2025 Supreme(Online)(SC) 10057
SUPREME COURT OF INDIA
HON'BLE MR. JUSTICE SANJAY KUMAR, HON'BLE MR. JUSTICE ALOK ARADHE
M/S LANCOR HOLDINGS LIMITED – Appellant
Versus
PREM KUMAR MENON – Respondent
C.A. No.-010074-010075 - 2024
Unexplained delay in an arbitral award that adversely affects findings, or an "unworkable" award that irrevocably alters party positions without final resolution, is patently illegal and contrary to public policy. Article 142 may be exercised to achieve complete justice and end such protracted litigation.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 14(2), 29A, 34(2)(b)(ii), and 34(2A); Constitution of India - Article 142 - Delay in pronouncement of arbitral award - Validity of award - Effect of unexplained delay - Conflict with public policy and patent illegality - An award that fails to resolve disputes but irrevocably alters positions of parties - Liable to be set aside - No requirement to invoke Section 14(2) as condition precedent to challenge under Section 34. (Paras 20, 63)
(B) Article 142 of the Constitution - Power to do complete justice - Exercise of power to bring protracted litigation to an end - Not to be used to rewrite award on merits but to avoid travesty of justice where status quo is irreversibly altered. (Paras 57-60)
Facts of the case:
Landowners and a developer entered a joint development agreement for the construction of a building. A dispute arose over the completion of the project and the determination of the handover date. The developer executed several sale deeds in its own favor using a photocopy of a power of attorney, while the original remained with an escrow agent. The appointed arbitrator took nearly four years to pronounce the award. The award declared the sale deeds illegal and divested the developer of possession and rentals, but failed to resolve the core monetary disputes and claims, advising the parties to seek further remedies through new litigation.
Findings of Court:
The arbitrator misconstrued the contractual terms regarding "fitness for occupation" and the requirement for completion certificates. The resulting award was perverse as it divested the developer of its share and possession without providing an equitable resolution or settling the disputes, leaving the landowners enriched by the construction without discharging their obligations. The unexplained and inordinate delay contributed to the arbitrator's indecisiveness and rendered the award in conflict with the public policy of the country.
Issues: (i) What is the effect of undue and unexplained delay in the pronouncement of an arbitral award upon its validity? (ii) Whether an unworkable arbitral award that fails to settle disputes finally while altering party positions irrevocably is liable to be set aside on grounds of perversity, patent illegality, and being opposed to the public policy of the country, and whether it warrants the exercise of jurisdiction under Article 142 of the Constitution?
Ratio Decidendi: Delay in the delivery of an arbitral award, by itself, is not sufficient to set it aside. However, where such delay is unexplained and its negative effect is explicit and adversely reflects on the findings, the award is in conflict with public policy and patently illegal. An award that fails to resolve the disputes but irrevocably alters the parties' positions is contrary to the fundamental objective of arbitration as a speedy resolution mechanism. In exceptional cases where the situation is irreversible and further litigation would be a travesty of justice, Article 142 of the Constitution can be exercised to do complete justice and end the dispute.
Result: Appeals allowed.
Legal Category Hierarchy
-
arbitration
-
arbitral award
-
delay in pronouncement
(Para 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 46, 47, 48)
-
unworkable award
(Para 46, 47, 48, 55, 63)
-
setting aside award
-
grounds
-
public policy
(Para 49, 50, 55)
-
patent illegality
(Para 50, 53)
-
mandate of arbitrator
-
termination under section 14
(Para 15, 20)
-
constitutional law
Table of Contents
1. Arbitral award delayed by nearly four years — Arbitrator failed to resolve disputes, leaving parties to initiate fresh litigation. (Para
1
,
21
,
22
,
23
,
24
,
25
,
26
,
27
,
28
,
29
,
30
,
31
,
32
,
33
,
34
,
35
,
36
,
37
,
38
,
39
,
40
,
41
,
42
,
43
,
44
,
45
)
2. Whether undue delay invalidates award — Whether award leaving disputes unresolved is contrary to public policy. (Para
1
)
3. Appeals allowed — Award set aside for patent illegality and opposed to public policy — Court exercised Article 142 to do complete justice. (Para
60
,
61
,
62
,
63
,
64
)
4. Does undue delay in pronouncement of an arbitral award alone invalidate it?
No, delay per se is not a ground. But if delay adversely affects findings, the award can be set aside under Section 34(2)(b)(ii) or 34(2A) of the Act. Unexplained delay may indicate prejudice. (Para
2
,
3
,
4
,
5
,
6
,
7
,
8
,
9
,
10
,
11
,
12
,
13
,
14
,
15
,
16
,
17
,
18
,
19
,
20
,
46
,
47
,
48
,
55
,
63
)
5. Is it necessary to invoke Section 14(2) before challenging a delayed award under Section 34?
No, both provisions operate independently; Section 14(2) is not a condition precedent. (Para
15
,
20
)
6. Can an arbitral award that fails to resolve disputes while altering parties' positions be set aside?
Yes, such an award is patently illegal and opposed to public policy because it defeats the purpose of arbitration. (Para
46
,
47
,
48
,
49
,
50
,
55
,
63
)
7. What is the scope of power under Article 142 to modify an arbitral award?
Article 142 can be exercised to bring litigation to an end, but not to rewrite the award on merits; great care is required. (Para
56
,
57
,
58
,
59
,
60
,
61
,
62
,
63
)
J U D G M E N T
SANJAY KUMAR, J
1. Two questions arise for consideration in these appeals: -
(i) What is the effect of undue and unexplained delay in the pronouncement of an arbitral award upon its validity?
(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 Signature Not Verified D ba igeb i i t t a a li ly pg a s n ig dhn e e y dt b ymonths later, with no definite resolution of the matter. Significantly, no Date: 2025.10.31 Reason: 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 1, (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
Click Here to Read the rest of this document
Back
