[Cites 4, Cited by 0]
Madras High Court
O.Muthu vs P.Ashok on 13 March, 2026
Author: C.V.Karthikeyan
Bench: C.V. Karthikeyan
1/11 OSA Nos.311 & 312 of 2019
IN THE HIGH COURT OF JUDICATURE AT MADRAS
RESERVED ON : 06.02.2026
PRONOUNCED ON : 13.03.2026
CORAM
THE HONOURABLE MR JUSTICE C.V. KARTHIKEYAN
AND
THE HONOURABLE MR.JUSTICE K.KUMARESH BABU
OSA Nos.311 & 312 of 2019
O.Muthu
Appellant(s) in both OSAs
Vs.
1.P.Ashok
2.Rama Srinivasan
3.M.K.Phandian
4.D.Balan
5.R.S.Anbazhagan,
Deputy Collector (Retd.)
Sole Arbitrator,
No.15, Shanthi Colony, Main Road,
Anna Nagar, Chennai 600 040.
Respondent (s) in OSA No.311 of 2019
1.M.K.Phandian
2.R.S.Anbazhagan,
Deputy Collector (Retd.)
Sole Arbitrator,
No.15, Shanthi Colony, Main Road,
Anna Nagar, Chennai 600 040.
3.D.Balan
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4.Jyotheeswari
5.P.Ashok
6.Rama Srinivasan
Respondent (s) in OSA No.312 of 2019
COMMON PRAYER:Appeals filed under Order XXXVI Rule 1 of O.S.Rules
to set aside the order and decree passed by this Court dated 25.06.2019, passed
in OP No.1050 of 2017 & A.No.8697 of 2017 and OP No.476 of 2015.
For Appellant(s): Mr.V.K.Vijayaragavan
in both Appeals
For Respondent(s): Mr.C.P.Sivamohan for R1 & R2
Mr.K.Ramkumar for R3 & R4
R5- Sole Arbitrator
(in OSA No.311 of 2019)
Mr.K.Ramkumar for R1 & R3
Mr.C.P.Sivamohan for R5 & R6
R2 Sole Arbitrator
(in OSA No.312 of 2019)
COMMON JUDGMENT
(Judgment of the Court was made by C.V.Karthikeyan, J.)
Both these Original Side Appeals arises from a common order passed by
a learned Single Judge of this Court dated 25.06.2019 in O.P. No.476 of 2015
and in O.P.No.1050 of 2017.
2.O.P.No.476 of 2016 had been filed under Section 34 of the Arbitration
and Conciliation Act, 1996 seeking interference with the Award dated
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23.03.2015 in ACP No.01 of 2014 passed by the second respondent/Sole
Arbitrator. O.P.No.1050 of 2017 had also been filed under Section 34 of the said
Act again seeking to set aside the Award dated 23.03.2015 in ACP No.1 of 2014
so far as the petitioners and their mother are concerned.
3.The entire issue surrounds the land measuring 6800 sq.mts. equal to 22
grounds in S.No.259/1 at Mogappair Village, Ambattur Taluk, Kancheepuram
District. One K.M.Parameswaran was stated to be the absolute owner of the said
land. He died on 27.01.2005 leaving behind his wife Jyotheeswari, his son
P.Ashok and daughter Rama Srinivasan as his legal heirs. It had been contended
that he had orally agreed to convey the suit property to M.K. Phandian, D.Balan
and that consequent to such oral agreement, they have protected the property
from encroachment and taken steps to retain the land from Land Acquisition and
Urban Land Ceiling. After death of K.M.Parameswaran, his legal heirs namely,
his wife son and daughter entered into an agreement of sale with M.K.Phandian,
D.Balan, on 17.02.2005 to convey the said property for a total consideration of
Rs.1,00,00,000/- and the agreement contemplated that the balance sale
consideration of Rs.99,00,000/- would be payable within a period of three
months from the date of conclusion of the writ petition which had been filed in
connection with the said land. The writ petitions were W.P.Nos.10972 of 2008,
25071/2008, 25072 of 2008 and 25073 of 2008. Subsequently, on 28.07.2010,
nearly five years later, the intending purchaser M.K.Phandian and D.Balan
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entered into a memorandum of understanding with a third party stranger
O.Muthu, whereby the said O.Muthu took up the responsibility of obtaining
necessary orders from the High Court and Appellate Court in retrieving the
property from Land Acquisition and Urban Land Ceiling at his risk and cost.
The terms relating to the consideration to be paid was also given in the
Memorandum of Understanding. The said document also provided the
settlement of disputes by engaging “services of a common person
Mr.Anbalagan of Annanagar for arbitration and his decision will be final and
conclusive.” The aforementioned writ petitions were allowed on 02.08.2012 and
writ appeals had been filed in W.A.Nos.2564 to 2567 of 2013 by BSNL and
they were also allowed by Judgment dated 27.03.2014. Disputes arose between
the parties in the Memorandum of Understanding and the said Mr.Anbalagan,
who was a retired Deputy Collector was appointed as Arbitrator. He entered
appearance and in ACP No.1 of 2014 passed an Award on 23.03.2015 directing
compensation of Rs.24,00,00,000/- to be paid by the respondents in the
arbitration proceedings, M.K.Phandian and D.Balan and also Jyotheeswari,
P.Ashok and Rama Srinivasan. They were also directed to refund the cash
deposit of Rs.42,30,000/- held by them. They were also directed to pay interest
at the rate of 12% per annum on the said sum of Rs.24,00,00,000/- from the
date of the claim till the date of realisation. They were also further directed to
pay costs of Rs.26,320/-.
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4.Challenging that Award M.K.Phandian filed O.P.No.476 of 2015 and
P.Ashok and Rama Srinivasan field O.P.No.1050 of 2017 both under section 34
of the Arbitration and Conciliation Act, 1996. A learned Single Judge of this
Court (N.Sathish Kumar, J.) by a common order dated 25.06.019 had set aside
the said Award necessitating filing of the present two original side appeals by
the claimant O.Muthu. The learned Single Judge in the course of his order had
stated that the said agreement was to solicit litigation and to clear the property
from acquisition and land ceiling and therefore concluded that it was in the
nature of a champerty. He further observed that the owners of the property were
not parties to the agreement but they were brought bound by the arbitrator to
pay compensation of Rs.24,00,00,000/- to the claimant/appellant herein. The
learned Single Judge further held that the said Memorandum of Understanding
was opposed to public policy. He further held that the Award had been passed
without any evidence adduced by the parties signifying the quantum of the
compensation that could be awarded. He also found that when the
Memorandum of Understanding was to a value of Rs.1,00,00,000/-, grant of
compensation for a sum of Rs.24,00,00,000/- was patently illegal, opposed to
public policy and perverse. Challenging the said common order passed, the
present Appeals had been filed.
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5.We have considered the submissions made and perused the material
records.
6.The land measuring 6800 sq. mts. equal to 22 grounds was said to be
owned by K.M.Parameswaran. No document has been produced to show that
he was the lawful and legal title holder over the said property. It is stated that
he has entered into an oral agreement of sale with two individuals
M.K.Phandian and D.Balan. No evidence had been produced to show that
K.M.Parameswaran had marketable title over the said property and had
authority to enter into such agreement of sale. No witnesses have spoken to
prove the oral agreement of sale. The total sale consideration agreed was also
not mentioned. Thereafter, K.M.Parameswaran died on on 27.01.2005. It is
claimed that he left behind three legal heirs, namely, his wife Jyotheeswari, his
son P.Ashok and daughter Rama Srinivasan. The agreement of sale had been
produced as a document dated 17.02.2005 entered into by the legal heirs of
K.M.Parameswaran with two individuals M.K.Phandian and D.Balan "in order
to fulfill the wishes of K.M.Parameswaran ". The very right of the said parties
to enter into such agreement itself is debatable and questionable. It is also seen
that the said agreement of sale is not registered. There are references to protect
the property from encroachment and taking legal measures to retrieve the land
from Land Acquisition and Urban Land Ceiling. It was also mentioned in the
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agreement that a writ petition was pending, however, details have not been
given. The details of the acquisition proceedings or proceedings under the
Urban Land Ceiling Act have also not been given. The consideration was
Rs.1,00,00,000 /- and an advance of Rs.1,00,000/- had been paid.
7.We hold that the said agreement is unenforceable in law as it is bereft of
necessary details, particularly, the right and title of the intending vendors over
the suit schedule property.
8.The intending purchasers M.K.Phandian and D.Balan then entered into
a Memorandum of Understanding on 28.07.2010 with the appellant herein
O.Muthu with respect to the very same land. They had no right or title, but
entered into the said agreement. They were only agreement holders. The
agreement in their favour itself is questionable. We hold that they can never
claim any interest over the property.
9.In the Memorandum of Understanding, entered into with the appellant
herein O.Muthu, it had been stated that they had “exhausted all their remedies
to retrieve the land from the Land Acquisition Act and the Urban Land Ceiling
Act” and therefore approached O.Muthu “who was influential with the
Government and experienced in accommodating suitable Senior Counsels of the
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subject knowledge” to get clearance from land acquisition authorities through
negotiations with the Government and to continue the pending suit and obtain
orders on merits.
10.The said covenant is unlawful and opposed to public policy. They had
not included the alleged owners of the land Jyotheeswari, P.Ashok and Rama
Srinivasan as parties to the said Memorandum of Understanding. They had also
not mentioned about consideration paid for the onerous task undertaken by
O.Muthu. They had also agreed to refer the disputes and specifically to refer
them to "Mr.Anbalagan of Anna Nagar" who would be the Sole Arbitrator. The
aforementioned clause is legally untenable and could never be categorised as
being within the confines of law.
11.Disputes arose and Mr.Anbalagan of Anna Nagar took up the role of
Arbitrator and by Award dated 23.03.2015 directed a payment of compensation
of Rs.24,00,00,000/- by Jyotheeswari, P.Ashok, Rama Srinivasan,
M.K.Phandian and D.Balan. It must be straight away stated that the said Award
is not worth the paper it had been written in. The Memorandum of
Understanding is an unlawful agreement. The learned Single Judge had
categorised it as a champerty. In Marriam Webster Dictionary, champerty had
been defined as “a proceeding by which a person not a party to suit bargains to
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aid in or carry on its prosecution or defense in consideration of a share of the
matter in suit.”
12.In Rattan Chand Hira Chand Vs. Askar Nawaz Jung (Dead) by LRs
and Others reported in (1991) 3 SCC 67 : 1991 SCC Online SC 79, it had been
held that a champerty agreement was unenforceable in law and opposed public
policy and forbidden by law.
13.In the instant case, the Memorandum of Understanding which
provided for obtaining favourable orders from the Government and engaging
counsels to get favourable orders from the Court without the owners of the
property being party to the said agreement is wholly an unlawful agreement. It
was an exercise opposed to public policy, covenant in the said agreement is void
ab initio.
14.The Arbitrator who was a retired Deputy Collector, Mr.Anbalagan of
Anna Nagar had granted a compensation of Rs.24,00,00,000/- without any
evidence. The said arbitration Award is a fraud played on the respondents
herein. It is neither enforceable nor can it be termed as a valid, legal and
enforceable document. The learned Single Judge had correctly appreciated the
fraud which had been played and had refused to give his stand of approval over
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the said Award which was opposed to public policy and unenforceable. We find
no reason to interfere with the said order.
15.The Original Side Appeals are dismissed. The appellant is directed to
pay costs of Rs.50,000/- in each of the two appeals towards the Tamil Nadu
State Legal Services Authority within a period of two months from this date. If
the said costs are not paid, the Member Secretary, Tamil Nadu State Legal
Services Authority is directed to proceed further by forwarding a report to the
District Collector, Chennai to initiate proceeding under the Revenue Recovery
Act against the appellant O.Muthu S/o.R.Odayappa Chettiar, having residential
office at G1, 1st Floor, B.Block, Y.S.Enclave, No.134-A, Arcot Road,
Virugambakkam, Chennai 600 092 for recovery of the costs.
(C.V.K.J., ) (K.B.J., )
13.03.2026
Index:Yes/No
Speaking/Non-speaking order
Internet:Yes
Neutral Citation:Yes/No
sli
To:
R.S.Anbazhagan,
Deputy Collector (Retd.)
Sole Arbitrator,
No.15, Shanthi Colony, Main Road,
Anna Nagar, Chennai 600 040.
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11/11 OSA Nos.311 & 312 of 2019
C.V.KARTHIKEYAN, J.
AND
K.KUMARESH BABU, J.
sli
Pre-delivery Judgment in
OSA Nos. 311 & 312 of 2019
13.03.2026
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