Inordinate, unexplained delay in passing arbitral award violates public policy, Madras HC [Read Judgment]

Inordinate and unexplained delay in the passing of an arbitral award is against public policy of India and thus liable to be set aside, the Madras High Court has ruled. A judgment to this effect was passed by Justice N Sathish Kumar earlier this month..The case before him had emerged out of a 2006 agreement between Southern Railways and an engineering contractor for the collection of granite blast. After a dispute emerged between the two out of related agreements, the same was referred to arbitration around 2008. The hearing before the arbitrators concluded in February 2011..However, the arbitrators passed the award only in March 2014, three years and seven months after the hearing’s conclusion. Further, the award was only dispatched in November 2014. The delay was not explained in the arbitral award. In view of the same, the engineering contractor had moved the High Court seeking that the arbitral award be set aside. One of the grounds canvassed before the High Court was the unexplained and inordinate delay in passing the arbitral award..Justice Kumar, in turn, found merit in this contention, observing that an inordinate delay in the passing of an arbitral award would defeat the purpose of arbitration. He went on to note that such an unexplained delay would contravene public policy, thereby warranted the Court’s intervention under Section 34 of the Arbitration Act, 1996. He held,.“…it is natural for any Arbitrator to forget contention and pleas raised by the parties during the course of arguments. There is a huge gap between the last date of hearing and the date on which the Award has been made. The Arbitrators should make and publish the Award within a reasonable time. What is reasonable time is flexible and depends upon the facts and circumstances of each case. In case there is a delay, it should be explained. The abnormal delay without satisfactory explanation certainly cause prejudice to the other party….…In the absence of any explanation or reason for the delay in passing the award, such delay in fact certainly have impact and violation of public policy of India. Therefore, the above Award cannot be sustained in the eye of law in view of the delay alone.”.The Court passed the ruling after placing reliance on the Supreme Court’s rulings in ONGC v Saw Pipes, Swan Gold Mining Ltd., v Hindustan Copper Ltd, McDermott International Inc., v Burn Standard Co.,Ltd. Puravankara Projects Limited v Ranjani Venkatraman Ganesh and Another and Associate Builders v. Delhi Development Authority. Particular reliance was also placed on the Delhi High Court case of Harji Engg. Works Pvt. Ltd., v Bharat Heavy Electricals Ltd. & Another..In view of these observations, Justice Kumar allowed the petition to set aside the arbitral award and directed the appointment of new arbitrators to decide on the counter claim that was under challenge before the High Court. The Court further directed that the new arbitrators be appointed within three months, and that the arbitral award be passed within three months thereafter..Advocate Naveen Kumar Murthi appeared for the petitioner in the case, and Advocate PT Ramkumar appeared for the Southern railways (respondents 1 and 2)..[Read the Judgment].Bar & Bench is available on WhatsApp. For real-time updates on stories, Click here to subscribe to our WhatsApp.