Delhi High Court: A Single Judge Bench of Chandra Dhari Singh, J.* set aside the arbitral award passed by the Sole Arbitrator and opined that inordinate, and unexplained delay of more than 1.5 years in rendering the award made it amenable to challenge under Section 34(2)(b)(ii) of the Arbitration and Conciliation Act, 1996 (‘Act'), that is, being in conflict with the public policy of India.
Background
In light of havoc created by the repeated fatal accidents due to rash and negligent driving by the blue line bus drivers, in the Public Interest Litigation titled Court on its own motion v. State of Delhi, 2008 SCC OnLine Del 1090, and in furtherance of the order passed by the Supreme Court in MC. Mehta v. Union of India, (1997) 8 SCC 770, the Division Bench of this Court took suo motu action directing the Government to formulate a proper policy for providing better public transport system in Delhi.
To provide safer and better-quality public transport system, a policy was formulated by Delhi Integrated Mechanism of Transportation System Ltd. (‘DIMTS') which was entrusted with the task of formulating the said policy for the Government. The respondent invited bids for provision of bus services for private stage carriage buses through corporate entities to which claimant was an eligible entity. After due evaluation of proposals, the Government accepted the proposal of the Claimant and in furtherance of the same, issued a Letter of Acceptance. Between the claimant and the respondent, a Concession Agreement was duly executed whereby the respondent was to induct low floor CNG buses for the route, which was a BOOT contract, that is, Build-Own-Operate-Transfer Contract. During the subsistence of the contract, issues arose between the parties due to the termination of the said contract by the respondent. The Arbitral Tribunal passed the impugned Award and awarded the respondent Rs. 57,04,47,373 with interest at 9% p.a. till the date of payment. The respondent was also awarded a cost of Rs. 2,29,90,875 vide the impugned Award. The petitioner preferred the present petition under Section 34 of the Act for setting aside the Arbitral Award passed by the Sole Arbitrator.
Analysis, Law, and Decision
The Court relied on Bhogilal Purshottam v. Chimanlal Amritlal, 1927 SCC OnLine Bom 44, wherein it was held that “delay in making of an award without any reasonable excuse or cause to explain the said delay, amounted to misconduct. Even if no time was fixed for making of an award, it was implied term in an arbitration clause that the award should be made within a reasonable time ”. The Court opined that “arbitration proceedings were encouraged because they were speedy alternative to court adjudication and its primary objective was fast and quick disposal of disputes between parties without delays normally associated with court proceedings. Arbitration implied timeous decisions and promptitude. It was the policy of law that arbitration proceedings should not be unduly prolonged. Arbitration proceedings, therefore, were expected to be prompt ”.
The Court also relied on Harji Engg. Works (P) Ltd. v. Bharat Heavy Electricals Ltd., 2008 SCC OnLine Del 1080, wherein it was held that “the award passed after an inordinate and unexplained delay would be “contrary to justice and would defeat justice”. Thus, the award which defeats justice would be in conflict with the public policy of India ”. The Court further relied on Director General, Central Reserve Police Force v. Fibroplast Marine (P) Ltd., (2022) 3 HCC (Del) 304, wherein it was held that delay in pronouncing an arbitral award could itself be a ground for setting aside the award. Therefore, this Court opined that the award passed after an inordinate, substantial, and unexplained delay would be “contrary to justice and would defeat justice”. Thus, the award which defeated justice would be in conflict with the public policy of India. The Court further opined that inordinate, and unexplained delay in rendering the award made it amenable to challenge under Section 34(2)(b)(ii) of the Act, that is, being in conflict with the public policy of India.
The Court noted that as per Section 29A(4) of the Act, “if the award was not made within the period specified in Section 29(1) or the extended period specified under Section 29(3), the mandate of the arbitrator(s) should terminate unless the Court had, either prior to or after the expiry of the period so specified, extended the period”. The Court further noted that the hearing had been concluded on 8-9-2018, but the award was passed on 9-6-2020. Thus, the Court observed that there was a substantial gap of more than 1.5 years between the date of reserving the award and the date of award.
The Court opined that “one of the principal reasons for ensuring that the arbitral award was rendered within a reasonable period was to ensure that the efficacy of oral submissions was not lost. 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 Court further noted that in the present case, the delay had not even been explained by the Arbitrator in the said award. Therefore, the Court held that the award stood vitiated on two grounds, firstly, for an inordinate, unexplained and substantial delay of more than 1.5 years from the date on which the award was reserved, thus being in contravention of public policy of India; and secondly, by virtue of the provision of Section 29A(1) read with Section 29A(4), the award was in the teeth of law due to the lack of jurisdiction of the arbitrator which stood terminated in accordance with the said provisions. Thus, this Court set aside the impugned award.
[Department of Transport v. Star Bus Services (P) Ltd., 2023 SCC OnLine Del 2890, decided on 16-5-2023]
Advocates who appeared in this case :
For the Petitioner: Darpan Wadhwa, Senior Advocate; Sameer Vashisht, ASC (Civil); Sanjana Nangia, Advocate
For the Respondent: Paras Kuhad, Senior Advocate; K.R. Sasiprabhu, Manu Aggarwal, Jitin Chaturvedi, Vishnu Sharma, Manan Shishodia, Advocates
*Judgment authored by: Justice Chandra Dhari Singh
