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Two-Year Delay in Arbitral Award Not Enough to Set Aside Without Adverse Impact:
In a significant ruling that reinforces the limited grounds for challenging arbitral awards, the has held that a two-year delay in pronouncing an award does not, by itself, justify setting it aside. The Division Bench of Justice C. Hari Shankar and Justice Vinod Kumar overturned a Single Judge’s decision that had annulled a ₹65.12 crore award on the sole ground of delay, clarifying that such delay must be unexplained and must have demonstrably impacted the tribunal’s findings.
The Dispute: A Fire, an Insurance Claim, and a Delayed Award
insured its hotel property with under two policies—a Standard Fire and Special Perils Policy and a Fire Loss of Profit Policy. After a fire broke out on , the insurer paid ₹20 crore and ₹30 crore under the respective policies but maintained that the claims were fully settled. Unison Hotels invoked arbitration in , and a three-member tribunal—comprising a retired judge, a former Chief Justice of the , and a former judge—was constituted.
The tribunal reserved the award on and pronounced it exactly two years later, on , awarding Unison Hotels ₹65,12,97,874 with 9% simple interest and ₹50 lakh in costs. The insurance company challenged the award under , primarily arguing that the two-year delay vitiated the award.
Single Judge’s Ruling and the Appeal
A Single Judge of the set aside the award, holding that the delay was inordinate and unexplained, and that it had affected the tribunal’s consideration of the arbitration clause, which limited arbitration to quantum disputes where liability was admitted. The judge observed that with the passage of time, “arguments no longer remain potent” and that the delay jolted the confidence of the parties.
Unison Hotels appealed under Section 37 of the Act. Before the Division Bench, senior counsel for the hotel argued that delay alone is insufficient to invalidate an award unless it adversely affects the findings—a principle firmly established by the in . The insurer, on the other hand, contended that the delay was itself fatal and that the tribunal had failed to address the arbitrability issue under Clause 13 of the policies.
The Legal Principle: Delay Must Be Unexplained and Impactful
The Division Bench extensively analyzed Lancor Holdings and the subsequent decision in , which together lay down the controlling test. The court observed that Section 34 does not list delay as a ground for setting aside an award; delay becomes relevant only when it is unexplained and when its negative effect is “explicit and adversely reflects on the findings in the said award.” Mere speculation that arguments may have been forgotten is insufficient.
Applying this test, the court found that the tribunal had provided adequate reasons for the delay: the COVID-19 pandemic interrupted hearings, written submissions were filed late, and the three arbitrators needed time to deliberate. The court also noted that the insurer had not raised any objection about the delay during the proceedings—it only did so after losing the award.
No Adverse Impact on Findings
Crucially, the Division Bench pointed out that the Single Judge had not identified a single finding in the award that was actually affected by the delay. The Single Judge’s observation that the tribunal may have forgotten arguments was purely presumptive. The court underscored: “Delay in its rendition does not , unless it is positively demonstrated and held that the delay fatally impacted the findings in the award.”
The court also rejected the argument that the tribunal failed to address the arbitration clause. It noted that the insurer had not specifically pleaded under Clause 13 before the tribunal; the only plea was that the claim was discharged by . The tribunal had examined that plea in detail and concluded that the was signed under . That finding, the court held, effectively disposed of the arbitrability issue because liability was never disputed—only the quantum remained.
Key Observations
The Division Bench made several significant observations:
“ of an arbitral award is not, by itself, sufficient to set it aside.”
“The learned Single Judge has not held, in the impugned judgment, that any finding in the arbitral award is affected by the delay in its rendition.”
“ has not pointed a single argument which was urged before the learned and was not considered by it, while rendering the arbitral award. This single fact, to our mind, is sufficient to completely demolish the submission that the award was vitiated by delay in its rendition.”
Decision and Implications
The allowed the appeal, quashed the Single Judge’s order, and remanded the Section 34 petition for fresh consideration, uninfluenced by the earlier observations. The court clarified that all findings in the present judgment were limited to the delay issue and that the merits of the award remained open for the Single Judge to examine.
The ruling reinforces that the ground of delay in arbitral awards is narrow and fact-specific. It aligns with the legislative policy of in arbitration and sends a clear message that courts should not set aside awards based on mere passage of time unless the delay is both unexplained and demonstrably harmful to the decision’s integrity. For parties and practitioners, the decision underscores the importance of timely raising objections during arbitration and of showing concrete prejudice when challenging an award on delay grounds.
