Arbitrator Cannot Modify Award On An Application Under Section 33 Arbitration Act: Supreme Court

The Supreme Court observed that an Arbitrator cannot modify an Arbitration award on an application filed under Section 33 of the Arbitration and Conciliation Act.

Only in a case of arithmetical and/or clerical error, the award can be modified and such errors only can be corrected, the bench comprising Justices MR Shah and BV Nagarathna said.

In this case, the arbitrator passed an award directing a party to return to the claimant 3648.80 grams of pure gold along with interest @ 18% per annum calculating the value of gold at Rs.740 per gram from 24.07.2004 and up to the date of delivery of the quantity of gold. In the alternative, the appellant was directed to pay the market value of 3648.80 grams of pure gold along with interest @ 18% per annum calculating the value of the gold at Rs. 740 per gram from 24.07.2004 till the date of payment. Thereafter, on an application under Section 33 of the Act, the Arbitrator made certain corrections in the award. Therefore corresponding changes was made in the alternate relief which read thus: In the alternative, the respondent shall pay to the claimant within the said period of three months the market value of 3,648.80 grams of 3 pure gold at [Rs.20,747.00 per 10 grams … value substituted] along with interest thereon at 18% per annum from 24.07.2004 and up to the date of payment.

One of the parties filed an application to set aside this modified Arbitration award which was dismissed. The appeal against this order was also dismissed. Before the Apex Court it was contended that there was no arithmetical and/or clerical error in the original award passed by the  arbitrator. It was contended that the City Civil Court as well as the High Court have materially erred in upholding the order passed by the  arbitrator allowing the application filed under Section 33 of the 1996 Act and modifying the award in purported exercise of powers under Section 33.

Agreeing with this contention, the bench observed that the order passed by the  arbitrator in the application under Section 33 of the 1996 Act is beyond the scope and ambit of Section 33 of the 1996 Act. Allowing the appeal, it observed thus: 

12. The original award was passed considering the claim made by the claimant as per its original claim and as per the statement of the claim made and therefore subsequently allowing the application under Section 33 of the 1996 Act to modify the original award in exercise of powers under Section 33 of the 1996 Act is not sustainable. Only in a case of arithmetical and/or clerical error, the award can be modified and such errors only can be corrected. In the present case, it cannot be said that there was any arithmetical and/or clerical error in the original award passed by the learned arbitrator. What was claimed by the original claimant in the statement of claim was awarded. Therefore, the order passed by the learned arbitrator on an application filed under Section 33 8 of the 1996 Act and thereafter modifying the original award cannot be sustained. The order passed by the learned arbitrator in the application under Section 33 of the 1996 Act is beyond the scope and ambit of Section 33 of the 1996 Act. Therefore, both, the City Civil Court as well as the High Court have committed a grave error in dismissing the arbitration suit/appeal under Sections 34 and 37 of the 1996 Act respectively. The modified award passed by the learned arbitrator allowing the application under Section 33 of the 1996 Act cannot be sustained and the same deserves to be quashed and set aside.

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