Case Summary: M/s. Lancor Holdings Limited v. Prem Kumar Menon & Ors. (2025) | Effect of Undue Delay in Arbitral Awards

This Supreme Court judgment, delivered by Justice Sanjay Kumar, addresses two key legal issues in arbitration law:

1. Effect of undue and unexplained delay in the pronouncement of an arbitral award upon its validity; and
2. Whether an arbitral award that fails to finally settle disputes, rendering it unworkable and compelling parties into further litigation, can be set aside for patent illegality or violation of public policy.

The case arose from a joint development agreement (JDA) between Lancor Holdings Ltd. (the developer) and Prem Kumar Menon and his brothers (the landowners) for constructing a commercial complex — Menon Eternity — in Chennai. The arbitration proceedings, initiated in 2009, culminated in an award pronounced after an extraordinary delay of nearly 3 years and 8 months (reserved in July 2012, delivered in March 2016).

Factual Matrix

The Joint Development Agreement (JDA)

The Menon brothers owned approximately 1.1 acres of land on St. Mary’s Road, Chennai. A Joint Development Agreement was executed in December 2004 with Lancor Gesco Properties Ltd. (later amalgamated into Lancor Holdings Ltd.), wherein:

• The developer would construct the building at its cost, and
• The landowners would receive 50% of the built-up area free of cost, while the developer would get 50% of the land and built-up area.

Lancor made security deposits totalling over ₹6.82 crore, refundable upon completion and handover of the constructed area. The Handover Date—a critical contractual trigger—depended on:

1. Completion of construction fit for occupation, certified by the project architect,
2. Application for a completion certificate, and
3. Written offer to hand over the constructed portion to the landowners.

A supplemental agreement (2006) fixed floor allocations: 2nd–5th floors for the developer, 6th–9th for landowners, and the 10th floor as shared. The building was christened Menon Eternity.

Dispute

The developer claimed it completed construction and applied for completion certificates in 2008. The architect’s certificate (10.10.2008) confirmed readiness for occupation, conditional on obtaining utility connections. The landowners disagreed, alleging incomplete work.

Despite partial refunds of ₹2 crore by the landowners, Lancor, on 19.12.2008, executed five sale deeds in its own favour, using a photocopy of a power of attorney still held in escrow — a move the landowners branded as fraudulent. They refused to refund the balance security deposits, triggering arbitration proceedings under the JDA’s arbitration clause.

Arbitration Proceedings

(1) Appointment and Claims

• Following court intervention, Justice K.P. Sivasubramaniam (Retd.) was appointed sole arbitrator.
• Lancor filed claims totalling over ₹9 crore, seeking a refund of deposits with 12% interest, damages, and a declaration of its entitlement to the power of attorney.

The Menons filed 24 counter-claims, seeking:

• Cancellation of the five sale deeds executed by Lancor in its own favour;
• Declaration that the architect’s certificate was illegal;
• Appointment of an independent architect;
• Compensation exceeding ₹50 crore for delay, loss of rent, and defamation.

(2) Issues Framed

Thirteen issues were framed, including:

• Whether construction was completed within the stipulated time;
• Validity of the architect’s certificate;
• Whether the sale deeds and lease deeds were lawful;
• Entitlement of parties to compensation and costs.

(3) Evidence

Each side examined one witness. Reports from M/s Velu Associates, Engineers, were marked as independent technical evidence, revealing persistent construction defects.

Arbitral Award (16 March 2016)

The arbitrator held against Lancor Holdings on all major issues:

• The building was not complete or fit for occupation on 10.10.2008.
• The architect’s certificate was invalid.
• The sale deeds executed by Lancor in its favour using an unauthorised copy of the power of attorney were illegal and void.

Although he recognised that both sides might have equitable interests, the arbitrator paradoxically refused to quantify relief or resolve the disputes fully, stating that “no further relief could be granted” and leaving parties free to pursue fresh proceedings.

He further justified his delay by noting the “complexity” of the case, but failed to explain why he took nearly four years after reserving the award to deliver it.

Result:

• All sale deeds were declared illegal and non-binding on the respondents.
• All claims and counterclaims were rejected or left open for future litigation.
• The award failed to finally settle disputes — an unworkable outcome.

Proceedings Before the Madras High Court

Lancor filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging the award for:

• Inordinate delay; and
• Failure to resolve disputes makes it perverse and contrary to public policy.

The Single Judge and Division Bench dismissed the challenge, reasoning that since the arbitration was conducted before Section 29A (time limit for awards) came into force, delay alone did not invalidate the award.

Relief Granted

• Recognising that the prolonged and deficient arbitral process had caused substantial injustice, the Supreme Court:
• Set aside the arbitral award dated 16.03.2016 for being vitiated by undue delay, perversity, and violation of public policy;
• Exercised powers under Article 142 of the Constitution to ensure complete justice, directing fresh arbitration proceedings before a new arbitrator; and
• Clarified that the parties’ respective claims and defences would remain open to be re-adjudicated expeditiously under the amended arbitration framework.

Ratio Decidendi

1. Delay and Validity: Undue and unexplained delay in pronouncing an arbitral award can vitiate it if the delay adversely affects the decision-making process or the perception of fairness.
2. Unworkable Awards: An award that fails to conclusively determine disputes, leaving parties to seek further remedies, is perverse and unenforceable. Arbitration must produce finality, not prolong litigation.
3. Public Policy and Patent Illegality: An award affected by delay and indecision violates the public policy of India (justice, fairness, and efficiency) and is patently illegal under Section 34(2A).
4. Section 14(2) Not Mandatory: A party need not first approach the Court under Section 14(2) before invoking Section 34 against a delayed award.
5. Role of Arbitrator: Arbitrators bear a moral and statutory duty to act with due diligence; failure to do so erodes faith in arbitration as a credible mechanism for speedy dispute resolution.

Click Here to Read the Official Judgment

Conclusion

The Supreme Court’s ruling in M/s. Lancor Holdings Ltd. v. Prem Kumar Menon & Ors. marks a crucial step in refining India’s arbitration jurisprudence. It firmly declares that justice delayed in arbitration is justice denied, and an arbitrator’s duty is not merely to decide but to decide effectively and timely.

The judgment reiterates that delay and indecision corrode legitimacy, and that arbitration must serve its legislative purpose — expeditious, fair, and final resolution of disputes. By setting aside an award that was both delayed and inconclusive, the Court sends a clear message:

“Arbitration cannot become a halfway house of justice. It must end disputes, not perpetuate them.”

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