Arbitration : Delay in delivery of award may render it in conflict with the public policy or patently illegal.

Supreme Court Sets Aside Arbitral Award for Delay and Illegality, Invokes Article 142 for Complete Justice. The Supreme Court invalidates an arbitral award due to undue delay and legal flaws, exercising Article 142 to finalize the dispute without further litigation.

In a significant ruling, the Supreme Court of India has set aside an arbitral award in the case of M/s. Lancor Holdings Limited v. Prem Kumar Menon, citing undue and unexplained delay, along with patent illegality and conflict with public policy. The judgment, delivered by a bench comprising Justices Sanjay Kumar and Satish Chandra Sharma, emphasizes the necessity for timely and effective resolution of disputes through arbitration.

The case originated from a Joint Development Agreement (JDA) between Lancor Holdings Limited and the respondents for the development of a property in Chennai. The dispute arose over the completion and handover of the constructed building. The arbitrator, a retired judge of the Madras High Court, took nearly four years to deliver an award that failed to resolve the disputes, prompting further litigation.

The Supreme Court noted that the arbitrator's delay, coupled with the inability to provide an equitable resolution, rendered the award unworkable. The award was found to alter the parties' positions irrevocably, without settling the disputes, which the Court deemed to be in conflict with the public policy of India and patently illegal under Sections 34(2)(b)(ii) and 34(2A) of the Arbitration and Conciliation Act, 1996.

Invoking Article 142 of the Constitution, the Supreme Court decided to bring the prolonged litigation to an end. The Court validated the sale deeds executed by Lancor Holdings, despite their initial illegality, and directed the forfeiture of security deposits as a penalty. Furthermore, Lancor Holdings was ordered to compensate the respondents for completing the building, thereby allowing both parties to take possession of their respective shares.

This decision underscores the Supreme Court's commitment to ensuring timely justice and its willingness to exercise constitutional powers to prevent protracted litigation, thereby upholding the integrity of the arbitration process.

Bottom Line:

Delay in delivery of an arbitral award, by itself, is not sufficient to set aside the award. However, unexplained and undue delay that adversely impacts the final decision may vitiate the award due to lapses committed by the arbitral tribunal, rendering it in conflict with the public policy of India or patently illegal.

Statutory provision(s): Arbitration and Conciliation Act, 1996 Section 34(2)(b)(ii), Section 34(2A), Constitution of India Article 142

M/s. Lancor Holdings Limited v. Prem Kumar Menon, (SC) : Law Finder Doc Id # 2802164