The Madras High Court recently set-aside an Arbitral Award on the grounds of inordinate and unexplained delay in passing it.

The Court was dealing with a Petition under Section 34(1) of the Arbitration and Conciliation Act, 1996 seeking setting-aside of the original award.

The single-bench of Justice P.B. Balaji observed, "I am constrained to set aside the award on the only ground that there has been an inordinate and unexplained delay in passing the award."

The Petitioner was represented by Advocate K. Aparna Devi while the Respondent as represented by Standing Counsel P.T. Ramkumar.

Facts of the Case

Counsel for the Petitioner argued that the delay in passing the award renders the award liable to be set aside, without even going into the merits. It was submitted that the Arbitrator, in a haste to pronounce the award, mingled issues together without any substance or basis whatsoever and therefore, the award passed is liable to be set aside, even if not on the ground of delay.

It was further submitted that the arguments were closed before the Arbitrator on 03.01.2017 and the matter was reserved for passing of the award. However, since there was a delay in passing the award, the petitioner made a mention to the Arbitrator and a fresh hearing was held on 06.01.2018 and on the same day, orders were again reserved in the matter. Subsequently also, there was an inordinate delay on the part of the Arbitrator to pronounce the award.

He also referred to the Petition filed under Sections 14 and 15 of the Act in view of non-passing of the award within a reasonable time and contended further that immediately on the said OP being taken on file, the Arbitrator had hastily proceeded to pass the award and an e-mail was sent to the Counsel for the Petitioner the next day. It was his contention that the Arbitrator ought to have given cogent and satisfactory reasons explaining the delay in pronouncing the award. It was stated that the reason for the omission to answer some of the claims is only because of the filing of Petition under Sections 14 & 15 of the Act and an immediate requirement to pass an award which has resulted in such a hasty award being passed by the Arbitrator.

Reasoning By Court

The Court at the outset noted that before the Amendment Act, there was no provision which required the Arbitrator to pass an award within a particular period of time. It asserted that delay would certainly affect the validity of an award.

The Court referred to Eagle Earthmovers (supra) wherein it was held that the appropriate length of time to pronounce a verdict in any legal proceedings would have to be considered as to whether the delay in the facts of the case would warrant setting aside the award, on the ground of delay.

"........the question of delay on the part of the Arbitrator or the Arbitral Tribunal in passing an award has not been appreciated by the High Courts as well as the Hon'ble Supreme Court in several cases. Even though there was no specific time frame for passing the award, the Courts, by various rulings have consistently expected the Arbitrators/Arbitral Tribunals to pronounce the award within a reasonable time," the Court observed.

The Court pointed out that in various cases the Arbitral Tribunal/ Arbitrator have been rebuked for the delay in publishing the award and on the ground of delay alone the awards have been set-aside.

".........when there is a delay, the Arbitral Tribunal/Arbitrator is bound to explain the delay by giving satisfactory reasons...........the parties concluded their oral submissions on 03.01.2017, on which date the Arbitrator adjourned the proceedings 'sine die' and also if the Arbitrator entertains any doubt, he will post the case on any date, after informing the parties for necessary clarifications," the Court observed.

It stated that though Section 31(5) of the Act, mandates that the Arbitral award be made and a signed copy is delivered to the party, in the present case, the Arbitrator only sent it to the Counsel for the Petitioner and it was only after a lapse of about 10 days, the Petitioner collected the copy of the award from the Arbitrator.

"This is also a procedural irregularity committed by the Arbitral Tribunal which is not in consonance with Section 31(5) of the Arbitration and Conciliation Act,1996. In any event, considering the aspect of delay, I am constrained to set aside the arbitral award on the ground that despite the Arbitrator reserving the matter for passing the award even as early as on 03.01.2017, did not publish the award till 06.01.2018, when again the matter was reserved for judgement. Thereafter also, until the petitioner moved this Court to terminate the mandate of the Arbitrator, the Arbitral Tribunal has not published the award. More importantly, the Arbitral Tribunal has not adduced any reasons whatsoever for the delay in passing the award. The delay would certainly prejudice the parties and as held in the various decisions discussed herein above, there is strong likelihood of the Arbitrator forgetting the arguments and relevant facts with passage of long intervals of time. Therefore delay certainly affects the rights of the aggrieved party and the same is clearly against public policy. Therefore, having found that the award is vitiated on the ground of delay on the part of the Arbitrator in publishing the award within a reasonable time, I do not see any necessity to further delve into the grounds of challenge on the merits of the award," the Court observed.

The Petition was accordingly allowed.

Cause Title: M/s. Unique Builders vs. The Union of India

Appearances:

Petitioner- Advocate K. Aparna Devi

Respondent- Standing Counsel P.T. Ramkumar

Click here to read/ download Judgement