Case Note & Summary
The Supreme Court of India considered two civil appeals arising from an arbitral award that was reserved on 28.07.2012 but pronounced only on 16.03.2016, a delay of nearly three years and eight months, with no explanation offered by the arbitrator. The award also failed to finally settle the disputes between the parties, leaving them to initiate further litigation. The Court examined the effect of such delay on the validity of the award under Section 34 of the Arbitration and Conciliation Act, 1996, and whether an unworkable award is liable to be set aside. Relying on the Delhi High Court decision in Harji Engg. Works Pvt. Ltd. vs. Bharat Heavy Electricals Ltd., the Court held that undue and unexplained delay in pronouncing the award renders it contrary to public policy and liable to be set aside. The Court also held that an award which does not finally settle disputes but alters parties' positions irrevocably is perverse and patently illegal. Consequently, the Court set aside the award and, exercising its power under Article 142 of the Constitution, restored the parties to their original positions by directing refund of amounts paid under the award with interest.
Headnote
A) Arbitration Law - Delay in Pronouncement of Award - Effect on Validity - Arbitration and Conciliation Act, 1996, Section 34 - Undue and unexplained delay of nearly three years and eight months in pronouncing the arbitral award after reserving it, without any explanation, renders the award liable to be set aside as it defeats the very purpose of alternative dispute resolution and is contrary to public policy. The underlying principle is that arbitration proceedings must be concluded expeditiously and the arbitrator must make and publish the award within reasonable time. (Paras 1-4) B) Arbitration Law - Unworkable Award - Setting Aside - Arbitration and Conciliation Act, 1996, Section 34 - An arbitral award that does not finally settle the disputes between the parties but alters their positions irrevocably, leaving them no choice but to initiate further litigation, is perverse, patently illegal, and opposed to the public policy of India. Such an award is liable to be set aside. (Paras 1, 5) C) Constitutional Law - Exercise of Power under Article 142 - Complete Justice - Constitution of India, Article 142 - Where the arbitral award is set aside due to delay and unworkability, the Supreme Court can exercise its power under Article 142 to do complete justice by restoring the parties to their original positions and directing refund of amounts paid under the award with interest. (Para 5)
Issue of Consideration
(i) What is the effect of undue and unexplained delay in the pronouncement of an arbitral award upon its validity? (ii) Is an arbitral award that is unworkable, in terms of not settling the disputes between the parties finally while 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?
Final Decision
The Supreme Court set aside the arbitral award and, exercising power under Article 142 of the Constitution, restored the parties to their original positions by directing refund of amounts paid under the award with interest.
Law Points
- Arbitration
- Delay in pronouncement of award
- Validity of award
- Public policy
- Section 34 Arbitration and Conciliation Act
- 1996
- Unworkable award
- Article 142 Constitution of India
