FWIW, I had terrible noise on my encoder lines (twisted pair, foil shielded) only when I DID ground the drain wire. Go figure!
The best way I have heard shielding explained is this. The shield is like an antenna. It can transmitt and it can receive. The common practice is to always ground at the controller end. This is where I suggest everyone start but if you need to unhook it at the controller end and ground at the device end, as long as it works, that's good and I have no problem with it. Your problem may well have been the motors are emitting the noise and grounding the shield at the controller end gave it a good easy path to follow back to the controller. In short, where you divert the noise to has a lot to do with where it is coming from. Its best to start following good practices and adjust as necessary if you need to. We would like to think we have all the answers but when it comes to EMF, say what you will but there is a bit of black magic and luck involved. With persistence it can usually be dealt with effectively but the best experts in the world will admit they cant explain all of it.
Brett