The Supreme Court has set aside the orders of the Madras High Court and the Trial Court which had rejected a suit filed by the Jegatheesan group against the Vaikundarajan group regarding the partition of vast family assets. The Apex Court held that allegations of fraud, coercion, and misrepresentation raised in the plaint disclosed a prima facie cause of action and could not be rejected at the threshold under Order VII Rule 11 of the Civil Procedure Code (CPC), 1908.
Crucially, the Division Bench comprising Justice Sanjay Kumar and Justice K. Vinod Chandran provided significant clarity on the application of Part III of the Arbitration and Conciliation Act, 1996, specifically regarding the status of conciliation proceedings and the challenge to awards.
Key Legal Observations: Sections 61 and 34 of the Arbitration Act
The Court addressed the contention that a “customary” partition or family settlement could bypass the statutory requirements of the Arbitration and Conciliation Act while still claiming the status of an Award.
1. Status of Conciliation under Section 61 (Para 25): The Court rejected the High Court’s finding that implied consent or custom could result in a waiver of Part III of the Act. Interpreting Section 61, the Bench laid down the law regarding the exclusion of Part III:
“On a reading of Section 61, any conciliation between two parties brought about by following the procedure in Part III of the Act of 1996 would definitely get the status and effect of an Award under the Act of 1996 unless the parties have agreed otherwise; which agreement should be expressly for the exclusion of Part III of the Act of 1996, despite a conciliation having been proceeded with and concluded.”
The Court clarified that if a process is claimed to be a conciliation, Part III applies unless expressly excluded. Conversely, if it does not have the status of a conciliation under the Act, Part III has no application.
2. Challenge to Award under Section 34 (Para 26): Addressing the remedy available to the Appellants, the Court noted that a challenge under Section 34 is contingent upon the document actually being an ‘Award’ under the Act.
“The challenge to the Award under Section 34 would be available if it can be termed ‘an Award’ under the Act.”
The Court observed that the Appellants’ specific contention was that the “Award” was a fabricated document created to give a Partition Deed the sheen of an Award under the Act, a claim that required adjudication in a civil suit rather than being presumed as an Award under the Act at the threshold.
Background of the Dispute
The case involves a dispute between two brothers, Vaikundarajan and Jegatheesan, regarding the dissolution of a business empire built by their father. While two other siblings settled their shares amicably, the families of Vaikundarajan and Jegatheesan engaged in prolonged litigation.
The Vaikundarajan group relied on a partition deed termed ‘Kaithadi Baga Pirivinai Pathiram’ (KBPP) dated December 31, 2018, and a subsequent Conciliation Award dated January 2, 2019, allegedly drawn up by their half-brother Ganesan acting as a Conciliator. They contended that these documents constituted a binding settlement.
The Jegatheesan group (Appellants), while admitting their signatures on the KBPP, argued that it was a tentative draft signed under undue influence and later resiled from due to inequitable division. They vehemently denied the existence of any conciliation proceedings or the validity of the Conciliation Award, terming it a “fabricated document” created to thwart their legal remedies.
The Jegatheesan group filed a suit challenging the KBPP and the Award. The Trial Court allowed an application under Order VII Rule 11 CPC rejecting the plaint, a decision subsequently confirmed by the Madras High Court.
Arguments Before the Supreme Court
For the Appellants (Jegatheesan Group): Senior Advocates Sh. Gopal Shankaranarayanan and Sh. V. Prakash argued that the requirements of Part III of the Arbitration and Conciliation Act, 1996 (Sections 61 to 74) were not followed. They contended that the Conciliation Award was passed behind their back and was fabricated. They emphasized that previous orders by the Supreme Court and High Court had preserved their liberty to initiate a civil suit.
For the Respondents (Vaikundarajan Group): Senior Advocates Sh. Mukul Rohatgi and Sh. Niranjan Reddy argued that the suit was an abuse of process as the Appellants had admitted to signing the KBPP. They contended that the KBPP read with the Conciliation Award constituted a decree executable under Section 36 of the Act of 1996. They submitted that the Appellants’ remedy was limited to filing objections in the execution proceedings under Section 47 of the CPC or challenging the award under Section 34 of the Act.
Court’s Analysis and Observations
1. On Order VII Rule 11 and Cause of Action: The Supreme Court criticized the lower courts for rejecting the plaint by assessing the merits of the allegations rather than the disclosure of a cause of action. The Bench termed the rejection of the plaint “egregiously erroneous in law.”
Addressing the Trial Court’s finding that the allegation of coercion was invalid because there was no “threat at knifepoint,” Justice K. Vinod Chandran, writing for the Bench, observed:
“We are unable to agree with the impugned orders of the Trial Court and the High Court that a ground of coercion could be urged only if the younger brother’s family was faced with a life threat… within the family, the coercion would not be very explicit and it could even arise from an apparent feeling of subservience or a manifest obedience to the elder’s opinion.”
2. Distinction Between KBPP and Conciliation Award: The Court noted that the Appellants challenged the KBPP and the Conciliation Award on distinct grounds. The KBPP was challenged on grounds of coercion and undue influence, while the Award was challenged as a “fabricated document.”
The Court observed:
“We are also not able to find any documentary substantiation of the conciliation having been initiated and carried out under Part III of the Act of 1996… The Settlement Agreement, which is essentially the KBPP has not been authenticated by the Conciliator as is mandated under sub-section (4) of Section 73.”
3. Validity of the Suit: The Court held that the Appellants’ remedy to challenge the KBPP was not foreclosed by earlier litigation. The Court noted that previous orders had specifically granted liberty to the Appellants to work out their remedies in accordance with the law.
“The cause of action as seen from the above discussion is a real one and not illusory or fictional. The factual averments, the legal grounds and the relief sought are not meaningless nor can it be said at this stage that the suit is bound to fail.”
4. Abuse of Process: The Court rejected the Respondents’ contention that filing a suit simultaneously with objections under Section 47 CPC in execution proceedings amounted to an abuse of process. The Court clarified that the Executing Court could not examine whether the KBPP was valid or vitiated by coercion; that required a properly instituted suit.
Decision
The Supreme Court allowed the appeals and set aside the impugned orders of the High Court and the Trial Court.
- Plaint Restored: The plaint was restored to the files of the Principal District Court, Tirunelveli.
- Joint Trial: The Court directed that the suit be tried along with the objections filed under Section 47 of the CPC in the execution proceedings.
- Constructive Res Judicata: The Court ruled that the plea of constructive res judicata cannot be raised by the Respondents as independent challenges were permitted by earlier High Court orders.
Observation on Arbitration: The Court recorded that if the Respondents/Defendants agree to withdraw all contentions regarding the KBPP and the document dated January 2, 2019, the parties may initiate a fresh arbitration “dehors the two contentious documents.”
Case Details:
- Case Title: J. Muthurajan & Anr. v. S. Vaikundarajan & Ors.
- Case No: Civil Appeal @ SLP (C) No. 16254 of 2025
- Coram: Justice Sanjay Kumar and Justice K. Vinod Chandran
