Disputes over tax filings intertwined with family-settlement implementation are referable to arbitration.

The parties’ Family Settlement Deed (FSD), decreed on 13 December 2019, provided for separate management of HLI’s medicines and food businesses while preserving its charitable mandate.

The Decree Holder (DH) alleged that Judgment Debtors 1 and 2 (JDs 1 and 2) had unilaterally filed Form 10AB for renewal of HLI’s tax-exempt registration and appointed Ellahi Goyal & Co. as statutory auditor.

The DH sought, among other reliefs, a declaration that the auditor’s appointment was illegal and appointment of an independent auditor.

The tax authorities had rejected the earlier Form 10AB with liberty to refile, and issued a show-cause notice concerning discrepancies in the properties listed in the subsequent application.

Disputes concerning implementation of the FSD, including property segregation, were already referred to arbitration, where applications concerning HLI’s assets and related information had been filed.

1. Whether the execution court should appoint an independent statutory auditor and grant related interim directions concerning HLI’s statutory filings.

2. Whether the dispute concerning Form 10AB and the properties disclosed in it should be addressed by the execution court or referred to the arbitral tribunal.

Section 12A(ac) of the Income Tax Act, 1961, was relevant to the periodic renewal of registration and the time for applying.

Clause 45 of the FSD contained an arbitration agreement; earlier orders had referred disputes under the FSD to a sole arbitrator and permitted the parties to seek interim measures under Section 17 of the Arbitration and Conciliation Act, 1996.

The Court proceeded on the basis that the arbitral tribunal could consider the interim directions sought in relation to matters connected with the pending arbitration.

The Court did not decide whether the consent decree or particular FSD clauses were executable; it expressly left those questions open.

The Court found no urgency warranting immediate relief concerning Form 10AB, noting that the application for renewal had already been filed and that the DH’s objections turned substantially on whether properties had been segregated or transferred under the FSD.

Because property segregation was disputed and intertwined with matters already before the arbitrator, the Court considered the requested relief referable to arbitration.

It also declined to appoint an independent auditor at that stage, reasoning that doing so at the eleventh hour could prejudice both parties.

The DH was permitted to apply to the arbitral tribunal for appropriate interim or other directions, to be decided on their merits and without being influenced by observations in this order.

Questions concerning executability of the consent decree and the relevant FSD clauses were left open.