Delay In Arbitral Award

 

 

IN VIEW of the Arbitrator reserving arbitral award on July 28, 2012, but pronouncing that only on March 16, 2016, nearly three years and eight months later, with no definite resolution of the matter and not offering any explanation worth the name for this delay, led to the judgement by the Supreme Court on October 31, 2025 in the case- M/s Lancor Holdings Ltd. v. Prem Kumar Menon and others. The two questions formulated by the Court and have been answered by Justice Sanjay Kumar and Satish Chandra Sharma.

 

The two questions, which arose for consideration before the Supreme Court are : (i) What is the effect of undue and unexplained delay in the pronouncement of an arbitral award upon its validity? and; (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? The issue of delay in the delivery of an arbitral award is now relevant only in the context of the period prior to insertion of section 29A in the Arbitration and Conciliation Act, 1996 which put in place stringent timeliness for passing of an arbitral award. During that earlier era, the question as to whether long delay in passing of the award would impact its validity, to the extent of that award being set aside on the ground under section 34 of the Act of 1996, was considered by different High Courts.

 

In the judgment of the case-Harji Engg.Works Pvt. Ltd. and Another v. Bharat Heavy Electricals Ltd. and Another - (2008) 153 DLT 489, Delhi High Court Judge formulated the question as to whether the delay of more than three years and, thereafter, the haste with which the award was passed made that contrary to public policy? Noting that section 28 of the erstwhile Arbitration Act, 1940 empowered the Court to enlarge the time for making an award otherwise amounted to grave misconduct and sufficient to set aside that award under sections 30 and 33 thereof, the said Judge observed that no specific period was prescribed in the Act of 1996 for making and publishing the award. Reference was made in the judgment of the case -Gayatri Balasamy v. ISG Novasoft Technologies - (2025)7 SCC 1, to the earlier Constitution Bench decision in the judgment of the case- Shilpa Sailesh v. Varun Sreenivasan-(2023) 14 SCC, which summarized the scope of the power under Article 142 of the Constitution and particularly, para 19 thereof, Which reads as under: “19. Given the aforesaid background and judgments of this Court, the plenary and conscientious power conferred on this Court under Article 142(1) of the Constitution of India, seemingly unhindered, is tempered or bounded by restraint, which must be exercised based on fundamental considerations of general and specific public policy. Fundamental general conditions of public policy refer to the fundamental rights, secularism, federalism and other basic features of the Constitution of India.

 

Specific public policy should be understood as some express Pre-eminent prohibition in any substantive law, and not stipulations and requirements to a particular statutory scheme. It should not contravene a fundamental and non-derogable principle at the core of the statute. “Even in the strictest sense, it was never doubted or debated that this Court is empowered under Article 142(1) of the Constitution of India to do “complete justice” without being bound by the relevant provisions of procedure, if it is satisfied that the departure from the said procedure is necessary to do “complete justice” between the parties.” The questions framed for consideration in these appeals have been answered as under: (i) Delay in the 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 individual facts to ascertain whether that delay had an adverse impact on the final decision of the arbitral tribunal, whereby that award would stand vitiated due to the lapses committed by the arbitral tribunal owing to such delay.

 

It is only when the effect of the undue delay in the delivery of an arbitral award is explicit and adversely reflects on the findings therein, such delay and, more so, if it remains unexplained, can be construed to result in award being in conflict with the public policy of India, thereby attracting section 34(2)(b)(ii)of the Act of 1996 or section 34(2A) thereof , as it may also vitiated by patent illegality. Further, it would not be necessary for an aggrieved party to, invoke the remedy under section 14(2)of the Act of 1996 as a condition precedent to lay a challenge to that delayed and tainted award under section 34 thereof; and (ii) The very basis and public policy underlying the process of arbitration is that it is less time-consuming and results in speedier resolution of disputes between the parties, If that premise is not fulfilled by an unworkable arbitral award that does not resolve disputes between the parties, on one hand, leaving them no choice but to initiate a fresh round of arbitration/litigation but the arbitrator, in the meanwhile, changed their positions, irrevocably altering the pre-existing balance between the parties prior to the arbitration, then such an arbitral award would not only be in conflict with the public policy of India, but would also be patently illegal on the face of it. It would therefore be liable to be set aside under section 34(2)(b)(ii) and/or section 34(2A) of the Act of 1996. Further, if the necessary conditions for exercise of power by the Supreme Court under Article 142 of the Constitution of India are made out, in terms of the Constitution Bench decision in the case of Gayatri Balasamy, the Supreme Court would be justified in exercising such a decision.