Quick Summary: The Madras High Court overturned an arbitration decision because it took too long to be made. The case involved the Tamil Nadu Housing Board (TNHB) and M/s. N.C.C. Ltd, with the original decision favoring the contractor. The delay led the court to rule the decision as going against public interest.
In this case, the Tamil Nadu Housing Board (TNHB) filed a request under Section 34 of the Arbitration and Conciliation Act, 1996, to challenge an arbitration decision dated July 30, 2020. The decision was made by a single arbitrator in favor of M/s. N.C.C. Ltd, which used to be called Nagarjuna Construction Company Ltd.
The main problem was how long it took to make the decision. The final talks were finished on November 24, 2013, but the decision wasn't made until July 30, 2020, more than seven years later. This delay was seen as unreasonable and not explained.
"The delay in making the decision is almost 8 years... this 6½ years delay ruins the challenged decision," argued Mr. J. Ravindran, Additional Advocate General.
The arbitrator decided on interest at 9% per year from August 21, 1998, with an increase to 18% if not paid within two months. This included the delay period, which the court found unreasonable.
"The Sole Arbitrator... imposed interest at the rate of 9% per year... and if not paid within two months... at the rate of 18% per year."
Justice N. Anand Venkatesh ruled that the decision went against public interest because of the unexplained delay and the interest charged during this time. The court overturned the decision and allowed for a new arbitrator to be appointed to hear final arguments and make a new decision.
"This Court finds that the Decision... needs to be changed due to violations under Section 34(2)(b)(ii) and under Section 34(2A) of the Act."
The court decided that the long delay in making the decision and the financial consequences were enough reasons to overturn the original decision. Now, the parties can appoint a new arbitrator to settle the matter quickly.
