The Supreme Court of India has ruled that an “undue and unexplained delay” in the pronouncement of an arbitral award is not, by itself, a sufficient ground to set it aside. In a judgment delivered on October 31, 2025, the Court held that it must be demonstrated that the delay had an “adverse impact” on the final decision, leading to perversity or “patent illegality.”
Applying this principle in the case of M/s. Lancor Holdings Limited versus Prem Kumar Menon and others (2025 INSC 1277), a bench of Justice Sanjay Kumar and Justice Satish Chandra Sharma set aside an arbitral award where a delay of nearly four years was found to have directly contributed to an “ineffective and futile” and “unworkable” decision that was “in conflict with the public policy of India.”
The Court invoked its extraordinary powers under Article 142 of the Constitution to provide a final resolution to the 16-year-old dispute, deeming it necessary “to do complete justice” rather than remanding the parties to fresh litigation.
Background of the Dispute
The case originated from a Joint Development Agreement (JDA) dated December 17, 2004, between the respondents (landowners) and the predecessor of the appellant, M/s. Lancor Holdings Limited (developer), for a 1.116-acre property in Chennai.
Under the JDA, the developer was to construct a building at its own cost, deliver 50% of the built-up area to the landowners, and in return, receive 50% of the built-up area along with a 50% undivided share in the land. The developer paid refundable interest-free security deposits totaling ₹6.82 crores.
These deposits were to be returned 15 days after the “Handover Date.” Clause 6 of the JDA defined this date as being reached when three conditions were met:
- The developer completes construction, and the “Architects for the project certify to the LAND OWNERS” that the building is complete and fit for occupation.
- The developer “has applied to the Chennai Metropolitan Development Authority (CMDA) for a Completion Certificate.”
- The developer offers possession in writing after the first two conditions are fulfilled.
A second Power-of-Attorney (POA), authorizing the developer to sell its 50% share, was kept in escrow with Housing Development Finance Corporation Limited (HDFCL), to be released only on the Handover Date.
Dispute and Arbitral Proceedings
A dispute arose when the developer, citing an Architect’s Certificate dated October 10, 2008, and its CMDA application dated July 29, 2008, claimed the Handover Date was reached on October 20, 2008, and demanded the refund of its deposits. The landowners contested this, stating the building was incomplete.
On December 19, 2008, the developer executed five registered sale deeds in its own favour for its 50% share, using a photocopy of the second POA while the original remained in escrow with HDFCL.
The matter was referred to arbitration, with Justice K.P. Sivasubramaniam (Retd.) as the sole Arbitrator. The developer sought a refund of the remaining ₹4.82 crores in deposits, while the landowners filed counter-claims, seeking a declaration that the five sale deeds were “illegal, void ab initio and non-est.”
The Arbitral Award and Delay
The Arbitrator reserved the award on July 28, 2012, but pronounced it on March 16, 2016, “nearly three years and eight months later.”
The Arbitrator found in favour of the landowners, holding the Architect’s Certificate “totally invalid” and the five sale deeds illegal. However, the Arbitrator failed to provide a final resolution, noting the situation was “very complex” and concluding that “in the absence of proper pleading and proof,” he could not quantify compensation.
The final award declared the sale deeds and Architect’s certificate illegal but “left open” all major monetary claims and counter-claims, directing the parties “to take appropriate further proceedings in accordance with law.” This was despite an interim order in 2010, which was acted upon, that had already irrevocably altered the parties’ positions.
Supreme Court’s Analysis
On Delay: The Supreme Court directly addressed the first question of law regarding delay. It held, “Delay in the delivery of an arbitral award, by itself, is not sufficient to set aside that award.”
The Court clarified the test: “However, each such case would have to be examined on its own individual facts to ascertain whether that delay had an adverse impact on the final decision… It is only when the effect of the undue delay… is explicit and adversely reflects on the findings therein, such delay and, more so, if it remains unexplained, can be construed to result in the award being in conflict with the public policy of India…”
In this specific case, the Court found the delay had such an impact. It observed that the “repetitions ad nauseam in the Award and the vacillation by the Arbitrator… clearly manifest that the delay on his part contributed to his demonstrable indecisiveness.” The Court concluded that this “unexplained and pointless delay” resulted in an “ineffective and futile Award” that was “against the public policy of India.”
On Perversity and Unworkability: The Court also found the award “utterly perverse” for “completely misconstruing and misunderstanding” Clause 6 of the JDA. It held the Arbitrator erred in questioning the validly issued Architect’s certificate and in finding that power and water connections were prerequisites for certification, a finding the Court deemed “tantamount to putting the cart before the horse.”
Furthermore, the award was held to be “unworkable” because the Arbitrator “failed to resolve the disputes” and left the developer “empty-handed” while the landowners enjoyed possession of their share “free of cost.”
Final Decision under Article 142
Finding that relegating the parties to fresh litigation after 16 years was “not a plausible option” and a “travesty of justice,” the Court invoked its power under Article 142.
While noting the developer’s “patent illegality” in using a photocopy of the POA, the Court held it “must necessarily be penalized for this illegal action.”
To do “complete justice,” the Supreme Court ordered:
- The five sale deeds dated December 19, 2008, are “treated as lawful and valid at this stage.”
- The appellant (developer) must pay a total of ₹10 crores to the respondents (landowners).
- This sum consists of the “forfeiture of the security deposits of ₹6.82 crores” and an additional “sum of ₹3.18 crores” to compensate the landowners for works undertaken by them.
- The payment must be made within three months.
- Upon full payment, the developer “would be entitled to take possession of its 50% share in the building.”
The appeals were allowed in these terms.
