Justice delayed, is Justice denied:

William E. Gladstone

Arbitration Law in India have been amended repeatedly, however despite of several amendments, India still lags from becoming an international arbitration hub because of several reasons, one of which is the inordinate delay in passing of arbitration award. It goes without saying that speedy resolution of dispute is fundamental principal of Arbitration as delay undermines the raison d'être of arbitration, weakens public confidence in the arbitral process, and denies justice to the winning party during the period of delay.

Indian Parliament as well as Judiciary, from time to time have taken landmark steps which led to promoting India as an international arbitration hub. Recently, the  Hon'ble High Court of Delhi in "Director General Central Reserve Police Force vs. Fibroplast Marine Pvt. Ltd"1dated 4th May 2022 has reaffirmed that if a legal remedy is available for a party that has suffered some injury, but is not forthcoming promptly, it effectively amounts to depriving of the remedy; and it was held by the Hon'ble High Court that inordinate and unexplained delay in rendering of the arbitral award is in conflict with the public policy of India and is amenable to challenge under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act).

The issue before the Hon'ble Delhi High Court was "Whether an unexplained and inordinate delay in rendering an Arbitral Award is liable to be set aside being vitiated by patent illegality and in conflict with Public Policy of India under Section 34 of the Arbitration and Conciliation Act, 1996? And "Whether the ground of "delay in making the impugned award renders it liable to be set aside as opposed to public policy", would also necessarily have to be considered in the context of the challenge?

The Hon'ble High Court after hearing both the parties, made the observation that there is merit in the contention that there was an inordinate delay in rendering of the award. The High Court took note of the facts that the learned Arbitrator was appointed on 29.09.2014 and the first hearing before the Arbitral Tribunal was held on 06.04.2015. The hearing spanned for more than two years, and the last hearing was held on 23.12.2017. The award was rendered on 31.05.2019, which was also subsequently corrected by the learned Arbitrator on 09.08.2019. In the backdrop of such facts the Court held that the award was issued with inexcusable delay, after the hearing before the Arbitral Tribunal lasted for more than two years. The Court observed that the purpose of the Arbitral Award to be rendered withing reasonable period, is to ensure that the efficacy of oral submissions is not lost. No person can be expected to remember the same after a long period of time.1 A large time gap between hearing of the oral submissions and rendering the decision would, in effect, debilitate the purpose of resorting to arbitration for expeditious adjudication of the disputes.

The Hon'ble High Court has also referred to its previous ruling on the similar issue wherein it was held that "the award passed after an inordinate and unexplained delay would be "contrary to justice and would defeat justice". It was noted in this context that the award which defeats justice would conflict with the public policy of India". 3

The issue of unjustified and inordinate delay in rendering the Arbitral award was considered on earlier occasion by the Hon'ble Apex Court in the case of "State of Punjab v. Hardyal"4, wherein it was observed that "arbitration proceedings should not be unduly prolonged. Court had got power to extend time even after award had been given or after expiry of period prescribed for award. However, this discretion had to be exercised in a judicial manner. A party to an arbitration agreement was not estopped from challenging award on ground of delay merely because it had participated in arbitration proceedings even after expiry of prescribed period without any demur".

Further, the Hon'ble High Court of Madras in the case of Mr. K. Dhanasekar vs. Union of India and Ors.5 decided on 10.09.2019, set aside an arbitral award on an application made to it under section 34 of the Arbitration and Conciliation Act, 2015, holding that undue and/or inordinate delays in passing an award are in fact violative of public policy. The Court observed that inordinate, and unexplained delay in rendering the award makes it amenable to challenge under Section 34(2)(b)(ii) of the A&C Act that is, conflicting with the public policy of India.

The Court while setting aside the Arbitral award held that the "at the outset, the impugned award was rendered after an inordinate and unexplained delay. Further, considering the impugned award on merits, this Court is of the view that the same is vitiated by patent illegality and in conflict with the public policy of India."

Conclusion

The delay in the arbitral Awards as explained in the Judgment by the Hon'ble High Court of Delhi in Director General Central Reserve Police Force vs. Fibroplast Marine Pvt. Ltd, debilitate the very purpose of resorting to arbitration for expeditious adjudication of the disputes. The delay in the award is likely to cause the parties to live with certain impairments to the quality of the arbitral award such as fading memory as to the impression of individual witnesses.

The possible solutions to avoid delay in conclusion of arbitration proceeding is to firstly, set stringent timelines within the arbitration agreement. Further, parties may opt for sole arbitrator, which will eliminate the necessity for the tribunal to coordinate amongst each other and will result into a faster publication of award.

Secondly, in order to fix the issue of delay in rendering of award, an amendment may be proposed to the Seventh Schedule (Grounds for Ineligibility of the Arbitrator) of the Arbitration and Conciliation Act, 1996, to the effect that if any arbitrator has repeatedly been delaying an award, a ground for ineligibility may be added so as to elicit a disciplined adherence to the timeline for rendering of the Award.

Thirdly, a process may be brought in place to bring transparency in the measures taken by the Arbitral institutions to monitor the engagements/appointments of their empanelled arbitrators and their ability to adhere to the timelines for rendering of the award. The arbitral institution should also keep transparent that the upper cap of engagements/appointments are being met by their empanelled arbitrators. Such attributes of the arbitral institution need be considered by the Arbitration Council of India for grading exercise of the arbitral institutions. In this regard process need be brought in place, enabling the parties to seek the status of arbitral award from the arbitral institution, as well as to notify the Arbitration Council of India, their grievances, if any.

Footnotes

1 Director General Central Reserve Police Force vs. Fibroplast Marine Pvt. Ltd, O.M.P. (COMM) 511/2019 & IA Nos. 17282/2019 & 17283/2019.

2 Para 37, "Director General Central Reserve Police Force vs. Fibroplast Marine Pvt. Ltd" O.M.P. (COMM) 511/2019 & IA Nos. 17282/2019 & 17283/2019.

3 Harji Engineering Works Pvt. Ltd. v. Bharat Heavy Electricals Ltd. & Anr, SCC OnLine Del 1080.

4 State of Punjab v. Hardyal, 1985 (2) SCC 629.

5 Mr. K. Dhanasekar v Union of India and Ors, O.P. No. 4 of 2015 and O.A. No. 31 of 2015.

Originally Published by ILI May 2022 Edition

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