Arbitral Award Passed After Inordinate, Unexplained Delay Is Contrary To Justice and Public Policy : Delhi High Court

The bench of Justice Chandra Dhari Singh was hearing a petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act), challenging the arbitral award on the ground that it had been passed after a long and substantial delay of 18 months.

The court reckoned that there was a substantial gap of more than 1.5 years between the date of reserving the award and the date of the award.

The court held that the inordinate and unexplained delay in rendering the award, made it amenable to challenge under Section 34(2)(b)(ii) of the A&C Act, i.e., for being in conflict with the public policy of India. It further held that by virtue of the provisions of Section 29A of the A&C Act- which specifically states the time limit for passing an arbitral award- the award was in the teeth of the law due to lack of jurisdiction of the Arbitrator, which stood terminated in accordance with the said provisions.

The bench added that a substantial delay in making the award cannot be a regular phenomenon and that the Arbitrator must use reasonable despatch in conducting the proceedings and making an award. It further observed that the question whether the delay in pronouncement of the arbitral award places it in conflict with the public policy of India, must be construed in the facts of each case.

The court remarked that of late, the Alternate Dispute Resolution (ADR) mechanisms, including arbitration, have been facing heat over their real effectiveness and whether they are indeed meeting the objectives behind their introduction to the legal system. The court said that a common criticism faced by arbitration nowadays is that the arbitral tribunals are taking too long to render the awards.

The respondent-claimant, Star Bus Services Pvt Ltd, executed a Concessionaire Agreement with the Department of Transport, Government of the National Capital Territory of Delhi (GNCTD), for provision of bus services.

After certain disputes arose between the parties under the contract, the same were referred to arbitration and an arbitral award was passed in favour of the claimant, Star Bus. Against this, GNCTD filed a petition under Section 34 of the A&C Act before the Delhi High Court.

GNCTD claimed that the award had been passed after a delay of 18 months. It submitted that the last hearing in the arbitral proceedings was held on 8.09.2018 and the award was passed on 9.06.2020. It averred that there was no explanation or justification in the arbitral award for such a gross delay.

The High Court noted that where the arbitration agreement between parties makes a provision for the time limit, the parties are bound by the terms of the agreement. Further, the Arbitrator is bound to make and publish his award within the time mutually agreed. Without consent to any extension of the said time-limit, the arbitral authority comes to an end.

The court also remarked that even where the parties have not expressly agreed upon a set time limit, it is the arbitrator’s duty to render the award without any undue delay.

The court added that it is easy to determine delay when the parties have already agreed upon the time limit in the arbitration contract. However, when there is no explicit mention of this in the agreement, it becomes important to understand what constitutes delay.

The bench held that it is difficult to impose a uniform timeline for all arbitration cases; thus, the issue as to how much time would actually constitute a delay, must be answered on a case-to-case basis. “The more time passes, the more significant is the fading of the memories of arbitrator start to fade with respect to the details of the case. Subsequently, the delay would have a negative impact on the quality of the award. This however varies from case to case as all arbitrations need not rely on facts and evidence alone, but for those which are merely legal in nature and addresses the law, the impairment of memory would not play as big a role. Therefore, it is difficult to impose a uniform timeline for all arbitration cases and hence this question regarding how much time would actually constitute a delay must be answered on a case-to-case basis,” said the court

It noted that, while jurisdictions like Turkey, Taiwan, Egypt, Syria, Sudan and even India, have incorporated time limits- within which an award must be rendered- into their national laws, jurisdictions like Italy and Belgium have provisions granting parties the autonomy to decide the time limit within which arbitral tribunals must make an award.

“In comparison to these jurisdictions, there is lack of party autonomy in deciding time limit for the arbitration in India under Section 29A which does not provide the parties any autonomy in deciding the time frame of their proceedings or even for extension for the time limit,” the court said.

While considering the issue whether undue delay can be taken as a ground for challenging the award, the court said that the setting aside of an award is generally allowed only in appropriate circumstances where delay is caused. The bench held that since there is no uniform law on this subject, the courts in India have adopted a case-to-case analysis of this issue.

The court further observed that the question whether the delay in pronouncement of the arbitral award places it in conflict with the public policy of India, must be construed in the facts of each case.

Referring to a catena of judgments, the bench concluded, “Having discussed the aforesaid, this Court is of the view that the award passed after an inordinate, substantial and unexplained delay would be “contrary to justice and would defeat justice”. Clearly, the award which defeats justice would be in conflict with the public policy of India. In the given circumstances, this Court is of the view that inordinate, and unexplained delay in rendering the award makes it amenable to challenge under Section 34(2)(b)(ii) of the Arbitration and Conciliation Act, that is, being in conflict with the public policy of India.”

Perusing the facts of the case, the court noted that there was a substantial gap of more than 1.5 years between the date of reserving the award and the date of award. “A large time gap between hearing of the oral submissions and rendering the decision would, in effect, debilitate the purpose of resorting to arbitration for expeditious adjudication of the disputes. No person can be expected to remember the same after a long period of time. In the instant case, the delay has not even been explained by the learned Arbitrator in the said award,” said the court.

The court further observed that the award was also vitiated due to the lack of jurisdiction of the Arbitrator in view of Section 29A of the A&C Act.

29A of the A&C Act mandates that all proceedings must be completed within a period of 12 months starting from the date when the arbitral tribunal enters upon reference. A further 6-month extension may be granted by the consent of the parties. However, after this period ends, the mandate of the tribunal stands cancelled unless extended by a civil court.

The court thus concluded, “Therefore, the award stands vitiated on two terms, firstly for an inordinate, unexplained and substantial delay of more than 1.5 years from the date on which the award was reserved, thus being in contravention of public policy of India; and Secondly, by virtue of the provision of Section 29A (1) read with Section 29A (4), the award is in the teeth of law due to the lack of jurisdiction of the arbitrator which stood terminated in accordance with the said provisions.”

The court thus allowed the petition and set aside the award.

Case Title: Department of Transport, GNCTD vs Star Bus Services Pvt Ltd

Citation: 2023 LiveLaw (Del) 421

Dated: 16.05.2023

Counsel for the Petitioner: Mr. Darpan Wadhwa, Sr. Advocate with Mr. Sameer Vashisht, ASC (Civil) for GNCTD alongwith Ms. Sanjana Nangia, Advocate

Counsel for the Respondent: Mr. Paras Kuhad, Sr. Advocate with Mr. K.R. Sasiprabhu, Mr. Manu Aggarwal, Mr. Jitin Chaturvedi, Mr. Vishnu Sharma and Mr. Manan Shishodia, Advocates

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