'Justice Must Appear to Be Done': Delhi High Court Sets Aside IFFCO Tokio–Unison Arbitration Award Over Delay

The Delhi High Court on Friday set aside an arbitral award arising out of an insurance dispute between IFFCO Tokio General Insurance Company Limited and Unison Hotels Private Limited, holding that the tribunal's two-year delay in pronouncing the award after reserving it had vitiated its findings.

The case was heard by a Single Judge Bench of Justice Avneesh Jhingan. The court reiterated that the object of arbitration is speedy dispute resolution. It also observed that “it is trite law that the justice should not only be done but should also appear to have been done.”

Unison Hotels Private Limited, a hotel management company, had insured its Delhi property with IFFCO Tokio under two policies. The first was a Material Damage policy for Rs 186.44 crore. The second was a Loss of Profit policy for Rs 100 crore. Both policies were valid from April 1, 2007 to March 31, 2008.

A fire broke out at the insured premises on January 26, 2008. Following the incident, Unison Hotels lodged claims of about Rs 68.64 crore under the Material Damage policy and Rs 100 crore under the Loss of Profit policy.

During the claim process, the insurer paid Rs 20 crore under the Material Damage policy and Rs 30 crore under the Loss of Profit policy. The claims were stated to have been settled on January 30, 2012. Unison Hotels later invoked the arbitration clause contained in the policies.

A three-member arbitral tribunal was constituted in April 2012. The tribunal reserved its award on March 6, 2021. The award was pronounced only on March 6, 2023.

As a preliminary issue, the tribunal examined the effect of the alleged full and final settlement. It concluded that the settlement was not voluntary. On that basis, it proceeded to adjudicate the claims on merits and ultimately ruled in favour of Unison Hotels under both policies.

IFFCO Tokio challenged the award before the Delhi High Court. It argued that the unexplained delay in pronouncing the award raised doubts about the tribunal's reasoning and warranted setting it aside.

It also questioned the tribunal's jurisdiction, contending that no arbitrable dispute survived once the claims had been settled in full and final terms.

Unison Hotels countered that delay alone could not invalidate an arbitral award. It maintained that the settlement was not voluntary and said the tribunal had adequately explained the time taken. It pointed to disruptions caused by the COVID-19 pandemic.

Relying on Supreme Court precedents, the High Court reiterated that while delay by itself is not a ground to set aside an award, unexplained delay that adversely reflects on the findings would give rise to unnecessary and wholly avoidable speculation and suspicion in the minds of the parties.

The Court emphasised that arbitration is intended to provide a speedy alternative forum for dispute resolution. It noted that this objective was reinforced by the insertion of Section 29A of the Arbitration and Conciliation Act, which prescribes timelines for making awards. The provision, however, was not applicable to the present arbitration.

The court rejected the explanation that COVID-19 prevented the tribunal members from meeting. It noted that even after leaving out the period affected by the pandemic, in line with Supreme Court directions, there was still close to a year with no explanation for the delay.

“Inordinate delay jolts the confidence of the parties as to whether the submissions were effectively weighed.”

Holding that the prolonged delay had impacted the tribunal's consideration of the jurisdictional objection and rendered the award patently illegal and unsustainable, the High Court allowed the petition and set aside the arbitral award dated March 6, 2023..

For IFFCO Tokio General Insurance Co. Ltd.: Advocates A.S. Chandhiok, Bindu Saxena, Tanpreet Gulati and Aparajita Swarup

For Unison Hotels Pvt. Ltd.: Advocates Darpan Wadhwa, Aseem Chaturvedi, Shivank, Arsh Alok and Divita Vyas