The Supreme Court has held that an arbitral award delivered after an inordinate and unexplained delay is liable to be set aside, as it renders the award patently illegal and contrary to the public policy of India.
The bench of Justice Sanjay Kumar and Justice Satish Chandra Sharma observed that while mere delay is not a standalone ground to set aside an award under Section 34 of the Arbitration and Conciliation Act, 1996, an arbitrator who takes years to deliver an award without justification risks rendering it contrary to the public policy of India.
The case arose out of a Joint Development Agreement between a Chennai-based developer and landowners for the construction of “Menon Eternity.” In the meantime, disputes arose which were referred to arbitration, where the sole arbitrator reserved the award in July 2012 but pronounced it only in March 2016, nearly four years later, without offering any explanation. The award declared five sale deeds executed by the developer, in its own favour, as illegal and void, but failed to grant any consequential relief, leaving both parties to seek remedies afresh before the court.
In the appeal filed before the Supreme Court, the following two issues were considered by the Court:-
1. What is the effect of undue and unexplained delay in the pronouncement of an arbitral award upon its validity?
2. Is an arbitral award that is unworkable, in terms of not settling the disputes between the parties finally but 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?
On the first issue, the Court examined whether an unexplained delay in pronouncing an arbitral award could render it illegal. Referring to Harji Engineering Works v. BHEL (2009) 107 DRJ 213, Peak Chemical Corporation v. NALCO (2012) 188 DLT 680, BWL Ltd. v. Union of India, 2012 SCC OnLine Del 5873, Gian Gupta v. MMTC, (2020) SCC OnLine Del 107, K. Dhanasekar v. Union of India, 2019 SCC OnLine Mad 38989, Unique Builders v. Union of India, 2025 SCC OnLine Mad 239, and GL Litmus Events v. DDA, 2025 SCC OnLine Del 5772, the Bench reviewed the evolving judicial consensus that delay, though not expressly mentioned in Section 34, may still render an award unenforceable, if it affects fairness or the quality of reasoning. The Court also relied on Anil Rai v. State of Bihar, (2001) 7 SCC 318, and R.C. Sharma v. Union of India, (1976) 3 SCC 574 to underline that the principle of “justice delayed is justice denied” applies equally to arbitration. The Court observed that an inordinate gap between the conclusion of hearings and delivery of the award undermines procedural fairness, as the lapse of time inevitably affects recollection, continuity of reasoning, and the parties’ confidence in the integrity of the adjudicatory process.
The Court observed that although Section 14(1)(a) of the Arbitration and Conciliation Act empowers termination of an arbitrator’s mandate where he fails to act without undue delay, this provision is seldom invoked in practice, as parties hesitate to challenge an arbitrator while the proceedings are ongoing, fearing it may affect the neutrality of the arbitrator. It noted that this practical limitation prompted Parliament to later introduce Section 29A, prescribing a fixed time frame for awards. However, even prior to the 2016 amendment, arbitrators were expected to act with reasonable promptness. In that backdrop, the Court held that the delay of nearly four years in delivering the award, unexplained by any cogent reason, reflected a clear failure to discharge this duty and rendered the award vulnerable to challenge as being contrary to the public policy of India.
On the second issue, the Court dealt with the arbitrator’s failure to finally adjudicate the dispute. The Court found the award to be unworkable and incomplete, noting that while it declared the sale deeds void, it failed to address the consequential relief or provide finality, thereby leaving the parties to pursue further litigation.
Such an award, the Court held, defeats the very purpose of arbitration, which is to bring disputes to an end, and therefore amounts to patent illegality and conflict with public policy under Section 34(2)(b)(ii) or Section 34(2A) of the Act. The Bench emphasised that once an arbitrator assumes jurisdiction, it is his duty to resolve all issues referred to him; failing to provide finality after prolonged delay undermines the efficacy and purpose of the arbitration process.
The court noted that the situation created by the Arbitrator, through his interim order, had become irreversible after such a lengthy delay. The Court, therefore, held that this was a fit case for the exercise of its jurisdiction under Article 142 of the Constitution to ensure complete justice at this stage, rather than relegating the parties to another round of arbitration or litigation, which would incur further costs and consume more valuable time. In this regard, the Court referred to the observations in Gayatri Balasamy vs. ISG Novasoft Technologies Limited, (2025) 7 SCC 1, which served as a guiding precedent for the exercise of its powers to do complete justice in matters of this nature.
The Court, consequently, set aside the arbitral award, invoking its powers under Article 142 of the Constitution to do complete justice in this matter.
