Can Arbitral Awards Be Modified Under S. 34 & S.37 Of Arbitration Act? Supreme Court Refers To 5 Judge Bench

The Supreme Court today (January 23) referred to a 5 judge constitution bench the issue of whether Courts have the power to modify an arbitral award under S. 34 and 37 of the Arbitration and Conciliation Act, 1996. The bench of CJI Sanjiv Khanna and Justices Sanjay Kumar and KV Viswanathan directed that while considering the scope of powers of the Court to modify arbitral awards, an examination of the scope and contours of S. 34 and 37 will also be needed. The Court would also need to see the extent to which modification powers can be given if such modification is allowed. S. 34 provides the outline for applying to set aside an arbitral award. S. 37 of the Act states the instances where an appeal may lie against orders relating to arbitral disputes. Notably, in February 2024, a bench of Justices Dipankar Dutta, K.V. Viswanathan, and Sandeep Mehta 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.The bench led by Justice Datta also noted that 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 5 main questions that the other bench had framed were :“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?”In M. Hakeem, Larsen Air Conditioning, and SV Samudram, the Apex Court 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.Today, Senior Advocate Saurabh Kirpal for the respondent argued that since the reference question was made by a 3-judge bench, it would be imperative to constitute a 5-judge bench to settle the matter at once. He added that those instances where the awards were not modified were by 2 judge benches, while 3 judge benches had allowed the modification under Article 142 powers. However, none of the three-judge benches expressly ruled on whether courts can exercise powers of modification under Article 142.The suggestion was supported by Sr Advocate Arvind Datar appearing for the petitioner in the lead matter. The Petitioner was represented by Mr. Arvind Datar, Sr. Advocate assisted by Mr. Nishanth Patil, Advocate.The Respondent was represented by Mr. Saurabh Kirpal, Sr. Advocate along with Mr. Debmalya Banerjee & Ms. Manmeet Kaur, Partners, Rohan Sharma, Principal Associate, Gurtejpal Singh, Senior Associate from Karanjawala & Co.Case Details : GAYATRI BALASAMY Versus M/S ISG NOVASOFT TECHNOLOGIES LIMITED| SLP(C) No. 15336-15337/2021 Click Here To Read/Download Order

Can Arbitral Awards Be Modified Under S. 34 & S.37 Of Arbitration Act? Supreme Court Refers To 5 Judge Bench

Anmol Kaur Bawa

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