rights of parties must derive either from the           consent of the parties or from an order of the           Court or from a statute, the terms of which make           it clear that the process is to be an arbitration,      (3) The  agreement must  contemplate  that  substantive           rights of parties will be determined by the agreed           tribunal,      (4) That  the tribunal will determine the rights of the           parties in  an impartial  and judicial manner with           the tribunal owing an equal obligation of fairness           towards both sides,      (5) That  the judgment  of the  parties to  refer their           disputes to  the decision  of the tribunal must be           intended to be enforceable in law and lastly,      (6) The  agreement must  contemplate that  the tribunal           will make  a decision  upon  a  dispute  which  is           already formulated at the time when a reference is           made to the tribunal.      The other  factors which  are relevant include, whether the agreement  contemplates that  the tribunal  will receive evidence from  both sides  and hear  their contentions or at least give  the parties  an opportunity to put them forward; Whether the  wording  of  the  agreement  is  consistent  or inconsistent with  the view that the process was intended to be an  arbitration, and  whether the  agreement requires the tribunal to decide the dispute according to law.      In Russell  on Arbitration,  21st Edition,  at page 37, paragraph 2-014,  the question  : How to distinguish between an expert  determination and arbitration, has been examined. It is  stated, "Many  cases have  been fought over whether a contract’s chosen  form  of  dispute  resolution  is  expert

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determination  or   arbitration.  This   is  a   matter   of construction of  the contract,  which involves  an objective enquiry into the intentions of the parties. First, there are the express  words of the disputes clause. If specific words of  the   disputes  clause.   If  specific   words  such  as ’arbitrator’, ’arbitral  tribunal’, ’arbitrator’ are used to describe the manner in which the dispute resolver is to act, they  are  likely  to  be  persuasive  although  not  always conclusive.......... Where  there is no express wording, the court will  refer to  certain guidelines. Of these, the most important used  to, whether there was an ’issue’ between the parties such as the value  of an asset on which they had not taken defined  positions, in  which case  the procedure  was held to  be expert  determination; or a ’formulated dispute’ between the  parties where defined positions had been taken, in which  case the  procedure was held to be an arbitration. This imprecise  concept is  still being  relied  on.  It  is unsatisfactory because some parties to contract deliberately chose expert  determination for dispute resolution. The next guideline is  the judicial  function of an arbitral tribunal as opposed  to the  expertise of  the expert’...........  An arbitral tribunal  arrives at  its decision  on the evidence and submission  of the  parties and must apply the law or if the parties agree, on other consideration; an expert, unless it is agreed otherwise, makes his own enquiries, applies his own expertise and decides on his own expert opinion......"      The authorities thus seem to agree that while there are no conclusive  tests, by  and large, one can follow a set of guidelines in  deciding whether the agreement is to refer an issue to  an expert  or whether  the parties  have agreed to resolve disputes through arbitration.      Therefore  our  courts  have  laid  emphasis  on    (1) existence of  disputes as  against intention to avoid future disputes; (2) the tribunal or forum so chosen is intended to act judicially  after taking  into account relevant evidence before it and the submissions made by the parties before it; and (3)  the decision  is  intended  to  bind  the  parties. Nomenclature used  by the parties may not be conclusive. One must examine  the true  intent and support of the agreement. There are,  of  course,  the  statutory  requirements  of  a written  agreement,  existing  or  future  disputes  and  an intention to  refer them  to arbitration.  (Vide  Section  2 Arbitration  Act   1940  and   Section  7   Arbitration  and Conciliation Act, 1996).      In the  case of  Smt. Rukmanibai  Gupta  v.  Collector, Jabalpur &  Ors. [(1980)  4 SCC  556], this Court dwelt upon the fact  that disputes were referred to arbitration and the fact that  the decision  of the  person to whom the disputes were referred  was made final, as denominative of the nature of the  agreement which  the court  held was  an arbitration agreement.      In the  case of State of U.P. v. Tipper Chand [(1980) 2 SCC 341],  a clause  in the contract which provided that the decision of  the Superintending  Engineer  shall  be  final, conclusive and  binding on  all parties to the contract upon all questions relating to the meaning of the specifications, designs, drawings  and instructions  was  contoured  as  not being an  arbitration clause.  This Court said the there was no mention  in this  clause of  any dispute,  much less of a reference thereof.  The purpose of the clause was clearly to vest the  Superintending Engineer  with supervision  of  the execution of  the work  and administrative  control over  it from time to time.      In the case of Cursetji Jamshedji Ardaseer Wadia & Ors. v.   Dr. R.D.Shiralee  [AIR 1943  Bombay 32]  the test which

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was emphasised  was whether the intention of the parties was to avoid  disputes or  to resolve  disputes. In  the case of Vadilal Chatrabhuj  Gandhi v.  Thakorelal Chimanlal  Munshaw [55 Bombay  Law Reporter  629] the  emphasis was on judicial enquiry and  determination as  indicative of  an arbitration agreement  as   against  an  expert  opinion.  The  test  of preventing disputes  or deciding  disputes was also resorted to for  the purpose of considering whether the agreement was a reference  to  arbitration  or  not.  In  that  case,  the agreement provided that the parties had agreed to enter into a compromise  for payment of a sum up to, but not exceeding, Rs. 20  lacs, "which  shall be borne and paid by the parties in such  proportions or  manner  as  Sir  Jamshedji  B.Kanga shall, in  his absolute  discretion, decide  as a valuer and not as  an  arbitrator  after  giving  each  of  us  summary hearing." The  court said that the mere fact that a judicial enquiry had been held is not sufficient to make the ultimate decision a  judicial  decision.  The  court  held  that  Sir Jamshedji Kanga   had  not to  decide upon  the evidence led before him.  He had  to decide  in his  absolute discretion. There was  not to  be judicial enquiry worked out a judicial manner. Hence this was not an arbitration.      In the  case of State of West Bengal & Ors. v. Haripada Santra  [AIR   1990  Calcutta   83],   the   agreement   the Superintending Engineer  of the  Circle shall  be final  The court relied  upon  the  fact  that  the  reference  was  to disputes  between  the  parties  on  which  a  decision  was required to  be  given  by  the  Super  intending  Engineer. Obviously, such  a decision  could b  e arrived  at b  y the Superintending Engineer  only when  the dispute was referred to him by either party for decision. He was also required to act judicially  and decide  the disputes  after hearing both parties and  after considering  the material  before him. It was, therefore, an arbitration agreement.      In  the   case  of   Jammu  and  Kashmir  State  Forest Corporation v.  Abdul Karim  Wani &  Ors. [(1989)  2 SCC 701 para  24],   this  Court  considered  the  agreement  as  an agreement of  reference to  arbitration. It  has  emphasised that (1) the agreement was in writing; (2) It was a contract at present  time to  refer the  dispute arising  out of  the present contract;  and (3)  There was  a valid  agreement to refer the  dispute to  arbitration of the Managing Director, Jammu  and  Kashmir  State  Forest  Corporation.  The  Court observed that endeavor should always be made to find out the intention of the parties, and that intention has to be found out by  reading the  terms broadly and clearly without being circumscribed.      The decision  in the  case of  Rukmanibai Gupta (supra) has been  followed by  this Court  in the case of M.Dayanand Reddy v.  A.P. Industrial Infrastructure Corporation Limited & Ors.  [(1993) 3 SCC 137 para 8], Commenting on the special characteristics of  an arbitration agreement this court h as further  observed   in  the   above  case  that  arbitration agreement embodies  an agreement between the parties that in case  of   a  dispute  such  dispute  shall  be  settled  by arbitrator or  umpire of  their own  constitution or  by  an arbitrator to  be appointed  by the  court in an appropriate case. "It  is pertinent  to mention that there is a material difference in  an arbitration  agreement inasmuch  as in  an ordinary contract  the obligation  of the  parties  to  each other cannot,  in  general,  be  specifically  enforced  and breach of  such terms  of contract  results only in damages, The  arbitration  clause,  however,  can  b  e  specifically enforced by the machinery of the Arbitration Act.........".      The Court  has further  observed that  it  is  to  b  e

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decided whether  the existence  of an agreement to refer the dispute to  arbitration can  be clearly  ascertained in  the facts and  circumstances of the case. This, in turn, depends on the  intention of  the parties  to be  gathered from  the relevant documents and surrounding circumstances.      The decisions in the case of State of U.P. Tipper Chand (supra) and  Rukmanibai Gupta  (supra) have  also been cited with approval by this Court in the case of State of Orissa & Anr. v.  Damodar Das [(1996) 2 SCC 216]. In this case, t his Court considered  a clause  in the  contract which  made the decision of  the Public  Health Engineer, "final, conclusive and binding  in respect  of all  questions relating  to  the meaning of  specifications, drawings,  instructions...... or as to  any other  question claim,  right,  matter  of  thing whatsoever in  any way  arising out  of or  relating to  the contract,  drawings,   specifications,  estimates......   or otherwise concerning  the works  or the execution or failure to execute   the same whether arising during the progress of the work or after the completion or the sooner determination thereof the contract." This Court held that  this was not an arbitration clause.  It did not envisage that any difference or dispute  that  may arise in execution of the works should be referred to the arbitration of an arbitrator.      A long line of English cases starting with In Re Carus- Wilson and Greene  [1986 (18) Queen’s   Bench  Division   7] have also  been cited  before us.  In  Re  Carus-Wilson  and Green, on  the sale  of land,  one of the conditions of sale was that the purchaser should pay for the timber on the land at a  valuation for which purpose, each party should appoint a valuer and the valuers should, before they proceed to act, appoint an  umpire. The  court said  that such valuation was not in  the nature of an award.  The court applied the tests which we  have already  referred to, namely, (1) Whether the terms of  the agreement  contemplated that  the intention of the parties  was for  the person,  to hold an enquiry in the nature of  a judicial  enquiry, hear  the respective case of the parties  and decide  upon evidence  laid before him, (2) Whether the person was appointed to prevent differences from arising and  not for settling them when they had arisen. The court held  the agreement  to be for valuation. It said that the fact that if the valuers could not agree as to price, an umpire was  to be  appointed would  not indicate  that there were any disputes between the parties.      In the  case of  Sutcliffe v.  Thackrah [1974  (1)  AER 859], the  clause in  question provided  that  at  specified intervals the  architect should  issue interim  certificates stating the  amount due  tot he  builders in respect of work properly executed.  There was a separate arbitration clause. The question  was whether  the function of the architect was sufficiently  judicial   in  character  for  him  to  escape liability in negligence. The House of Lords was not directly concerned with the question whether the architect was acting as an  arbitrator or  a valuer.  It was  required to  decide whether the  architect, who had not taken sufficient care in certifying the  amount payable,  should be  held  liable  in negligence. And  the court said that when a professional man was employed to make a valuation, and to his knowledge, that valuation was  to be  binding on  his principal  and another party under  an agreement  between them,  it did  not follow that because  he was  under   a duty to act fairly in making his valuation,  he was  immune from  liability for negligent valuation. A  similar  question  arose  in  connection  with valuation of  shares by  auditors in  the case of Arenson v. Casson Beckman Rutely & Co. [1975 (3) AER 901]. The House of Lords said  that an  auditor of  a private  company who,  on

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request, valued  the shares  in the company in the knowledge that his valuation was to determine the price to be paid for the shares  under a  contract of sale, was liable to be sued by the  seller  or  the  buyer  if  he  made  the  valuation negligently. These two case do not directly assist us in the present case.      In the  case of Imperial Metal Industries (Kynoch) Ltd. v. Amalgamated  Union of  Engineering Workers  [1979 (1) AER 847], the  contract between the parties included a clause to the effect  that persons in the employment of the contractor were required  to be  paid fair  wages  as  per  Fair  Wages Resolution. A  trade union complained that the conditions of the Fair  Wages Resolution  were not  being observed b y the employers.  This   dispute  was   referred  to  the  Central Arbitration Committee.  The Court  said that even though the Committee was  acting as arbitrators, they were not doing so pursuant to  arbitration agreement  as defined  in  the  Act because the  arbitration was  required  to  be  between  the parties to the parties to the agreement about a matter which they had  agreed to  refer to  arbitration. In  the  present case, the Union was not a party to the contract.      In the  present case,  the Memorandum  of Understanding records the settlement of various dispute as between Group A and Group  B in terms of the Memorandum of Understanding. In terms of  the settlement,  the shares  and assets of various companies are  required to be valued in the manner specified in the  agreement. The  valuation is  to be done by M/s S.B. Billimoria &  Co. Three  companies which  have to be divided between the  two groups are to be divided in accordance with a scheme  to be  prepared by  Bansi S.  Mehta &  Co. In  the implementation of  the Memorandum  of Understanding which is to be  done in consultation with the financial institutions, any disputes  or clarifications  relating to  implementation are to  be referred  to the  Chairman, IFCI  or his nominees whose decision  will be  final and  binding. The  purport of Clause 9 is to prevent any further disputes between Groups A and B. Because the agreement requires  division of assets in agreed proportions after their valuation by a named body and under a  scheme of  division by another named body. Clause 9 is intended  to clear any other difficulties which may arise in the  implementation of the agreement by leaving it to the decision of  the Chairman,  IFCI.  This    clause  does  not contemplate any judicial determination by the Chairman of he IFCI. He is entitled to nominate another person for deciding any question.  His decision has been made final and binding. Thus, Clause  9 is  not intended  to be  for  any  different decision that  what  is  already  agreed  upon  between  the parties  to   the  dispute.   It  is   meant  for  a  proper implementation of  settlement already arrived at. A judicial determination,  recording   of   evidence   etc.   are   not contemplated. The  decision of  the Chairman  IFCI is  to be binding on  the parties. Moreover, difficulties and disputes in implementation may not be between the parties disputes in implementation  may  not  be  between  the  parties  to  the Memorandum of Understanding. It is possible that the Valuers nominated in  the Memorandum  of Understanding  or the  firm entrusted with  the responsibility  of splitting some of the companies  may  require  some  clarifications  or  may  find difficulties in  doing the  work. They  can also  escort  to Clause 9.  Looking  to  the  scheme  of  the  Memorandum  of Understanding and  the purpose behind Clauses 9, the learned Single  Judge,   in  our  view,  has  rightly  come  to  the conclusion that  this was not an agreement to refer disputes to arbitration. It was meant to be an expert’s decision. The Chairman, IFCI has designated his decision as a decision. He

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has consulted  experts  in  connection  with  valuation  and division of  assets. He  did not  file his decision in court nor did any of the parties request him to do so.      Undoubtedly, in  the course of correspondence exchanged by various  members of  Groups A  and B  with the  Chairman, IFCI, some  of the members have used the words "arbitration" in connection with Clause 9. That by itself, however, is not conclusive. The intention of the parties was not to have any judicial determination  on the  basis of evidence led before the Chairman,  IFCI. Nor  was the Chairman, IFCI required to base his  decision only on the material placed before him by the parties  and their  submissions. He was free to make his own inquiries.  He had to apply his own mind and use his own expertise for  the purpose.  He was free to take the help of other experts.  He was  required to  decide the  question of valuation and the division of assets as an expert and not as an arbitrator.  He had been authorise to nominate another in his place.  But  the  contract  indicates  that  he  has  to nominate an  expert. The  fact that  submissions  were  made before the  Chairman, IFCI,  would not  turn  the  decision- making process into an arbitration.      The Chairman,  IFCI has  framed issues before answering them in  his decision.  These issues  have  been  framed  by himself for  the purpose  of enabling  him to pinpoint those issues which  require  his  decision.  There  is  no  agreed reference in respect of any specific disputes by the parties to him.                The  finality   of  the   decision  is   also indicative of  it  being  an  expert’s  decision  though  of course, this  would not  be conclusive.  But looking  at the nature of  the functions  expected to  be performed  by  the Chairman,  IFCI,  in  our  view,  the  decision  is  not  an arbitration award.  The learned  Single Judge was, therefor, right in  coming to  the  conclusion  that  the  proceedings before the Chairman, IFCI, were not arbitration proceedings. Nor was his decision an award. Appeal arising out of Special Leave Petition  No. 14905  of 1997  is, therefore, dismissed with costs. Question No. 2:      The next  question which requires to be decided related to Suit  No. 1394  of 1996.  The learned  Single  Judge  has struck off  the plaint  in the  suit as being an abuse of he process of  court. The appellants had filed this suit in the Delhi High  Court on  the same  day as  Arbitration Petition bearing  O.M.P.  No.58  of  1996.  It  challenges  the  same decision of  the Chairman,  IFCI which  is challenged in the arbitration petition as an award.      The learned Single Judge has compared the plaint in the suit with  the petition filed under the Arbitration Act. The prayers in  the arbitration  petition are  for a declaration (a) that  the award  of the C.M.D., IFCI, dated 8.12.1995 is illegal, bad  in  law  and  null  and  void;  (b)  that  the directions given  and actions taken by the Chairman, Modipon Ltd, in  letters dated  22-1-1996, 5.2.1996,  17.4.1996  and 24.4.1996 and the scheme of arrangement drawn up by M/s S.S. Kothari &  Co. are illegal and bad in law; (c) that the said award to  the Chairman  and Managing  Director, IFCI and the said letters  and directions  of the  Chairman, Modipon Ltd, and the said scheme of arrangement drawn by M/s S.S. Kothari &  Co.   be  set   aside;  (d)  for  a  perpetual  injection restraining the  respondents from taking any action directly or indirectly  in pursuance of or to give effect to the said award; (e)  for a perpetual injection restraining respondent no .5  from passing any resolutions in terms of the proposed items 8  and 9  set out in the notice regarding the proposed

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Board Meeting of Modipon Ltd.; (f) for a perpetual injection restraining respondents 6 and 7 from selling or disposing of shares in  Godfrey Phillips  India Ltd. or from dealing with the said  shares in a manner contrary to the scheme prepared by M/s  Bansi S.  Mehta &  Co. and  for  further  and  other reliefs.      In the  plaint in the suit, prayers (c), (d), (e), (f), (G) &  (h) are identical with the prayers in the arbitration petition with  small variations which are of no consequence. The remaining  prayers are  as follows:  Prayer (a) is for a declaration  that  the  Memorandum  of  Understanding  dated 24.1.1989 is  binding on  both the plaintiffs and defendants and all  parties are  bound in law to act in conformity with the same. Prayer (b) is for a declaration that neither the Chairman, IFCI  nor the Chairman, Modipon Ltd. had any power to alter,  amend, or  modify in  any manner  the  scheme  of separation drawn  by M/s  Bansi S. Mehta & Co. Prayer (i) is for an  injection restraining  the defendants from altering, amending or  modifying the  scheme of separation drawn up by M/s Bansi  S.Mehta & Co. Prayer (j) is for a decree ordering and directing  Modipon Ltd.  to be  split in accordance with the   scheme of  separation drawn up by M/s Bansi S. Mehta & Co. and  prayer (k)  is for  a decree ordering and directing the implementation  of the  said Memorandum of Understanding dated 24.1.1989  in respect of Modipon Ltd, in such a manner that the  control and  a  management  of  Chemical  Division including the shares of Modi Group Company allotted to Group B held  by Modipon  Ltd, is  vested in the plaintiff and the control and  management of  the  remainder  of  the  company including the  Fibre Division  is vested in the Group A. The paragraphs in the plaint and in the arbitration petition are verbatim that  same to a substantial extent. The respondents have pointed  out that  paragraphs 1A to 54A in the petition are the  same as  paragraphs 1  to 54A  in the  plaint.  The grounds which  are set out in the petition as well as in the plaint are also substantially the same.      Mr. Nariman, learned senior counsel for the appellants, however, has  drawn our  attention to  paragraph 55  of  the plaint. In paragraph 55 it is stated as follows:      "The  plaintiff  says  and  submits      that as the said Ruling/Decision of      the CMD,  IFCI  is  an  Arbitration      Award within  the  meaning  of  the      Arbitrator Act,  1940, the legality      and validity  of the  same  can  be      questioned and a prayer can be made      for setting  aside that  said award      only  in  an  arbitration  petition      filed  under   Section  33  of  the      Arbitration    Act,    1940.    The      Plaintiff  is,   therefore,  filing      along  with  the  present  suit  an      Arbitration  Petition   under   the      provisions of  he Arbitration  Act,      challenging   the    legality   and      validity   of   the   said   award.      However, the  present suit  is also      being  filed   in  respect   of  he      actions   of   third   parties   in      pursuance of  and to give effect to      the said  Award.  Further,  in  the      event of  it being contended by any      of the  defendants  herein,  or  it      being held  by this  Hon’ble  Court      for  any   reason  that   the  said

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    Ruling/Decision of the CMD, IFCI is      not  an   Arbitration  Award,   the      legality and  validity of  the said      Ruling/Decision   is   also   being      challenged in the present suit."      He   has submitted  that in  the event of it being held that Clause  9 of  the Memorandum of Understanding is not an arbitration clause  and the  decision of the Chairman, IFCI, is not an award, it is open to the appellants to file a suit to challenge the decision. This is the reason why along with the arbitration  petition, a  suit has also been filed as an alternative  method  of  challenging  the  decision  of  the Chairman and  Managing Director,  IFCI, is  not an award. He has contended  that filling  a separate  proceeding in  this context cannot  be considered  as an  abuse of he process of the court;  and the  learned Single  Judge was  not right in striking out the plaint under Order 6 Rule 16 of the Code of Civil Procedure.      Under Order  6 Rule  16, the Court may, at any state of he proceeding,  order to  b e  struck out,  inter alia,  any matter in  any pleading  which is  otherwise an abuse of the process of  the court.  Mulla in his treatise on the Code of Civil Procedure. (15th Edition, Volume II, page 1179 note 7) has stated that power under clause (c) of Order 6 Rule 16 of the Code  is confined to cases where the abuse of he process of the  Court is  manifest from the pleadings; and that this power is  unlike the  power  under  Section  151  whereunder Courts have  inherent power  to strike  out pleadings  or to stay or  dismiss proceedings  which are  an abuse  of  their process. In  the present  case the  High Court  has held the suit to  be an  abuse of he process of Court on the basis of what is stated in the plaint.      The Supreme  Court Practice  1995 published  by Sweet & Maxwell in paragraph 18/19/33 (page 344) explains the phrase "abuse of  the  process  of  the  court"  thus:  "This  term connotes that  the process  of the  court must  be used bona fide and  properly and  must not  be abused.  The court will prevent improper  use of  its machinery and will in a proper case, summarily  prevent its  machinery from being used as a means  of   vexation  and   oppression  in  the  process  of litigation........ The  categories of  conduct  rendering  a claim frivolous,  vexatious or  an abuse  of process are not closed but  depend on  all the  relevant circumstances.  And for this  purpose considerations   of  public policy and the interests of justice may be very material."      One of the examples cited as an abuse of the process of court is re-litigation. It is an abuse of the process of the court and  contrary to justice and public policy for a party to re-litigate  the same issue which h as already been tried and decided earlier against him. The re-agitation may or may not be  barred as  res judicata.  But if  the same  issue is sought to be re-agitated, it also amounts to an abuse of the process of  court. A proceeding being filed for a collateral purpose, or  a spurious  claim being  made in litigation may also in  a given  set of  facts amount  to an  abuse of  the process of the court. Frivolous or vexatious proceedings may also amount  to an abuse of the process  of court especially where the  proceedings are  absolutely groundless. The court then has  the power  to stop  such proceedings summarily and prevent the  time of  the public  and t  he court from being wasted. Undoubtedly,  it is  a matter  of courts’ discretion whether such  proceedings should be stopped or not; and this discretion has  to be exercised with circumspection. It is a jurisdiction  which   should  be  sparingly  exercised,  and exercised only  in special  cases. The  court should also be

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satisfied that there is no chance of the suit succeeding.      In the  case of  Greenhalgh v.  Mallard [19147  (2) AER 255] the  e court  had to  consider different proceedings on the same  cause of  action for  conspiracy, but supported by different averments.  The Court,  held that if the plaintiff has chosen  to put his case in one way, he cannot thereafter bring the same transaction before the court, put his case in another way  and say  that he  is relying  on a new cause of action. In such circumstances he can be met with the plea of res judicata or the statement or plaint may be struck out on the ground  that the action is frivolous and vexation and an abuse of the process of court.      In Mcllkenny v. Chief Constable of West Midlands Police Force and another [1980 (2) AER 227], the Court of Appeal in England struck  out the  pleading on  the  ground  that  the action was  an abuse  of the  process of  the court since it raised an  issue identical  to that  which had  been finally determined at  the plaintiffs’  earlier criminal  trial. The court said  even when  it is  not possible to strike out the plaint on  the ground  of issue  estoppel, the action can be struck out  as an  abuse of the process of the court because it is  an abuse  for a  party to  re-litigate a  question or issue which has already been decided against him even though the other  party cannot  satisfy  the  strict  rule  of  res judicata or the requirement of issue estoppel.      In the  present case, the learned Judge was of the view that  the   appellants  had   resorted   to   two   parallel proceedings, one  under the Arbitration Act and the other by way of a suit. When the order of interim injunction obtained by the  appellants was  vacated in  arbitration proceedings, they obtained  an injunction in the suit. The learned Single Judge also  felt that the issues in the two proceedings were identical, and  the suit  was substantially to set aside the award. He,  therefore, held  that the proceeding by way of a suit was  an abuse of the process of court since it amounted to litigating  the same  issue in  a different forum through different proceedings.      The  perception   of   the   Learned   Judge   may   be substantially correct  throughout entirely  so. Undoubtedly, if the  plaint in the suit is viewed as challenging only the arbitration award,  a suit  to challenge  the award would be re-litigating the  issues already  raised in the arbitration petition. The  suit would also be barred under Section 32 of the Arbitration  Act, 1940.  Section 32  of the  Arbitration Act, 1940 provides that notwithstanding any law for the time being in  force, no suit  shall lie on any ground whatsoever for a  decision upon  the existence effect or validity of an arbitration agreement  or award,  nor shall  any arbitration agreement or  award b  e set  aside, amended, modified or in any way affected otherwise than as provided in this Act.      According to  the appellants,  however, the suit is not confined only  to  challenging  the  award  or  steps  taken pursuant to the award by the Chairman, Modipon Ltd. in order to enforce  it. According  to the  appellants, in  the  suit there is  an alternative  plea that if the impugned decision of  the   Chairman  and   Managing  Director,  IFCI  is  not considered as  an awards,  then that  decision as a decision should be  set aside.  It is  contended that the suit, in so far as  it challenges  the  decision  of  the  Chairman  and Managing Director,  IFCI, as  a decision and not as an award is maintainable.  In support,  the e  appellants have relied upon the  submissions in  paragraph 55  of the  plaint which were have set out earlier.      The plaint  in the  suit, tot he limited extent that it challenges the  decision as  a decision, would not amount to

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abuse of  the process  of Court.  We are  not called upon to examine whether  this alternative submission is supported by proper averments  and whether  there is  a proper  cause  of action  framed   in  the   plaint  in  Support  of  such  an alternative plea.  This is  a matter which the court hearing the suit  will have  to examine and decide. But in the suit, the decision cannot be challenged as if it were an award and on the  same grounds  as if it were an award. The court will also have  to consider the binding nature of such a decision particularly when  no mala  fides have  been alleged against the CMD,  IFIC. If  ultimately it  is found that even on the alternative plea,  the claim  is not  maintainable the court may pass  appropriate orders  in accordance with law. But to the limited  extend that  the  suit  erased  an  alternative independent plea,  it cannot  be considered as re-litigation of the same issue or an abuse of the process of court.      In  a   proceeding  under   the  Arbitration  Act,  the appellants could not have raised an alternative plea that in case the  impugned decision  is treated not as an award. but as a  decision, the same is bad in law. This plea could only have been raised by filing a separate suit. Similarly in the suit, the  appellants could  not h ave raised an alternative plea that  in case the impugned decision is considered as an award, the  same should  be set  aside. For  this purpose an arbitration petition was required to be filed. Therefor, the suit, if  and to the extent that it challenges in accordance with law,  the impugned  decision as  a decision,  cannot be treated as an abuse of  the process of the court.      Group A  also contends  that there  is no  merit in the challenge to  the decision of the Chairman of IFCI which has been made binding under the Memorandum of Understanding. The entire Memorandum of Understanding including Clause 9 has to be looked  upon  as  a  family  settlement  between  various members  of   the  Modi  family.  Under  the  Memorandum  of Understanding, all  pending the  Modi family forming part of either Group  A or  Group B  have been  finally settled  and adjusted. Where it has become necessary to split any of  the existing companies,  this has  also  been  provided  for  in Memorandum of  Understanding. It  is a  complete settlement, providing how  assets are  to be  valued, how they are to be dividing some  of the specified companies has to be prepared and who  has to  do this  work.  In  order  to  obviate  any dispute, the parties have agreed that the entire working out of this agreement will b e subject to such directions as the chairman, IFCI  may give pertaining to the implementation of Memorandum of  Understanding. He  is also  empowered to give clarifications and  decide any  differences relating  tot he implementation of  the Memorandum  of Understanding.  Such a family settlement  which settled  disputes within the family should not  be lightly  interfered with  especially when the settlement has  been already  acted upon  by some members of the family.  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  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.      The appeal  of the  appellants from the judgment of the Learned Judge  striking out the plaint is, therefore, partly

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allowed and  the suit,  to the  extent  that  it  challenges independently the  decision of  the  Chairman  and  Managing Director, IFCI  as a  decision  and  not  as  an  award,  is maintainable in  the sense  that it  is not  an abuse of the process of  the court.  We make  it clear  that we  are  not examining the  merits of the claim nor whether the plaint in the suit  discloses a  cause of  action in  this regard. The plaint leaves  much to  be desired  and it  is for the trial court to decide these and allied questions. The plaint in so far as  it challenges  the decision  as an  award and on the same  grounds   as  an   award;  or  seeks  to  prevent  the enforcement of  that award  by the Chairman, Modipon Ltd. or in any  other way has been rightly considered as an abuse of the process  of court  since the  same reliefs  have already been asked  for in  the arbitration  petition. The  Transfer Case No.13 of 1997 is, therefore, partly allowed.      We also  direct that all the defendants in he said suit who are  supporting the  Plaintiffs shall  be transposed  as plaintiffs along  with the  original plaintiffs  since  they have a  common  cause  of  action.  For  this  purpose,  the plaintiffs shall carry out necessary amendments in he causer title and  any consequential amendments in he suit with four weeks of this order.      Pending the  hearing and  final disposal of the suit in he Delhi  High Court  and/or until  any further  orders  are passed by the trial court if the exigencies of the situation then prevailing  so require, no meeting of the Modipon Board shall be  held for  considering any  matter relating  to the decision  of   the  CMD,  IFCI  dated  8.12.1995.  Also  the defendants in  eh said  suit (Group  A) shall  not sell  any shares held  in Godfrey  Phillips India  Ltd.  provided  the plaintiffs in the suit deposit in the Delhi High Court a sum of Rs.5 crores (Five Crores) within four weeks from the date of this  order. In the event of their failure to deposit the said  amount   within  the   aforesaid  period,   the  order restraining the  defendants (Group  A) from selling the said shares shall stand vacated. The amount so deposited shall be invested  by   the  High  Court  in  Fixed  Deposits  within Nationalised Banks pending further orders. The interim order of 7th  January, 1998  will continue  to  operate  in  terms thereof. In  the event  of any  change in the circumstances, the parties  will be  at liberty  to apply to the High Court for any  variation  of  this  order.  Appeals  arising  from Special Leave  Petition Nos. 14905/97, 18711/97 and Transfer Case No. 13/97 are disposed of accordingly together with all interim applications.