Delay Alone Not Ground to Set Aside Arbitral Award Unless It Impacts Fairness of Decision: Supreme Court

The Supreme Court on October 31, 2025 observed that a delayed arbitral award cannot be struck down merely because of the time taken to pronounce it, unless the delay demonstrably affects the reasoning, fairness, or validity of the decision.

While setting aside an award delivered nearly four years after hearings concluded, the bench of Justices Sanjay Kumar and Satish Chandra Sharma held that mere delay in pronouncement, without showing prejudice or improper reasoning, does not by itself vitiate an award under Section 34 of the Arbitration and Conciliation Act, 1996.

“The Act does not postulate delay in the delivery of an arbitral award as a ground, in itself, to set it aside,” the court observed. It clarified that only where the negative effects of delay are explicit and adversely reflect on the tribunal’s findings can such delay form a valid ground for interference.

An arbitration took place between real estate developer Lancor Holdings Limited and three landowners over a joint development agreement for a commercial property in Chennai known as “Menon Eternity.” The arbitrator had reserved his award in July 2012 but delivered it only in March 2016, nearly three years and eight months later, without any explanation.

Lancor argued that the inordinate delay violated the principles of natural justice and rendered the award arbitrary and contrary to public policy. The Madras High Court had refused to interfere, holding that delay alone did not justify setting aside the award.

Agreeing with that principle but finding the award in question “unworkable and tainted by the consequences of delay,” the Supreme Court struck it down.

Justice Sanjay Kumar, authoring the judgment, noted that while delay by itself is not one of the statutory grounds under Section 34, an award could still be invalidated if such delay results in a loss of recall, faulty appreciation of evidence, or shakes the parties’ faith in the fairness of the adjudication.

“Inordinate and unexplained delay in the pronouncement of an arbitral award has several deleterious effects. Passage of time debilitates human memory… and gives rise to unnecessary speculation and suspicion in the minds of the parties,” court observed, adding that faith and trust in the arbitral system are essential to make it work as intended.

Citing precedents from the Delhi and Madras High Courts and referring to authoritative commentaries like Redfern and Hunter on International Arbitration, the bench reaffirmed that “justice delayed is justice denied” applies equally to arbitral proceedings. However, it warned that not every instance of delay would justify judicial interference

“It is only in cases where the negative effect of the delay in the delivery of an arbitral award is explicit and adversely reflects on the findings in the award, that such delay, and more so if it remains unexplained, can be construed to be a factor to set aside that award,” the court said.

The bench also pointed out, with the insertion of Section 29A in the Act with effect from October 23, 2015, stringent timelines for passing of an arbitral award have been put in place.

"Thereby, time for the making of domestic arbitral awards was mandatorily fixed by requiring the same to be pronounced within 12 months from the date of completion of the pleadings under Section 23(4) of the Act of 1996,'' it said.

The court also noted, the power to extend that time was conferred upon the parties, under Section 29A(3) of the Act of 1996, subject to a maximum period of 6 months. Section 29A(4) of the Act of 1996, however, empowered the court to grant further extension of time if sufficient cause was shown therefor.

It pointed out, the very objective of the exercise would be lost if, after the entire process, an arbitrator fails to resolve the disputes between the parties and leaves them high and dry with advice to initiate a fresh round of arbitration/litigation once again. 

The bench further clarified that parties need not first invoke Section 14(2) of the Act, which allows termination of an arbitrator’s mandate for failure to act without undue delay, before approaching a court under Section 34 to challenge the award. Both remedies, the court held, operate independently.

Finding that the arbitrator’s prolonged delay and inconclusive reasoning had left the disputes unresolved, the Supreme Court said the award was unworkable and contrary to the public policy of India.

It accordingly set it aside while reiterating that “delay alone” is not enough to invalidate an arbitral award unless it undermines the quality and fairness of the adjudication itself.

Case Title: M/s Lancor Holdings Limited Vs Prem Kumar Menon and others

Judgment Date: October 31, 2025

Bench: Justices Sanjay Kumar and Satish Chandra Sharma