Patent illegality in arbitration: refund with interest was severed because the award ignored express contractual consequences of default.

In Section 34 review, refusal of specific performance was sustained because the evidence showed only part-payment of consideration, the alleged cash payment was unproved, and the claimant was not shown to be ready and willing to pay the balance. The court found no perversity, lack of evidence, or patent illegality in that finding. The refund direction with interest was set aside because the contract itself prescribed the consequences of default, and the tribunal could not replace the parties' bargain with equity or fairness after finding the claimant in default. The offending portion was severable, so partial interference with the award was permitted.

---

---

Issues: (i) Whether the claimant proved readiness and willingness so as to justify specific performance of the registered agreement. (ii) Whether the direction to refund money with interest, despite a finding of default by the purchaser, was contrary to the contract and liable to be set aside in part.

Issue (i): Whether the claimant proved readiness and willingness so as to justify specific performance of the registered agreement.

Analysis: The evidence accepted in the award showed payment of only part of the consideration, while the alleged cash payment of Rs. 5,00,000/- was not proved by cogent evidence. The finding also recorded that the claimant was not in a position to pay the balance consideration. On that material, the refusal of specific performance did not disclose perversity, lack of evidence, or patent illegality within the restricted scope of interference under Section 34.

Conclusion: The refusal of specific performance was upheld and is in favour of the respondents.

Issue (ii): Whether the direction to refund money with interest, despite a finding of default by the purchaser, was contrary to the contract and liable to be set aside in part.

Analysis: The contractual clauses expressly provided the consequences of default by either side. Once the claimant was found to be in default, the tribunal could not grant refund with interest by invoking equity or notions of fairness contrary to the contract. Such an approach ignored the express bargain, travelled beyond the contract, and attracted patent illegality. The objectionable part of the award was severable, so partial setting aside was permissible.

Conclusion: The refund direction was set aside and the challenge of the respondents succeeded on this issue.

Final Conclusion: The award was sustained to the extent it rejected specific performance, but was set aside insofar as it directed refund of Rs. 6,50,000/- with interest; the result was a partial interference with the award.

Ratio Decidendi: In Section 34 review, an arbitral award that ignores the express contractual consequences of default and substitutes an equitable result without party authorization suffers from patent illegality, and the offending part may be severed if it is separable from the rest of the award.

---