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Civil Property & InheritanceSupreme Court of India

Rajni Sanghi v. Western Indian State Motors Ltd. & Ors.

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 3687 of 2006)Decided 1 Dec 2015
Civil Appeal No. 3687 of 2006
Justice Vikramajit Sen · Justice Shiva Kirti Singh

Background

Four brothers of a family business had informally divided it between their branches, and they agreed to have an arbitrator divide the business. The arbitration award was later challenged, and the Delhi High Court set it aside. Meanwhile, the family had reached two settlements, one in 1994 approved by the Rajasthan High Court and one in 1995, which Rajni Sanghi was a party to. A Rajasthan High Court Division Bench had sent the 1994 settlement back to the trial court on technical grounds, and Rajni Sanghi challenged that remand.

Decision Breakdown

The Supreme Court held that parties who settle their dispute amicably, even after an arbitration award has been made, can have that settlement prevail, because an award becomes enforceable only once a court makes it a rule of the court. It upheld the Delhi High Court's decision to set aside the award as "otherwise invalid," since the courts in Bombay and Rajasthan had already approved family arrangements over the same property. It set aside the Rajasthan remand order and affirmed both the 1994 and 1995 family arrangements. Rajni Sanghi's appeal was allowed, and the other two appeals were dismissed. The Court also observed that the family head's decisions bind junior family members in family business, absent proof of fraud or immoral conduct.

Lesson Learnt

A written family settlement that the parties have acted on can be enforced by the courts even against an arbitration award that was never completed. A person who signs a family agreement should understand that backing out of it later can be legally blocked.

Rajni Sanghi v. Western Indian State Motors Ltd. & Ors. – Legal Case Shots | LegalAware