Case Note & Summary
The dispute concerned a property measuring 6800 sq. mts. in Mogappair Village. One K.M.Parameswaran was claimed to be the owner. After his death, his legal heirs entered into an unregistered sale agreement dated 17.02.2005 with M.K.Phandian and D.Balan for Rs.1,00,00,000, with an advance of Rs.1,00,000. The intending purchasers then entered into a Memorandum of Understanding dated 28.07.2010 with the appellant O.Muthu, who undertook to get the property released from land acquisition and urban land ceiling proceedings at his own risk and cost through litigation and negotiation. The MoU provided for arbitration by a named arbitrator. Disputes arose, and the arbitrator passed an award on 23.03.2015 directing the respondents to pay Rs.24,00,00,000 plus interest and costs to the appellant. Challenging the award, OP Nos.476 of 2015 and 1050 of 2017 were filed under Section 34 of the Arbitration and Conciliation Act, 1996. A learned Single Judge set aside the award on grounds that the MoU was champertous and opposed to public policy, the award lacked evidence, and the compensation was patently illegal. The appellant filed the present Original Side Appeals under Order XXXVI Rule 1 of the Original Side Rules. The Division Bench examined the agreements and found the sale agreement unenforceable due to lack of title details and non-registration, the MoU champertous as it involved an outsider funding and managing litigation for profit, and the award without any evidence on quantum. The court held that the Single Judge rightly set aside the award, and the appeals were dismissed.
Headnote
A) Contract Law - Champerty and Public Policy - Unenforceability of Champertous Agreement - Arbitration and Conciliation Act, 1996, Section 34 - The Memorandum of Understanding dated 28.07.2010, wherein the appellant undertook to retrieve land from acquisition and litigation at his risk and cost, was held to be champertous and opposed to public policy. The court relied on the Single Judge's finding that the agreement solicited litigation and was void; thus, the arbitral award based on it was set aside (Paras 4, 9). B) Arbitration - Setting Aside Award - Patent Illegality and Perversity - Arbitration and Conciliation Act, 1996, Section 34 - The award directing payment of Rs.24,00,00,000 while the underlying agreements were worth Rs.1,00,00,000 was held patently illegal and perverse. The award suffered from lack of evidence on compensation quantum and was set aside (Paras 4, 6, 7). C) Property Law - Sale Agreement - Unregistered and Incomplete Agreement - Transfer of Property Act, 1882 - The sale agreement dated 17.02.2005 was unregistered and lacked essential details of title, consideration terms, and was preceded by an unproven oral agreement. Held that such agreement is unenforceable and confers no interest (Paras 6, 7). D) Evidence - Arbitral Proceedings - Award Without Evidence - Arbitration and Conciliation Act, 1996, Section 34 - The arbitrator passed an award without parties adducing evidence on compensation quantum. The court found this a ground for setting aside the award as the compensation figure lacked evidentiary basis (Para 4).
Issue of Consideration
Whether the Memorandum of Understanding dated 28.07.2010 was champertous and opposed to public policy; Whether the arbitral award was liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996 for being without evidence and patently illegal.
Final Decision
Appeals dismissed; order setting aside the arbitral award confirmed.
Law Points
- champertous agreement opposed to public policy
- unregistered sale agreement lacking title details unenforceable
- arbitral award without evidence patently illegal
- compensation exceeding agreement value perverse
- oral agreement of sale not proved
- Section 34 of Arbitration and Conciliation Act
- 1996
