Court Has No Power To Modify Award U/Sec 34 Arbitration & Conciliation Act : Supreme Court

The Supreme Court reiterated that a court, under Section 34 of the Arbitration and Conciliation Act, has no power to modify an arbitration award.

The limited and extremely circumscribed jurisdiction of the court under Section 34 of the Act, permits the court to interfere with an award, sans the grounds of patent illegality, the bench of Justices S Ravindra Bhat and Dipankar Datta said.

In this case, the Allahabad High Court, while disposing an under Section 37 of the Act, modified the arbitral award to the extent of reducing the interest, from compound interest of 18% to 9% simple interest per annum.

In appeal, the court noted that the old Act (Arbitration Act, 1940) contained a provision which enabled the court to modify an award.

"However, that power has been consciously omitted by Parliament, while enacting the Act of 1996. This means that the Parliamentary intent was to exclude power to modify an award, in any manner, to the court.", the bench said.

Setting aside the direction of the High Court modifying the award, the bench said:

"The limited and extremely circumscribed jurisdiction of the court under Section 34 of the Act, permits the court to interfere with an award, sans the grounds of patent illegality, i.e., that “illegality must go to the root of the matter and cannot be of a trivial nature”; and that the tribunal “must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground” .The other ground would be denial of natural justice. In appeal, Section 37 of the Act grants narrower scope to the appellate court to review the findings in an award, if it has been upheld, or substantially upheld under Section 34."

Larsen Air Conditioning and Refrigeration Company vs Union of India | 2023 LiveLaw (SC) 631 | 2023 INSC 708

Arbitration and Conciliation Act, 1996 ; Section 34, 37 - The court is powerless to modify the award and can only set aside partially, or wholly, an award on a finding that the conditions spelt out under Section 34 have been established - In appeal, Section 37 of the Act grants narrower scope to the appellate court to review the findings in an award, if it has been upheld, or substantially upheld under Section 34. (Para 13-16)

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