Forgetfulness Is Not a Ground: Delhi HC Restores Arbitral Award Set Aside Over Delay

Can a court set aside an arbitral award simply because a long gap between reserving and pronouncing it might have caused the arbitrators to forget what was argued before them? The Delhi High Court answered no in Unison Hotels Private Limited v. IFFCO Tokio General Insurance Company Limited,¹ allowing an appeal against a Single Judge’s order that had set aside a unanimous, three-member arbitral award on exactly this basis. A Division Bench of Justices C. Hari Shankar and Vinod Kumar held that a “mere possibility of forgetting,” without any specific finding that the delay actually affected a particular finding in the award, is not enough to set it aside, and remanded the insurer’s challenge for fresh consideration. For practitioners handling delay-based challenges under Section 34,² the judgment is a close, practically useful application of the Supreme Court’s test in Lancor Holdings v. Prem Kumar Menon³ to facts where the delay, on examination, did not actually damage the award.

Unison Hotels had insured its Vasant Kunj property under two policies with IFFCO Tokio, together worth over Rs 286 crore in cover. After a fire in January 2008, the insurer made part payments and treated the claims as fully and finally settled in January 2012. Unison invoked arbitration under Clause 13 of the policies, which permitted arbitration only over the quantum payable where liability itself was not disputed, asserting the settlement was procured under financial duress. A three-member tribunal, appointed in April 2012, found the settlement was not voluntary, decided the claims on their merits, and awarded Unison roughly Rs 65.13 crore with interest and costs, but not before a gap of two years between reserving the award in March 2021 and pronouncing it in March 2023. The insurer challenged the award under Section 34, primarily on the ground that this delay was inordinate and unexplained, and secondarily that the dispute was never arbitrable under Clause 13 in the first place. A Single Judge accepted both points and set aside the award, holding that the delay had eroded confidence that the tribunal’s reasoning on arbitrability was sound, without identifying any specific submission the tribunal had actually failed to consider.

The Governing Test: Lancor Holdings

The Division Bench anchored its analysis in the Supreme Court’s decision in Lancor Holdings Limited v. Prem Kumar Menon, which it read closely to extract the operative test. The Court held that “the ratio of the decision in Lancor Holdings is contained in… para 25.2,” and that “delay can be said to vitiate an arbitral award only if it is explicit, adversely reflects on the findings in the award and is unexplained to the extent that the arbitral award is riddled with the damaging effects of the delay. Short of this, the mere fact that an arbitral award was rendered belatedly cannot constitute sufficient basis to set it aside.” Applying this, the Court distinguished Lancor Holdings itself on facts: that case involved a nearly four-year delay with no explanation at all, an arbitrator who vacillated between proposed remedies, and an award that left the parties to litigate afresh rather than resolving the dispute. None of these features, the Court found, were present here.

No Specific Finding, Only a Possibility

The Court’s central holding targeted the structure of the Single Judge’s reasoning itself. Examining the judgment under appeal, the Division Bench held that “the learned Single Judge has not returned any specific finding of adverse impact, of the delay in rendition of the arbitral award… on the findings in the award. All he says [is] that there is a mere possibility that, owing to the passage of time, the fallibility of human memory, the arbitrators may have forgotten the arguments advance[d] before them. Which argument was forgotten is also not spelt out in the impugned judgment.” The Court held plainly that “a mere ‘possibility of forgetting,’ absent any specific finding of the delay in the arbitral award having a negative effect on the findings contained therein is, quite clearly, insufficient to set aside the award.” This finding alone, the Court noted, was sufficient to allow the appeal.

Clause 13 Was Never Actually in Dispute

On the insurer’s separate argument that the dispute fell outside Clause 13 because the tribunal never properly addressed arbitrability, the Court went back to the insurer’s own Statement of Defence before the tribunal and found it telling. The insurer had never categorically denied its liability to pay Unison under the policies, it disputed only the amount already paid being sufficient. The Court held that “pleadings bind the parties as much in arbitration as in other legal proceedings. A plea that the dispute was not arbitrable, given the nature of Clause 13 of the Policies, is, at the very least, a mixed question of fact and law. It has to be pleaded,” and found no such plea had been raised before the tribunal at all. Even assuming the tribunal ought to have addressed arbitrability regardless, the Court held its detailed findings rejecting the discharge voucher as the product of financial duress necessarily resolved the question, since once that voucher could not operate as a full settlement, “the quantum of amount payable by the Insurance Company to UHPL remained open to adjudication,” meaning the dispute was squarely about quantum and therefore arbitrable. The Court was careful to add that it was “not returning any finding on whether the decision of the learned Arbitral Tribunal, with respect to the plea of accord and satisfaction raised by the Insurance Company is, or is not, legally sustainable,” since the Single Judge had not examined that question either.

Outcome: Remanded, Not Restored

Having found the Single Judge’s reasoning on delay unsustainable, the Court did not itself restore the arbitral award or pronounce on whether it should otherwise survive scrutiny under Section 34. It allowed the appeal, set aside the Single Judge’s judgment, and remanded the insurer’s Section 34 petition for fresh consideration, uninfluenced by the observations in the judgment that had been set aside. The Court clarified that its own observations were confined to whether the award could be set aside solely for delay in its delivery, leaving every other ground of challenge open for the Single Judge to examine afresh. No costs were awarded.

The judgment supplies a useful, concrete illustration of how Lancor Holdings‘ abstract test actually bites in practice: a court cannot infer damage to an award’s findings from the bare fact of delay, it must identify, specifically, which finding was affected and how. An unsupported assumption that arbitrators “may have forgotten” an argument, without naming the argument or showing its absence from the award’s reasoning, does not meet that bar. The decision also offers a cautionary note on pleading discipline in arbitration: a non-arbitrability objection under a clause like this one needs to be specifically raised before the tribunal, since a court reviewing the award later will look first at what was actually pleaded, not at what might have been argued. Finally, the remand itself is instructive, overturning a Single Judge’s delay-based reasoning does not automatically validate the underlying award; it simply reopens the remaining grounds of challenge for proper consideration.

Citations

1. Unison Hotels Private Limited v. IFFCO Tokio General Insurance Company Limited, FAO(OS) (COMM) 29/2026 ↩︎
2. The Arbitration and Conciliation Act, 1996, s. 34 ↩︎
3. Lancor Holdings Limited v. Prem Kumar Menon, 2025 SCC OnLine SC 2319 ↩︎

Expositor(s): Adv. Pratistha Dahiya