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

The Delhi High Court has ruled that an arbitral award passed after an inordinate, substantial and unexplained delay would be “contrary to justice and would defeat justice”. Consequently, the same would also be in conflict with the public policy of India. 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 ...

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

Parina Katyal

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