Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | C.A. No.-010074-010075 – 2024 |
| Diary Number | 6448/2019 |
| Judge Name | HON’BLE MR. JUSTICE SANJAY KUMAR |
| Bench | HON’BLE MR. JUSTICE SANJAY KUMAR; HON’BLE MR. JUSTICE ALOK ARADHE |
| Precedent Value | Binding authority on all subordinate courts |
| Overrules / Affirms |
|
| Type of Law | Arbitration and Conciliation Act, 1996; Article 142, Constitution of India |
| Questions of Law |
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| Ratio Decidendi |
The Court held that unexplained delay alone is not a standalone ground under Section 34 of the 1996 Act but, if such delay adversely affects the arbitrator’s decision—by causing forgetfulness, suspicion or selective recollection—and the award fails to resolve disputes finally or irreversibly alters parties’ positions, it may contravene the public policy of India or suffer patent illegality under Sections 34(2)(b)(ii) or 34(2A). Further, where arbitration has produced an unworkable result and parties’ positions cannot be restored—exemplified here by an interim order granting possession and creation of third-party rights—the Supreme Court may mould relief under Article 142 to bring finality and do complete justice. |
| Judgments Relied Upon |
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| Logic / Jurisprudence / Authorities Relied Upon |
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| Facts as Summarised by the Court |
Brothers owning land contracted with developer under a Joint Development Agreement requiring completion, certification and Handover within specified conditions; developer furnished deposits and allegedly completed building by late 2008, obtained completion certificates and entered leases, but landowners disputed completion; arbitration was invoked, Arbitrator reserved award in July 2012 but pronounced it only in March 2016 without satisfactory explanation, issued an award that declared certain sales illegal yet failed to quantify relief, and directed parties to seek fresh proceedings, altering factual possession positions by interim order and creating third-party rights. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All subordinate courts (as a binding Supreme Court precedent on delay and unworkable awards) |
| Persuasive For | High Courts and tribunals (in arbitration challenges under Section 34 and applications for Article 142 relief) |
| Overrules | The “delay per se” approach adopted in some decisions that delay alone—without adverse impact—can vitiate an award |
| Distinguishes | Peak Chemical and Niko Resources (which declined to set aside awards on delay alone)—confirms factual urgency and adverse-impact tests for delay challenges |
| Follows | Associate Builders v. DDA; MMTC Ltd. v. Vedanta Ltd. (on public-policy and patent-illegality standards) |
What’s New / What Lawyers Should Note
- Supreme Court clarifies that unexplained, unreasonable delay does not automatically invalidate an award but may do so if the delay adversely impacts the tribunal’s findings or gives rise to suspicion, forgetfulness or selective recollection.
- Awards that fail to resolve disputes finally yet permanently alter parties’ rights (e.g., by interim orders creating third-party interests) can be set aside as opposed to the public policy of India and patently illegal.
- No pre-condition to invoke Section 14(2) (termination of arbitrator’s mandate) before challenging an award under Section 34 on delay or unworkability grounds.
- Court may invoke Article 142 to mould relief and bring finality where an award is unworkable and parties’ positions cannot be restored, avoiding protracted fresh arbitration or litigation.
Summary of Legal Reasoning
- Delay Not a Standalone Ground: Delay alone is not enumerated in Section 34; each case must be fact-sensitive to determine if delay adversely affected the fairness or content of the award.
- Public-Policy and Patent Illegality: Awards can be set aside under Section 34(2)(b)(ii) or 34(2A) if they violate fundamental policy of Indian law or manifest patent illegality, including adverse effects of delay or unworkable outcomes.
- Statutory Scheme: Prior to Section 29A insertion, remedies for dilatory arbitrators lay under Section 14(2). Post-2015 amendments impose strict timelines but non-compliance remains challengeable under existing public-policy grounds.
- Unworkable Award Test: If an award fails to settle disputes finally, yet irrevocably alters parties’ positions—making restoration of status quo impossible—it conflicts with arbitration’s object of speedy finality.
- Article 142 Jurisdiction: Where award setting aside would lead only to fresh, lengthy disputes (here, creation of third-party leases and possession since 2010), Supreme Court may use Article 142 to mould relief and do complete justice.
Factual Background
The landowners and developer entered a 2004 Joint Development Agreement for constructing a building, with the developer depositing ₹6.82 cr and obligated to hand over 50% of built-up area upon completion and certification. By late 2008 the developer obtained completion certificates and claiming the “Handover Date” but landowners disputed non-compliance of certain works. Arbitration was commenced; the sole arbitrator reserved award in July 2012 but pronounced it only in March 2016 without adequate explanation, delivered findings against the developer’s compliance, invalidated its self-conveyances but failed to quantify relief, and directed parties to initiate fresh proceedings, all the while having granted interim possession to the landowners in 2010.
Statutory Analysis
- Section 23 & 28 (Arbitration Act, 1940): Time for making award regulated by Court and extendable; delay viewed as grave misconduct pre-1996.
- Section 14 (Arbitration Act, 1996): Mandate can be terminated for “failure to act without undue delay”; Court remedy under Section 14(2)—not mandatory prerequisite for Section 34 challenge.
- Section 29A (1996 Act, as amended 2015): Domestic awards to be made within 12 months of reference; parties may extend up to six months; further extension only by Court on cause shown.
- Section 34 (1996 Act): Limited grounds for setting aside—fraud, violation of public policy, patent illegality; Explanation 1 clarifies “public policy” includes basic justice and morality; Section 34(2A) adds patent illegality as standalone ground.
- Article 142 (Constitution): Enables Supreme Court to mould relief and do “complete justice” where strict application of statutory procedure would fail to resolve disputes finally.
Alert Indicators
- ✔ Precedent Followed – Affirms and refines public-policy and patent-illegality tests under Section 34
- ⚖️ No Split Verdict – unanimous two-judge bench on principles of delay and Article 142 jurisdiction