Court’s Decision
The Supreme Court of India delivered a detailed and deeply analytical judgment addressing two fundamental questions: (i) whether long and unexplained delay in pronouncing an arbitral award can invalidate it, and (ii) whether an unworkable award that fails to finally resolve disputes and forces parties into further proceedings can be set aside for patent illegality or conflict with public policy. The Court traced extensive jurisprudence on delayed awards, comparative perspectives, statutory evolution, and the arbitrator’s duty to ensure fair, effective, and meaningful adjudication. The Court also reviewed a complex joint-development dispute to test whether the award suffered from delay-based infirmities or unworkability.
The Court held that delay per se is not an independent ground under Section 34 for setting aside an arbitral award, but emphasized that unexplained delay causing prejudice, memory loss, selective recollection, or undermining fairness could render an award patently illegal and contrary to public policy. The Supreme Court further clarified that recourse under Section 14(2) is not a mandatory precondition before invoking Section 34. Most importantly, the Court held that each case must be judged on its own facts, and where delay demonstrably affects the award’s reasoning or outcome, it may be struck down.
Facts
The uploaded text reveals a deeply complex joint development dispute. The landowners owned over an acre of land on a major Chennai road and entered into a joint development agreement (JDA) with a developer for construction of a large multi-storied building. The arrangement required the developer to construct the building at its cost, deliver half the built-up area to the owners, and secure certifications and statutory compliances before the owners were obligated to refund substantial security deposits running into crores.
Over time, multiple supplemental agreements were executed, deposits were made and partly refunded, and the building—known as “Menon Eternity”—was developed. The developer claimed completion, produced certificates, applied for completion certificate, and entered into lease transactions. The owners contended that construction was incomplete, certifications invalid, and that the developer illegally executed five sale deeds in its own favour using a copy of a power of attorney still held in escrow. This triggered extensive arbitration, including claims, counterclaims, and allegations of incomplete construction, invalid certifications, wrongful self-conveyance, and unlawful possession.
The arbitrator reserved the award in 2012 but delivered it in March 2016—a delay of more than three years and eight months—with no explanation. The award was voluminous but did not finally resolve disputes, instead declaring the sale deeds invalid while leaving monetary and consequential issues for future litigation. This failure to provide finality formed one of the core questions before the Supreme Court.
Issues
- Whether undue and unexplained delay of nearly four years in pronouncing an arbitral award undermines its validity and fairness.
- Whether an arbitral award that leaves disputes unresolved, alters party positions irreversibly, and compels further litigation is liable to be set aside as unworkable, perverse, patently illegal, or contrary to the public policy of India.
- Whether the statutory scheme before Section 29A permitted challenges based on delay and how courts should assess delay-based prejudice.
- Whether recourse under Section 14(2) is a mandatory requirement before invoking Section 34.
Petitioner’s Arguments
The petitioners argued that the delay in delivering the award was excessive, unexplained, and fatal to the fairness of the arbitral process. They submitted that human memory fades with time, leading to loss of continuity, improper evaluation of evidence, and potential bias. The petitioners emphasised that justice must not only be done but appear to be done, and a three-year-eight-month delay irreparably damaged the integrity of the award. They contended that the arbitrator’s inability to provide finality—despite recognising the complexity of the situation, rendered the award unworkable, as it neither resolved claims nor quantified liabilities but merely declared the sale deeds illegal and directed parties to fresh proceedings. This, according to them, made the award patently illegal and contrary to public policy.
Respondent’s Arguments
The respondents argued that delay alone is not a statutory ground for setting aside an award and should not invalidate the decision absent demonstrated prejudice. They contended that the arbitrator discussed evidence extensively, examined witnesses, referred to engineering reports, and delivered a reasoned award despite the time gap. They asserted that the award addressed the core illegality of the sale deeds and protected the respondents’ rights. They further argued that parties participate in arbitration with knowledge of its limitations and that statutory amendments imposing strict time-lines came into effect only later. Therefore, delay from the pre-Section 29A period should not retroactively apply.
Analysis of the Law
The Supreme Court undertook an exhaustive analysis of the legal landscape on delay. Before Section 29A, the Arbitration Act, 1996 did not prescribe statutory timelines. Courts relied on earlier jurisprudence under the Arbitration Act, 1940, which treated unexplained delay as misconduct. The Court reviewed multiple High Court decisions, academic texts (Russel, Redfern & Hunter), and its own past rulings emphasising timely justice.
The Court recognised that delay itself is not a standalone ground under Section 34, but acknowledged that it can undermine fairness, impair recollection, introduce speculation, and damage public confidence. An award delivered after long delay must be tested for whether the delay directly impacted findings, led to selective recollection, or produced an unreasonable outcome. The court emphasised that long delay combined with an unworkable or contradictory award can constitute patent illegality.
Precedent Analysis
The following precedents were discussed in detail:
Harji Engineering Works – Held that delay of three years without explanation amounts to misconduct; an award passed long after hearings may be set aside. Relevance: Establishes that unexplained delay can prejudice fairness.
Peak Chemical Corporation – Despite 4.5 years’ delay, the award was upheld because it was substantively sound. Relevance: Delay alone is insufficient.
Niko Resources – Delay does not per se vitiate the award, but may amount to patent illegality when combined with other flaws. Relevance: Delay must affect outcome to be fatal.
Oil India Ltd. v. Essar Oil Ltd. – Awards upheld; delay did not impair reasoning. Relevance: Delay must be shown to distort factual findings.
BWL Ltd. – Delay of 5 years warranted setting aside; “justice must appear to be done.” Relevance: Long delay may shake public confidence.
Gian Gupta, Fibroplast Marine, Dhanasekar, Unique Builders, GL Litmus Events – All reinforce that where delay undermines fairness, awards may be struck down under public policy.
The Supreme Court harmonised these precedents to hold that long delay, when it clearly affects the substance of the award, can invalidate it.
Court’s Reasoning
The Supreme Court observed that delay of nearly four years was extraordinary and without justification. It noted widespread jurisprudence warning that human memory fades, fairness diminishes, and selective recollection may occur. The Court emphasised that the arbitrator himself admitted complexity but ultimately left disputes unresolved, rendering the award unworkable. The Court reiterated that dispute resolution must provide finality, not compel further rounds of litigation.
The Court reasoned that while delay alone is not automatically fatal, this particular award suffered from serious structural defects: it failed to quantify compensation, refused to mould relief despite recognising obligations, and left both parties in a limbo. The award therefore appeared to be impacted by the very delay, resulting in incomplete, uncertain, and practically unusable directions.
Conclusion
The Supreme Court of India concluded that delay is not an independent statutory ground under Section 34, but where delay materially affects an arbitrator’s reasoning and prevents a clear, final, workable resolution, the award may be invalidated for patent illegality or conflict with public policy. The Court held that the present award, delivered after nearly four years and leaving disputes unresolved, revealed the adverse effects of delay on fairness and functionality. Therefore, the award could not be sustained in its present form.
Implications
- Reinforces that arbitrators must pronounce awards promptly.
- Courts will assess whether delay has substantively impaired the award.
- Awards that fail to provide finality may be struck down even without explicit procedural breaches.
- This judgment strengthens India’s pro-arbitration stance while emphasising discipline, fairness, and efficiency.
