Legal Review and Analysis of Ms Lancor Holdings Limited vs Prem Kumar Menon and others 2025 INSC 1277

In-Short

Case: M/s. Lancor Holdings Ltd. vs. Prem Kumar Menon & Ors.Citation: 2025 INSC 1277Short Caption: The Supreme Court set aside an arbitral award for being rendered after an unexplained delay of nearly four years and for failing to resolve the disputes, terming it unworkable and against public policy. Invoking Article 142, the Court imposed a financial penalty on the developer to validate the disputed transactions and bring finality to the two-decade-long legal battle.

1. Heading of the Judgment

Case Name: M/s. Lancor Holdings Limited vs. Prem Kumar Menon and others
Citation: 2025 INSC 1277
Court: Supreme Court of India
Civil Appeal Nos.: 10074-10075 of 2024
Date of Judgment: October 31, 2025
Judges: Justice Sanjay Kumar and Justice Satish Chandra Sharma

2. Related Laws and Sections

The judgment extensively deals with the following statutory provisions and legal principles:

• The Arbitration and Conciliation Act, 1996 (the "Act"):
  Section 34: Setting aside an arbitral award. The court discussed grounds such as the award being in conflict with the "public policy of India" and "patent illegality."
  Section 34(2)(b)(ii): Pertains to an award being in conflict with the public policy of India.
  Section 34(2A): Specific to domestic arbitrations, allows setting aside an award if it is vitiated by "patent illegality."
  Section 29A: The provision inserted by the 2015 Amendment to impose timelines for rendering an arbitral award. The judgment clarifies the legal position for the period prior to its insertion.
  Section 14: Provides for the termination of an arbitrator's mandate for failure to act without undue delay.

• The Constitution of India:
  Article 142: Grants the Supreme Court the power to pass any decree or order necessary for doing "complete justice" in any cause or matter pending before it.

• Other Legal Doctrines:
  Fundamental Policy of Indian Law
  Principles of Natural Justice ("justice must not only be done, but must be seen to be done")
  The doctrine against unjust enrichment

3. Basic Judgment Details

This appeal arose from a long-drawn dispute under a Joint Development Agreement (JDA) dated 17.12.2004. The core dispute was whether the appellant-developer, Lancor Holdings, had fulfilled its obligations to construct a building, triggering the "Handover Date" and the obligation on the respondent-landowners to refund security deposits and convey the developer's share.

The sole arbitrator, after concluding hearings on 28.07.2012, pronounced the award nearly four years later on 16.03.2016. The award declared the sale deeds executed by the developer in its own favour as illegal but failed to provide a final, workable resolution, leaving the parties to initiate fresh litigation. The award was challenged under Section 34 of the Act. The Madras High Court initially set it aside in part, but a Division Bench restored it. The developer then appealed to the Supreme Court.

4. Core Principle and Analysis of the Judgment

The Supreme Court's judgment addresses two pivotal legal issues that form the core of its analysis.

Issue 1: The Impact of Undue and Unexplained Delay in Pronouncing an Arbitral Award

The Legal Question: What is the effect of a long, unexplained delay by an arbitrator in delivering an award, especially in the era before statutory timelines were introduced under Section 29A of the Act?

The Supreme Court's Analysis and Holding:

The Court conducted a comprehensive survey of case law from various High Courts, which revealed conflicting views. Some judgments held that inordinate delay, by itself, vitiates an award as it violates the fundamental policy of speedy justice. Others opined that delay alone is not a ground under Section 34 unless it leads to a patent illegality in the award.

The Supreme Court synthesized these views and laid down a balanced principle. It held that delay in the delivery of an arbitral award, by itself, is not a standalone ground to set it aside. (Para 63(i))

However, the Court emphasized that each case must be examined on its own facts. An award becomes vulnerable when the delay has an explicit and adverse impact on the findings. The judgment states that the passage of time debilitates human memory, making it nearly impossible for an arbitrator to have total recall of evidence and arguments. Unexplained delay gives rise to avoidable speculation and suspicion, shaking the parties' faith in the system.

Conclusion on this Issue: The Court held that when the negative effect of undue delay is explicit and adversely reflects on the award's findings, such delay—especially if unexplained—can render the award in conflict with the public policy of India under Section 34(2)(b)(ii) or vitiated by patent illegality under Section 34(2A). (Para 63(i))

Furthermore, the Court pragmatically observed that an aggrieved party is not mandatorily required to first invoke the remedy under Section 14(2) (termination of mandate) before challenging a tainted award under Section 34, as doing so could risk arbitrator bias. (Para 63(i))

Issue 2: The Validity of an Unworkable Award and the Power under Article 142

The Legal Question: Is an arbitral award that fails to settle disputes finally, irrevocably alters the parties' positions, and forces them into further litigation, liable to be set aside? If so, can the Supreme Court use its power under Article 142 to resolve the dispute?

The Supreme Court's Analysis and Holding:

The Court scrutinized the arbitrator's award in this case and found it deeply flawed. The arbitrator, after a 4-year delay, declared the developer's sale deeds illegal but provided no final relief. He left critical monetary claims and counter-claims undecided, explicitly telling the parties to approach a civil court or a new arbitrator. (Paras 39-42)

The Court condemned this approach. It held that the very premise of arbitration is to provide a speedy and efficacious mechanism for dispute resolution. An award that does not resolve the disputes but forces the parties into a fresh round of litigation defeats the fundamental objective of the Act.

Conclusion on this Issue: The Supreme Court held that such an "unworkable" arbitral award is both in conflict with the public policy of India and patently illegal, making it liable to be set aside under Section 34(2)(b)(ii) and Section 34(2A). (Para 63(ii))

More significantly, the Court found that merely setting aside the award would be an empty remedy, as it would force the parties to start afresh after 16 years, and the status quo ante was impossible to restore due to the creation of third-party rights. Invoking the principle from the Constitution Bench in Gayatri Balasamy vs. ISG Novasoft Technologies Limited (2025), the Court decided this was a fit case to exercise its extraordinary power under Article 142 of the Constitution to do "complete justice" and bring finality to the litigation. (Paras 56-57)

5. Final Outcome and Supreme Court's Directions

Applying Article 142, the Supreme Court devised a pragmatic solution to end the dispute:

1. Validation of Sale Deeds: The sale deeds executed by the developer on 19.12.2008, though initially unlawful, were directed to be treated as lawful and valid. This was to avoid the impracticality of their cancellation and re-execution.

2. Penalty and Compensation: As a penalty for the developer's illegal action and to compensate the landowners for completing any outstanding works, the Court directed:
   Forfeiture of the security deposits of ₹6.82 crores already with the developer.
   An additional payment of ₹3.18 crores by the developer to the landowners.
   The total sum of ₹10 crores was to be paid by the developer within three months.

3. Restoration of Possession: Upon full payment, the developer would be entitled to take possession of its 50% share in the building and land, as per the original JDA.

This arrangement was crafted to balance the equities, penalize wrongdoing, compensate for expenses, and, most importantly, provide a final quietus to the parties. (Paras 60-62)

6. MCQs Based on the Judgment

1: The Supreme Court, in Lancor Holdings Ltd. vs. Prem Kumar Menon (2025 INSC 1277), held that undue delay in pronouncing an arbitral award?
(a) Is always a sufficient ground by itself to set aside the award under Section 34.
(b) Is irrelevant if the award is otherwise reasoned and detailed.
(c) Can vitiate the award if it explicitly and adversely impacts the findings, rendering it against public policy or patently illegal.
(d) Must first be challenged through an application under Section 14(2) before a Section 34 challenge can be made.

2: In the aforementioned case, the Supreme Court exercised its power under Article 142 of the Constitution primarily because?
(a) The arbitrator was found to be corrupt.
(b) The Joint Development Agreement was void from its inception.
(c) Setting aside the unworkable award would have forced the parties into fresh litigation without restoring the status quo ante, causing a travesty of justice.
(d) The respondents had not filed any counter-claims in the arbitration.