Supreme Court rules that unexplained 4-year delay by arbitrator resulting in indecisive award violates public policy - such awards can be set aside, and Court can use Article 142 powers to impose final settlement after 16-year legal battle.
(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?
(i) Delay in the delivery of an arbitral award, by itself, is not sufficient to set aside that award. However, 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 the 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 be vitiated by patent illegality.
(ii) An unworkable arbitral award that does not resolve the disputes between the parties, leaving them with no choice but to initiate a fresh round of arbitration/litigation while the arbitrator has changed their positions, irrevocably altering the pre-existing balance between the parties prior to the arbitration, 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 Arbitration and Conciliation Act, 1996.
Joint Development Agreement: Respondents entered into JDA with Lancor Gesco Properties Limited for development of land in Chennai
Construction & Disputes: Building construction completed but disputes arose over completion certificates and handover date
Illegal Sale Deeds: Company executed five sale deeds in its own favor using photocopy of power of attorney
Arbitration Invoked: Company invoked arbitration clause, Justice K.P. Sivasubramaniam appointed as sole arbitrator
Award Reserved: Arbitrator reserved the award after hearings
Award Pronounced: Arbitrator pronounced award after unexplained delay of nearly 4 years
Supreme Court Ruling: "Unexplained delay makes award patently illegal" - set aside award and imposed final settlement using Article 142
| Legal Provision | What It Means | Application in This Case |
|---|---|---|
| Section 34 Arbitration and Conciliation Act, 1996 |
Provides grounds for setting aside arbitral awards | Unexplained delay can make award contrary to public policy under Section 34(2)(b)(ii) |
| Section 34(2A) Arbitration Act (Amendment) |
Additional ground for setting aside domestic awards for patent illegality | Unexplained delay resulting in indecisive award constitutes patent illegality |
| Section 29A Arbitration Act (Inserted 2016) |
Mandates arbitral award within 12 months (extendable) | Shows legislative intent against delays, though not applicable retrospectively |
| Article 142 Constitution of India |
Supreme Court power to do complete justice | Used to impose final settlement when relegating to fresh litigation would be unjust |
The fundamental policy of Indian law, interests of India, justice or morality. An award can be set aside if it violates public policy.
Illegality that appears on the face of the award. It must go to the root of the matter and not amount to mere erroneous application of law.
The provision that allows courts to set aside arbitral awards on limited grounds, including violation of public policy.
Power of the Supreme Court to pass any decree or order necessary for doing complete justice in any cause or matter.
"The very objective of the exercise would be lost if, after the entire process, an arbitrator fails to resolve the disputes between the parties and leaves them high and dry with advice to initiate a fresh round of arbitration/litigation once again. When the public policy underlying resort to arbitration is to make it a time-saving mechanism for resolving disputes, this unexplained and pointless delay of the Arbitrator in concluding the matter clearly pitted his ineffective and futile Award against the public policy of India."
This judgment reinforces that arbitration must serve as an effective dispute resolution mechanism, not become another layer of protracted litigation. It empowers parties to challenge awards that suffer from unexplained delays, particularly when such delays result in indecisive awards that fail to resolve the actual disputes between parties.
This content is for informational purposes only and does not constitute legal advice. Consult a qualified legal professional for specific legal guidance. The information provided is based on judicial interpretation and may be subject to changes in law.
Making Supreme Court judgments accessible and actionable for every Indian citizen navigating legal challenges.
This analysis decodes a complex arbitration judgment to help businesses and individuals understand their rights when facing unexplained delays in arbitral proceedings and awards.