An award reserved in 2021 and delivered in 2023: Delhi HC holds delay alone cannot set it aside

A Division Bench restores a unanimous arbitral award on a hotel fire claim, holding that delay in rendition vitiates an award only when it is unexplained and has affected the findings.

An arbitral tribunal reserved its award on 6 March 2021 and pronounced it on 6 March 2023. A learned Single Judge of the Delhi High Court held that the two-year gap was enough, by itself, to set the award aside. On 16 September 2026 a Division Bench disagreed. In Unison Hotels Private Limited v. IFFCO Tokio General Insurance Company Limited, Justice C. Hari Shankar and Justice Vinod Kumar allowed the appeal, holding that delay in the rendition of an arbitral award is not by itself sufficient to set it aside — the delay must be unexplained, and the findings in the award must have been affected by it.

The judgment frames the question at the outset as a seminal one: whether a unanimous award rendered by a three-member tribunal stands vitiated solely because two years elapsed between the reserving and the rendition of the award. The appeal, under Section 37(2)(b) of the Arbitration and Conciliation Act, 1996, produced an answer with consequences for every award delivered after a long reserve.

A fire in January 2008

Unison Hotels Private Limited had insured its hotel with IFFCO Tokio General Insurance Company Limited under two policies valid from 1 April 2007 to 31 March 2008: a Standard Fire and Special Perils Policy for Rs 186,44,11,765 and a Fire Loss of Profit Policy for Rs 100 crore.

A fire broke out at the hotel on 26 January 2008, within the currency of both policies. Unison sought redemption, claiming Rs 68.64 crore under the material damage policy and Rs 100 crore under the loss of profit policy. The insurer paid Rs 20 crore under the first and Rs 30 crore under the second, and took the position that the claims between the parties stood settled on 30 January 2012.

Unison did not accept that its claims had been met. Taking the view that they had been short paid, it invoked the arbitration provision in Clause 13, common to both policies. That clause referred to arbitration any dispute or difference as to the quantum to be paid, liability being otherwise admitted — and expressly stipulated that no dispute would be referable to arbitration if the company had disputed or not accepted liability under the policy. It also made an award on the amount of the loss a condition precedent to any right of action or suit.

Eleven years to an award

A three-member arbitral tribunal was appointed on 27 April 2012. The statement of claim was filed on 7 September 2012. The award was reserved on 6 March 2021 and pronounced on 6 March 2023 — two years to the day.

The tribunal did explain the interval, and the explanation is recorded in the award. Hearings had been interrupted by COVID-19. The matter was concluded on 6 March 2021, but written submissions were filed only in August 2021. Thereafter the members of the tribunal could not meet to finalise the award because of the pandemic, which receded in the last quarter of 2022.

Broken into its parts, as senior counsel for Unison set it out before the Bench, the account runs this way. The final hearing was interrupted by the onset of the pandemic and concluded on 6 March 2021. The parties were directed to file written submissions on or before 15 April 2021; they did not, sought multiple extensions, and filed only in August 2021 — a stretch of the delay directly attributable to the parties themselves rather than to the tribunal. Meetings of the tribunal to deliberate on the issues were then interrupted again by the pandemic. Ultimately the tribunal held four meetings to analyse the evidence and the documents and to finalise the award.

The award was unanimous. It was also, as the Division Bench would later record, detailed and comprehensive, dealing with all aspects of the dispute. The insurer challenged it under Section 34.

What the Single Judge held

The Single Judge set the award aside, and did so on the delay. The reasoning has a definite shape. Hearings had continued and the award had been reserved during the pandemic itself, so the pandemic could not explain what followed. Excluding the time the parties took to file written submissions, there remained a delay of more than eighteen months in pronouncing the award.

The Single Judge then measured the tribunal’s explanation against the Supreme Court’s order in its suo motu proceedings on limitation. By the order dated 10 January 2022, limitation periods expiring between 15 March 2020 and 28 February 2022 were to run from 1 March 2022, and for computing periods under Sections 23(4) and 29A of the 1996 Act and Section 12A of the Commercial Courts Act, 2015, the window from 15 March 2020 to 28 February 2022 stood excluded. Attributing delay to COVID-19 up to the last quarter of 2022 was, the Single Judge held, not in consonance with that order. Even after excluding time to 28 February 2022, almost a year of delay remained. The tribunal’s own statement that its members could not meet for a long time after reserving the award fortified the conclusion that for a considerable period there had been no deliberation at all.

The Single Judge also observed that the award had not dealt with the arbitrability of the dispute in the light of Clause 13, and reasoned that the tribunal had probably omitted to address it because, with the passage of time, the submissions on the point had been effaced from the members’ memory. Having taken that view, the Single Judge held it unnecessary to enter into the merits of the award.

What each side argued on appeal

For Unison, Mr Darpan Wadhwa with Mr Rajiv Nayar put the case on the authorities. Delay in delivering an award is not by itself sufficient to set it aside, as the Supreme Court held in Lancor Holdings and in C. Velusamy v. K. Indhera. Delay vitiates an award only where it is unexplained and has an adverse impact on the findings. A balance has to be struck between the pace of an arbitration and the satisfactory, meaningful content of what it produces, because the court and the parties alike have an interest in a correct decision. It is only where an award is clearly riddled with the damaging effects of delay that it can be said to conflict with public policy or to be vitiated by patent illegality. Here, the argument went, the delay was explained, and its absence of effect on the findings was in substance acknowledged by the Single Judge.

For the insurer, Mr A.S. Chandhiok sought to take Lancor Holdings out of the reckoning, submitting that it was not a valuable precedent and had been rendered under Article 142 of the Constitution. In rejoinder Mr Wadhwa answered that Article 142 had been invoked by the Supreme Court only in support of its decision not to send the dispute back for de novo consideration by the arbitrator, who had left many issues undecided, and that Lancor Holdings had itself taken note of the Single Judge’s decision in G.L. Litmus Events.

The rejoinder also went to what the arbitration had actually been about. The only issue the insurer had raised before the tribunal was that the liability stood discharged by accord and satisfaction. Clause 13 of the policies was never made the subject matter of dispute. Taking the Bench through sub-paragraphs (a) to (g) of the statement of defence, the issues framed by the tribunal, and the relevant paragraphs of the award, Mr Wadhwa submitted that the tribunal had been called upon to decide one question — whether the claims stood discharged by accord and satisfaction — and had decided it.

The test, and where it comes from

The Division Bench’s answer rests on the two-limbed test it traces to Lancor Holdings and to Velusamy. Delay in the rendition of an arbitral award is fatal only where, first, the delay is unexplained, and second, the delay has affected the findings in the award. Both limbs are necessary. The second is described as a sine qua non: unless the findings themselves bear the mark of the delay, the interval between reserving and pronouncing does not supply a ground under Section 34.

That is a demanding standard, and deliberately so. A court applying it cannot stop at the calendar. It has to identify something in the award — a submission not dealt with, a point of evidence misremembered, a finding that does not follow from the record — which the passage of time can be said to have produced.

The insurer relied on the Division Bench decision in G.L. Litmus Events, where an unexplained delay of approximately nineteen months was held to render the arbitral proceeding contrary to the public policy of India, with the award rightly set aside under Section 34(2)(b)(ii). In that case the parties had written to the arbitrator on three occasions asking for the award to be pronounced, which the court there read as showing their anxiety and a loss of faith in the arbitral process, and no explanation for the delay had been given in the award.

The Bench distinguished it on two grounds. The position that delay is fatal only where it is unexplained and has affected the findings stands reiterated in Velusamy, which was decided after G.L. Litmus Events — so that Division Bench had no occasion to consider it. And the facts were not the same: in G.L. Litmus Events the parties had pressed for the award at the time, while here neither side raised any objection about the delay when it was occurring.

Six reasons the award survived

The Bench set out, in a numbered sequitur, why it could not sustain the impugned judgment.

Delay is not by itself sufficient; it must be unexplained, and the findings must be affected by it. Here the tribunal had provided an explanation which, in the Bench’s view, adequately explained the delay. Neither side had raised any objection about it at the time, and the plea was advanced by the insurer only in its Section 34 petition, once it found that the award had gone against it — a point the judgment makes plainly, and which will be quoted in later cases.

The award itself was detailed and comprehensive and dealt with all aspects of the dispute, and the Single Judge had not held that any finding in it was affected by the delay. On the contrary, the Single Judge had expressly held it unnecessary to enter into the merits — an approach that militates against the test in Lancor Holdings and Velusamy, both of which require the findings to be shown to have been affected before an award can fall on this ground. The Bench, examining the matter on facts, found no ground to hold that any finding had been affected by the delay; nor had senior counsel for the insurer so contended before it.

The finding about arbitrability fared no better. There was no accompanying finding that the dispute was in fact or in law not arbitrable under Clause 13. The impugned judgment did not identify any submission by either party that the tribunal had failed to deal with. Absent such a finding, the observation that submissions may have been forgotten with the passage of time was a presumption at best, and wholly insufficient to invalidate the award. Clause 13 had, moreover, never been invoked by the insurer in its statement of defence: the only plea it had raised to contest the validity of the claims was that they stood discharged by accord and satisfaction.

What the judgment means for awards delivered late

The practical effect is to narrow a ground that had begun to look broad. A party dissatisfied with an award cannot count the months between the last hearing and the pronouncement and treat the number as a ground of challenge. It must point to an explanation that is absent or inadequate, and then to something in the award that the delay produced.

The judgment is equally pointed about timing on the other side. An objection to delay raised for the first time in a Section 34 petition, after the award has gone against the objector, is worth less than one raised while the tribunal still has the matter. The parties in G.L. Litmus Events had written three times asking for their award; the insurer here said nothing until it lost.

For arbitral tribunals the message is narrower but clear. An award that explains its own delay, and that deals comprehensively with the issues and the submissions actually advanced, is considerably harder to dislodge than one that leaves the interval unaccounted for. The explanation belongs in the award.

Order

The Division Bench remanded OMP (Comm) 197/2023 for consideration de novo by the learned Single Judge, uninfluenced by any observation or finding in the impugned judgment. It clarified that all observations in its own judgment were returned only for the purpose of adjudicating the appeal, which was limited to whether the arbitral award was liable to be set aside solely on the ground of delay in its rendition — and on that question it held otherwise. The appeal was allowed, with no orders as to costs.