Delayed And Unworkable Arbitral Awards: Supreme Court's Intervention In Lancor Holdings Ltd v. Prem Kumar Menon

Introduction

The Supreme Court of India, in Lancor Holdings Limited v. Prem Kumar Menon & Ors [2025 INSC 1277; decided on 31 October 2025], has provided guidance on two fundamental aspects of arbitration law i.e. – (a) the effect of undue delay in pronouncing arbitral awards upon its validity; and (b) whether an unworkable award that fails to resolve the dispute between the parties is liable to be set aside on grounds of patent illegality and being opposed to the public policy of India under Section 34 of the Arbitration and Conciliation Act, 1996 (Act). The Supreme Court has also examined that if the award is liable to be set aside, what would be considered a fit case for exercising jurisdiction under Article 142 of the Constitution of India, 1950 as per the law laid down by the Constitution Bench in Gayatri Balasamy v. ISG Novasoft Technologies Limited¹.

The Supreme Court's decision addresses questions that have long troubled arbitration practitioners and parties resorting to alternative dispute resolution mechanisms in India.

The dispute in the above case arose under a Joint Development Agreement executed between Prem Kumar Menon and others (Landowners) and Lancor Holding Limited (Lancor/Developer), that envisaged construction of a building on the Landowners' land at the cost and expense of Lancor in consideration of 50% share in the land along with the building erected thereon. The issues concerning Lancor's inability to complete the building as per the agreed terms, transfer of 50% of the building after construction to the Landowners, return of bank guarantees provided by Lancor to the Landowners and cancellation of certain sale deeds illegally executed by Lancor, amongst others, were referred to an Arbitrator for adjudication.

The arbitration proceedings commenced in September 2009, and the Arbitrator reserved the Award on 28 July 2012 but pronounced it only on 16 March 2016 i.e., nearly three years and eight months later with no explanation for the delay. The Award was otherwise also unsatisfactory as it failed to provide any final resolution to the monetary claims and counterclaims raised by the parties. Instead, the Award left it open to both parties to work out their remedies in accordance with law by either approaching the civil court or through another arbitrator by putting forth appropriate pleadings.

Delayed Arbitral Awards

The Supreme Court examined conflicting views of various High Courts on the issue of delayed arbitral awards. In Harji Engg Works Pvt Ltd v. Bharat Heavy Electricals Ltd & Anr², the Delhi High Court held that abnormal delay without a satisfactory explanation was contrary to justice as it defeated the very purpose and fundamental basis for alternative dispute redressal. The court observed that it is natural for an arbitrator to forget contentions and pleas raised by parties if there was a huge gap between the last date of hearing and the date on which the award was published. What was reasonable time to publish an award was flexible and would depend upon the facts and circumstances of each case. Similarly, in BWL Ltd v. Union of India³, a Division Bench of the Delhi High Court observed that human memory is short and it was doubtful whether substantive hearings long ago would leave sufficient imprints on the mind of the arbitrator to be remembered when the award was pronounced years later. The Division Bench set aside the impugned awards, agreeing with the view taken in Harji Engg. Works Pvt. Ltd. (supra) that such an arbitral award was against the public policy of India.

The Delhi High Court in Peak Chemical Corporation Inc v. National Aluminium Co Ltd.⁴ held that delay was not specified as one of the grounds to set aside an arbitral award under Section 34, a position which was in variance with its earlier decision in Harji Engg. Works Pvt. Ltd. (supra). The Court opined that it would be straining the language of the provision to hold that delay in the pronouncement of an award would, by itself, place it in conflict with the public policy of India. On facts, the learned Judge found that the award comprehensively dealt with all aspects of the matter, factual and legal, and held that it would not be in the interest of justice to set aside the said award only on the ground of delay, requiring another fresh determination. In Union of India v. Niko Resources Ltd⁵ and Oil India Limited v. Essar Oil Ltd.⁶, the same bench affirmed that delay did not, per se, vitiate an award, though ultimately it was held that the award was liable to be set aside on other grounds.

The Supreme Court laid to rest the conflicting views by agreeing with the latter position that Section 34 of the Act did not postulate delay in the pronouncement of an arbitral award as a ground, in itself, to set it aside. However, it was held that inordinate delay in the pronouncement of an arbitral award has several deleterious effects - passage of time invariably debilitates frail human memory, and it would be impossible for an arbitrator to have total recall of the oral evidence, if any, adduced by witnesses; and the submissions and arguments advanced by the parties. More importantly, such delay, if unexplained, would give rise to unnecessary and wholly avoidable speculation and suspicion in the minds of the parties.

However, each case would have to be examined on its own individual facts to ascertain whether the delay was of such import and impact on the final decision of the arbitral tribunal, whereby that award would stand vitiated due to the lapses committed by the arbitral tribunal owing to such delay. The Supreme Court encouraged that there must be a balance between the pace of the arbitration, culminating in an arbitral award, and the satisfactory meaningful content thereof.

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 said award, that such delay, and more so, if it remains unexplained, could be construed as a factor to set aside that award. If the arbitral award was clearly riddled with the damaging effects of the delay, it could be construed to be in conflict with the public policy of India, thereby attracting Section 34(2)(b)(ii) of the Act, or Section 34(2A) thereof as it may also be vitiated by patent illegality. Further, it would not be necessary for an aggrieved party to invoke the remedy under Section 14(2) of the Act (termination of arbitrator's mandate) as a condition precedent to laying a challenge to a delayed and tainted award under Section 34.

The statutory timeline introduced by inserting Section 29A, with retrospective effect from 23 October 2015, mandating that awards be pronounced within 12 months from the date of completion of pleadings, is another step in the way of reducing delays in delivery of an arbitral award.

Unworkable Arbitral Awards

On the second aspect of workability of arbitral awards, the Supreme Court opined that arbitration is envisioned as a substitute to time-consuming and costly litigation in courts. The aim and objective of this mechanism is to ensure settlement of disputes between parties with minimum court intervention. The Court held that Section 34 is crafted in a manner to restrict the grounds on which the arbitrator's award can be set aside. Unless the limited grounds stipulated in the provision are made out, an arbitral award cannot be invalidated. However, 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.

While a proper relief/award which 'would be equitable to both parties' is envisaged under the Act, the Arbitrator in the present case ultimately did not devise any such relief which was equitable to both parties but held entirely in favour of the Landowners. The Arbitrator took nearly 4 years to conclude that he had no equitable relief to offer both parties but held in favour of one side in all respects, leaving it to the parties to start litigating again. The Arbitrator simply opined that proper pleadings and evidence had not been placed before him and, therefore, he was constrained to relegate the parties to another round of litigation, ignoring that the Award had already altered the positions of parties and one party had benefitted at the expense of the other. The Landowners were put in possession of their share of the building, free of cost and without discharging their share of the obligations under the agreement. They were also enriched to the extent of appropriating all the rentals collected by Lancor. In effect, the Arbitrator left Lancor empty-handed with no relief whatsoever being granted to it except for advice to take recourse to fresh litigation.

This approach on the part of the Arbitrator, after keeping the Award under consideration for nearly 4 years, served absolutely no purpose and reflected total non-application of mind. The Supreme Court found that the Award was liable to be set aside as it was in clear conflict with the public policy of India and also patently illegal.

Exercise of power under Article 142

Relying upon the Constitution Bench decision in Gayatri Balasamy (supra), the Supreme Court was of the opinion that this is a fit case for invoking Article 142 of the Constitution so as to do complete justice to the parties, instead of relegating them to another round of arbitration/litigation, which would entail incurring more costs and expending more valuable time.

Exercising its powers under Article 142, the Supreme Court directed the Landowners to restore possession of Lancor's 50% share in the building to it upon receipt of a specified amount representing the cost of construction that had to be undertaken by the Landowners on their own. This arrangement, in the Supreme Court's opinion, was to bring the litigation to an end while doing justice to both parties.

The power under Article 142 of the Constitution is to be exercised with great care and caution, as explained by the Constitution Bench in Gayatri Balasamy (supra). Article 142 enables the court to do complete justice in any cause or matter pending before it. The exercise of this power has to be in consonance with the fundamental principles and objectives behind the Act and not in derogation or in suppression thereof. The power should not be exercised to rewrite an award or modify the award on merits. However, the power can be exercised where it is required and necessary to bring the litigation or dispute to an end. Not only would this end the protracted litigation, but it would also save parties' money and time.

Conclusion

The Supreme Court's decision sets a precedent that the arbitrators must not only deliver awards within reasonable time but must also ensure that the awards actually adjudicate and resolve the underlying disputes. An award that takes years to deliver and then fails to provide any resolution particularly after irreversibly altering parties' positions through interim orders defeats the very purpose of arbitration and will not receive judicial sanction.

However, the test of whether delay "explicitly and adversely reflects" on findings as laid down in this case may lead to subjective interpretations by different courts. Both excessive delay and unworkable awards can render arbitral awards liable to be set aside on grounds of conflict with public policy and patent illegality.

This decision will undoubtedly influence how arbitrators approach their responsibilities and how courts will evaluate arbitral awards when challenged. The liberal exercise of power under Article 142 to provide final resolution, while pragmatic in this case, has undoubtedly opened avenues for increased judicial intervention in arbitration.

Be that as it may, the Supreme Court has reinforced the principle that arbitration must remain a meaningful alternative to court litigation. Applying this principle, the Delhi High Court recently adopted a balanced approach inM/s Inderjit Mehta Constructions Pvt Ltd v. Union of India⁷, wherein the petitioner prayed for termination of the tribunal's mandate and its substitution (collectively under Sections 14, 15(2) and 11(6) of the Act) after the time limit under Section 29A of the Act had expired and several extensions had already been granted to the tribunal for pronouncing the award. The court agreed to grant a limited extension only so that an already prepared award could be pronounced, instead of ordering substitution of the arbitrator at the final stage.

Footnotes

1 (2025) 7 SCC 1

2 (2008) SCC OnLine Del 1080

3 2012 SCC OnLine Del 5873

4 2012 SCC OnLine Del 759

5 2012 SCC OnLine Del 3328

6 2012 SCC OnLine Del 4279

7 2025:DHC:11857; decided on 16 December 2025

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