Madras High Court criticises conduct of retired judge arbitrator over 7 year delay in passing award

The Madras High Court has sharply criticised the conduct of a former judge of the Court who acted as sole arbitrator in a dispute between Tamil Nadu Housing Board (TNHB) and NCC Ltd, holding that an unexplained delay of more than seven years in delivering the award vitiated the process and conflicted with India’s arbitration framework. (Tamil Nadu Housing Board Vs NCC Limited)

Justice N Anand Venkatesh allowed TNHB’s challenge to the July 2020 award, observing that “The Public Policy underlying resorting to arbitration is to make it a time saving mechanism for resolving disputes and while so, an Award passed with an unexplained and exorbitant delay of more than seven years, certainly is in conflict with the Public Policy of India."

The sole arbitrator was former Madras High Court judge Justice K P Sivasubramanian. Final arguments before him were concluded on November 24, 2013, and the proceedings were adjourned for pronouncement. However, no award was issued for more than seven years, and the arbitrator only reopened the proceedings in February 2020. Even then, no oral submissions were heard and written submissions were not filed. The arbitrator proceeded to deliver the award based solely on existing records

Applying the Supreme Court’s decision in Lancor Holdings Ltd v Prem Kumar Menon, the Court reiterated that delay is not by itself a ground to set aside an award. What matters is whether prejudice is caused. Justice Venkatesh held that the prejudice here was visible on the face of the record:

"The arguments that were advanced in the year 2013, certainly cannot be recollected in the year 2020. Therefore, the Award has been passed only based on the materials that were available before the Sole Arbitrator without the parties putting forth their arguments either oral or written, before the Sole Arbitrator. It must also be borne in mind that the Covid-19 Pandemic started from March 2020 and there was no occasion for the parties to ascertain as to what happened to the proceedings after 16.03.2020."

A further point of criticism was directed at the arbitrator’s award of interest. Justice Sivasubramanian had granted interest at 9 per cent per annum from 1998 till the award date and 18 per cent thereafter. The High Court termed this unfair:

“it will be unreasonable to mulct the petitioner with interest even for the period of delay in passing the Award. Such finding… certainly suffers from patent illegality.”

Rejecting NCC’s contention that delay was not specifically pleaded as a ground of challenge, the Court cited State of Chhattisgarh v Sal Udyog Pvt Ltd to hold that courts are entitled to intervene when illegality is visible on the face of an award, whether or not it is expressly raised in pleadings.

The Court held "In the considered view of this Court, the Apex Court has clarified the position in State of Chhattisgarh v. Sal Udyog Private Limited .... that even if a ground is not raised in the petition, if the Court is able to ascertain the perversity or patent illegality on the face of the Award, the Court can always strike down the Award on that ground."

Holding that the arbitrator’s conduct had compromised fairness and imposed financial prejudice on parties for a delay not attributable to them, the Court set aside the award under Sections 34(2)(b)(ii) and 34(2A).

It granted liberty to the parties to appoint a fresh arbitrator “only for the purpose of making their submissions (oral and or written) and for passing the final Award, within a stipulated time frame.”

TNHB was represented by Additional Advocate General J Ravindran, assisted by Advocate S Aravindran for Fox Mandal Associates.

NCC Ltd was represented by Advocate P J Rishikesh