Whether Courts Can Modify Arbitral Award U/S 34 or 37 of Arbitration Act? Supreme Court Refers To Larger Bench

The Supreme Court has referred to the larger bench the question of whether the courts have the power to modify the arbitral award under Sections 34 or 37 of the Arbitration and Conciliation Act, 1996.

“Whether or not the Courts in exercise of power under sections 34 or 37 of the Arbitration and Conciliation Act, 1996 are empowered to modify an arbitral award is a question which frequently arises in proceedings not only before this Court but also before the High Courts and the District Courts.”, the Supreme Court frames the question.

The Bench Comprising of Justices Dipankar Dutta, K.V. Viswanathan, and Sandeep Mehta said while one line of decisions of this Court has answered the aforesaid question in the negative, there are decisions which have either modified the awards of the arbitral tribunals or upheld orders under challenge modifying the awards.

The court reasoned that due to different opinions rendered by the Supreme Court and High Courts, an authoritative pronouncement is required to provide clarity on the issue.

“It is, therefore, of seminal importance that through an authoritative pronouncement clarity is provided for the guidance of the Courts which are required to exercise jurisdiction under the aforesaid sections 34 and 37, as the case may be, day in and day out.”, the Supreme Court said.

The Supreme Court referred following questions to be decided by the larger bench:

“1. Whether the powers of the Court under section 34 and 37 of the Arbitration and Conciliation Act, 1996, will include the power to modify an arbitral award?

2. If the power to modify the award is available, whether such power can be exercised only where the award is severable and a part thereof can be modified?

3. Whether the power to set aside an award under section 34 of the Act, being a larger power, will include the power to modify an arbitral award and if so, to what extent?

4. Whether the power to modify an award can be read into the power to set aside an award under section 34 of the Act?

5. Whether the judgment of this Court in Project Director NHAI vs. M. Hakeem, followed in Larsen Air Conditioning and Refrigeration Company vs. Union of India and SV Samudram vs. State of Karnataka lay down the correct law, as other benches of two Judges (in Vedanta Limited vs. Shenzden Shandong Nuclear Power Construction Company Limited, Oriental Structural Engineers Pvt. Ltd. vs. State of Kerala and M.P. Power Generation Co. Ltd. vs. Ansaldo Energia Spa) and three Judges (in J.C. Budhraja vs. Chairman, Orissa Mining Corporation Ltd., Tata Hydroelectric Power Supply Co. Ltd. vs. Union of India and Shakti Nath vs. Alpha Tiger Cyprus Investment No.3 Ltd.) of this Court have either modified or accepted modification of the arbitral awards under consideration?”

The Petition is listed before the Chief Justice of India for appropriate order.

 The Supreme Court in M. Hakeem, Larsen Air Conditioning, and SV Samudram has held that the courts are not empowered to modify the arbitral award under Sections 34 or 37 of the Arbitration Act whereas in other aforementioned cases, the Supreme Court had modified or accepted the modified arbitral award.

Background

The instant Special Leave Petition (Civil) is preferred against the judgment/order passed by the Division Bench of the Madras High Court where the High Court while partly allowing the arbitral award had modified the award passed by the Arbitral Tribunal.

Two modifications were made by the High Court. One by the Single Judge and another by the Division Bench.

The Single Judge proceeded to award a sum of Rs.1,68,00,000/- to the Appellant in addition to the amount of arbitral award amounting to a sum of Rs.2 crores.

The Division Bench after noting that no arithmetic calculation was being done by the Single Judge to grant an additional amount to the Appellant had further modified the arbitral award by reducing the amount to Rs. 50,000/- from Rs. 1,68,00,000/-.

It is against the modification in the amount made by the Division Bench that the instant petition was preferred by the Appellant.

Case Details: GAYATRI BALASAMY VERSUS M/S ISG NOVASOFT TECHNOLOGIES LIMITED, SLP (C) Nos.15336-15337/2021

Citation : 2024 LiveLaw (SC) 149

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