SC Sets Aside Delayed and Incomplete Arbitral Award: Exercises Article 142 To Finally Resolve 16-Year Dispute

The dispute arose out of a Joint Development Agreement (JDA) for construction of a commercial building in Chennai, under which the developer-company and the landowners were to share the constructed area equally. After construction, disputes arose over alleged delays, incomplete works, and the developer’s execution of five sale deeds in its own favour using a photocopied power of attorney. Arbitration commenced in 2009, but the sole arbitrator took nearly four years after reserving the matter to deliver his award in March 2016.

During the arbitration, an interim order directed the landowners to return security deposits, after which the developer handed over possession of their 50% share. The landowners then created third-party rights by leasing out portions, including to a major IT tenant in 2011. The final award declared the sale deeds illegal but left virtually all monetary claims and counterclaims unresolved, directing both parties to approach civil court or fresh arbitration. The developer lost possession and rental income for its 50% share, while the landowners continued enjoying their portion without completing their contractual obligations.

Central Issue: Whether an arbitral award reserved for nearly four years, which failed to resolve key issues, altered parties’ positions irreversibly, and compelled fresh litigation, is liable to be set aside as perverse, patently illegal, and against the public policy of India and whether the Supreme Court should invoke Article 142 to bring the prolonged dispute to a final close.

SC’s Decision: The Supreme Court held that the award suffered from fundamental defects: it was delayed without justification, internally inconsistent, and failed to provide any workable adjudication of the parties’ competing monetary claims. The arbitrator misconstrued core JDA clauses, ignored the binding project architect’s certificate, and delivered an incomplete award that forced the parties into another round of litigation while irrevocably shifting their positions through interim orders.

The Court ruled that such an award is patently illegal, perverse, and contrary to public policy under Section 34(2)(b)(ii) and Section 34(2A) of the Arbitration and Conciliation Act. Given that a fresh arbitral process was impossible due to third-party rights created over time, the Court invoked Article 142 to finally settle the dispute rather than send the parties back to further proceedings 16 years after construction. The appeals were allowed in terms of the directions issued by the Court, with each side bearing its own costs.

To Read Full Judgment, Download PDF Given Below