Undue Delay That Taints and “Unworkable” Arbitral Awards: Supreme Court’s Test and Article 142 Cure in Lancor Holdings Ltd. v. Prem Kumar Menon (2025 INSC 1277)

Introduction

This decision of the Supreme Court of India (Sanjay Kumar, J; Satish Chandra Sharma, J) addresses two recurring but under-theorised problems in Indian arbitration law:

• When does an undue and unexplained delay in pronouncing an arbitral award affect its validity?
• Can an arbitral award be set aside if, despite altering the parties’ positions irreversibly during the proceedings, it fails to finally resolve their disputes—i.e., it is “unworkable”?

The Court answers both questions with a principled, effects-based test, and, in a rare but carefully justified move, invokes Article 142 of the Constitution to bring an end to a 16-year-old dispute.

The dispute arose from a 2004 Joint Development Agreement (JDA) for “Menon Eternity”, a multi-storey technology park in Chennai. The developer (Lancor Holdings Ltd.) claimed completion and demanded refund of security deposits; the landowners (the Menon brothers) contested completion and objected to Lancor’s self-conveyance of its share by using a photocopy of an escrowed power of attorney. Arbitration ensued. Hearings concluded, the tribunal reserved the award on 28 July 2012 but delivered it only on 16 March 2016—nearly three years and eight months later—without giving a complete resolution, and after interim directions had already shifted possession to the landowners.

Summary of the Judgment

The Supreme Court:

• Set aside the arbitral award as being in conflict with the public policy of India and vitiated by patent illegality. The delay was not treated as an independent ground; rather, the Court found that the unexplained delay palpably tainted the award’s content—through indecision, repetition, and a perverse reading of the contract—and the award failed to deliver a final settlement despite irrevocably altering party positions.
• Clarified the law on delay: delay per se is not a ground under Section 34; but when the delay demonstrably and adversely impacts the decision, the award can be set aside under Section 34(2)(b)(ii) (public policy) and/or Section 34(2A) (patent illegality). Aggrieved parties need not first invoke Section 14(2) (termination of mandate for failure to act without undue delay) before approaching under Section 34.
• Held that an “unworkable” award—one that does not resolve disputes yet leaves parties with no option but to litigate again while having already altered their positions—offends public policy and is patently illegal.
• Exercised Article 142 to do complete justice: despite the illegality of Lancor’s self-conveyance using a photocopied power of attorney, the Court validated those sale deeds at this stage to avoid cascading registrations and costs; however, it penalised the developer by directing forfeiture of the entire security deposit (₹6.82 crore) plus ₹3.18 crore towards completion works—total ₹10 crore payable within 3 months. Upon full payment, Lancor may retake possession of its 50% share; parties to enjoy their respective shares thereafter. No order as to costs.

Factual Background and Procedural History (Essentials)

• Parties: Lancor Holdings Ltd. (developer) and the Menon brothers (landowners).
• JDA terms (December 2004) provided a 50/50 split of constructed area; refundable interest-free security deposits aggregating ₹6.82 crores; and a three-pronged clause (Clause 6) defining “Handover Date”:
  • 6(a): Completion in accordance with sanctioned plan; Project Architect certifies building is completed per plan and is fit for occupation (in that sense).
  • 6(b): Application to CMDA for Completion Certificate (issuance not mandated by the clause as a precondition).
  • 6(c): Written offer to handover landowners’ constructed area.
• The developer secured the Architect’s certificate (10 Oct 2008), applied for and obtained CMDA Completion Certificate (14 Nov 2008), and wrote offering handover (20 Oct 2008). Utilities and departmental compliances followed in Oct–Nov 2008. Some minor deficiencies remained (staircase tiling, basement seepage, canopy).
• Despite partial refund of ₹2 crores by the landowners, Lancor, on 19 Dec 2008, executed five sale deeds in its own favour using a photocopy of the escrowed power of attorney (the original remained with HDFCL).
• Arbitration commenced: interim order (23 Oct 2010) directed return of deposits to developer and delivery of possession of the landowners’ 50% share—irreversibly changing positions. Award reserved on 28 July 2012; delivered on 16 March 2016.
• The award: declared the five self-conveyance sale deeds illegal; directed that rentals received be made over to the landowners; rejected all monetary claims and counter-claims; and then told parties to seek fresh litigation/arbitration for unresolved issues—despite the tribunal’s own interim orders having altered status quo.
• Section 34: Single Judge partly set aside (sustained non-compliance with Clause 6(a), but did not accept invalidation of sale deeds as an inevitable course; urged adjudicator to finish the job). Section 37: Division Bench restored the award. Supreme Court: allowed the developer’s appeals, set aside the award, and moulded final relief under Article 142.

The New Principles Announced

1. Delay and validity of arbitral awards (pre-29A regime):
   • Delay per se is not an independent ground under Section 34.
   • However, where undue and unexplained delay explicitly and adversely affects the content of the award—manifest in errors, vacillation, or failure to engage with pleadings and evidence—it renders the award in conflict with the public policy of India (Section 34(2)(b)(ii)) and/or patently illegal (Section 34(2A)).
   • Parties need not exhaust Section 14(2) (termination of mandate for “failure to act without undue delay”) before filing under Section 34; both operate independently.
2. “Unworkable” awards offend public policy and are patently illegal:
   • If the award does not resolve disputes and forces parties into further litigation, yet the arbitrator has already shifted party positions irreversibly via interim measures, the award is liable to be set aside for conflict with public policy and patent illegality.
3. Article 142 in arbitration:
   • Though courts ordinarily cannot rewrite or modify awards on merits under Sections 34/37, the Supreme Court can, in a fit case, exercise Article 142 to end litigation, conserve time and cost, and do complete justice—consistent with the Arbitration Act’s objectives and the Constitution Bench in Gayatri Balasamy.

Detailed Analysis

Precedents and Authorities Traversed

High Court jurisprudence on delay (pre-Section 29A)

• Harji Engg. Works Pvt. Ltd. v. BHEL (Delhi HC): Delay of over 3 years, unexplained, with hearings not concluded—award set aside as against public policy; recognised prejudice from human memory fade.
• Peak Chemical Corp. v. NALCO (Delhi HC): Delay of 4.5 years. Held: delay per se not a ground under Section 34; if the award comprehensively deals with issues, courts should be slow to set aside for delay alone.
• UOI v. Niko Resources (Delhi HC): Delay of over 4 years; not per se fatal, but when coupled with failure to engage with dissent, constituted patent illegality.
• Oil India v. Essar Oil (Delhi HC Single Judge and Division Bench; SLP dismissed): Delay per se not fatal when awards are detailed and reasoned. Reinforces effects-based approach.
• BWL Ltd. v. UOI (Delhi HC DB): Nearly 5 years’ delay; awards set aside—justice must not only be done but seen to be done; memory fade and appearance of unfairness mattered.
• Gian Gupta v. MMTC (Delhi HC): >6 years’ delay; award set aside; Section 14(2) not mandatory precondition to Section 34.
• DG, CRPF v. Fibroplast Marine (Delhi HC): ~1.5 years’ delay; inordinate and unexplained—award set aside for public policy conflict and patent illegality.
• K. Dhanasekar v. UOI (Madras HC): 3 years 7 months’ delay—award set aside as violative of public policy.
• Unique Builders v. UOI (Madras HC, 2025): Delay without reasons prejudices parties; award set aside.
• GL Litmus Events v. DDA (Delhi HC, 2025): Relied on Anil Rai; held delay strikes at fairness; award set aside under Section 34(2)(b)(ii) (public policy).

Supreme Court on delayed judgments and arbitration standards

• Anil Rai v. State of Bihar: Justice delayed is justice denied—principle applied by analogy to arbitration.
• R.C. Sharma v. UOI; Kanhaiyalal v. Anupkumar; Bhagwandas F.C. Daswani v. HPA International: Delayed judicial pronouncements shake confidence—points transferrable to arbitrations.
• ONGC v. Saw Pipes: Speed cannot trump correctness; public policy analysis in arbitration setting-aside.
• MMTC v. Vedanta: Post-2015 Section 34 framework—public policy and patent illegality contours.
• Ssangyong Engineering v. NHAI: Narrowed public policy; perversity as patent illegality basis in domestic awards.
• Associate Builders v. DDA: Provides matrix later re-calibrated by Ssangyong.
• OPG Power Generation v. Enexio (2025): Arbitrators must decide per contract; a view not possible on contract is perverse and amenable to interference.
• Gayatri Balasamy v. ISG Novasoft (Constitution Bench, 2025): Limited modification powers under Sections 34/37; Article 142 available with restraint to bring closure.
• SHILPA SAILESH v. VARUN SREENIVASAN: Scope of Article 142—complete justice with restraint, consistent with fundamental policy.

International authorities

• Russell on Arbitration (24th ed.): Duty to avoid unnecessary delay; exceptional delay causing substantial injustice can justify removal or setting aside.
• Redfern & Hunter on International Arbitration (7th ed.): Moral duty to act with due diligence; “justice delayed is justice denied”; delays often inadequately compensated by interest.
• Prof. William W. Park, “Arbitrators and Accuracy” (2010): The balance between speed and correctness—accuracy and fairness are paramount; quick-but-wrong awards are unacceptable.

Statutory Framework and Its Evolution

• Arbitration Act, 1940: Sections 23 and 28 empowered courts to fix and extend time for awards; delay could amount to misconduct.
• Arbitration and Conciliation Act, 1996 (pre-2015): No fixed time for awards. Section 14 permitted termination of mandate for failure to act “without undue delay” and recourse to court. Section 34 established narrow grounds for setting aside; “delay” not listed.
• 2015–2016 Amendments (Act 3 of 2016) introducing Section 29A (retrospectively from 23.10.2015):
  • Mandates 12 months from completion of pleadings for domestic awards; parties may extend by 6 months; beyond that, court extension required.
  • Signifies legislative impatience with arbitral delays.

Legal Reasoning: How the Court Reached Its Result

1) Delay as a vitiating factor—an effects-based test

The Court acknowledges that “delay” is not a stand-alone statutory ground under Section 34. Yet, delay has real-world consequences: memory fades; notes do not substitute for fresh comprehension; and unexplained inaction breeds suspicion and undermines confidence. Accordingly:

• Courts must examine on a case-by-case basis whether undue, unexplained delay has infected the award’s reasoning or outcomes.
• Where the record reveals vacillation, repetition, failure to decide, or perverse contractual readings linked to the interval between reserve and pronouncement, the award can be quashed as contrary to public policy (basic justice/morality) and/or patently illegal.
• Importantly, parties are not required to first move under Section 14(2) to terminate the mandate before seeking setting aside under Section 34. The Court explicitly recognises why parties may be reluctant to trigger Section 14(2) against a sitting arbitrator (risk of perceived bias if the application fails).

2) “Unworkable award” as patent illegality and public policy conflict

The award here was quintessentially unworkable:

• During the arbitration, the tribunal’s Section 17 interim order compelled return of deposits and delivery of the landowners’ 50% possession—irreversibly altering status quo.
• Yet the final award invalidated the developer’s title, stripped its possession and rentals, rejected all claims/counter-claims, and told the parties to go litigate afresh.

Such an outcome violates the fundamental premise of arbitration (speedy, final dispute resolution), offends justice and morality, and therefore attracts Section 34(2)(b)(ii). It also constitutes patent illegality (Section 34(2A)): a failure to decide relief despite self-recognised necessity, and a perverse interpretation of the JDA.

3) Perverse reading of JDA Clause 6(a), (b), (c)

• Clause 6(a) required the Project Architect’s certification that the building was completed according to the sanctioned plan and was “fit for occupation” in that contextual sense. It did not require that utilities be operational on the same date as a condition of “fitness”.
• Clause 6(b) only required that the developer “apply” for the Completion Certificate—not that the certificate be issued by the “Handover Date”. Notably, issuance often precedes utilities; to require utilities first would invert the order (“cart before horse”).
• The Project Architect was jointly appointed; the clause did not contemplate second-guessing that certificate through a searching merit review as the arbitrator did.
• On facts, the developer had both applied for and obtained the CMDA Completion Certificate by 14.11.2008, and secured departmental compliances; the landowners themselves leased out floors from December 2010—undercutting their “unfit” position.
• Applying OPG Power Generation, the arbitrator’s construction was not a “possible view” on the contract; hence perverse and illegal.

4) Article 142 to end litigation, not to rewrite the merits

After setting aside the award, the Court faced a situation where (i) positions were irreversibly altered since 2010; (ii) the contract dated to 2004; and (iii) fresh arbitration/litigation would be a travesty. Guided by Gayatri Balasamy and Shilpa Sailesh, the Court:

• Validated—at this stage only—the five self-conveyance sale deeds (19.12.2008) to avoid multiplicity of registrations and stamp duties;
• Penalised the developer’s illegality by directing forfeiture of the full security deposits (₹6.82 crore) and awarding ₹3.18 crore towards completion-related works—making an even ₹10 crore payment to the landowners within three months;
• Restored the developer’s right to retake possession of its 50% share upon full payment; thereafter each party to enjoy its own share per the JDA.

This is a calibrated use of Article 142: it avoids rewriting arbitral merits (there was, in substance, no workable award to rewrite), cures the inequity created by interim measures, and brings complete justice by final closure.

Impact and Significance

1) Delay doctrine in Indian arbitration is now effects-based

• Delay is not a freestanding ground under Section 34. But when delay demonstrably taints the reasoning or outcome, the award is vulnerable under public policy and patent illegality grounds.
• This harmonises divergent High Court approaches and aligns with post-2015 amendments: speed is essential, but not at the expense of correctness—both values are protected.
• Arbitrators should record reasons for any substantial delay and must ensure the final award engages comprehensively with pleadings, evidence, and relief. Vacillation or deferral to fresh litigation after having altered positions will not be countenanced.

2) Section 14(2) is not a mandatory precondition to Section 34

• Parties can directly challenge a delayed and tainted award under Section 34 without first seeking termination of the mandate. The Supreme Court’s frank recognition of practical risks (perceived bias) lowers procedural friction and protects parties.

3) “Unworkable award” is now a meaningful rubric

• Where an award neither resolves disputes nor restores status quo—especially after interim measures have changed possession/benefits—courts can set it aside for public policy conflict and patent illegality.

4) Article 142 as a safety valve in exceptional arbitration cases

• In rare, fact-intensive scenarios with long passage of time and irreversible third-party effects, the Court may use Article 142 to end litigation and do equity without undermining the Arbitration Act’s core principles.

5) Contract drafting and project practice (especially JDAs)

• Parties should draft completion/hand-over clauses with precise triggers (e.g., “architect certification plus proof of application for completion certificate” versus “utility connections”).
• Escrow and power-of-attorney mechanics must be honoured to avoid allegations of self-dealing; use of photocopied POA invites invalidity and penalties.
• Developers should maintain meticulous documentary trails (certificates, applications, departmental compliance) and consider pleading alternative relief (e.g., compensation in lieu of title) to enable tribunals to mould complete relief.

Complex Concepts Simplified

• Public Policy of India (arbitration context): After 2015 amendments, it covers awards induced by fraud/corruption, contravention of fundamental policy of Indian law, and outcomes that shock the court’s conscience (most basic notions of justice/morality). It is narrower than in the pre-2015 era.
• Patent Illegality (Section 34(2A)): Available in domestic awards; captures illegality apparent on the face of the award—e.g., contravention of substantive law/contract, decisions no reasonable person could reach on the contract (“perverse” view). Not every error of law qualifies; it must go to the root.
• Section 14(2) vs Section 34: Section 14(2) lets a party seek termination of an arbitrator’s mandate for failure to act without undue delay. Section 34 is for setting aside an award post-pronouncement on limited grounds. One is not a precondition to the other.
• Section 29A: Statutory timeline for awards (12 months post-pleadings; extendable by 6 months by consent; thereafter by court). It signals a strong legislative policy against dilatory arbitration.
• Unworkable Award: An award that fails to resolve disputes meaningfully, often deferring issues to future litigation despite having already altered possession/benefits via interim orders. Such awards can be set aside for public policy and patent illegality.
• Article 142: Supreme Court’s constitutional power to do “complete justice” in a matter before it. Used sparingly, consistent with statutory frameworks, to bring closure where ordinary remedies are inadequate or counterproductive.

Practical Guidance for Stakeholders

• For arbitrators:
  • Record reasons for any significant delay; if delay occurs, double down on clarity, completeness, and relief formulation.
  • Avoid leaving parties to fresh litigation after having changed their positions via interim measures; decide relief fully or frame a proper interim award and continue.
  • Stay within contract terms; avoid importing conditions not bargained for.
• For counsel:
  • Plead alternative relief (e.g., compensation, restitution, regularisation on terms) to enable comprehensive relief if title is in dispute.
  • If award is delayed, consider measured reminders; Section 14(2) may be used, but is not mandatory before Section 34.
  • In Section 34 petitions, show with precision how delay tainted the award’s content—link the time-gap to omissions, contradictions, or perverse readings.
• For contract drafters (especially in JDAs):
  • Define “Handover Date” triggers precisely, and sequence approvals, certificates, and utilities in a commercially realistic way.
  • Specify consequences and liquidated damages for scenarios like invalid self-conveyance or defective completion to reduce uncertainty.
  • Escrow mechanisms should be rigorous; prohibit use of copies for title conveyance.

Case Disposition and Tailored Relief (Article 142)

• Award set aside for conflict with public policy and patent illegality.
• Sale deeds dated 19.12.2008—though unlawful ab initio—treated as valid “at this stage” to avoid fresh conveyancing and costs.
• Developer penalised:
  • Forfeiture of entire security deposits of ₹6.82 crores; and
  • ₹3.18 crores towards completion-related works (round total ₹10 crores) payable within 3 months.
• Upon full payment, developer entitled to retake possession of its 50% share per JDA; parties then free to enjoy and deal with their respective shares, bringing complete closure.
• No order as to costs.

Conclusion

Lancor Holdings v. Prem Kumar Menon is now a lodestar on two fronts. First, it articulates an effects-based standard for when undue and unexplained delay in delivering an arbitral award vitiates it: not as a standalone ground, but when the delay demonstrably corrupts the award’s reasoning or outcome, the award offends public policy and is patently illegal. The Court also clarifies that Section 14(2) is not a mandatory gateway to Section 34. Second, it recognises and condemns the phenomenon of “unworkable awards”—those that, after reshaping party positions through interim orders, fail to finally resolve disputes and compel further litigation. Such awards subvert arbitration’s raison d’être and are liable to be set aside.

Equally significant is the Court’s remedial pragmatism: invoking Article 142 to validate flawed sale deeds while penalising the wrongdoer and compensating the other side, thereby ending an intractable, 16-year saga without re-inflicting delay and cost. Arbitrators are reminded that speed and accuracy are not opposing poles but co-requisites; parties and counsel are given clear incentives to plead and enable complete relief; and contract drafters, especially in development transactions, receive cautionary guidance on drafting handover triggers and escrow protocols. The judgment thus fortifies Indian arbitration’s credibility by insisting that arbitral justice must be both timely and just—and when it is neither, courts will intervene in a principled, proportionate, and final manner.