Trivedi and Parashar (Advocates and Solicitors)
Delhi High Court - Arbitral award passed after an unjustified delay is contrary to justice and public policy.
In the 𝘋𝘦𝘱𝘢𝘳𝘵𝘮𝘦𝘯𝘵 𝘰𝘧 𝘛𝘳𝘢𝘯𝘴𝘱𝘰𝘳𝘵, 𝘎𝘕𝘊𝘛𝘋 𝘷. 𝘚𝘵𝘢𝘳 𝘉𝘶𝘴 𝘚𝘦𝘳𝘷𝘪𝘤𝘦𝘴 𝘗𝘷𝘵. 𝘓𝘵𝘥. [O.M.P. (COMM) 495/2020], the Petitioner and the Respondent had entered into a Concessionaire Agreement to provide bus services. Eventually, disputes arose between the Petitioner and the Respondent. Therefore, to resolve the conflicts, the parties referred the matter to arbitration, and an Arbitral Award was passed in favor of the Respondent, however with a delay of 18 months after the last hearing. Aggrieved by the award passed by the arbitrator, the Petitioner initiated set-aside proceedings u/s 34 of the Arbitration and Conciliation Act, 1996 ("Act") before the Delhi High Court.
It was argued that the award was passed after a long and substantial delay of 18 months, due to the absence of a provision specifying the time limit under the arbitration agreement.
The Court observed that when there is an explicit provision relating to time limit, it is easier to determine whether there is a delay as the arbitrator is then bound by the parties’ agreement, but if there is no provision, then the Court has to examine it on a case-to-case basis. There were two issues before the High Court: first, whether undue delay can be taken as ground for challenging the Award; second, whether the delay in pronouncement of the Arbitral Award places it in conflict with the public policy of India.
While answering the first issue, the Court held that there was an unjustified gap of more than 1.5 years between the date of reserving and the date of the award. Even if there are no provisions for a time limit, the Arbitrator is under a duty to render an Award without substantial delay.
"𝘈 𝘭𝘢𝘳𝘨𝘦 𝘵𝘪𝘮𝘦 𝘨𝘢𝘱 𝘣𝘦𝘵𝘸𝘦𝘦𝘯 𝘩𝘦𝘢𝘳𝘪𝘯𝘨 𝘵𝘩𝘦 𝘰𝘳𝘢𝘭 𝘴𝘶𝘣𝘮𝘪𝘴𝘴𝘪𝘰𝘯𝘴 𝘢𝘯𝘥 𝘳𝘦𝘯𝘥𝘦𝘳𝘪𝘯𝘨 𝘵𝘩𝘦 𝘥𝘦𝘤𝘪𝘴𝘪𝘰𝘯 𝘸𝘰𝘶𝘭𝘥, 𝘪𝘯 𝘦𝘧𝘧𝘦𝘤𝘵, 𝘥𝘦𝘣𝘪𝘭𝘪𝘵𝘢𝘵𝘦 𝘵𝘩𝘦 𝘱𝘶𝘳𝘱𝘰𝘴𝘦 𝘰𝘧 𝘳𝘦𝘴𝘰𝘳𝘵𝘪𝘯𝘨 𝘵𝘰 𝘢𝘳𝘣𝘪𝘵𝘳𝘢𝘵𝘪𝘰𝘯 𝘧𝘰𝘳 𝘦𝘹𝘱𝘦𝘥𝘪𝘵𝘪𝘰𝘶𝘴 𝘢𝘥𝘫𝘶𝘥𝘪𝘤𝘢𝘵𝘪𝘰𝘯 𝘰𝘧 𝘵𝘩𝘦 𝘥𝘪𝘴𝘱𝘶𝘵𝘦𝘴. 𝘕𝘰 𝘱𝘦𝘳𝘴𝘰𝘯 𝘤𝘢𝘯 𝘣𝘦 𝘦𝘹𝘱𝘦𝘤𝘵𝘦𝘥 𝘵𝘰 𝘳𝘦𝘮𝘦𝘮𝘣𝘦𝘳 𝘵𝘩𝘦 𝘴𝘢𝘮𝘦 𝘢𝘧𝘵𝘦𝘳 𝘢 𝘭𝘰𝘯𝘨 𝘱𝘦𝘳𝘪𝘰𝘥 𝘰𝘧 𝘵𝘪𝘮𝘦. 𝘐𝘯 𝘵𝘩𝘦 𝘪𝘯𝘴𝘵𝘢𝘯𝘵 𝘤𝘢𝘴𝘦, 𝘵𝘩𝘦 𝘥𝘦𝘭𝘢𝘺 𝘩𝘢𝘴 𝘯𝘰𝘵 𝘦𝘷𝘦𝘯 𝘣𝘦𝘦𝘯 𝘦𝘹𝘱𝘭𝘢𝘪𝘯𝘦𝘥 𝘣𝘺 𝘵𝘩𝘦 𝘭𝘦𝘢𝘳𝘯𝘦𝘥 𝘈𝘳𝘣𝘪𝘵𝘳𝘢𝘵𝘰𝘳 𝘪𝘯 𝘵𝘩𝘦 𝘴𝘢𝘪𝘥 𝘈𝘸𝘢𝘳𝘥,"
While answering the second issue, the Court held that "𝘏𝘢𝘷𝘪𝘯𝘨 𝘥𝘪𝘴𝘤𝘶𝘴𝘴𝘦𝘥 𝘵𝘩𝘦 𝘢𝘧𝘰𝘳𝘦𝘴𝘢𝘪𝘥, 𝘵𝘩𝘪𝘴 𝘊𝘰𝘶𝘳𝘵 𝘪𝘴 𝘰𝘧 𝘵𝘩𝘦 𝘷𝘪𝘦𝘸 𝘵𝘩𝘢𝘵 𝘵𝘩𝘦 𝘢𝘸𝘢𝘳𝘥 𝘱𝘢𝘴𝘴𝘦𝘥 𝘢𝘧𝘵𝘦𝘳 𝘢𝘯 𝘪𝘯𝘰𝘳𝘥𝘪𝘯𝘢𝘵𝘦, 𝘴𝘶𝘣𝘴𝘵𝘢𝘯𝘵𝘪𝘢𝘭 𝘢𝘯𝘥 𝘶𝘯𝘦𝘹𝘱𝘭𝘢𝘪𝘯𝘦𝘥 𝘥𝘦𝘭𝘢𝘺 𝘸𝘰𝘶𝘭𝘥 𝘣𝘦 "𝘤𝘰𝘯𝘵𝘳𝘢𝘳𝘺 𝘵𝘰 𝘫𝘶𝘴𝘵𝘪𝘤𝘦 𝘢𝘯𝘥 𝘸𝘰𝘶𝘭𝘥 𝘥𝘦𝘧𝘦𝘢𝘵 𝘫𝘶𝘴𝘵𝘪𝘤𝘦."
𝘊𝘭𝘦𝘢𝘳𝘭𝘺, 𝘵𝘩𝘦 𝘈𝘸𝘢𝘳𝘥 𝘸𝘩𝘪𝘤𝘩 𝘥𝘦𝘧𝘦𝘢𝘵𝘴 𝘫𝘶𝘴𝘵𝘪𝘤𝘦 𝘸𝘰𝘶𝘭𝘥 𝘣𝘦 𝘪𝘯 𝘤𝘰𝘯𝘧𝘭𝘪𝘤𝘵 𝘸𝘪𝘵𝘩 𝘵𝘩𝘦 𝘱𝘶𝘣𝘭𝘪𝘤 𝘱𝘰𝘭𝘪𝘤𝘺 𝘰𝘧 𝘐𝘯𝘥𝘪𝘢. 𝘐𝘯 𝘵𝘩𝘦 𝘨𝘪𝘷𝘦𝘯 𝘤𝘪𝘳𝘤𝘶𝘮𝘴𝘵𝘢𝘯𝘤𝘦𝘴, 𝘵𝘩𝘪𝘴 𝘊𝘰𝘶𝘳𝘵 𝘪𝘴 𝘰𝘧 𝘵𝘩𝘦 𝘷𝘪𝘦𝘸 𝘵𝘩𝘢𝘵 𝘪𝘯𝘰𝘳𝘥𝘪𝘯𝘢𝘵𝘦 𝘢𝘯𝘥 𝘶𝘯𝘦𝘹𝘱𝘭𝘢𝘪𝘯𝘦𝘥 𝘥𝘦𝘭𝘢𝘺 𝘪𝘯 𝘳𝘦𝘯𝘥𝘦𝘳𝘪𝘯𝘨 𝘵𝘩𝘦 𝘈𝘸𝘢𝘳𝘥 𝘮𝘢𝘬𝘦𝘴 𝘪𝘵 𝘢𝘮𝘦𝘯𝘢𝘣𝘭𝘦 𝘵𝘰 𝘤𝘩𝘢𝘭𝘭𝘦𝘯𝘨𝘦 𝘶𝘯𝘥𝘦𝘳 𝘚𝘦𝘤𝘵𝘪𝘰𝘯 34(2)(𝘣)(𝘪𝘪) 𝘰𝘧 𝘵𝘩𝘦 𝘈𝘳𝘣𝘪𝘵𝘳𝘢𝘵𝘪𝘰𝘯 𝘢𝘯𝘥 𝘊𝘰𝘯𝘤𝘪𝘭𝘪𝘢𝘵𝘪𝘰𝘯 𝘈𝘤𝘵, 𝘵𝘩𝘢𝘵 𝘪𝘴, 𝘣𝘦𝘪𝘯𝘨 𝘪𝘯 𝘤𝘰𝘯𝘧𝘭𝘪𝘤𝘵 𝘸𝘪𝘵𝘩 𝘵𝘩𝘦 𝘱𝘶𝘣𝘭𝘪𝘤 𝘱𝘰𝘭𝘪𝘤𝘺 𝘰𝘧 𝘐𝘯𝘥𝘪𝘢."
Furthermore, the Court also observed that the jurisdiction of the arbitrator stood terminated u/s 29(A) of the Act, which mandates that all proceedings must be completed within a period of 12 months starting from the date when the arbitral tribunal enters upon reference, and further, by the consent of the parties’, time-limit can be extended for a period of six months. If this period ends, the tribunal's mandate stands cancelled, and only a civil court can extend it.
Therefore, the Court allowed the Petition and set aside the arbitral award as being opposed to the public policy of India.