Historically, TPF has been considered illegal in litigation in most common law jurisdictions due to the application of the doctrines of maintenance and champerty. The English legal principles of Champerty and Maintenance do not apply strictly speaking to the Indian jurisdiction. It has been established that the mere fact that an agreement is binding is not in itself sufficient to annul it, but it must also be established that it is contrary to the public policy of India, as provided for in section 23 of the Indian Contract Act 1872. The embargo on third-party funding under Singaporean law is far-fetched. The Singapore Court of Appeal stated that “the principles underlying the champerty doctrine apply to all types of disputes and claims, including arbitration.” [27] There are several legal and customary exceptions: First, the Singapore Companies Act allows the liquidator owned by an insolvent company to sell to the third party that will provide the financing. [28] Second, a TPF agreement would not be terminated if the same agreement constitutes an agreement ancillary to the circumstance in which the real estate interest is transferred. Moreover, the fact that the funder can benefit from a third-party funding agreement does not mean that the funding put in place violates the principle of champerty and maintenance. [29] Lord Neuberger, “From barretry, maintenance and champerty to litigation funding,” Gray`s Inn speech, May 8, 2013 While the Indian legal system and its English counterpart shared a conceptually similar doctrine of champerty, approaches were different. Since the days of the Privy Council, the predominance of arrangements that can be considered champertous and their legality “per se” have been conditionally recognized. In the past, third parties were prohibited from funding the litigation of an unaffiliated party under the doctrines of maintenance and champerty. Alimony refers to an unaffiliated third party who helps maintain a dispute, for example by providing financial assistance.
Champerty is a form of maintenance in which a third party pays some or all of the legal fees in exchange for part of the product. The gradual emergence of a liberal tendency in the English courts has led to the erosion of the archaic Champerty doctrine and the recognition that third-party funding of disputes can be legitimized in cases where the financing operations are in good faith and do not lead to corruption of public justice and the integrity of judicial proceedings. On the question of the applicability of English law, which makes Champerty and alimony a criminal offence in India, Sir R. Couch, C.J. stated in pechell v Watson[10] that “english common law and the maintenance and Champerty laws are not applicable and are not considered invalid in India”. Moreover, in Chedambara Chetty v. Renga Krishna Mithu Vira Puchaiya Naickar,[11] the Privy Council held that “the law in India is not the same as in England. Champerty`s status, which is part of the law of England, of course has no effect on the Mofussil of India; and the courts of India admit the validity of many such transactions that would not be recognized or treated as valid by the courts of England. [12] However, the courts will act in accordance with the principles of justice, fairness and good conscience, taking into account that “the transaction is simply to acquire an interest in the subject matter of a dispute in good faith or that it is an unfair or illegitimate transaction established solely for the purpose of looting; or legal disputes that disturb the peace of families and continue for corrupt and inappropriate reasons.” In Giles v Thompson,[3] Lord Justice Steyn stated: “In modern idioms, the maintenance of a dispute by a stranger is without good reason. Champerty is a difficult form of maintenance.
The distinguishing feature of Champerty is the support of a dispute by a foreigner in exchange for part of the product. Rules prohibiting maintenance and champerty were first introduced in medieval England. These were aimed at preventing the abuse of justice by corrupt nobles and royal officials who associated themselves with fraudulent and vexatious claims, which strengthened the credibility of the claims in exchange for a portion of the profits. .