Arbitration Act | Courts' Jurisdiction Under Sections 34 and 37 Do Not Extend To Modifying Arbitral Award: Supreme Court Reiterates
Recently, the Supreme Court affirmed the principle laid down in National Highways Authority of India vs. M. Hakeem & Another that the jurisdiction of the Courts under Sections 34 and 37 of the Arbitration & Conciliation Act, 1996 (1996 Act) will not extend to modifying an arbitral award.The bench comprising Justices PS Narasimha and Manoj Misra was hearing the case dealing with the...
Recently, the Supreme Court affirmed the principle laid down in National Highways Authority of India vs. M. Hakeem & Another that the jurisdiction of the Courts under Sections 34 and 37 of the Arbitration & Conciliation Act, 1996 (1996 Act) will not extend to modifying an arbitral award.
The bench comprising Justices PS Narasimha and Manoj Misra was hearing the case dealing with the land acquisition compensation under the National Highways Act, 1956. Dissatisfied with the Arbitral Tribunal's decision to award land acquisition compensation @ ₹495/sq.m, the Appellant preferred application before the District Court under Section 34, which had modified the award and enhanced the compensation to be payable @ ₹4,500/sq.m with 9% interest.
Following this, the Special District Revenue Officer, being the competent authority, preferred an application under Section 37 before the Madras High Court. Upon placing reliance on M. Hakeem's case, the High Court set aside the district judge's order granting enhanced compensation, noting that the Courts cannot modify the arbitral award, and reinstated the award granted by the Arbitral Tribunal.
Following this, the appellant approached the Supreme Court, arguing for parity with similarly placed claimants in the M. Hakeem case, where the apex court exercised its discretion under Article 136 to uphold higher compensation.
The Court affirmed the High Court's decision to the extent that it decided the case based on the observation laid down in M. Hakeem's case, that the court lacks jurisdiction to modify an arbitral award.
However, the Court exercised its powers under Article 142 to ensure fairness and parity with the decision in M. Hakeem, where the Court, under Article 136 of the Constitution, refrained from interfering with the grant of similar compensation to the respondents in that case.
“the High Court could not have exercised the discretion which the Supreme Court exercised in granting the same compensation to the Appellant as was granted to the Respondents in M. Hakeem's case (supra). To this extent, the High Court is correct in following the judgment of this Court in M. Hakeem's case (supra).”, the court observed.
“However, in order to maintain parity and grant to the Appellant(s) the same benefits as were extended to similarly placed claimants in M. Hakeem's case (supra), we deem it appropriate to exercise our power under Article 142 of the Constitution of India to direct that the Appellant(s) shall be paid the same compensation as was granted by the Principal District Judge, Vellore.”, the court added.
It is worthwhile to mention that recently, the bench led by Justice Dipankar Datta had 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. It 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.
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 cases such as 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. Ltd, the Supreme Court had modified or accepted the modified arbitral award.
Case Title: S. JAYALAKSHMI VERSUS THE SPECIAL DISTRICT REVENUE OFFICER & ORS.
Citation : 2025 LiveLaw (SC) 98