Hi,
Thank you for your replies guys 
TomGeorge, I am using a 4in1 ESC so na it is not in a Star Configuration. And No, its on the same power leads as the ESC with no protection circuitry.
When this happened, the smell of smoke came from the Arduino. Im pretty sure there was a voltage spike through the arduino and just killed it.
MoragnS Yes I agree, but this will not occur when there are no sharp changed in the power drawn from the motors. right? Im an Electrical Engineer with one year to go till I graduate, so I beleive I have a half decent idea whats happening.
I have attached the physical setup of what i am talking about.
sorry I couldnt find a way to tag you guys.
Thanks
