Case name: M/s. Lancor Holdings Ltd. VERSUS Prem Kumar Menon and others
Case number: Civil Appeal Nos. 10074-10075 OF 2024
Date: Friday, Thirty First day of October, Two thousand Twenty-Five
Quorum: Hon’ble Justice Sanjay Kumar and Justice Satish Chandra Sharma
FACTS
The matter deals between the Appellant, Lancor holdings Limited and Respondent, Prem Kumar Menon and Others where both of the parties entered into a Joint Development Agreement (JDA) for construction of a multi-storey software technology park named as Menon Eternity in Chennai. Following which several supplemental agreements from 2004 to 2007 have taken place. Under the Joint Development Agreement (JDA), the land owners were to receive a portion of the constructed area and were entitled to terminate the agreement upon certain specific breaches. The core dispute that arose between the parties was whether the construction was completed as per the agreed terms? And the other dispute was related to the legality of certain sale deeds and lease deeds executed by the appellant using a copy of the power of attorney while the original remained with the escrow account holder of HDFCL. Arbitration was invoked pursuant to Clause 52 of the JDA.
The arbitrator reserved his arbitral award on 28.07.2012 but pronounced it on 16.03.2016, nearly 3 years and 8 months later. Thereafter no explanation was offered by him for the delay caused. Therefore the award did not resolve the disputes between the parties, hence they were compelled to resort to litigation.
ISSUES
- What is the effect of undue and unexplained delay in the pronouncement of an arbitral award upon its validity?
- Is the arbitral award that fails to conclusively resolve disputes and irreversibly alters the parties’ positions liable to be set aside on the grounds of perversity, patent illegality, and conflict with public policy?
- Whether such a case validates the Supreme Court’s exercise of the jurisdiction under Article 142 of the Constitution of India?
LEGAL PROVISIONS
- Arbitration and Conciliation Act, 1996
- Section 14(1) (a) – Termination can be due to both de jure (by law) and de facto (by fact) of the arbitrator’s mandate if they become unable to perform functions or fail to act without undue delay.
- Section 14(2) – Remedy that allows a party to apply before the court to decide on the termination of an arbitrator’s mandate.
- Section 29A (inserted by Amendment act No. 3 of 2016) – Sets a time limit of 12 months for the arbitral tribunal to make an award, starting from the date pleadings are completed. This period can be extended by additional 6 months if both the parties mutually agree to it. If not made within this time frame, the tribunal’s mandate terminates unless the court extends the period upon reasonable cause.
- Section 34(2) (b) (ii) – Setting aside arbitral awards conflicting with the public policy of India.
- Section 34(2A) – setting aside domestic arbitral awards if there is a patent illegality on the face of the award.
- Constitution of India – Article 142 (grants the Supreme Court the power to issue orders and decrees to ensure complete justice.
ARGUMENTS
Appellant: The appellant, arbitrator’s award was invalid due to the inordinate and unexplained delay of nearly four years in its pronouncement. Such delay rendered the award contrary to the public policy of India and patently illegal under Section 34 of Arbitration and Conciliation Act, 1996. The award was unworkable and failed to finally resolve the disputes, forcing renewed litigation and violating the very purpose of arbitration as a speedy dispute resolution mechanism. They therefore sought that the award be set aside as being perverse, arbitrary, and contrary to the principles of fairness and justice.
Respondent: The respondent contended that mere delay alone does not automatically vitiate an arbitral award unless prejudice or illegality is proven. They argued that the arbitrator had considered all relevant materials, including documents and evidence, before reaching his solution. They further stated that the appellant’s conduct in executing sale and lease deeds using a photocopy of the power of attorney showed lack of bona fides.
ANALYSIS
The Supreme Court of India examined whether undue and unexplained delay in delivering an arbitral award affects its validity, tracing judicial developments under both the 1940 and 1996 Arbitration Acts. This Court referred to the precedents such as Harji Engg. Works Pvt. Ltd. V. BHEL and another [(2009) 107 DRJ 213 = (2008) 153 DLT 489] and BWL Ltd. V. Union of India and another [2012 SCC OnLine Del 5873], which explained delay can lead to an inference of unfairness and violation of public policy. The Court also acknowledge contrary opinions from judicial decisions like Peak Chemical Corporation v. NALCO [(2012) 188 DLT 680 = 2012 Supp (1) Arb LR 184] and Oil India Ltd. v. Essar Oil ltd.[ ILR 2012 6 Delhi 222 = (2012) 192 DLT 417 = (2012) 3 Arb LR 220], which proposed that delay alone is not sufficient to vitiate an award. Therefore each cases must be examined on its own facts to determine whether the delay has affected the arbitrator’s reasoning or fairness of the proceedings.
The Court also referred to scholarly authorities like Redfern and Hunter on International Arbitration [Redfern and Hunter on International Arbitration. 7th Edition (Paras 5.74 and 5.75).] and Russell on Arbitration [Russel on Arbitration 24th Edition. Chapter 7 (Para 7-127).], emphasising that “Justice Delayed is Justice Denied”. The Supreme Court criticised the arbitrator’s approach as perverse, unworkable, and against the fundamental policy of Indian Law.
JUDGEMENT
The Supreme Court held that while mere delay in pronouncing an arbitral award may not automatically vitiate it. But in this case, the arbitrator’s delay for four years, combined with his failure to provide a conclusive and workable resolution, showed a clear lapse in diligence and application of mind. The award neither settled the dispute nor upheld the purpose of arbitration as an efficient and binding mechanism. Therefore the appeals were allowed and the impugned arbitral award was set aside. And each party was directed to bear their own costs.
CONCLUSION
Hon’ble Supreme Court reaffirmed that arbitral awards must be lawful, timely, reasoned and final. Undue and unexplained delay undermines public confidence in arbitration as a viable alternative to litigation. The judgement states that the true legitimacy of arbitration lies in its ability to deliver swift and conclusive justice.
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