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SUPREME COURT OF INDIA
Sanjay Kumar, Satish Chandra Sharma, JJ.
M/s. Lancor Holdings Limited – Appellant
Versus
Prem Kumar Menon and others – Respondents
Civil Appeal Nos. 10074-10075 of 2024
Decided On : 31-10-2025
(A) Arbitration and Conciliation Act, 1996 – Section 34 – Delay in pronouncement of arbitral award – Section 34 of Act of 1996 does not postulate delay in delivery of an arbitral award as a ground, in itself, to set it aside – However, inordinate delay in the pronouncement of an arbitral award has several deleterious effects – Delay in delivery of an arbitral award, by itself, is not sufficient to set aside that award – However, each such case would have to be examined on its own individual facts to ascertain whether that delay had adverse impact on final decision of Arbitral Tribunal, whereby that award would stand vitiated due to lapses committed by Arbitral Tribunal owing to such delay – It is only when effect of undue delay in delivery of arbitral award is explicit and adversely reflects on findings therein, such delay and, more so, if it remains unexplained, can be construed to result in award being in conflict with public policy of India, thereby attracting Section 34(2)(b)(ii) of Act of 1996 or Section 34(2A) thereof, as it may also be vitiated by patent illegality – It would not be necessary for an aggrieved party to invoke remedy under Section 14(2) of Act of 1996 as a condition precedent to lay challenge to that delayed and tainted award under Section 34 thereof – There must be balance between pace of arbitration, culminating in an arbitral award, and satisfactory meaningful content thereof. (Paras 19, 20 and 63(i))
(B) Arbitration and Conciliation Act, 1996 – Section 34 – Constitution of India – Article 142 – Setting aside arbitral award – Arbitration, an alternative dispute resolution mechanism, is envisioned as a substitute to time-consuming and costly litigation in Courts – Very basis and public policy underlying process of arbitration is that it is less time-consuming and results in speedier resolution of disputes between parties – If that premise is not fulfilled by an unworkable arbitral award that does not resolve disputes between parties, on one hand, leaving them with no choice but to initiate fresh round of arbitration/litigation but Arbitrator, in meanwhile, also changed their positions, irrevocably altering pre-existing balance between parties prior to arbitration, then such arbitral award would not only be in conflict with public policy of India but would also be patently illegal on face of it – It would be liable to be set aside under Section 34(2)(b)(ii) and/or Section 34(2A) of Arbitration and Conciliation Act, 1996 – If necessary conditions for exercise of power by Supreme Court under Article 142 of Constitution of India are made out, Supreme Court would be justified in exercising such jurisdiction – Power should not be exercised where effect of order passed by Court would be to rewrite award or modify award on merits. (Paras 47, 48, 57, 58, 59 and 63(ii))
(C) Constitution of India – Article 142 – Power to do complete justice – Power under Article 142 can be exercised where it is required and necessary to bring litigation or dispute to an end as it would not only end protracted litigation, but would also save parties' money and time. (Para 60)
Facts of the case:
Two questions arise for consideration in these appeals: -
(i) What is effect of undue and unexplained delay in pronouncement of an arbitral award upon its validity?
(ii) Is an arbitral award that is unworkable, in terms of not settling disputes between parties finally while altering their positions irrevocably thereby leaving them no choice but to initiate further litigation, liable to be set aside on grounds of perversity, patent illegality and being opposed to the public policy of India? If so, would it be a fit case for exercise of jurisdiction under Article 142 of Constitution?
Findings of Court:
In terms of interpretation of the JDA, all findings of the Arbitrator are perverse, being opposed to clear language of the relevant clauses in the JDA. Only the finding with regard to the illegality shrouding the execution of the sale deeds by the Company in its own favour is valid and sustainable. However, having held so, after altering the parties’ positions irrevocably with his interim direction, the Arbitrator left them hanging by directing them to separately seek resolution of Issues 9 and 10 framed by him, with regard to the relief to be granted, through a fresh resolution process all over again.
Result : Appeals allowed.
JUDGMENT :
SANJAY KUMAR, J
1. Two questions arise for consideration in these appeals: -
(ii) Is an arbitral award that is unworkable, in terms of not settling the disputes between the parties finally while altering their positions irrevocably thereby leaving them no choice but to initiate further litigation, liable to be set aside on grounds of perversity, patent illegality and being opposed to the public policy of India? If so, would it be a fit case for exercise of jurisdiction under Article 142 of the Constitution?
In this case, the learned Arbitrator reserved his arbitral award on 28.07.2012 but pronounced it only on 16.03.2016, i.e., nearly three years and eight months later, with no definite resolution of the matter. Significantly, no explanation worth the name was offered by him for the delay.
2. The issue of delay in the delivery of an arbitral award is relevant now only in the context of the period prior to insertion of Section 29A in the Arbitration and Conciliation Act, 1996 (for short, ‘the Act of 1996’), which put in place stringent timelines for passing of an arbitral award. During that earlier era, the question as to whether long delay in the passing of the award would impact its validity, to the extent of that award being set aside on that ground under Section 34 of the Act of 1996, was considered by different High Courts.
3. In Harji Engg. Works Pvt. Ltd. vs. Bharat Heavy Electricals Ltd. and another, (2009) 107 DRJ 213 = (2008) 153 DLT 489, a learned Judge of the Delhi High Court was faced with an arbitral award that was pronounced with a delay of over three years. No explanation was offered in the award for the delay. On facts, the learned Judge found that the hearings in the arbitration had not even concluded. In that scenario, the learned Judge formulated the question as to whether the delay of more than three years and, thereafter, the haste in which the award was passed made it contrary to public policy? Noting that Section 28 of the erstwhile Arbitration Act, 1940 (for short, ‘the Act of 1940’), empowered the Court to enlarge the time for making an award but delay in the making of an award otherwise amounted to grave misconduct and was sufficient to set aside that award under Sections 30 and 33 thereof, the learned Judge observed that no specific period was prescribed in the Act of 1996 for making and publishing the award. The learned Judge, however, opined that the underlying principle and policy of law remained intact that arbitration proceedings should not be unduly prolonged and delayed. It was observed that it is natural and normal for an arbitrator to forget contentions and pleas raised by the parties during the course of hearing, if there was a huge gap between the last date of hearing and the date on which the award was made and, therefore, an arbitrator should make and publish an award within reasonable time. What was reasonable time was flexible, per the learned Judge, and would depend upon the facts and circumstances of each case. Further, it was opined that in the event there is delay, it should be explained, as abnormal delay without satisfactory explanation would amount to undue delay and would cause prejudice. Holding that arbitration proceedings must be concluded expeditiously so as to be just, fair and effective, the learned Judge observed that the statute imposed additional responsibilities and obligations upon the arbitrator to make and publish the award within reasonable time and without undue delay. The learned Judge held that a party must be satisfied that the arbitrator was conscious of and had taken into consideration all contentions and pleas before rejecting or partly rejecting a claim. This was held to be the right of the party which should not be denied. The learned Judge observed that the Court has limited power to set aside an arbitral award under Section 34 of the A
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