Arbitration’s ticking clock: Why inordinate delay can undo an award?

Recently, the High Court of Delhi (“Court”) in GL Litmus Events Pvt. Ltd. v. Delhi Development Authority addressed a critical issue of whether an arbitral award can be set aside on the ground of inordinate and unexplained delay in its pronouncement, and if such delay constitutes a violation of the principles of natural justice and public policy of India under Section 34 of the Arbitration and Conciliation Act, 1996 (“Act”).

The disputes arose from a contract related to the Commonwealth Games 2010 in New Delhi. GL Litmus Events Pvt. Ltd. (“Petitioner”) was formed as a joint venture to execute a project for the Delhi Development Authority (“Respondent”/“DDA”) involving the design, construction, maintenance, and rental of temporary accommodation at the Commonwealth Games Village. However, disputes arose regarding the amounts to be paid by DDA to the petitioner leading the petitioner to invoke arbitration in January 2013.  The arbitration process itself was protracted, with multiple arbitrators being appointed and resigning before the final arbitrator was appointed in April 2015. The tribunal eventually delivered the award on November 27, 2017, dismissing all 16 claims raised by the petitioner.  The petitioner challenged the award before the Court under Section 34 of the Act.

Submissions on behalf of petitioner

The award was delivered after an inordinate and unexplained delay of nineteen months from the closure of arguments, which violated the principles of natural justice and public policy. The arbitrator failed to treat the parties equally, relied on unproven documents, and disregarded the petitioner’s evidence and claims.

Submissions on behalf of respondent

Delay alone is not a ground for setting aside an award under Section 34 and the arbitral record was voluminous and complex, leading the arbitrator to provide a reasoned award after considering all relevant facts and documents. Further, petitioner had not substantiated claims of duress or coercion with evidence.

Whether the inordinate and unexplained delay in making the arbitral award rendered it liable to be set aside under Section 34 of the Act?

The Court observed that the Act is a self-contained code designed to provide party autonomy, time bound proceedings and efficacious resolution of disputes, amongst the other fundamental features. Section 29A of the Act clearly provides that the award shall be delivered within twelve months from the date of entering reference, thereby signifying the intention of the Legislature that the arbitral proceedings including the passing of the award should be completed in a time bound manner.

The principle of ‘justice delayed is justice denied’ has been repeatedly emphasised by the Hon’ble Supreme Court, including in Anil Rai v. State of Bihar and recently in Ravindra Pratap Shahi v. State of U.P., to adhere to the principles emphasised in Anil Rai (supra). Although, Anil Rai (supra) was rendered in the context of judicial proceedings, the principle applies with equal force to the arbitral proceedings to deliver the award timely, where the objective of the Act is to provide an efficacious and speedy mechanism of dispute resolution.

The Court referred to various decisions to highlight how they have grappled with whether the delay in pronouncing awards alone can render them invalid. In Harji Engg. Works (P) Ltd. v. Bharat Heavy Electricals Ltd., the Court set aside the award only on the ground that the same was delivered after a delay of three years and observed that arbitration’s primary objective is speedy disposal of disputes, ensuring justice and upholding contractual rights.

In BWL Ltd. v. UOI, a Division Bench of the Court set aside an award as it was passed after a delay of two years and seven months from the last clarification hearing. Similarly, in Satya Parkash & Brothers Pvt. Ltd. v. North Delhi Municipal Corporation, Gian Gupta v. MMTC Ltd., and CRPF v. Fibroplast Marine (P) Ltd., the award was set aside on the ground of it being delayed by three, six, and one and a half years respectively. More recently, in Dept. of Transport v. Star Bus Services (P) Ltd. and HR Builders v. Delhi Agricultural Marketing Board, the Court set aside the award solely on the ground that the same was passed after a period of one and a half years, and two years and eight months, respectively, from the date of reserving the award.

The Court distinguished the judgments of Union of India v. Niko Resources Ltd. and Peak Chemical Corporation v. National Aluminium Co. Ltd. where both cases observed that it would not be in the interest of justice to set aside an award merely on the ground of delay.

In the present case, the arbitral proceedings were concluded on September 10, 2015 owing to both parties being heard at length and had nothing to say or produce any evidence or documents except the written submissions to be filed before October 19, 2015. Subsequently, some additional documents were filed by the respondent and on May 4, 2016, some clarifications were sought by the respondent’s witness after which the hearing was closed. The award was passed on November 27, 2017. Going by the date when the original hearing was concluded being September 10, 2015, the award was delivered after a period of more than two years and two months. If the time is calculated from the date of May 4, 2016 when the last clarification was sought, then the delay in pronouncing the award is of nineteen months.

The Court noted that both parties repeatedly urged the arbitrator to deliver the award, reflecting their growing anxiety and loss of faith in the arbitral process and the letters from the parties highlighted the prejudice caused by delay and requested expeditious pronouncement.

The Court categorically observed that arbitration under the Act is intended to provide speedy and efficient dispute resolution. When an award is delivered after an inordinate delay, it strikes at the core of fairness and efficiency, undermining confidence in the process. Arbitrators, being human, cannot retain the same clarity of recollection over time, especially of oral submissions which are central to effective adjudication. Written submissions, though helpful, cannot substitute oral advocacy. An unexplained delay in reserving and pronouncing the award not only diminishes the effect of oral hearings but also erodes trust in arbitration as a credible alternative to litigation, particularly in commercial disputes where time is critical. Further, no reasons have been given by the arbitrator to explain this inordinate delay in pronouncement of the award.

In light of the above, the Court set aside the award being against the “public policy of India” under Section 34(2)(b)(ii) of the Act as it contravenes the most basic notions of justice, having been pronounced after nineteen months from conclusion of the proceedings. The Court held that once the award has been set aside only due to delay in pronouncement, the merits of disputes need not be adverted to.

In the matter at hand, neither party identified any circumstance beyond the tribunal’s control that could have justified the delay in issuing the award. The arbitrator likewise offered no explanation for the prolonged interval between the close of proceedings and the award’s pronouncement. Against this backdrop, the Court concluded that the unexplained delay alone warranted setting the award aside.

The outcome might be different where the record demonstrates factors outside the arbitrator’s control or where the arbitrator has provided cogent reasons for the delay. A case in point is the decision in Peak (supra), where the dispute dated back to 1996 and the arbitrator passed away after rendering the award. There, it would have been inequitable to annul the award solely on the basis of delay, given the time, effort, and expense already invested in resolving the controversy. Likewise, medical issues, party-driven postponements, or comparable extraneous events could justify additional time, and a court hearing a Section 34 challenge would evaluate such explanations before determining whether delay has vitiated the award.

Further, Section 29A(1) of the Act prescribes a stringent twelve-month timeline from completion of pleadings for making awards in India-seated domestic arbitrations. However, for international commercial arbitrations (“ICA”) seated in India, 29A(1) provides that the award may be made as expeditiously as possible and ‘endeavor’ may be made to dispose of the matter within the said period of twelve months.

Although “patent illegality” is not a ground for setting aside an ICA award, a violation of India’s public policy is. In this case, the Court held that an inordinate and unexplained delay strikes at the heart of public policy and can therefore support annulment under Section 34. Therefore, while Section 29A casts timelines as an aspiration for ICAs, an undue and unjustifiable delay by the tribunal in delivering the award in ICAs may nonetheless render it vulnerable to being set aside on the touchstone of violation of public policy.

In conclusion, this decision reinforces the importance of adhering to timelines and maintaining the integrity of the arbitral process, provides clarity on the interplay between procedural fairness and the finality of arbitral awards, and ensures that the pursuit of efficiency does not come at the expense of justice. It also sends a strong message for arbitrators to be mindful of the need to deliver awards promptly as unexplained delays can result in the setting aside of the award, regardless of the merits.

About the authors: Ajoy Roy is a Partner, Avlokita Rajvi is a Counsel, Lakshya Khanna is a Senior Associate and Shradha Sriram is an Associate at Shardul Amarchand Mangaldas & Co.

Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.

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