Madras High Court Sets Aside Arbitration Award Due to Excessive Delay

Court cites unexplained delay of over seven years in passing arbitral award as a violation of public policy, orders fresh arbitration.

In a recent judgment, the Madras High Court has set aside an arbitral award issued by a sole arbitrator, citing an unexplained and excessive delay of over seven years as a violation of public policy. The judgment was delivered by Justice N. Anand Venkatesh in the case of Tamil Nadu Housing Board v. M/s. N.C.C. Ltd.

The case involved a dispute over the construction of high-income group flats in Chennai, with the Tamil Nadu Housing Board challenging the award made by the sole arbitrator dated July 30, 2020. The court noted that the arbitration proceedings had been concluded as early as November 24, 2013, but the award was not passed until July 2020, with no satisfactory explanation for this delay.

The court emphasized that such delays undermine the very purpose of arbitration, which is meant to provide a time-efficient dispute resolution mechanism. Justice Venkatesh highlighted that the lengthy delay, along with the award's imposition of interest for the delayed period, amounted to patent illegality and contravened the public policy of India.

The judgment also pointed out that neither party had filed written submissions nor was there any oral hearing after the reopening of the case in February 2020. The court found that the arbitrator's decision to impose interest for the period of delay was unreasonable as the delay was not attributable to either party.

In its decision, the court referenced a recent Supreme Court ruling in Lancor Holdings Limited v. Prem Kumar Menon, which established that undue delay in delivering an arbitral award could vitiate the award if it adversely affected the final decision. The court also noted that even if a ground of delay was not raised in the initial petition, the court could still intervene if the delay was apparent on the face of the award.

The court has now left it to the parties to appoint a new arbitrator to hear final arguments and pass a fresh award within a stipulated timeframe, ensuring that the arbitration process remains efficient and just.

Bottom Line:

Arbitration - An unexplained and undue delay in passing the arbitral award, if it adversely impacts the final decision and violates public policy, can lead to setting aside the award under Section 34(2)(b)(ii) and Section 34(2A) of the Arbitration and Conciliation Act, 1996.

Statutory provision(s): Arbitration and Conciliation Act, 1996, Section 34(2)(b)(ii), Section 34(2A).

Tamil Nadu Housing Board v. M/s. N.C.C.Ltd., (Madras) : Law Finder Doc Id # 2819567