Arbitration and Conciliation Act, 1996 — Ss. 14(1)(a), 14(2), 29-A and 34(2)(b)(ii), (2-A) — Delay in pronouncement of arbitral award — Effect —
Held, delay per se is not an independent ground to set aside an arbitral award under S. 34, but each case must be examined on its own facts to determine whether the delay adversely impacted the decision-making or vitiated the award by reason of lapse, indecision or loss of memory on the part of the arbitrator.
An unexplained and inordinate delay, coupled with indications that the arbitrator has lost coherence, mis-appreciated evidence, vacillated or failed to deliver a workable award, would render the award in conflict with the public policy of India under S. 34(2)(b)(ii) or vitiated by patent illegality under S. 34(2-A).
Harji Engg. Works (P) Ltd. v. BHEL, 2009 (107) DRJ 213; Peak Chemical Corpn. Inc. v. NALCO, (2012) 188 DLT 680; BWL Ltd. v. Union of India, 2012 SCC OnLine Del 5873; Gian Gupta v. MMTC Ltd., (2020) SCC OnLine Del 107; Unique Builders v. Union of India, 2025 SCC OnLine Mad 239; and GL Litmus Events (P) Ltd. v. DDA, 2025 SCC OnLine Del 5772 — approved.
Oil India Ltd. v. Essar Oil Ltd., ILR 2012 6 Del 222 — explained.
[Paras 1 – 20, 63(i)]
— S. 34 — Arbitral award — When “unworkable” — Held, an award which fails to resolve the disputes finally, alters the parties’ positions irreversibly, or drives them into further arbitration/litigation, is unworkable and opposed to the very public policy underlying arbitration, and is therefore liable to be set aside as perverse, patently illegal and contrary to justice and morality.
Arbitration must yield a final, reasoned, enforceable adjudication; an award which leaves the parties “high and dry” after years of proceedings offends the fundamental policy of Indian law.
[Paras 20, 45 – 49, 63(ii)]
— S. 14(2) — Remedy for dilatory arbitrator — Necessity of prior recourse —
Held, it is not mandatory for an aggrieved party to first invoke S. 14(2) (termination of mandate for undue delay) before challenging a delayed and tainted award under S. 34. Both provisions operate independently; S. 34 remedy is not conditional on exhausting S. 14(2).
[Paras 15, 19, 63(i)]
— S. 29-A (inserted w.e.f. 23-10-2015) — Object — discussed. Enacted to curb arbitral delay and ensure expeditious conclusion of proceedings. Statement of Objects and Reasons (Amendment Act 3 of 2016) quoted and relied on.
[Paras 14 – 16]
— Public Policy — Meaning and content — “Conflict with public policy of India” and “patent illegality” —
Explained with reference to ONGC v. Saw Pipes, (2003) 5 SCC 705; Associate Builders v. DDA, (2015) 3 SCC 49; Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131; MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163; and Gayatri Balasamy v. ISG Novasoft Technologies Ltd., (2025) 7 SCC 1.
[Paras 49 – 51]
— Article 142 of the Constitution — Scope — Power to do complete justice in arbitral matters —
Held, this Court may exercise Art. 142 power to bring protracted arbitral litigation to an end, provided such exercise does not amount to rewriting or re-appraising the award on merits and remains consistent with the fundamental policy of the 1996 Act.
Followed Gayatri Balasamy v. ISG Novasoft Technologies Ltd. and Shilpa Sailesh v. Varun Sreenivasan, (2023) 14 SCC 231.
[Paras 56 – 60]
Contract — Joint Development Agreement (JDA) — Interpretation of completion clause — Clauses 6(a), (b) and (c) —
Held, certification by the Project Architect that construction was “completed according to the sanctioned plan and fit for occupation” could not be re-adjudicated by the arbitrator; “fitness for occupation” referred only to conformity with sanctioned plan, not to external utilities like water, sewerage or electricity, which follow issuance of completion certificate. Arbitrator’s contrary interpretation held perverse and patently illegal.
[Paras 52 – 55]
Arbitrator’s conduct — Delay of 3 yrs 8 months in delivering award — Unexplained —
Held, such delay led to loss of coherence, indecision and vacillation, culminating in an ineffective, non-final award; award set aside as perverse, patently illegal and contrary to public policy.
[Paras 1, 46 – 49, 54 – 55]
Relief moulded under Article 142 —
Considering irreversible alteration of parties’ positions (delivery of possession in 2010, creation of third-party leases), Held, cancellation of award and remand would be futile.
Therefore, to do complete justice, Court:
(a) Treated the sale deeds executed by the appellant-developer in its own favour on 19-12-2008 as lawful and valid, notwithstanding original contractual violation;
(b) Imposed penalty of ₹ 10 crore (₹ 6.82 cr forfeiture of deposits + ₹ 3.18 cr compensation for respondents’ completion works) payable by appellant within 3 months;
(c) On payment, appellant entitled to possession of its 50 % share in building as per JDA; parties to enjoy respective shares thereafter;
(d) Parties to bear own costs.
[Paras 60 – 62, 64]
Held, per curiam —
Delay per se does not vitiate an arbitral award, but where delay leads to indecisive or unworkable adjudication, the award is void for conflict with public policy/patent illegality.
It is not mandatory to seek termination of mandate under S. 14 before moving under S. 34.
An “unworkable” award that leaves disputes unresolved offends the fundamental policy of law.
Article 142 power may be used to end long-pending arbitral disputes and mould equitable relief without rewriting the award.
Result — Appeals allowed. Arbitral award set aside as patently illegal and contrary to public policy. Relief moulded under Art. 142 by validating sale deeds subject to payment of ₹ 10 crores; parties to bear own costs.
2025 INSC 1277
1
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOs. 10074-10075 OF 2024
M/s. Lancor Holdings Limited … Appellant
versus
Prem Kumar Menon and others … Respondents
J U D G M E N T
SANJAY KUMAR, J
1. Two questions arise for consideration in these appeals: -
(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?
In this case, the learned Arbitrator reserved his arbitral award on
28.07.2012 but pronounced it only on 16.03.2016, i.e., nearly three years and
eight months later, with no definite resolution of the matter. Significantly, no
explanation worth the name was offered by him for the delay.
2
2. The issue of delay in the delivery of an arbitral award is relevant now
only in the context of the period prior to insertion of Section 29A in the
Arbitration and Conciliation Act, 1996 (for short, ‘the Act of 1996’), which put
in place stringent timelines for passing of an arbitral award. During that earlier
era, the question as to whether long delay in the passing of the award would
impact its validity, to the extent of that award being set aside on that ground
under Section 34 of the Act of 1996, was considered by different High Courts.
3. In Harji Engg. Works Pvt. Ltd. vs. Bharat Heavy Electricals Ltd. and
another1
, a learned Judge of the Delhi High Court was faced with an arbitral
award that was pronounced with a delay of over three years. No explanation
was offered in the award for the delay. On facts, the learned Judge found that
the hearings in the arbitration had not even concluded. In that scenario, the
learned Judge formulated the question as to whether the delay of more than
three years and, thereafter, the haste in which the award was passed made it
contrary to public policy? Noting that Section 28 of the erstwhile Arbitration
Act, 1940 (for short, ‘the Act of 1940’), empowered the Court to enlarge the
time for making an award but delay in the making of an award otherwise
amounted to grave misconduct and was sufficient to set aside that award
under Sections 30 and 33 thereof, the learned Judge observed that no
specific period was prescribed in the Act of 1996 for making and publishing
the award. The learned Judge, however, opined that the underlying principle
1 (2009) 107 DRJ 213 = (2008) 153 DLT 489
3
and policy of law remained intact that arbitration proceedings should not be
unduly prolonged and delayed. It was observed that it is natural and normal
for an arbitrator to forget contentions and pleas raised by the parties during
the course of hearing, if there was a huge gap between the last date of
hearing and the date on which the award was made and, therefore, an
arbitrator should make and publish an award within reasonable time. What
was reasonable time was flexible, per the learned Judge, and would depend
upon the facts and circumstances of each case. Further, it was opined that in
the event there is delay, it should be explained, as abnormal delay without
satisfactory explanation would amount to undue delay and would cause
prejudice. Holding that arbitration proceedings must be concluded
expeditiously so as to be just, fair and effective, the learned Judge observed
that the statute imposed additional responsibilities and obligations upon the
arbitrator to make and publish the award within reasonable time and without
undue delay. The learned Judge held that a party must be satisfied that the
arbitrator was conscious of and had taken into consideration all contentions
and pleas before rejecting or partly rejecting a claim. This was held to be the
right of the party which should not be denied. The learned Judge observed
that the Court has limited power to set aside an arbitral award under Section
34 of the Act of 1996 but held that the award which was passed three years
after the date of the last effective hearing, without satisfactory explanation for
that delay, was contrary to justice as it defeated the very purpose and
4
fundamental basis for alternative dispute redressal. Further, having found that
the arbitrator had not even concluded the hearings in the arbitration
proceedings, the learned Judge held that the award was contrary to principles
of fair play, as justice should not only be done but should manifestly be seen
to be done. On these grounds, the learned Judge set aside the arbitral award.
4. Thereafter, in Peak Chemical Corporation Inc. vs. National
Aluminium Co. Ltd.2
, another learned Judge of the Delhi High Court dealt
with an arbitral award delivered with a delay of four and a half years. It was
contended before the learned Judge that the delay was a sufficient reason, by
itself, to set aside that award. Noting that no two cases are the same and it
would depend upon the facts and circumstances of each case as to whether
delay in its pronouncement would vitiate an arbitral award, the learned Judge
observed that delay was not specified as one of the grounds to set aside an
arbitral award under Section 34 of the Act of 1996. The learned Judge opined
that it would be straining the language of the provision to hold that delay in
the pronouncement of an award would, by itself, place it in conflict with the
public policy of India within the meaning of Section 34(2)(b)(ii) of the Act of
1996. On facts, the learned Judge found that the award comprehensively
dealt with all aspects of the matter, factual and legal, and held that it would
not be in the interest of justice to set aside the said award only on the ground
of delay, requiring another fresh determination.
2 (2012) 188 DLT 680 = 2012 Supp (1) Arb LR 184
5
5. Again, in Union of India vs. Niko Resources Ltd. and another3
, the
same learned Judge held that a delay of four years in the pronouncement of
the arbitral award was indeed extraordinary but affirmed that the delay did not,
per se, vitiate the award, though ultimately he found it liable to be set aside
on other grounds. In that case, there were two separate awards - a majority
award and a dissenting minority award. There was a delay of over four years
in the delivery of the majority award. No explanation was forthcoming for the
delay and for not dealing with the findings of the dissenting arbitrator in his
minority award. Reference was made by the learned Judge to the decision of
this Court in Oil and Natural Gas Corporation Ltd. vs. Saw Pipes Ltd.4
,
wherein it was observed that Sections 23 and 28 of the Act of 1940
specifically provided that the arbitrator shall pass the award within the time
fixed by the Court but not providing a time limit in the Act of 1996 had no
bearing on the interpretation of Section 34 thereof. This Court had further
observed that, for achieving the object of speedier disposal of a dispute,
justice in accordance with law could not be sacrificed. The learned Judge
then stated that one possible remedy available to a party aggrieved by delay
in pronouncing the award is to approach the arbitral tribunal itself with a
prayer to expedite the award. The learned Judge opined that, if after being
approached by either party with a prayer to expedite the pronouncement of
the award, the arbitrator failed to do so, the Court could be approached in
3 (2012) 191 DLT 668 = (2012) 3 Arb LR 19
4 (2003) 5 SCC 705
6
terms of Section 14(2) of the Act of 1996. The learned Judge concluded that,
given the scheme of the Act of 1996, it would be appropriate to exhaust the
remedy under Section 14(2) before challenging the award under Section 34
thereof. Reiterating his earlier view that delay, per se, was not one of the
grounds under Section 34, the learned Judge observed that it would have to
be shown that the award suffered from patent illegality on account of such
delay. The learned Judge added that the Court should also weigh as to what
would be the cost incurred and the time spent in the arbitral proceedings
before interfering on the sole ground of delay. In effect, the learned Judge
held that it would be the facts and circumstances of a given case which would
determine whether the delay was so unconscionable as to vitiate the award.
On facts, the learned Judge found that the majority award did not inspire
confidence as it failed to discuss the points raised by the dissenting arbitrator
in the minority award. The learned Judge held that though the delay in the
pronouncement of the award, per se, did not vitiate it, that delay led to the
award being vitiated by patent illegality.
6. Yet again, the very same learned Judge affirmed the view taken by him
as to delay, per se, not being sufficient to set aside an arbitral award in his
later decision in Oil India Limited vs. Essar Oil Ltd.5
. On facts, the learned
Judge found that the impugned awards, both majority and minority, were
detailed and reasoned and dealt with each claim and counter claim at great
5 ILR 2012 6 Delhi 222 = (2012) 192 DLT 417 = (2012) 3 Arb LR 220
7
length. The learned Judge, therefore, opined that the passage of time since
the reserving of the award did not lead to any plea or submission of the
parties being overlooked and concluded that delay in the pronouncement of
the awards did not render them patently illegal or opposed to the public policy
of India. In the appeal arising from this judgment in FAO (OS) 503 of 2012,
reported in Oil India Limited vs. Essar Oil Limited6
, a Division Bench of the
Delhi High Court upheld the view taken by the learned Judge. SLP (C) No.
146 of 2017 filed by Oil India Limited assailing the decision of the Division
Bench was dismissed by this Court on 13.02.2017.
7. Prior thereto, in BWL Ltd. vs. Union of India and another7
, a Division
Bench of the Delhi High Court had considered two arbitral awards passed
nearly 5 years after conclusion of the regular hearings and 2 years 7 months
after the last clarificatory hearing. A learned Judge had held that the delay
was not fatal, leading to the appeal. The Bench observed that human memory
is short and it was doubtful whether substantive hearings and a meagre
clarificatory hearing long ago would leave sufficient imprints on the mind of
the arbitrator to be remembered so that the award could be pronounced long
thereafter. The Bench opined that justice must not only be done but must also
appear to have been done and set aside the impugned awards, agreeing with
the view taken in Harji Engg. Works Pvt. Ltd. (supra) that such an arbitral
award was against the public policy of India.
6 (2016) 6 Arb LR 97 (DB)
7 2012 SCC OnLine Del 5873
8
8. A few years later, in Gian Gupta vs. MMTC Ltd.8, another learned
Judge of the Delhi High Court dealt with an award which was reserved on
27.11.2007 and pronounced on 20.12.2013. There was, thus, a delay of more
than six years in the delivery of the award. The learned Judge observed that
exhaustion of the remedy under Section 14(2) of the Act of 1996 should not
be read as a mandatory recourse in order to mount a challenge on that
ground under Section 34 thereof. The learned Judge noted that the decision
of the Division Bench in BWL Limited (supra) was challenged unsuccessfully
before this Court in SLP (C) No. 4299 of 2013. He further noted that whether
an arbitral award would be vitiated by delay or not would depend on the facts
and circumstances of each case and, in that case, the learned Judge found
that there was little explanation for the delay of six years. The learned Judge,
accordingly, set aside the award on the ground that it was contrary to the
principles of fair play and justice.
9. Again, in Director General, Central Reserve Police Force vs.
Fibroplast Marine Private Limited9
, a learned Judge of the Delhi High Court
dealt with an arbitral award that was pronounced with a delay of nearly one
and a half years and opined that the inordinate and unexplained delay
rendered it amenable to challenge under Section 34(2)(b)(ii) of the Act of
1996. The learned Judge held that, apart from the delay, the award was
vitiated by patent illegality and was in conflict with the public policy of India.
8 (2020) SCC OnLine Del 107 = (2020) 1 Arb LR 406
9 (2022) 3 High Court Cases (Del) 304
9
10. In K. Dhanasekar vs. Union of India10, a learned Judge of the Madras
High Court was dealing with an arbitral award passed with a delay of 3 years
and 7 months. The learned Judge followed Harji Engg. Works Pvt. Ltd.
(supra) and observed that it is natural for an arbitrator to forget contentions
and pleas raised by the parties during the course of arguments and held that
the arbitrator should make and publish the award within a reasonable time.
Abnormal delay without satisfactory explanation, per the learned Judge,
caused prejudice. The learned Judge opined that it would certainly have an
impact and be violative of the public policy of India and, accordingly, set aside
the arbitral award on the ground that it was vitiated by the long delay.
11. Again, in Unique Builders vs. Union of India11, another learned Judge
of the Madras High Court, while dealing with a delayed arbitral award,
rejected the contention that such delay had no impact in the pre-Section 29A
era. The learned Judge noted that the arbitral tribunal had not offered any
reason for the delay in the passing of the award and observed that the delay
certainly prejudiced the parties. Referring to earlier decisions, the learned
Judge held that there was a strong likelihood of the arbitrator forgetting
arguments and relevant facts with passage of a long interval of time. Having
found that the award was vitiated on the ground of delay on the part of the
arbitrator in publishing the award within a reasonable time, the learned Judge
set aside the arbitral award.
10 2019 SCC OnLine Mad 38989
11 2025 SCC OnLine Mad 239
10
12. More recently, in GL Litmus Events Pvt. Ltd. vs. Delhi Development
Authority12, a learned Judge of the Delhi High Court considered an arbitral
award delivered with a delay of over one and a half years. Taking note of the
precedential law laid down by that Court, the learned Judge referred to the
decision of this Court in Anil Rai vs. State of Bihar 13 , wherein it was
emphasised that justice delayed would be justice denied. Noting that the said
decision was given in the context of judicial proceedings, the learned Judge
observed that the same principle would apply with equal force to arbitral
proceedings as the very objective of the Act of 1996 is to provide an
efficacious and speedy mechanism for dispute resolution. On facts, the
learned Judge found that the parties were constrained to request the
arbitrator to deliver the award on three separate occasions but despite the
same, the delay of over one and a half years ensued. Opining that arbitrators
are human beings whose ability to recollect oral submissions and evaluate
evidence would diminish over a period of time, the learned Judge held that
such delay would not be a mere procedural lapse but would cause
substantive prejudice to the parties as it would strike at the heart of fairness in
adjudication. The learned Judge opined that when an arbitrator pronounces
an award after a long gap, the very faith of the parties in arbitration
proceedings being an efficacious remedy would stand diminished. The
learned Judge further opined that there was a real and substantial risk when
12 2025 SCC OnLine Del 5772
13 (2001) 7 SCC 318
11
an award is rendered after a long gap that it is based on selective recollection
of submissions, thereby effecting the fairness of the process. The learned
Judge, accordingly, set aside the award on the ground that it was opposed to
the public policy of India, covered by Section 34(2)(b)(ii) of the Act of 1996.
13. Interestingly, apart from Anil Rai (supra), this Court had other
occasions to frown upon undue delays on the part of High Courts in delivering
judgments. In R.C. Sharma vs. Union of India and others14, a 3-Judge
Bench of this Court was critical of the delay of 8 months in the delivery of a
judgment by a High Court. Observing that the Code of Civil Procedure, 1908,
did not prescribe a time limit for the delivery of a judgment, the Bench
observed that unless explained by exceptional and extraordinary
circumstances, delay in delivery of judgments was highly undesirable, as it is
not unlikely that some points which a litigant considers important may escape
notice. It was further observed that what is more important is that litigants
must have complete confidence in the result of the adjudication and that
confidence would be shaken if there is excessive delay between hearing of
arguments and delivery of the judgment. It was pointed out that justice, as
often observed, must not only be done but must manifestly appear to be done.
Again, in Kanhaiyalal and others vs. Anupkumar and others15, this Court
affirmed its earlier view in Bhagwandas Fateh Chand Daswani vs. HPA
14 (1976) 3 SCC 574
15 (2003) 1 SCC 430
12
International 16 that long delay in the delivery of a judgment would be
sufficient to set it aside as such delay would give rise to unnecessary
speculation in the minds of the parties and the party whose case was rejected
by the High Court may have an apprehension that the arguments raised at
the Bar were not reflected or appreciated while delivering the judgment.
14. Now, turning to the statutory scheme, we may first note that Section 23
of the Act of 1940 provided that the Court shall, by order, refer the matter in
difference in any suit to the arbitrator and shall, in the order, specify such time
as it thinks reasonable for the making of the award. Section 28(1) of the Act
of 1940 empowered the Court, if it thought fit, irrespective of whether the time
for making the award had expired or not and whether the award had been
made or not, to enlarge the time for making the award. Section 28(2) thereof
dealt with enlargement of time for making the award with the consent of the
parties and stated that any provision in the arbitration agreement, whereby
the arbitrator was empowered to enlarge the time for making the award
without the consent of the parties, would be void and of no effect.
However, no such time stipulations found mention in the Act of 1996 till
the insertion of Section 29A therein, vide Amendment Act No. 3 of 2016, with
retrospective effect from 23.10.2015. Thereby, time for the making of
domestic arbitral awards was mandatorily fixed by requiring the same to be
pronounced within 12 months from the date of completion of the pleadings
16 (2000) 2 SCC 13
13
under Section 23(4) of the Act of 1996. Power to extend that time was
conferred upon the parties, under Section 29A(3) of the Act of 1996, subject
to a maximum period of 6 months. Section 29A(4) of the Act of 1996,
however, empowered the Court to grant further extension of time if sufficient
cause was shown therefor.
15. Prior to insertion of Section 29A in the statute book, in the event of
failure of an arbitrator to act without undue delay, recourse was provided
under Section 14 of the Act of 1996 to dual remedies – by approaching the
arbitrator first and, then, the Court. Section 14(1)(a) states that the mandate
of an arbitrator would stand terminated if he either becomes de jure or de
facto unable to perform his functions or, for other reasons, fails to act without
undue delay. Section 14(2) states that, if a controversy remains concerning
any of the grounds referred to in Section 14(1)(a), a party may, unless
otherwise agreed by the parties, apply to the Court to decide on the
termination of the arbitrator’s mandate. Though it is argued before us that
recourse must necessarily be taken to this remedy under Section 14(2) if a
party is aggrieved by long delay on the part of an arbitrator in delivering the
arbitral award, we may observe that, in reality, a party to an arbitration
proceeding would not willingly choose to incur the risk of provoking the wrath
of the arbitrator by moving such an application as, in the event of failing in
that endeavour, the very same arbitrator would continue with the arbitration
proceedings and deliver a verdict. Being human, an arbitrator, who is
14
unsuccessfully subjected to a proceeding seeking the termination of his/her
mandate under Section 14(2), on grounds of his/her personal failure, may
well be prone to bias against the party who had subjected him to such
process. Therefore, notwithstanding this remedy provided by the statute, to
what extent it has actually been of use is open to question. Though Section
34(2)(b) of the Act of 1996 speaks of an award being set aside if it is in
conflict with the public policy of India and Explanation 1 thereto elucidates
that an award would be construed to be so if it is against the most basic
notions of morality or justice or if the making of the award was induced or
affected by fraud or corruption, it would be rather difficult for a party to
establish the bias that may develop if the arbitrator bears a grudge against
the party who had unsuccessfully taken him/her to Court under Section 14(2)
of the Act of 1996. Therefore, one would not ordinarily come across an
instance of a party to the arbitration unilaterally approaching the Court under
Section 14(2) of the Act of 1996, thereby taking on the risks involved therein.
16. It is perhaps for this reason that the Act of 1996 came to be amended,
with retrospective effect from 23.10.2015, so as to curb possible delays on
the part of arbitrators more effectively. The Statement of Objects and
Reasons dated 25.11.2015 of Amendment Act No.3 of 2016 sets out that the
Act of 1996 was enacted to provide for speedy disposal of cases relating to
arbitration with least amount of intervention by the Courts but, with passage
of time, some difficulties in the applicability of the Act of 1996 were noticed.
15
Therefore, amendments were proposed to be made in the Act of 1996 to
facilitate and encourage alternative dispute mechanisms, especially
arbitration, ‘for settlement of disputes in a more user-friendly, cost effective
and expeditious disposal of cases, as India was committed to improve its
legal framework to obviate delay in disposal of cases’. In this regard, an
amendment was proposed that an arbitral tribunal should make its award
within a period of 12 months from the date it enters upon the reference, giving
liberty to the parties to extend such period up to 6 months, beyond which
extension could only be granted by the Court on sufficient cause being shown.
17. Notably, on the issue of a ‘dilatory arbitrator’, Russel on Arbitration17
states that an arbitral tribunal is required to conduct proceedings and adopt
procedures that would avoid unnecessary delay and refusal or failure to
conduct the proceedings or make an award with reasonable dispatch can
lead to that tribunal’s removal, although the delay would have to be truly
exceptional so as to cause substantial injustice to the applicant. As to what
would be reasonable dispatch was stated to depend on circumstances - for
instance, a decision in a ‘documents-only’ case may be expected more
quickly than in an arbitration where the testimony of many witnesses has to
be considered. It was further stated that a delay of 12 months in publishing an
award was inordinate and was capable of founding an application to have that
award set aside.
17 Russel on Arbitration 24th Edition. Chapter 7 (Para 7-127).
16
18. Similarly, on ‘Duty to act promptly’ in Chapter 5, titled ‘Powers, Duties,
and Jurisdiction of an Arbitral Tribunal’, Redfern and Hunter18 states thus:
‘An arbitral tribunal has an obvious moral obligation to carry out its
task with due diligence. Justice delayed is justice denied. Some
systems of law endeavour to ensure that an arbitration is carried out
with reasonable speed by setting a time limit within which an arbitral
tribunal must make its award. The time limit fixed is sometimes as
short as six months (as in the ICC rules), although generally it may
be extended by consent of the parties, or at the initiative of the
institution or the tribunal. If an award is not made within the time
allowed, the authority of the arbitral tribunal may be regarded as
having terminated, with the risk that any award will be null and void.
Some systems of law provide that an arbitrator who fails to proceed
with reasonable speed in conducting the arbitration and making his
or her award may be removed by a competent court, and deprived of
any entitlement to remuneration. The Model Law provides that the
mandate of an arbitrator terminates if he or she ‘fails to act without
undue delay’.
The learned authors pointed out that though the above sanctions may
act as a spur to the indolent arbitrator, they do not compensate a party who
suffered financial loss as a result of delay in the conduct of the arbitration.
It was noted that delay in the conduct of an arbitration may have serious
financial consequences as awards of interest rarely compensate a party for
the financial loss suffered in the interim. It was pointed out that faced with
increasing delays in the conduct of arbitrations, major institutions revised
their rules to improve the speed and efficiency of arbitrations. Though the
18 Redfern and Hunter on International Arbitration. 7th Edition (Paras 5.74 and 5.75).
17
above observations were made in the context of international arbitrations,
the same principle would hold good for domestic arbitrations also.
Therefore, when the Arbitrator presently took years together to deliver the
Award, the least that the parties would expect is a quietus being given to
their disputes instead of being relegated to another round of arbitration/
litigation. The Arbitrator, therefore, failed to live up to that minimal
expectation reposed in him by law and by the parties themselves.
19. However, the undeniable fact remains that Section 34 of the Act of 1996
does not postulate delay in the delivery of an arbitral award as a ground, in
itself, to set it aside. There is no gainsaying the fact that inordinate delay in
the pronouncement of an arbitral award has several deleterious effects.
Passage of time invariably debilitates frail human memory and it would be
well-nigh impossible for an arbitrator to have total recall of the oral evidence,
if any, adduced by witnesses; and the submissions and arguments advanced
by the parties or their learned counsel. Even if detailed notes were made by
the arbitrator during the process, they would be a poor substitute to what is
fresh in the mind immediately after conclusion of the hearings in the case.
More importantly, such delay, if unexplained, would give rise to unnecessary
and wholly avoidable speculation and suspicion in the minds of the parties.
Absolute faith and trust in the system is essential to make it work the way it is
intended to. Once that belief is shaken, it would lead to a breakdown of that
system itself. A situation that is to be eschewed at all costs.
18
20. That being said, we must also recognize that, in the usual course, long
delay in the passing of arbitral awards is not the norm. However, when an
instance of undue delay in the delivery of an arbitral award occasionally crops
up, given the weighty preponderance of judicial thought on the issue with
which we are in respectful agreement, we are of the considered opinion that
each case would have to be examined on its own individual facts to ascertain
whether the delay was of such import and impact on the final decision of the
arbitral tribunal, whereby that award would stand vitiated due to the lapses
committed by the arbitral tribunal owing to such delay. We are also conscious
of the fact that there must be a balance between the pace of the arbitration,
culminating in an arbitral award, and the satisfactory meaningful content
thereof. In this regard, in his seminal article, titled ‘Arbitrators and Accuracy’19,
Professor William W Park says thus:
‘Although good case management values speed and economy, it
does so with respect for the parties’ interest in correct decisions. The
parties have no less interest in correct decisions than in efficient
proceedings. An arbitrator who makes the effort to listen before
deciding will enhance both the prospect of accuracy and satisfaction
of the litigants’ taste for fairness. In the long run, little satisfaction will
come from awards that are quick and cheap at the price of being
systematically wrong.
Therefore, keeping in mind these competing interests, it is only in cases
where the negative effect of the delay in the delivery of an arbitral award is
explicit and adversely reflects on the findings in the said award, that such
19 Journal of International Dispute Settlement (February, 2010).
19
delay, and more so, if it remains unexplained, can be construed to be a factor
to set aside that award. Once all the requirements, referred to supra, are
fulfilled in a given case and the arbitral award therein is clearly riddled with
the damaging effects of the delay, it can be construed to be in conflict with the
public policy of India, thereby attracting Section 34(2)(b)(ii) of the Act of 1996,
or Section 34(2A) thereof as it may also be vitiated by patent illegality. Further,
it would not be necessary for an aggrieved party to invoke the remedy under
Section 14(2) of the Act of 1996 as a condition precedent to laying a
challenge to a delayed and tainted award under Section 34 thereof. Both
provisions would operate independently as the latter is not dependent on the
former. This being the legal position, we would have to examine whether the
present arbitral award suffers from any such malady owing to the delay,
whereby its very validity would stand vitiated. Further, we would also have to
see whether the award is liable to be set aside for falling short, as it did not
resolve the disputes between the parties but their positions stood altered
irreversibly owing to the interim orders passed during the arbitral proceedings.
Lastly, if the award is liable to be set aside, the relief to be granted.
21. We may now note the relevant facts. The respondents in these appeals
are brothers. The subject land, being an extent of 20 grounds and 600 sq. ft
(1.116 acre) situated at New No.165, Old Door No. 110, St. Mary’s Road,
Chennai, was owned by them. While so, they entered into Joint Development
Agreement dated 17.12.2004 (JDA) with one Lancor Gesco Properties
20
Limited (LG) for the development of this land by construction of a building
thereon for their mutual benefit. This JDA envisaged construction of a
residential or commercial building at the cost and expense of the developer
and delivery of 50% of the built-up area in the building to the respondents free
of cost. In return, the developer was to be conveyed, free from all
encumbrances, an undivided 50% share in the land along with 50% share in
the building erected thereon. The developer was required to make a
refundable interest-free deposit of ₹3,57,00,000/- with the respondents and
another refundable interest-free deposit of ₹25,00,000/- within six months
thereafter. These security deposits were to be returned by the respondents
within 15 days of fulfilment by the developer of the stipulated conditions, in
terms of Clause 6 of the JDA, which reads to the following effect:
‘a. LG completes the construction of the building in all respects,
including the landowners’ constructed area fit for occupation and the
Architects for the project certify to the landowners that the building
had been put up and completed according to the sanctioned plan and
is fit for occupation.
b. LG has applied to the Chennai Metropolitan Development
Authority for a Completion Certificate in respect of the said building;
and
c. LG offers, in writing, to handover the landowners’
constructed area to the landowners, after the conditions stipulated in
clause (a) and (b) are fulfilled.
22. The date on which all the above conditions stood fulfilled was to be
treated as the ‘Handover Date’. It was also agreed between the parties that,
21
irrespective of the landowners taking delivery of their constructed area, upon
expiry of 15 days from the Handover Date, the developer was deemed to
have fulfilled its obligation to deliver the landowners’ constructed area,
irrespective of whether or not physical possession thereof had been taken by
the landowners, and the security deposits would be due and payable to them
on such date, i.e.,15 days after the Handover Date. It was expressly agreed
between the parties that the developer was not required to handover physical
possession of the landowners’ constructed area to them until the security
deposits together with interest, if any, in terms of the agreement had been
returned by the landowners to the developer. The interest that was
contemplated was payable at the rate of 12% per annum in the event the
landowners did not refund the deposits within 15 days from the Handover
Date. In addition to the two security deposits referred to above, the developer
made another refundable interest-free deposit of ₹1,25,00,000/-. This deposit
was to be returned by the landowners to the developer within 30 days from
the Handover Date. The parties were to decide whether the land should be
developed into a commercial or a residential complex within 120 days.
23. Under Clause 25 of the JDA, the developer was required to appoint the
Architect for the development after obtaining the consent of the landowners.
Under Clauses 36 and 37, two powers-of-attorney were to be executed by the
landowners in favour of the developer. The first one was to enable the
developer to carry out the development and obtain various approvals,
22
sanctions and permissions relating thereto in addition to entering into
agreements to sell or lease or mortgage, by way of deposit of title deeds, the
developer’s constructed area and its proportionate undivided share in the
land. The second one was to be kept in escrow with Housing Development
Finance Corporation Limited (HDFCL), which was to deliver the same to the
developer on the Handover Date in accordance with the terms of the Escrow
Agreement. This second power-of-attorney was to authorize and empower
the developer or its nominees to execute and register sale deeds in respect of
the developer’s undivided share in the land and its share in the constructed
area. This power-of-attorney was to be irrevocable and was to be acted upon
only after the developer delivered or was deemed to have delivered the
landowners’ constructed area to them. In the event of breach or violation of
the terms of the JDA, the aggrieved party was entitled to give written notice to
the defaulting party and such defaulting party was required to rectify the
breach within 30 days of the receipt of such notice. The landowners were
entitled to terminate the JDA only if the developer failed to complete the
development within the agreed time; failed to deliver the landowners’
constructed area within the stipulated time without encumbrances; or
permitted a change in ownership of its equity share capital. In the event of
such termination, the landowners were to return the security deposits of the
developer after deducting the losses that they may have suffered. Clause 52
of the JDA provided for resolution of disputes through arbitration.
23
24. A Supplemental Agreement was executed on 17/18.12.2004 by and
between the parties, whereby it was agreed that till the Handover Date was
reached, the proceeds received by the developer in connection with sale of
the constructed area would be deposited in a separate bank account and
such amounts would be used only for the purpose of financing the cost of
development; repayment of loans taken for such development; payment of
interest on such loans; and payment of taxes in relation to the development.
Another supplemental agreement was executed by the parties on 29.03.2006,
whereby they agreed upon appointment of M/s. Natraj & Venkat, Architects,
as the Project Architect for the development of the property in terms of the
JDA. This agreement recorded that the parties had agreed upon construction
of a multi-storied software technology park on the land. In terms of this
supplemental agreement, the 2nd, 3rd, 4th and 5th floors were allotted to the
share of the developer, while the 6th, 7th, 8th, and 9th floors fell to the share of
the landowners. The 10th floor was to be shared by both parties, along with
the terrace and common areas. The building was to be named ‘Menon
Eternity’. An additional sum of ₹25,00,000/- was also deposited by the
developer under this agreement towards security deposit. The agreement
also recorded that the second power-of-attorney had been executed by the
landowners and was kept in escrow with the HDFCL. A third supplemental
agreement was executed on 22.02.2007. Thereunder, the developer agreed
to pay to the landowners an additional interest-free refundable deposit of
24
₹3,00,00,000/-. Meanwhile, Lancor Gesco Properties Limited was renamed
as Lancor G. Corp. Properties Limited on 10.05.2005. Thereafter, Lancor G.
Corp. Properties Limited was amalgamated with Lancor Holdings Limited, the
appellant before us (hereinafter, ‘the Company’), vide the scheme sanctioned
by the Madras High Court on 23.08.2007.
25. The core dispute that arose between the parties was whether or not the
construction of the building was completed as per the agreed terms. Another
dispute was with regard to the sale deeds executed by the Company in its
own favour by using a copy of the second power-of-attorney, while the
original remained with HDFCL. Further, refusal by the respondents to refund
the security deposits to the Company was another issue. The respondents’
case was that the building was not completed as agreed upon and, therefore,
the Handover Date, in terms of the JDA, had not materialized. According to
the Company, the building stood completed on 29.07.2008, when it applied
for a Completion Certificate. The Project Architect issued Certificate dated
10.10.2008 stating that the building was completed as per the plans and was
fit for occupation as soon as the Electricity Board and the Water and
Sewerage Board gave the power, water and sewerage connections.
26. In addition to these documents, the Company relied upon the letter
dated 22.07.2008 sent by M/s. Future Management and Consultancy Private
Limited to respondent No.1 along with a cheque for ₹1,00,00,000/-, as
earnest money deposit, for execution of a formal lease agreement in respect
25
of the 6th floor of the building. Another document relied on by the Company
was the lease deed executed on 10.11.2008 between the Company and BNP
Paribas Global Securities Market Operations Private Limited in relation to the
built-up area of 20,878 sq. feet on the 2nd and 3rd floors of the building.
27. A separate Completion Certificate was obtained by the Company from
the Corporation of Chennai on 21.08.2008. Completion Certificate was issued
by the Chennai Metropolitan Development Authority on 14.11.2008. Water
and sewerage connections were provided by the Chennai Metropolitan Water
Supply and Sewage Board on 22.11.2008. Further, Compliance Certificate
dated 23.09.2008 was secured from the Director of Fire and Rescue Services
and Compliance Certificate dated 25.09.2008 was obtained from the Police
(Traffic) Department. Compliance Certificate dated 30.10.2008 was also
obtained from the Electronics Corporation of Tamil Nadu, as it was required
for operation of a software technology park.
28. However, the respondents were not satisfied that the construction of the
building was complete in terms of the JDA. Correspondence ensued between
the parties on this account and the Company accepted that certain minor
works were still outstanding which required attention, i.e., with regard to the
staircase, the basement and the construction of a canopy. On 20.10.2008,
the Company took the stand that it had fulfilled its obligations under the JDA
and, therefore, the said date should be reckoned as the Handover Date. The
Company, accordingly, called upon the respondents to refund the security
26
deposits. The respondents, however, contested this claim stating that the
conditions in Clauses 6(a) and (b) of the JDA were not fulfilled and, therefore,
the Handover Date had not come as yet.
29. Surprisingly, on 28.07.2008, the respondents chose to refund to the
Company a sum of ₹1,00,00,000/- from out of the security deposits held by
them. Further, another sum of ₹1,00,00,000/- was refunded by them on
01.12.2008 during the course of their correspondence. Therefore, out of the
security deposits, totalling ₹6.82 crores, a sum of ₹2 crores stood refunded,
bringing the balance deposits to ₹4.82 crores. It is at this point of time, i.e., on
19.12.2008, that the Company chose to execute five registered sale deeds in
its own favour on the basis of a photocopy of the second power-of-attorney,
the original of which was still lying with the escrow account holder, HDFCL.
30. On 05.01.2009, the Company invoked the arbitration clause contained
in the JDA, naming Mr. Justice K.P. Sivasubramaniam, a former Judge of the
Madras High Court, as its nominee Arbitrator. However, the respondents
issued reply dated 27.01.2009 stating that they were advised to resolve the
matter without arbitration. No such resolution took place, leading to filing of
five applications by the respondents under Section 9 of the Act of 1996. Four
out of those applications were dismissed by a learned Judge of the Madras
High Court, vide common order dated 21.04.2009. As regards the last
application, the Company gave an undertaking that it would not disturb or
interfere with the joint possession of the property. This application was,
27
therefore, allowed by the same common order. Appeals were preferred
against this common order but the same stood dismissed on 30.11.2009.
31. In the meanwhile, the respondents filed Civil Suit No.279 of 2009
seeking permanent and mandatory injunctions against the Company and the
authorities of the Registration department. While so, as the respondents had
failed to name their nominee Arbitrator in terms of the arbitration clause, the
Company filed a petition in OP No. 137 of 2009 before the Madras High Court
under Section 11 of the Act of 1996. Ultimately, the Company’s nominee, i.e.,
Justice K.P. Sivasubramaniam (Retd.) was appointed as the sole Arbitrator.
32. The Company filed its claim statement on 28.09.2009 praying that the
Arbitrator may be pleased to pass an award:
“a) directing the respondents to jointly and severally pay the claimant
a sum of Rs.5,92,83,923/- being the refundable security deposit
together with interest @ 12% per annum and future interest @ 12%
per annum on the sum of Rs.4,82,00,000/- from this date till date of
realization.
b) directing the respondents to jointly and severally pay the claimant a
sum of Rs.1,21,67,741/- towards rental deposit, caution deposit, OSR
charges, demolition charges, together with interest @ 12% per
annum and future interest @ 12% per annum on the sum of
Rs.1,09,76,830/- from this date till date of realization.
c) directing the respondents to jointly and severally pay the claimant a
sum of Rs. 28,63,093/- being the statutory charges together with
interest @ 12% per annum and future interest @ 12% per annum on
the sum of Rs. 25,82,870/- from this date till date of realization.
d) directing the respondents to jointly and severally to pay the
claimant a sum of Rs.37,87,641/- towards maintenance charges
together with interest thereon @ 12% per annum, and future interest
@ 12% per annum on the sum of Rs.35,82,464/- from this date till
date of realization.
e) directing the respondents to jointly and severally pay future
maintenance charges @ Rs. 3.50 per sq. ft. per month from this date.
28
f) directing the respondents to jointly and severally pay the claimant a
sum of Rs.4,86,906/- towards electricity consumption charges for
common areas, together with interest thereon @ 12% per annum and
future interest @ 12% per annum on the sum of Rs.4,65,345/- from
this date till date of realization.
g) directing the respondents to jointly and severally pay the future
electricity consumption charges in respect of common areas, as per
actual meter readings.
h) declaring that the respondents are liable to pay the service tax
arising out of the transactions and consequently directing the
respondents to jointly and severally pay a sum of Rs.82,40,000/-
towards service tax.
i) directing the respondents to jointly and severally pay a sum of
Rs.1,00,000/- towards damages for loss of reputation and goodwill.
j) directing the respondents to jointly and severally to pay a sum of
Rs.30,18,104/- towards property tax, fire insurance and IBMS cost.
k) declaring that the claimant is entitled to the original of the power of
attorney dated 29.03.2006 executed by the respondents in favour of
the claimant and presently under the custody of the escrow agent,
HDFC, Bangalore.
I) directing the respondents to pay the costs of the proceedings and
pass such further or other order in the interests of justice and
circumstances of the case.”
33. The respondents, along with their statement of defence dated
22.01.2010, raised double the number of counter claims, which read as under:
“1. Declaring and adjudging that (i) the Sale Deed dated 19.12.2008
which is registered as Document No. 2890 of 2008, (ii) the Sale Deed
dated 19.12.2008 which is registered as Document No. 2891 of 2008,
(iii) the Sale Deed dated 19.12.2008 which is registered as
Document No. 2892 of 2008, (iv) the Sale Deed dated 19.12.2008
which is registered as Document No. 2893 of 2008 and (v) the Sale
Deed dated 19.12.2008 which is registered as Document No. 2894 of
2008, all in Book I in the Office of the Sub Registrar, Mylapore,
Chennai, allegedly executed by the respondents, through the alleged
power of attorney holder, Lancor Holdings Ltd., in favour of the
claimant, Lancor Holdings Ltd., are illegal, void ab initio and non-est
and not binding upon the respondents herein and directing the
claimant herein to deliver up the said sale deeds for being cancelled
and authorizing the respondents to execute appropriate cancellation
deeds and getting the cancellation deeds registered in the
jurisdictional Sub Registrar’s Office, Chennai.
29
2. Declaring and adjudging that the lease deed dated 10.11.2008
which is registered as Document No. 1110 of 2009 of Book I in the
office of the Sub Registrar, Mylapore, Chennai, allegedly executed by
Lancor Holdings Ltd., in favour of BNP Paribas Global Securities
Market Operations Ltd., is illegal, void ab initio and non-est and not
binding on the respondents and directing the claimant to deliver up
the said lease deed and directing the cancellation of the said lease
deed by executing a cancellation deed and registering the same in
the Office of the jurisdictional Sub Registrar.
2(a). Declaring and adjudging that the lease deed dated 11.01.2010,
which is registered as Document No. 928 of 2010 of Book I in the
office of the Sub Registrar, Mylapore, Chennai, allegedly executed by
Lancor Holdings Ltd., in favour of BNP Paribas Sundaram Global
Securities Operations Pvt. Ltd. allegedly leasing the 4th floor in the
building ‘Menon Eternity’ situated at No. 165, St. Mary’s Road,
Alwarpet, Chennai – 600018, is illegal, void ab initio and non-est and
not binding on the respondents and directing the claimant to deliver
up the said lease deed and directing the claimant to deliver up the
said lease deed and directing the cancellation of the said lease deed
by executing a cancellation deed and registering the same in the
office of the jurisdictional Sub Registrar.
2(b). Declaring and adjudging that the lease deed dated 11.01.2010,
which is registered as Document No. 1263 of 2010 of Book I in the
office of the Sub Registrar, Mylapore, Chennai, allegedly executed by
Lancor Holdings Ltd., in favour of BNP Paribas Sundaram Global
Securities Operations Pvt. Ltd. allegedly leasing the 5th floor in the
building ‘Menon Eternity’ situated at No. 165, St. Mary’s Road,
Alwarpet, Chennai – 600018, is illegal, void ab initio and non-est and
not binding on the respondents and directing the claimant to deliver
up the said lease deed and directing the claimant to deliver up the
said lease deed and directing the cancellation of the said lease deed
by executing a cancellation deed and registering the same in the
office of the jurisdictional Sub Registrar.
2(c). Declaring and adjudging that the lease deed dated 25.02.2010,
which is registered as Document No. 1422 of 2010 of Book I in the
office of the Sub Registrar, Mylapore, Chennai, allegedly executed by
Lancor Holdings Ltd., in favour of NEMC Solar Services Pvt. Ltd.
allegedly leasing a portion of 10th floor (north wing) measuring 10,339
square feet in the building ‘Menon Eternity’ situated at No. 165, St.
Mary’s Road, Alwarpet, Chennai – 600018, is illegal, void ab initio
and non-est and not binding on the respondents and directing the
claimant to deliver up the said lease deed and directing the claimant
to deliver up the said lease deed and directing the cancellation of the
said lease deed by executing a cancellation deed and registering the
same in the office of the jurisdictional Sub Registrar.
3. Declaring all the acts, deeds and documents done by and/or
executed on the basis of the said five sale deeds all dated
30
19.12.2008 and the said Lease Deed dated 10.11.2008 by the
claimant are illegal, void ab initio and non-est and directing the
claimant to cancel all such acts, deeds and documents and further
direct the claimant to pay to the respondents all the monies and
benefits that the claimant has received and/or earned in pursuance of
the alleged Sale Deeds and the Lease Deed mentioned above.
4. Declare that the Certificate dated 10.10.2008 issued by the Project
Architect, viz., Nataraj & Venkat, having their office at No. 5, Victoria
Hostel Road (TNCA Stadium), Chennai 600005, in respect of the
building “Menon Eternity” is illegal, void ab initio and non-est.
5. Grant an order of permanent injunction restraining the claimant
from relying upon the said certificate dated 10.10.2008 of the said
Project Architect.
6. Appoint an independent Architect for joint inspection of the building
in the subject property sand for certifying the measurement and
quality of the constructed areas of the claimant and the respondents
and the building including the common areas and common amenities
at the cost and expense of the claimant.
7. Direct the claimant to complete the building and the respondents’
constructed area as per the agreed specifications in the JDA and
obtain a Completion Certificate from the said Independent Architect
in respect of the said building and obtain an Area Statement for the
total super-built-up area duly certified by the said Architect and
furnish the same to the respondents.
8. Direct the claimant to deliver to the respondents their 50%
constructed area in the building “Menon Eternity” in the subject
property, upon the respondents paying to the claimant such sum of
monies as this Hon’ble Arbitral Tribunal may be pleased to determine
as being due and payable by the respondents to the claimant.
9. Direct the claimant to return to the respondents all original
documents of title pertaining to the subject property.
10. Direct the claimant to deliver to the respondents all
original/authenticated copies of drawings, plans, literatures,
brochures, specifications, etc., pertaining to all the devices, the
equipment and the amenities provided at the building in the subject
property.
11. Direct the claimant to display the name of the building “Menon
Eternity” at a prominent place in the building in the subject property
as may be chosen by the respondents.
12. Grant an order of permanent injunction restraining the claimant
from using the name “Lancor” anywhere in the building “Menon
Eternity” in the subject property.
31
13. Direct the claimant to pay to the respondents as compensation
for the delay in completion of the building a sum of Rs.80,60,456/-
and future interest at 12% p.a. on the said sum of Rs.80,60,456/-
calculated from this day till the date of its payment in respect of the
respondents’ constructed area as per the calculations given in
paragraph 112 above.
14. Direct the claimant to pay to the respondents as compensation
towards loss of previous rents in a sum of Rs.12,41,36,609/- along
with future interest thereon at the rate of 12% p.a. calculated from
today till the date of its payment as per the calculations given in
paragraph 113 above.
15. Direct the claimant to pay to the respondents compensation for
loss of rents in respect of the car park areas in a sum of
Rs.39,59,220/- together with future interest at 12% p.a. on the said
sum of Rs.39,59,220/- calculated from this day till the date of its
payment in respect of the respondents’ constructed area as per the
calculations given in paragraph 114 above.
16. Direct the claimant to pay to the respondents as compensation
towards loss of interest on advance rent in a sum of Rs.1,29,63,726/-
along with future interest on Rs.1,29,63,726/- thereon at 12% p.a.
calculated from this day till the date of its payment as per the
calculations given in paragraph 115 above.
17. Direct the claimant to pay to the respondents a sum of
Rs.31,75,35,342/- as compensation towards loss of future rents in
respect of the respondents’ constructed area of 93,050 sq. ft..,
calculated from today till 30.11.2017 along with future interest
thereon at 12% p.a. calculated from this day till the date of its
payment as per the calculations given in the annexure referred in
paragraph 116 above.
18. Direct the claimant to pay to the respondents a sum of Rs. 5
Crore or such sum of money, as may be determined by this Hon’ble
Arbitral Tribunal, as damages for slandering the title of the
respondents to their share of constructed area in the subject property
along with interest thereon at 12% p.a. calculated from 17.07.2009
(the date of publication of the Public Notice in the Newspaper) till the
date of its payment.
19. Direct the claimant to pay to each of the three respondents a sum
of Rs.3 Crore each (in all Rupees Nine Crores) or such sum of
money, as may be determined by this Hon’ble Arbitral Tribunal as
damages for the claimant having defamed the fair name and
reputation of the respondents.
20. Direct the claimant to tender an unconditional apology to the
respondents and to withdraw the public notice published in the Hindu
daily on 17.7.2009 and prominently publish the unconditional apology
and withdraw the said Notice in the same News Paper.
32
21. Direct the claimant to pay to the respondents the prematurely
repaid deposit of Rs.2 Crores and the interest thereon, totally
amounting to Rs.2,31,00,000/- along with future interest thereon at
12% p.a. calculated from today till the date of its payment as per the
calculations given in paragraph 120 above.
22. Direct the claimant to appoint an independent Agency acceptable
to the respondents for maintenance of the common areas and
common amenities at the said building in the subject property.
23. Direct the claimant to discharge the loan obtained from HDFC
and obtain the original title deeds and documents in respect of the
subject property from the HDFC to enable the claimant to return the
same to the respondents.
24. Direct the claimant to pay to the respondents the costs of this
proceedings and pass such other and further orders as this Hon’ble
Arbitral Tribunal may deem fit in the interest of justice.”
34. The learned Arbitrator, thereupon, framed the following issues for
resolution in the arbitration proceedings:
1. Whether there was any delay on the part of the respondents in
handing over the property after demolition?
2. Whether the claimant has discharged its obligations and
completed the construction of the building within the stipulated time
as required under the Joint Development Agreement and the
supplemental agreement?
3. Whether the certificate of the Architect dated 10.10.2008 is valid
and binding on the parties and whether the availment of the
electricity and water connection was a pre-condition for the
completion?
4. Whether there should be an appointment of an Architect afresh?
5. Whether the claimant had complied with the terms of clause 6 of
the Joint Development Agreement?
6. Whether 20.10.2008 can be construed as the deemed date of
handing over?
7. Whether the terms of the escrow agreement is relevant for these
arbitral proceedings and if so whether the claimant had complied with
more particularly clause 7?
33
8. Whether the sale deeds dated 19.12.2008 are supported by good
and valid consideration?
9. Whether the claimant is entitled to the various claims as prayed for?
10. Whether the respondents are entitled to the claims made under
their counter claims?
11. Whether the parties are entitled to the cost of the proceedings?
12. Whether the claimant was entitled to premature return of the
deposits from the respondents?
13. To what other reliefs the parties are entitled to?
35. The Award dated 16.03.2016 reflects that one witness each was
examined by the Company and the respondents. Two Engineers from an
independent agency, M/s Velu Associates, Engineers, were examined. The
Company marked 58 exhibits in evidence while the respondents marked 81
exhibits. The Report of M/s Velu Associates, Engineers, was Ex. A/1.
36. On the crucial issue pertaining to the Handover Date, the Arbitrator
noted that Clauses 6(a), (b) and (c) of the JDA were of relevance and, in
terms thereof, the requirements were summed up thus:
(i) Construction to be completed and fit for occupation;
(ii) The Project Architect was to certify to the landowners that the
building was complete and fit for occupation;
(iii) The Company should have applied for the Completion Certificate
from the Chennai Metropolitan Development Authority; and
(iv) The Company should, in writing, offer to handover the
landowners’ constructed area after fulfilling the three conditions.
37. The Arbitrator then dealt with the Project Architect’s Certificate dated
10.10.2008 (Ex. R/20) and opined that, even in terms thereof, the building
34
was not fit for occupation till power, water and sewerage connections were
provided and, as on the date of that certificate, those requirements had not
been fulfilled. The Arbitrator, therefore, found fault with the Project Architect
for issuing the said certificate stating that the building was fit for occupation
when it was not so. The Arbitrator held that the stand of the Project Architect
was untenable and was completely violative of its role contemplated under
the JDA. In consequence, the Arbitrator held that the certificate issued by the
Project Architect was totally invalid and unacceptable. The Arbitrator, in effect,
came to the conclusion that Clause 6(a) of the JDA remained unfulfilled. The
Arbitrator brushed aside the fact that a completion certificate had not only
been applied for but was also secured by the Company from the Chennai
Metropolitan Development Authority as he found that various requirements
under the JDA had not been complied with. The Arbitrator, therefore, held
against the Company not only on Issue No.1 but also on Issue Nos. 2, 3, 5
and 6. As regards Issue No.4, the Arbitrator was of the opinion that there was
no requirement to appoint an architect afresh as M/s Velu Associates,
Engineers, were appointed as independent engineers during the course of
the arbitral proceedings and a report was already submitted by them (Ex. A/1).
38. The Arbitrator relied upon the Engineers’ Report (Ex. A/1) and came to
the conclusion that major defects were found in the construction even in
March, 2011. Further, the Arbitrator concluded that the Escrow Agent,
HDFCL, was justified in not handing over the original power-of-attorney to the
35
Company. The Arbitrator opined that merely because a portion of the building
was made ready for occupation, in the context of the letter and list produced
by the Company, it did not mean that the entire building was ready for use
and occupation, as contemplated under the JDA. The Arbitrator, therefore,
held against the Company on Issue No. 7 with regard to the escrow
agreement. On Issue No. 8, pertaining to the validity of the sale deeds
executed by the Company in its own favour, the Arbitrator held that it was not
open to the Company to take the law into its own hands on the self-serving
and incorrect assumption that the escrow agent had colluded with the
respondents or failed to act neutrally. The Arbitrator, therefore, concluded that
the conduct of the Company reflected utter lack of bonafides and held in
favour of the respondents.
39. The relief to be granted as a consequence of such findings was also
discussed by the Arbitrator. According to him, ‘the situation created by the
Company, leading to the finding which was inevitable, was very complex and
unusual which required to be carefully dealt with and had, in fact, resulted in
some delay in devising a proper relief/Award which would be equitable to
both parties’. Having stated so in para 126 of the Award, we may note at this
stage, that the Arbitrator completely failed in finding a solution that was
‘equitable to both parties’ and, instead, tilted wholly in favour of the
respondents. The Arbitrator observed that there was no clause in the
agreement which specifically governed the peculiar scenario of the
36
unsustainable sales effected by the Company in its own favour. He observed
that there was no stipulation for either liquidated damages or a process for
assessing damages to fix fair and just compensation to be paid to the
respondents while setting aside the sales. He went on to observe that in the
event of the sales being set aside, the Company could not be deprived of its
entitlement under law!! Noting that the respondents had not offered any
solution so as to render full justice to both parties if the sales were held
invalid, he observed that the respondents would be required to restore all the
benefits received by them under the contract.
40. Therefore, per the Arbitrator, viewed from any angle, the sales being
held void or voidable would give rise to a corresponding obligation on the
respondents to restore the benefits received by them. However, as the
construction of the building was carried out by the Company and if the sale of
50% thereof in its favour was to be set aside, then the Company would be
entitled to be paid the expenditure incurred by it, if the contract was rescinded
by the respondents. At the same time, according to the Arbitrator, being a
wrongdoer, the Company which had acted illegally and unilaterally could not
be let off, as it would amount to putting a premium on its wrongdoing. The
Arbitrator then stated that, notwithstanding the above finding, granting of
consequential reliefs involved very complicated legal and factual hurdles. He
opined that the natural result of holding the sale deeds void and
unenforceable would lead to invalidating the entire contract, stripping the
37
Company of its rights over the property leading to its ejectment therefrom, but
this would not be possible without the respondents being directed to make
good/compensate the Company for the amounts invested by it under the JDA.
The Arbitrator observed that he had explored the possibility of moulding the
relief in a ‘proper and equitable manner’, as the respondents could not be
allowed to unjustly enrich themselves while the Company could not be
allowed to go scot-free, notwithstanding its illegal action.
41. The possible alternatives stated by the Arbitrator were that either the
respondents paid the Company for the entire work done by it or the Company
compensated the respondents for taking over its share under illegal
conveyances. According to the Arbitrator, the first alternative would mean that
the Company had to be ejected from the property but would receive
compensation in terms of Section 70 of the Indian Contract Act, 1872, while
the second alternative would mean that the Company, in order to retain its
share in the property, should pay proper compensation to the respondents for
obtaining void conveyances. The Arbitrator repeated himself by again stating
that the sales by the Company were illegal and unsustainable leading to a
very uncertain scenario in the matter of providing further relief but the
respondents had satisfied themselves by assailing the sales by the Company
in its own favour and had not suggested any solution/relief to fulfil the
requirements to which the Company would be entitled to under Section 70 of
the Indian Contract Act, 1872. He pointed out that the respondents had not
38
pleaded for any relief for themselves in the event of the sales being set aside.
He further noted that there was no provision in the JDA for liquidated
damages which would cover the situation of the sale deeds executed by the
Company being set aside on the ground of illegality. Further, he noted that
neither party had come forward with any pleading, much less proof, of the
actual compensation that would be payable to the Company on the sales
being held invalid or even if the entire contract became voidable, entitling the
respondents to rescind the contract.
42. The Arbitrator then stated that, in trying to find a solution which would
put an end to further litigation, he had also thought of devising a relief which
would be equitable to both parties, i.e., by holding that the security deposits
collected from the Company and later refunded by the respondents to the
Company should be treated as forfeited and treated as the compensation
payable by the Company to the respondents for executing the sale deeds in
its own favour in an illegal manner, so that such sales could stand regularized.
In other words, according to him, the Company would pay back the entire
amount of security deposits to the respondents as compensation for the
illegal sales effected by it in its own favour and both parties would thereby put
an end to the litigation. Strangely, he opined that it was not open to him to
grant such relief or quantify compensation in the absence of proper pleading
and proof. He, therefore, concluded that, apart from recording a finding and
declaring that the sale deeds in favour of the Company were invalid and
39
illegal, no further relief could be granted and he left it open to both parties to
work out their remedies in accordance with law by approaching the
competent forum, i.e., either the Civil Court or under the provisions of the Act
of 1996 again through another arbitrator, by putting forth appropriate
pleadings. Dealing with Issue Nos. 9 and 10, the Arbitrator observed that all
claims were rejected subject to the observations made by him. He, however,
noted that pursuant to his direction in an interlocutory application filed by the
respondents, they had returned the security deposits lying with them to the
Company which had, thereupon, put them in possession of their share.
Insofar as the interest on the refund of security deposits was concerned, the
Arbitrator had then directed the respondents to furnish a bank guarantee for a
sum of ₹1.56 crore in favour of the Company. He, therefore, held that there
was no necessity to grant any further relief and the Company would not be
entitled to any interest on the refund of its security deposits. As regards the
other claims and counter claims in monetary terms, the Arbitrator left it open
to both sides to take appropriate steps in accordance with law. In summation,
the Arbitrator ordered as under: -
‘I. The five sale deeds dated 19.12.2008 registered as Nos. 2890,
2891, 2892, 2893 and 2894 of 2008 in the office of the Sub Registrar,
Mylapore, Chennai, are declared as 'illegal' and not binding on the
Respondents and Respondents are entitled to execute appropriate
cancellation deeds.
II. No declaration is necessary in respect of the Lease Deeds
mentioned under para 2 of the counter claim in view of the Arbitrator
40
having been informed that the lease period under the said leases are
already over and fresh leases have to be executed only after April,
2016. It is declared that in view of the findings that the sale deeds in
favour of the Claimants are illegal and not binding on the Respondent,
the Claimant shall not have any right to lease any portion allotted
towards their 50% share in the property.
Ill. All the acts done and deeds executed on the basis of 5 sale deeds
dated 19.12.2008 are declared as non-est and illegal and the
Respondent shall be entitled to receive all the consequential benefits
acquired by the Claimant thereon.
IV. The Project Architect certificate dated 10.10.2008 of M/s. Natraj
and Venkat is declared as illegal, non-est, violative of the terms of
agreement and not binding on the Respondent.
V. Prayer Nos. 5 to 8 are rejected as unnecessary.
VI. All the individual items of claim under the claim statement as put
forth by the Claimant and the individual items of counter claims under
Prayer No. 9 to 23, and other additional claims made by both parties,
are not considered by the Arbitrator in view of the observations made
above. Such claims, counter claims, additional claims are left open to
both parties to take appropriate further proceedings in accordance
with law.
VII. There will no order as to costs and both parties to bear their
respective costs.’
In effect, the Company stood divested of the possession of its 50%
built-up share in the building and also the rentals received by it on the basis
of such possession, traceable to the sale deeds dated 19.12.2008, as it was
directed to make over the same to the respondents.
43. Notably, the Arbitrator had passed an interim order on 23.10.2010,
under Section 17 of the Act of 1996, whereby the respondents were directed
41
to return the security deposits to the Company and, thereupon, the Company
was directed to deliver possession of the respondents’ 50% share in the
building to them. This is the order that the Arbitrator referred to in the
concluding portion of the Award. We may note that, by passing this order
which was duly acted upon, the Arbitrator altered the factual position
wherefrom the parties could not revert to the status quo ante, as third-party
rights were created by the respondents in respect of their share of the
building. Having created that situation, the Arbitrator ought not to have
backtracked by failing to resolve the disputes between the parties. He placed
the parties in a paradoxical situation as they could not, thereafter, be restored
to the positions that they were in before the arbitration proceedings. Having
done so, he however left them to fend for themselves with an unresolved
scenario where only one party stood benefitted, i.e., the respondents.
44. Aggrieved by the Award, the Company filed OP No.231 of 2016 under
Section 34 of the Act of 1996. This petition was disposed of by a learned
Judge of the Madras High Court, vide order dated 23.12.2016. By the said
order, the learned Judge observed that though the Arbitrator had set forth
various ways in which the final relief could be moulded, he had stopped short
of firming up the final relief with regard to compensation to be paid either way,
that is, if, the sales were to be set aside, as was finally done or, in the
alternative, if, the sale transactions were to be regularised. Noting that these
observations were set out in paras 126 to 136 of the Award, the learned
42
Judge opined that what compounded the problem was the observation of the
Arbitrator that the parties could seek their remedies by taking recourse to a
Civil Court or by accessing the Act of 1996 again with the caveat that they
could not avail of his services. The learned Judge observed that by doing so,
the Arbitrator shut the door on exercise of power under Section 34(4) of the
Act of 1996, whereby the Arbitrator could have been called upon to rule on
undecided issues. Further, as the parties were not agreeable to treating the
Award as an Interim Award, leaving other issues to be addressed in a fresh
round of litigation, the learned Judge eschewed that option. The learned
Judge was of the opinion that the Arbitrator could have called upon the
parties to lead evidence for the purpose of determining compensation,
consequent to his finding that the sale deeds were illegal, as the JDA had not
been terminated by the respondents despite the breach by the Company.
According to the learned Judge, compensation for the delay caused and the
costs required to cure the defects in the building should have been the focal
point of adjudication by the Arbitrator. In that sense, per the learned Judge,
the arbitration proceedings remained inchoate and gave rise to another round
of litigation at a heavy cost to the parties, both tangible and intangible. The
learned Judge further opined that, if the Arbitrator was of the view that one of
the parties needed to be compensated, depending on which of the two
alternatives suggested by him was adopted, then the Arbitrator ought to have
logically processed the matter further on one of the two courses set out by
43
him. Holding that it was incumbent on the Arbitrator to decide all issues and
his failure to do so rendered the Award bad in law, thereby causing grave
prejudice to the parties, the learned Judge set aside the Award in part. The
finding of the Arbitrator with respect to the Company failing to comply with
Clause 6(a) of the JDA was sustained, along with all attendant findings, but
the learned Judge was disinclined to accept the Award to the extent it
invalidated the sale deeds executed by the Company in its own favour. This,
as per the learned Judge, would necessarily have to depend on the course of
action which the concerned adjudicator would take thereafter, as it would be
open to that adjudicator to permit the Company to claim title to its half-share
in the building by paying damages or, in the alternative, declare the sale
deeds invalid and allow payment of the cost of construction to the Company.
The learned Judge observed that, while taking recourse to such an alternative,
the concerned adjudicator would have to bear in mind the terms of the JDA
and the nature of the arrangement arrived at between the parties.
45. Both sides were aggrieved by the order dated 23.12.2016 passed by
the learned Judge. OSA No. 39 of 2017 was filed by the respondents while
the Company filed Cross-Objection No.58 of 2017 therein. A Division Bench
of the Madras High Court disposed of the matters on 30.01.2019. Noting that
the building in question was awarded the US Green Building Council Norms
and Standard Certification, the Division Bench observed that the core
question to be decided by it in the appeal and the cross-objection was as to
44
whether setting aside of the Award in part by the learned Judge was
sustainable. Considering the scope of Section 37 of the Act of 1996, the
Bench observed that it did not find any perversity in the Award as the
Arbitrator did not have the power to grant relief that went beyond what was
claimed by the parties. Referring to case law, the Bench observed that relief
not founded on pleadings could not be sustained and opined that the learned
Judge was not correct in finding fault with the Arbitrator for not finally deciding
the dispute between the parties. The Bench opined that, as the Company had
not sought any alternative relief, the Arbitrator was not at fault for failing to
grant relief to it after declaring the sale deeds illegal. The observation of the
learned Judge that the Arbitrator ought to have called upon the parties to lead
evidence, if necessary, and to amend their pleadings was, therefore, held to
be unsustainable. The order of the learned Judge to the extent it partly set
aside the Award was, therefore, set aside. In the result, the appeal filed by
the respondents was allowed and the Company’s cross-objection was
dismissed. Hence, these appeals by the Company.
46. Having given our earnest consideration to the Award in question, we
are of the opinion that the repetitions ad nauseam in the Award and the
vacillation by the Arbitrator as to what he should do clearly manifest that the
delay on his part contributed to his demonstrable indecisiveness. Having
stated at one stage that the situation created by the Company was very
complex requiring to be carefully dealt with resulting in some delay in devising
45
a proper relief/award which ‘would be equitable to both parties’, the Arbitrator
ultimately did not devise any such relief which was equitable to both parties
but held entirely in favour of the respondents. He set aside the sale deeds
executed by the Company in its own favour and divested it of its possession
over its 50% share in the building, apart from directing payment of all the
rentals received by it to the respondents. In effect, the Arbitrator left the
Company empty-handed with no relief whatsoever being granted to it except
for advice to take recourse to fresh litigation. The respondents, on the other
hand, were put in possession of their share of the building, free of cost and
without discharging their obligations in terms of the JDA. They were also
enriched to the extent of appropriating all the rentals collected by the
Company till 2016. As noted by the Arbitrator himself and affirmed by both the
Courts that heard the matter thereafter, the building was not built gratuitously
by the Company and it was to be given its 50% share in the building, along
with a corresponding share in the land, to be enjoyed by it and/or its
nominees with full rights. However, without that coming to pass, the Company
was left with nothing while the respondents got to enjoy the possession of
their share in the building for the past 15 years, provided to them free of cost
and without discharge of their corresponding obligations. In this scenario, the
respondents obviously did not think it fit to terminate the JDA!
47. Arbitration, an alternative dispute resolution mechanism, is envisioned
as a substitute to time-consuming and costly litigation in Courts. The aim and
46
objective of this mechanism is to ensure settlement of disputes between
parties with minimum intervention by the Court. That is the reason why
Section 34 of the Act of 1996 is crafted in a manner so as to restrict the
grounds on which the arbitrator’s award can be set aside. Unless the limited
grounds stipulated in the provision are made out, an arbitral award cannot be
invalidated. However, the very objective of the exercise would be lost if, after
the entire process, an arbitrator fails to resolve the disputes between the
parties and leaves them high and dry with advice to initiate a fresh round of
arbitration/litigation once again. In his article, ‘Arbitrators and Accuracy’
(supra), Professor William W Park says as follows:
‘An arbitrator’s primary duty remains the delivery of an accurate
award, resting on a reasonably ascertainable picture of reality.
Litigants wanting only quick or cheap solutions can roll dice, and
have no need of lawyers. Evidentiary tools in arbitration should
balance sensitivity toward cost and delay against the parties’ interest
in due process and correct decisions. If arbitration loses its moorings
as a truth-seeking process, nostalgia for a golden age of simplicity
will yield to calls for reinvention of an adjudicatory process aimed at
discovering the facts, finding the law, and correctly construing
contract language….Much of the criticism of arbitration’s cost and
delay thus tells only half the story, often with subtexts portending a
cure worse than the disease. An arbitrator’s main duty lies not in
dictating a peace treaty, but in delivery of an accurate award that
rests on a reasonable view of what happened and what the law says.’
48. The Arbitrator in this case took nearly 4 years to conclude that he had
no equitable relief to offer both parties but held in favour of one side in all
respects, leaving it to the parties to start litigating again. He conveniently
47
opined that proper pleadings and evidence had not been placed before him
and, therefore, he was constrained to relegate the parties to another round of
litigation, ignoring the fact that he had already altered their positions and had
benefitted one party at the expense of the other. This approach on the part of
the Arbitrator, after dithering for nearly 4 years, served absolutely no purpose
and reflected total non-application of mind. The delay in the making of the
Award resulted in nearly four valuable years passing away with no benefit to
show for it. When the public policy underlying resort to arbitration is to make it
a time-saving mechanism for resolving disputes, this unexplained and
pointless delay of the Arbitrator in concluding the matter clearly pitted his
ineffective and futile Award against the public policy of India.
49. Significantly, in MMTC Limited vs. Vedanta Limited 20 , this Court
observed that it is well-settled that, in exercise of power under Section 34 of
the Act of 1996, the Court would not sit in appeal over an arbitral award and
would interfere on merits only if the award was found to be against the public
policy of India. It was noted that violation of public policy would include
violation of the fundamental policy of Indian law, violation of the interest of
India, conflict with justice or morality or the existence of patent illegality in the
arbitral award. Patent illegality was held to mean contravention of the
substantive law of India, contravention of the Act of 1996 and contravention of
the terms of the contract. It was also noted that after the amendment to
20 (2019) 4 SCC 163
48
Section 34 in the year 2015, the position stood modified as Explanation 1 to
Section 34(2) demonstrated that contravention of public policy of India would
now mean fraud or corruption in the making of the award or contravention of
particular provisions of the Act of 1996 or of the fundamental policy of Indian
law and conflict with the most basic notions of justice and morality. Further,
Section 34(2A) of the Act of 1996 provides that in domestic arbitrations,
patent illegality appearing on the face of an award is a ground to set it aside.
50. In Ssangyong Engineering and Construction Company Limited vs.
National Highway Authority of India21, this Court observed that a domestic
award would be liable to be set aside if it is contrary to the fundamental policy
of Indian law, as understood in paras 18 and 27 of Associate Builders vs.
Delhi Development Authority22, or if it is against the basic notions of justice
or morality, as set out in paras 36 to 39 thereof. It was noted that Explanation
2 to Section 34(2)(b)(ii) and Explanation 2 to Section 48(2)(b)(ii) were added
by Amendment Act No.3 of 2016 only to ensure that the law laid down in Oil
and Natural Gas Corporation Limited vs. Western Geco Internation
Limited23, as understood in paras 28 and 29 of Associate Builders (supra),
was done away with. Further, it was noted that an additional ground was
made available under Section 34(2A), brought in by Amendment Act No.3 of
2016, and that the patent illegality appearing on the face of the award must
21 (2019) 15 SCC 131
22 (2015) 3 SCC 49
23 (2014) 9 SCC 263
49
go to the root of the matter, but would not amount to mere erroneous
application of law. It was also noted that a decision which was perverse, as
understood in paras 31 and 32 of Associate Builders (supra), while no
longer being a ground of challenge apropos the public policy of India would
certainly amount to patent illegality appearing on the face of the award.
51. More recently, the scope of interference with an arbitral award in
exercise of power under Section 34 of the Act of 1996, which would also
define the contours of the appellate jurisdiction under Section 37 thereof, was
settled by a Constitution Bench in Gayatri Balasamy vs. ISG Novasoft
Technologies Limited24. The majority opinion therein held that the Court
would have a limited power under Sections 34 and 37 to modify an arbitral
award in the following circumstances -1. When the arbitral award is severable,
by severing the invalid portion from the valid portion of the award; 2. By
correcting any clerical, computational or typographical errors which appear on
the face of the award as well as other manifest errors, provided that such
modification does not necessitate a merits-based evaluation. 3. By modifying
post-award interest in certain circumstances; and 4. By exercise of power
under Article 142 of the Constitution, albeit such power being exercised with
great care and caution and within the limits of the constitutional power.
52. We may now note certain undeniable factual aspects in the case on
hand. The building is now complete and the floors falling to the share of the
24 (2025) 7 SCC 1
50
respondents have been put to beneficial use by them, since the delivery of
possession thereof pursuant to the direction of the Arbitrator on 20.10.2010.
The floors that fell to the share of the Company, which were put to use by it till
the passing of the Award, have remained vacant and unused since then. The
Company obtained Certificate dated 10.10.2008 from the Project Architect
that the building was completed according to the sanctioned plan and was fit
for occupation. Further, the Company not only applied for a Completion
Certificate from the Chennai Metropolitan Development Authority in July,
2008, but also obtained it on 14.11.2008. The Company wrote to the
respondents on 20.10.2008, stating that it was ready to handover their 50 %
share of the constructed area to them and that it should be treated as the
‘Handover Date’. These acts on the part of the Company confirmed that the
three conditions stipulated in Clauses 6(a), (b) and (c) of the JDA stood duly
complied with.
53. In this context, the review and exercise undertaken by the Arbitrator to
assess the ‘validity’ of the Project Architect’s Certificate dated 10.10.2008 is
open to question. As already noted hereinbefore, Clause 6(a) of the JDA
reads as follows:
‘a. LG completes the construction of the building in
all respects, including the LAND–OWNERS
CONSTRUCTED AREA fit for occupation and the
Architects for the project certify to the LAND
OWNERS that the building has been put up and
completed according to the sanctioned plan and is
fit for occupation.’
51
It is clear from a bare reading of the above clause that the certification
by the Project Architect was only to confirm that the building had been put
up and completed according to the sanctioned plan and was fit for
occupation. The phrase had to be read in its entirety and with continuity. By
reading it so, it reflects that the ‘fitness for occupation’ was only in the
context of the building being completed in accordance with the sanctioned
plan and no more. The next clause, viz., Clause 6(b) is of relevance in this
regard and it reads as follows:
‘LG has applied to the Chennai Metropolitan
Development Authority for Completion Certificate
in respect of the said building’.
It may be noted that this clause only required the Company to apply for
the completion certificate and it was not necessary that the said certificate
should have been issued by the Handover Date. In this regard, we may note
that unless a completion certificate is issued by the competent authority,
neither an electrical connection nor a water supply and sewerage connection
would ordinarily be provided to a building. Therefore, the Arbitrator’s finding
that provision of such facilities must also be read into Clause 6(a) to certify
the ‘fitness of the building for occupation’ would tantamount to putting the cart
before the horse. Further, the Arbitrator completely overlooked the fact that
the Project Architect was appointed with the consent of the respondents and
neither the searching scrutiny of the Project Architect’s certificate nor a
challenge thereto by the respondents was contemplated by Clause 6(a) of the
52
JDA. Mere issuance of that certificate by the Project Architect was sufficient
to confirm compliance with Clause 6(a). In this regard, useful reference may
be made to the observations of a 3-Judge Bench of this Court in OPG Power
Generation (P) Ltd. v. Enexio Power Cooling Solutions (India) (P) Ltd.25,
which are extracted hereunder:
84. An Arbitral Tribunal must decide in accordance with the terms of
the contract. In a case where an Arbitral Tribunal passes an award
against the terms of the contract, the award would be patently illegal.
…. where, on a full reading of the contract, the view of the
Arbitral Tribunal on the terms of a contract is not a possible view, the
award would be considered perverse and as such amenable to
interference [South East Asia Marine Engg. & Constructions
Ltd. v. Oil India Ltd., (2020) 5 SCC 164 : (2020) 3 SCC (Civ) 1].
Therefore, the exercise undertaken by the Arbitrator and his findings
thereon were utterly perverse, as he completely misconstrued and
misunderstood the scope of what was intended under Clauses 6(a), (b) and
(c) of the JDA.
54. In any event, as already noted, the Company secured all the necessary
certificates and clearances in October/November 2008 itself. Admittedly,
certain shortcomings were still there in the building, that is, with regard to the
slipshod tiling of the staircase; water seepage in the basement area and, in
particular, the electrical room; and the erection of a canopy. However, these
shortcomings were not sufficient to infer violation of Clause 6(a), whereby the
25 (2025) 2 SCC 417
53
respondents could have said that the building was not fit for occupation. It
may be noted that after the passing of the interim order dated 20.10.2010 by
the Arbitrator, the respondents themselves executed a registered lease deed
on 14.02.2011 renting out the 8th floor in the building to Cognizant
Technology Solutions India Pvt. Ltd. for a monthly rental of ₹13,44,070/-. The
lease was to commence from 15.12.2010 and was for a period of nine years,
with rental escalation every three years. This lease deed demonstrates that
the building was ready for occupation and use at least by December, 2010.
55. The Arbitrator, therefore, clearly fell into error in reading more into
Clause 6(a), (b) and (c) than was permissible. The Award was ultimately
passed by him with a delay of nearly 4 years, not even settling the matter
finally but requiring the parties to litigate or seek arbitration afresh. In
Ssangyong Engineering and Construction Company Limited (supra), it
was observed that an argument to set aside an award on the ground of
being in conflict with “most basic notions of justice” can be raised only in
very exceptional circumstances, that is, when the conscience of the Court
is shocked by infraction of some fundamental principle of justice. The
undue delay and wavering attitude of the Arbitrator, contributing to his
rudderless Award, are utterly shocking, to say the least, as he totally lost
sight of the very purpose of the exercise. Further, owing to the pointless
Award passed by him with a delay of nearly 4 years, the parties were left
with no option but to litigate once again in relation to a contract dating back
54
to the year 2004! The Award is, therefore, liable to be set aside as it is in
clear conflict with the public policy of India and is also patently illegal.
56. That being settled, we are now faced with the issue as to what would be
the best course of action to be taken at this late stage. Merely setting aside
the Award would mean that the parties may have to take recourse to
arbitration or litigation once again. But that is also not a possible course of
action, given the fact that much water has flown under the bridge pursuant to
the interim and final directions of the Arbitrator. The respondents were given
possession of their share of the building in the year 2010 itself and they have
inducted third parties into their allotted floors under lease deeds. The situation
created by the Arbitrator, vide his interim order, is irreversible after this length
of time. We are, therefore, of the opinion that this is a fit case for exercise of
jurisdiction under Article 142 of the Constitution so as to do complete justice
at this stage, instead of relegating the parties to another round of arbitration/
litigation, incurring more costs and expending more valuable time.
57. In the context of this Court’s power to do complete justice in a matter of
this nature under Article 142 of the Constitution, the observations in Gayatri
Balasamy (supra) are of guidance. The same are extracted hereunder:
‘84. As far as the applicability of Article 142 of the Constitution is
concerned, this power is to be exercised by this Court with great care
and caution. Article 142 enables the Court to do complete justice in
any cause or matter pending before it. The exercise of this power has
to be in consonance with the fundamental principles and objectives
behind the 1996 Act and not in derogation or in suppression thereof.
55
86. While exercising power under Article 142, this Court must be
conscious of the aforesaid dictum. In our opinion, the power should
not be exercised where the effect of the order passed by the Court
would be to rewrite the award or modify the award on merits.
However, the power can be exercised where it is required and
necessary to bring the litigation or dispute to an end. Not only would
this end protracted litigation, but it would also save parties' money
and time.’ (emphasis is ours)
58. Reference was made in Gayatri Balasamy (supra) to the earlier
Constitution Bench decision in Shilpa Sailesh vs. Varun Sreenivasan26,
which summarized the scope of the power under Article 142 of the
Constitution and, in particular, para 19 thereof, which reads as under:
“19. Given the aforesaid background and judgments of this Court, the
plenary and conscientious power conferred on this Court under
Article 142(1) of the Constitution of India, seemingly unhindered, is
tempered or bounded by restraint, which must be exercised based on
fundamental considerations of general and specific public policy.
Fundamental general conditions of public policy refer to the
fundamental rights, secularism, federalism, and other basic features
of the Constitution of India. Specific public policy should be
understood as some express pre-eminent prohibition in any
substantive law, and not stipulations and requirements to a particular
statutory scheme. It should not contravene a fundamental and
non-derogable principle at the core of the statute. Even in the
strictest sense, it was never doubted or debated that this Court is
empowered under Article 142(1) of the Constitution of India to do
“complete justice” without being bound by the relevant provisions of
procedure, if it is satisfied that the departure from the said procedure
is necessary to do “complete justice” between the parties.
26 (2023)14 SCC 231
56
59. Therefore, while exercising power under Article 142, this Court must be
conscious of the dictum in Shilpa Sailesh (supra). Further, such power
should not be exercised where the effect of the order of this Court would be to
rewrite the arbitral award or modify it on merits, but such power can be
exercised where it is required and necessary to bring the litigation or dispute
to an end as this would not only end protracted litigation but would also save
parties money and time. The caveat is, therefore, subject to that exception
and would ordinarily be applicable in a case where there is an ‘arbitral award’
to begin with, i.e., an award that resolved the issues between the parties one
way or the other, but is found to be perverse, opposed to public policy or
patently illegal and, in consequence, unsustainable. Presently, that is not the
situation as we find that the Arbitrator failed to render an arbitral award in the
true sense, though he rendered findings on the factual issues framed by him,
as he did not resolve the disputes between the parties. Further, in terms of
interpretation of the JDA, we find all the findings of the Arbitrator to be
perverse, being opposed to the clear language of the relevant clauses in the
JDA. Only the finding with regard to the illegality shrouding the execution of
the sale deeds by the Company in its own favour is valid and sustainable.
However, having held so, after altering the parties’ positions irrevocably with
his interim direction, the Arbitrator left them hanging by directing them to
separately seek resolution of Issues 9 and 10 framed by him, with regard to
the relief to be granted, through a fresh resolution process all over again.
57
60. Given these circumstances, we are of the firm opinion that exercise of
jurisdiction under Article 142 of the Constitution is the only viable alternative
in this case as the other alternative would be to set aside the Award, thereby
relegating the parties to another round of arbitration/litigation after 16 years!
Doing so would be a travesty of justice and nothing short of making a
mockery of the process to the extent of shaking the very faith and trust that
parties necessarily have to repose when they resort to arbitration to settle
their disputes. As observed in Gayatri Balasamy (supra), the power under
Article 142 can be exercised where it is required and necessary to bring the
litigation or dispute to an end as it would not only end protracted litigation, but
would also save parties' money and time. That apart, as already noted,
relegating the parties to fresh arbitration/litigation after setting aside the
Award is not even a plausible option in this case as it is not possible to turn
back the clock and restore the parties to the status quo ante, owing to the
developments after delivery of possession of the respondents’ share of the
building in 2010, resulting in creation of third-party interests. The undeniable
fact as on date is that the respondents are enjoying their 50% share of the
building by putting the same to beneficial use, while the Company has been
divested of occupation and use of its 50% share since passing of the Award.
61. We are conscious of the fact that the Company resorted to patent
illegality in executing registered sale deeds in its own favour on the strength
of a photocopy of the second power-of-attorney, the original of which
58
remained with the escrow agent, HDFCL, knowing fully well that this course
of action on its part was opposed to the terms of the contract. The Company
must necessarily be penalized for this illegal action. Further, it is not possible
at this stage to determine with precision the incomplete works that were there
in the building which were attended to by the respondents at that time.
However, the fact remains that the respondents would have expended funds
and effort to complete the building in all respects so as to put their share
therein to beneficial use and they deserve to be compensated therefor.
62. Given these facts, we are of the opinion that equities and the interest of
justice would be sufficiently served by directing that the execution of the sale
deeds by the Company on 19.12.2008, though unlawful in its inception as it
was based on a violation of the agreement terms and was without obtaining
the original power-of-attorney from the escrow agent, HDFCL, should be
treated as lawful and valid at this stage, instead of requiring their cancellation
and execution of fresh sale deeds involving payment of higher stamp duties
and registration charges. This would, however, be at the cost of penalizing
the Company for such violation, by directing forfeiture of the security deposits
of ₹6.82 crores. Further, as the respondents have to be compensated for the
works undertaken by them for the completion of the building, we consider it
appropriate to grant a sum of ₹3.18 crores under this head, so as to bring the
amount payable by the Company to a round figure of ₹10 crores. This amount
shall be paid by the Company to the respondents within three months from
59
today, be it in lump sum or in instalments. Upon making the full payment of
this amount, the Company would be entitled to take possession of its 50%
share in the building, in keeping with the terms of the JDA with regard to the
apportionment and sharing of the built-up areas and the common areas, apart
from the share in the land itself. The parties would then be at liberty to deal
with and enjoy their respective shares in the building. This arrangement, in
our considered opinion, would bring the curtains down and end this litigation
while doing justice to both parties, who would otherwise be required to initiate
a fresh round of arbitration/litigation, involving more time and money.
63. To conclude, the questions framed for consideration in these appeals
are answered as under:
(i) What is the effect of undue and unexplained delay in the
pronouncement of an arbitral award upon its validity?
- Delay in the delivery of an arbitral award, by itself, is not sufficient to
set aside that award. However, each such case would have to be
examined on its own individual facts to ascertain whether that delay had
an adverse impact on the final decision of the arbitral tribunal, whereby
that award would stand vitiated due to the lapses committed by the
arbitral tribunal owing to such delay. It is only when the effect of the
undue delay in the delivery of an arbitral award is explicit and adversely
reflects on the findings therein, such delay and, more so, if it remains
unexplained, can be construed to result in the award being in conflict
with the public policy of India, thereby attracting Section 34(2)(b)(ii) of
the Act of 1996 or Section 34(2A) thereof, as it may also be vitiated by
patent illegality. Further, it would not be necessary for an aggrieved
party to invoke the remedy under Section 14(2) of the Act of 1996 as a
60
condition precedent to lay a challenge to that delayed and tainted
award under Section 34 thereof.
(ii) 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?
- The very basis and public policy underlying the process of arbitration
is that it is less time-consuming and results in speedier resolution of
disputes between the parties. If that premise is not fulfilled by an
unworkable arbitral award that does not resolve the disputes between
the parties, on one hand, leaving them with no choice but to initiate a
fresh round of arbitration/litigation but the arbitrator, in the meanwhile,
also changed their positions, irrevocably altering the pre-existing
balance between the parties prior to the arbitration, then such an
arbitral award would not only be in conflict with the public policy of India
but would also be patently illegal on the face of it. It would therefore be
liable to be set aside under Section 34(2)(b)(ii) and/or Section 34(2A) of
the Arbitration and Conciliation Act, 1996. Further, if the necessary
conditions for exercise of power by this Court under Article 142 of the
Constitution of India are made out, in terms of the Constitution Bench
decision in Gayatri Balasamy vs. ISG Novasoft Technologies
Limited (supra), this Court would be justified in exercising such
jurisdiction.
64. The appeals are accordingly allowed, in terms of what has been stated
in paras 60 to 62 hereinabove.
61
In the circumstances, parties shall bear their own costs.
..............................., J
(SANJAY KUMAR)
………………............................., J
(SATISH CHANDRA SHARMA)
October 31, 2025
New Delhi.
