The Supreme Court on Wednesday held that appellate courts can modify arbitral awards under the Arbitration and Conciliation Act, 1996, but should do so with “great care and caution”.
In a 4:1 majority ruling, the SC bench comprising Chief Justice of India Sanjiv Khanna and Justices BR Gavai, Sanjay Kumar and AG Masih held that courts have “limited power” under Section 34 and 37 of the Act to modify arbitral awards. Section 34 of the Arbitration Act deals with applications for setting aside an arbitral award, while section 37 deals with the circumstances in which an appeal would lie against the order in an arbitral dispute.
Reading out the order, the CJI said that “this limited power” can be used only when the award is severable — by separating the invalid portion from the valid portion of the award, to correct any clerical, computational or typographical errors which appear erroneous on the face of the record, and to modify post-award interest in some circumstances.
The SC may also modify awards by exercising powers under Article 142 of the Constitution, the bench said, adding that it “must be exercised with great care and caution and within the limits of Constitutional power.”
Justice KV Viswanathan delivered a dissenting opinion in the case, disagreeing with the majority on certain aspects.
He held that courts exercising powers under Section 34 and the courts hearing appeals therefrom under Section 37 have no power to modify an award.
“Power to modify is not a lesser power than the power to set aside as the two operate in separate spheres. The inherent power under Section 151 CPC cannot be used to modify awards, as it is against the express provision of Section 34. Similarly, there is no scope to invoke the doctrine of implied powers to imply the power to modify the award. Article 142 of the Constitution cannot be exercised to modify an award, as it is well settled that Article 142 cannot be used to go by the substantive statutory provisions,” Justice Viswanathan further said.
The five judges were answering a question raised by a three-judge bench in February 2024 on whether courts can modify arbitral awards.
