SUPREME COURT OF INDIA
Gayatri Balasamy v. ISG Novasoft Technologies Ltd.
30 April 2025 · 2025 INSC 605
Limited power to modify arbitral awards
Source and extraction notes
- Machine extraction can contain spacing, reading-order and character errors. Check quotations against the unchanged source PDF. No claim of word-for-word visual certification is made.
Draft summary
AI-assisted historical explanation. Independently checked against the source by an AI reviewer. Not reviewed by a lawyer. This historical summary does not certify the current legal position.
In one sentence
The majority recognised a limited power to modify arbitral awards in defined situations.
Question decided
Do sections 34 and 37 permit anything short of setting an award aside?
Key holdings
- The majority identified limited categories including severance, correction of apparent clerical or computational errors and certain post-award interest adjustments.Source PDF pages: 36, 37.
- The Supreme Court’s Article 142 power remains exceptional and cannot become a general appeal on the merits of the award.Source PDF pages: 36, 37.
Outcome
The reference was answered by a four-to-one majority.
Source PDF pages: 36, 37.Plain-English explanation
The Constitution Bench considered whether a court must always set an award aside or can make limited corrections. The majority allowed a narrow power in the categories explained in the judgment. It did not authorise judges to rehear the dispute and substitute their preferred assessment of evidence or damages. Severability is important: an invalid part may be removed only where the valid part can properly stand. Interest and obvious errors also have specific limits. Justice Viswanathan disagreed with the broader modification power while accepting distinctions concerning severance and corrections. The majority opinion is followed by annexures and then the separate opinion in the source PDF. Readers must not mistake the dissent’s concluding answer for the Court’s controlling position.
Relevant law
- Arbitration and Conciliation Act, 1996: sections 34 and 37
- Constitution: Article 142
Opinions
Four-judge majority led by Chief Justice Khanna; Justice K.V. Viswanathan dissented in part.
Research notes and limits
Keep modification within the defined categories; check later applications and distinguish merits review from permissible correction.
Judgment - source material
All pages of the downloaded court document follow, including separate opinions, annexures and any final joint order. This is machine-extracted original text, not an AI rewrite. Use the PDF to check exact wording.
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Source PDF page 1
Open this page in the original PDF2025 INSC 605 Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 1 of 61 REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOS. OF 2025 (Arising out of S.L.P.(C) Nos.15336-15337 of 2021) GAYATRI BALASAMY ..... APPELLANT VERSUS M/S. ISG NOVASOFT TECHNOLOGIES LIMITED ..... RESPONDENT W I T H CIVIL APPEAL NO. OF 2025 (Arising out of S.L.P.(C) No.21301 of 2024) CIVIL APPEAL NO. OF 2025 (Arising out of S.L.P.(C) No.17941 of 2019) CIVIL APPEAL NO. OF 2025 (Arising out of S.L.P.(C) No.7973 of 2022) CIVIL APPEAL NOS. OF 2025 (Arising out of S.L.P.(C) Nos.4961-4962 of 2024) CIVIL APPEAL NO. OF 2025 (Arising out of S.L.P.(C) No. of 2025 @ S.L.P.(C) Diary No.7789 of 2024) CIVIL APPEAL NOS. OF 2025 (Arising out of S.L.P.(C) Nos.18656-18663 of 2024) CIVIL APPEAL NO.8183 OF 2016 CIVIL APPEAL NO.8184 OF 2016
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 2 of 61 J U D G M E N T SANJIV KHANNA, CJI. A three-Judge Bench of this Court, vide order dated 20th February 2024, directed that the Special Leave Petitions in Gayatri Balasamy v. ISG Novasoft Technologies Limited,1 be placed before the Chief Justice of India for an appropriate order. The matter was to be examined to determine the need to refer the following questions of law to a larger Bench: “1. Whether the powers of the Court under Sections 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,2 followed in Larsen Air Conditioning and Refrigeration Company vs. Union of India,3 and SV Samudram vs. State of Karnataka,4 lay down the correct law, as other benches of two Judges (in Vedanta Limited vs. Shenzden Shandong Nuclear Power Construction Company Limited,5 Oriental Structural Engineers Pvt. Ltd. vs. State of Kerala,6 and M.P. Power Generation Co. Ltd. vs. Ansaldo Energia Spa)7 and three Judges (in J.C. 1 2024 SCC OnLine SC 1681. 2 (2021) 9 SCC 1. 3 (2023) 15 SCC 472. 4 (2024) 3 SCC 623. 5 (2019) 11 SSC 465. 6 (2021) 6 SCC 150. 7 (2018) 16 SCC 661.
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 3 of 61 Budhraja vs. Chairman, Orissa Mining Corporation Ltd.,8 Tata Hydroelectric Power Supply Co. Ltd. vs. Union of India,9 and Shakti Nath vs. Alpha Tiger Cyprus Investment No.3 Ltd.10) of this Court have either modified or accepted modification of the arbitral awards under consideration?” 2. Accordingly, this Bench of five-Judges has been constituted to decide the questions referred. 3. The fulcrum of the legal controversy rests on the following question(s): Are Indian courts jurisdictionally empowered to modify an arbitral award? If so, to what extent? The controversy arises because the Arbitration and Conciliation Act, 1996,11 does not expressly empower courts to modify or vary an arbitral award. Section 34 of the 1996 Act only confers upon courts the power to set aside an award. Nevertheless, this Court, on several instances, has been compelled to modify arbitral awards, seeking to minimize protracted litigation and foster the ends of justice. In contrast, some judgments have posited that Indian courts cannot modify awards, due to the narrowly defined scope of Section 34. Therefore, divergent and contrasting judicial opinions exist on this question. 4. Annexure A to this judgment reproduces Section 34, and other pertinent provisions of the 1996 Act – namely Sections 5, 31, 33, 37, 43 and 48. Annexure B provides a compilation of prevailing stances adopted by foreign jurisdictions vis-à-vis the question of modification. 8 (2008) 2 SCC 444. 9 (2003) 4 SCC 172. 10 (2020) 11 SCC 685. 11 Hereinafter referred to as, “1996 Act”.
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 4 of 61 5. Before addressing the arguments raised, it would be useful to capture the divergence of judicial opinions on the question of modification. These conflicting judgments provide context to the legal controversy and the arguments presented. A. JUDICIAL DIVERGENCE ON MODIFICATION POWERS 6. In McDermott International Inc. v. Burn Standard Co. Ltd. and Others,12 this Court explained the difference between judicial interference permitted by the 1996 Act vis-à-vis the Arbitration and Conciliation Act, 194013. The 1996 Act limits the supervisory role of the court to specific grounds under Section 34, while the 1940 Act gave courts broader powers under Sections 30 and 33. The Court clarified that under Section 34, the court does not act as an appellate authority for factual findings, evidence, or questions of law dealt with by the arbitral tribunal. At the same time, the 1996 Act mandates that arbitrators issue a reasoned award, which was not a requirement under the 1940 Act. 7. Further, the judgment clarifies the role of arbitrators in determining claims and counterclaims. The court cannot correct the arbitrator's mistakes, whether factual or legal. Rather, its role is confined to setting aside the award, leaving the parties the option to initiate fresh arbitration proceedings if they wish. However, when it came to the rate of interest, the Court invoked its power under Article 142 of the Constitution14 to vary the award, reducing the interest 12 (2006) 11 SCC 181. 13 Hereinafter referred to as, “1940 Act”. 14 “142. Enforcement of decrees and orders of Supreme Court and orders as to discovery, etc.—(1) The Supreme Court in the exercise of its jurisdiction may pass such decree or make such order as is necessary for doing complete justice in any cause or matter pending before it, and any decree so passed or order so made shall be enforceable throughout the territory of India in such manner as may
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 5 of 61 from 10% per annum (as awarded by the tribunal) to 7.5% per annum. It felt compelled to do so as there was a significant lapse of time. Two earlier decisions were relied upon: Pure Helium India (P) Limited v. Oil & Natural Gas Commission,15 where the rate of interest was reduced from 18% per annum to 6% per annum, and Mukand Ltd. v. Hindustan Petroleum Corpn. Ltd.,16 where the interest rate was lowered from 11% per annum to 7.5% per annum. 8. In Vedanta Limited v. Shenzhen Shandong Nuclear Power Construction Company Limited,17 this Court, in the context of an international award, highlighted the need to consider the differing impact of interest rates when the parties operate in different currencies. The rate of interest had to be aligned with the applicable currency of each party. Accordingly, the Court held that applying a uniform interest rate for both the INR and Euro components was not justified. While maintaining the interest rate at 9% per annum for the INR component, the interest on the Euro component was modified to the London Interbank Offered Rate (LIBOR) rate plus 3 percentage points. Furthermore, the Court deleted the interest rate of 15% per annum, which was applicable if the awarded sum was not paid within 120 days. Significantly, this judgment did not reference the Court's power under Article 142 of the Constitution. be prescribed by or under any law made by Parliament and, until provision in that behalf is so made, in such manner as the President may by order prescribe. (2) Subject to the provisions of any law made in this behalf by Parliament, the Supreme Court shall, as respects the whole of the territory of India, have all and every power to make any order for the purpose of securing the attendance of any person, the discovery or production of any documents, or the investigation or punishment of any contempt of itself.” 15 (2003) 8 SCC 593. 16 (2006) 9 SCC 383. 17 (2019) 11 SCC 465.
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 6 of 61 9. In Oil and Natural Gas Corporation Limited v. Western GECO International Limited,18 a three Judge Bench of this Court observed that when an arbitral tribunal, upon considering the facts presented before it, fails to draw an inference that ought to have been drawn or, conversely, draws an inference that is manifestly untenable, resulting in a gross miscarriage of justice, such an award becomes amenable to challenge. In such circumstances, the award may be set aside or modified, depending on whether the offending part of the award is severable or not. 10. Earlier, a two-Judges Bench of this Court in Numaligarh Refinery Ltd. v. Daelim Industrial Co. Ltd.,19 held that courts should ordinarily refrain from substituting their interpretation for that of the arbitrator. However, where the parties, with full knowledge, have consented to refer the matter to arbitration, the court may intervene and modify the award when it is demonstrably and reasonably justified. For example, when an arbitrator acts without jurisdiction or adopts an interpretation that is contrary to established law, the court has the authority to interfere and set the matter right. 11. In an earlier decision of this Court in Tata Hydro-Electric Power Supply Co. Ltd. and Others v. Union of India,20 this Court exercised its power to modify the effective date from which the awarded interest would apply. However, similar to Numaligarh Refinery Ltd. (supra), this decision did not specifically address the restricted grounds of Section 34. 18 (2014) 9 SCC 263. 19 (2007) 8 SCC 466. 20 (2003) 4 SCC 172.
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 7 of 61 12. In a catena of judgments of this Court, it has been consistently held that the arbitral tribunal is the master of evidence. The scope of judicial intervention under Section 34 is confined to the limited grounds expressly provided therein.21 The Court does not possess the power to correct errors of fact, reconsider costs, or engage in a review of the merits of the arbitral award. 13. In Ssangyong Engineering and Construction Company Limited v. National Highways Authority of India (NHAI),22 a two-judge bench of this Court ruled that interference based on public policy violations under Section 34(2)(b)(ii) is limited to the fundamental policy of Indian law. The court cannot interfere merely because the arbitrator lacked a “judicial approach”.23 Albeit in the said case, an issue arose which went beyond the narrow scope of Section 34. The fundamental principle of justice was stated to be violated due to a unilateral change or addition to the contract by the arbitral tribunal. The Court emphasized that such changes, made without the affected party’s consent, cannot be allowed. As a result, the majority award was set aside, along with the judgments of the Single Judge and the Division Bench of the High Court that had upheld the award. To ensure full justice, this Court, using its power under Article 142 of the Constitution, upheld the minority award and the interest it stipulated. 21 See Maharashtra State Electricity Distribution Company Limited v. Datar Switchgear Limited and Others, (2018) 3 SCC 133; Parsa Kente Collieries Limited v. Rajasthan Rajya Vidyut Utpadan Nigam Limited, (2019) 7 SCC 236; and M.P. Power Generation Co. Ltd. v. ANSALDO Energia SpA, (2018) 16 SCC 661. 22 (2019) 15 SCC 131. 23 For domestic awards made in India, an additional ground of interference is available – patent illegality appearing on the face of the award – in terms of Section 34(2A) of the 1996 Act.
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 8 of 61 14. In Oriental Structural Engineers Private Limited v. State of Kerala,24 this Court upheld the award for being in consonance with the contract but intervened to modify the interest rate. It was observed that the principles laid down in Secretary, Irrigation Department, Government of Orissa and Others v. G.C. Roy,25 for determining the interest rate would be equally applicable to the 1996 Act. In fact, Section 31(7)(a) of the 1996 Act, incorporates this principle. Simple interest at the rate of 8% per annum was directed to be paid on the sum left unpaid. 15. In Project Director, National Highways No. 45 E and 220 National Highways Authority of India v. M. Hakeem and Another,26 a two-judge bench of this Court held that Section 34 allows arbitral awards to be set aside only on the limited grounds specified in sub-sections (2) and (3). When a right is limited, its enforceability is coterminous with its limited nature, i.e., it can only be enforced in line with those limitations. As a result, the award can either be set aside or remanded to the arbitral tribunal. Section 34(4) facilitates such remand by allowing the court to adjourn the proceedings, and hence providing the arbitral tribunal a chance to eliminate the grounds for setting it aside. Here again, the tribunal’s opinion is key in determining whether the grounds for setting aside have been resolved. 16. The Court also noted that Section 34 is modelled on the UNCITRAL Model Law on International Commercial Arbitration, 1985,27 which does not allow courts to modify awards. Unlike the broader powers available under the 1940 24 (2021) 6 SCC 150. 25 (1992) 1 SCC 508. 26 (2021) 9 SCC 1. 27 Hereinafter referred to as, “Model Law”.
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 9 of 61 Act, the court’s powers under the 1996 Act are narrower. The Court cited previous judgments of this Court and various High Courts, emphasizing that allowing modification under Section 34 would go against the legal framework, as only the legislature has the power to change the law. Any expansion of Section 34’s powers to include modification would require a legislative amendment. B. ARGUMENTS RAISED I. In Favour of Modification 17. First, it is contended that the judgment in M. Hakeem (supra) warrants reconsideration, as it conflicts with several decisions rendered by Benches of two and three Judges of this Court, in which awards were modified and varied. This Court has also upheld the modification of awards by the High Courts or District Courts on other occasions. Second, it is claimed that the Model Law, based on the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 195828, permits a broader scope of judicial intervention. Several signatory countries to the Model Law have enacted provisions for domestic awards that permit modification and/or variation (Annexure B), in addition to allowing for the setting aside of awards. This international perspective, it is argued, reflects a broader understanding of the court’s powers in arbitrations. Lastly, the principle that a greater power includes a lesser power is invoked. Since Section 34 allows for the setting aside of an 28 Hereinafter referred to as, “New York Convention”.
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 10 of 61 award, it is argued that this power inherently includes the ability to modify the award, as modification is seen as a lesser form of intervention than annulment. 18. Reference is made to Ahmedabad St. Xavier College Society and Another v. State of Gujarat and Another,29 where a nine-Judge Bench of this Court applied the maxim “omne majus continent in se minus” – the greater contains the lesser. Applying this maxim, it is contended that the power to set aside will include power to modify or partially set aside an award. It is also submitted that the power to modify and set aside an award can be exercised when the award is in conflict with public policy in terms of Section 34(2)(b)(ii) or to the extent it is vitiated by patent illegality in terms of Section 34(2A) of the 1996 Act. This approach aligns with the jurisprudence of other jurisdictions such as the United Kingdom, Australia, Singapore, and other countries (Annexure B), where similar powers are vested in the courts. 19. Three additional and ancillary arguments were raised. The first argument was that the expression, 'recourse', used in Section 34, is broad in scope, and it can include any action to enforce a right. Thus, the recourse to set aside an award includes within its ambit the recourse to modify or vary it. The second argument relates to the public law aspect of land acquisition under the National Highways Act, 195630. As this Act mandates arbitration on public law issues, it is contended that commercial considerations can neither be factored in nor applied. Further, the court, while examining a petition under Section 34, has the power to enhance compensation for acquired land. Lastly, it was contended 29 (1974) 1 SCC 717. 30 Hereinafter referred to as, “NHAI Act”.
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 11 of 61 that the power to grant, reduce, or increase interest should be read into Section 34, without requiring the parties to go through a fresh arbitration process. The granting of interest does not necessitate an elaborate inquiry that would justify the need for re-arbitration. II. Against Modification 20. The learned counsel opposing the court’s power of modification argue that the Model Law was the result of a collective effort by several countries to establish a uniform and cohesive legal framework. During discussions, it was decided that courts should not have the power to modify awards. If courts had such power, it could result in a situation where a court order or decree replaces the arbitral award, which in arbitration jurisprudence is unacceptable. It may carry international repercussions when awards are sought to be enforced under foreign conventions. 21. For example, under the New York Convention, only arbitral awards are recognized and enforceable, not court decrees/orders that modify those awards. A court decree cannot substitute an arbitral award, especially when the award is examined under the limited jurisdiction of Section 34. Section 36 treats awards as enforceable in the same way as court decrees. However, unless Indian law legislatively empowers courts to modify awards, this power cannot be assumed from the power to set aside an award under Section 34. While some countries have granted courts the specific power to modify or vary an award under their domestic laws, Indian law does not permit the same.
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 12 of 61 22. It is further submitted that the maxim omne majus continent in se minus – the greater contains the lesser – should not be applied in the present case. The power to set aside an award is a sui generis power, which is intrinsically different from the modification power. Further, when an award is set aside, it results in the annulment of the award. Annulment means that the award no longer exists. Something that does not exist cannot be modified or altered. Similarly, it is submitted that the arbitral tribunal after rendering an award, becomes functus officio. Thus, the exercise of any modification, would lead to the courts adopting appellate powers. Without appellate powers, which the court does not possess, an award cannot be modified. Therefore, assuming modification powers would be contrary to both the express language and the intent behind Section 34 of the 1996 Act. 23. Lastly, it is submitted that the doctrine of merger does not apply to court modifications of an arbitral award. The nature and scope of the power of a court, being distinct from an arbitral tribunal, the modifications will not merge with the arbitral award. In simpler words, any modification or variation made by the court to the arbitral award would not be subsumed into the arbitral award. For instance, if the court modifies the rate of interest decided by a tribunal, the original award will not be deemed to have been amended to reflect this new interest rate. This could cause issues at the enforcement stage, as the New York Convention allows only the enforcement of an arbitral award, not a court's judgment/order.
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 13 of 61 C. ANALYSIS 24. Given this background, we have to determine whether, and under what circumstances, the courts have the power to modify or vary arbitral awards. 25. We recognize that the legal controversy carries significant implications. The arguments canvassed symbolize the longstanding conflict between equity and justice, on the one hand, and the fetters imposed by the court’s jurisdictional limits, on the other. Therefore, in addressing the questions referred, it is crucial to adopt a balanced approach. While we may favour an equitable and pragmatic view, our interpretation must not be at odds with the express or implied legislative intent underlying the 1996 Act. The question therefore is – to what extent can we weave the principles of equity and justice while not offending the jurisdictional fabric of Section 34? 26. We begin by examining the scope and ambit of the power of ‘recourse’ under Section 34 of the 1996 Act. I. Contours of Section 34, 1996 Act 27. Section 5 of the 1996 Act limits judicial intervention in an arbitral award to what is authorized by Part I of the Act. Section 34(1) stipulates that ‘recourse’ to a court against an arbitral award may be made only by an application for setting aside the award in accordance with Section 34(2) and 34(3). 28. Section 34(2)(a) enumerates specific grounds on which an award can be set aside. These include – the incapacity of a party, invalidity of an arbitration agreement in law, improper notice for appointment of an arbitrator or arbitral proceedings, denying the opportunity to a party to present their case, the award
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 14 of 61 being beyond the scope of submission to arbitration, and the composition of the arbitral tribunal or the arbitral procedure not being by the agreement of the parties in certain circumstances. The proviso to Section 34(2)(a)(iv) outlines the concept of “severability of awards”. This has been addressed separately in Part II of our Analysis. 29. Section 34(2)(b) stipulates that an arbitral award may be set aside when the subject matter of the dispute cannot be settled by arbitration per the applicable law or if the arbitral award conflicts with the public policy of India. Explanation I clarifies that an award can conflict with public policy of India only if (i) the award is induced or affected by fraud, corruption or is in violation of Section 7531 or Section 8132 of the 1996 Act; (ii) when it is in contravention with the fundamental policy of Indian law;33 or (iii) when it conflicts with the most basic notions of morality or justice. Explanation 2 mandates that no review on the merits shall be undertaken when determining a contravention of the fundamental policy of Indian law. 31 “75. Confidentiality.— Notwithstanding anything contained in any other law for the time being in force, the conciliator and the parties shall keep confidential all matters relating to the conciliation proceedings. Confidentiality shall extend also to the settlement agreement, except where its disclosure is necessary for purposes of implementation and enforcement.” 32 “81. Admissibility of evidence in other proceedings.— The parties shall not rely on or introduce as evidence in arbitral or judicial proceedings, whether or not such proceedings relate to the dispute that is the subject of the conciliation proceedings,— (a) views expressed or suggestions made by the other party in respect of a possible settlement of the dispute; (b) admissions made by the other party in the course of the conciliation proceedings; (c) proposals made by the conciliator; (d) the fact that the other party had indicated his willingness to accept a proposal for settlement made by the conciliator.” 33 In Ssangyong Engineering and Construction Company Limited v. National Highways Authority of India (NHAI), (2019) 15 SCC 131 the scope of the public policy ground for setting aside awards was narrowed and confined to violations of the fundamental policy of Indian law.
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 15 of 61 30. Section 34(2-A) stipulates that an award may be set aside when it is vitiated by patent illegality appearing on the face of the award. The proviso clarifies that such determination shall not be made solely because there is an erroneous application of law or through reappreciation of evidence. Section 34(3) provides timelines which needs to be adhered to while filing an application under Section 34. Section 34(4) stipulates the court’s power of remanding an award to the arbitral tribunal. We have addressed this remand power in Part VI of our Analysis. Section 34(5) outlines notice requirements, while Section 34(6) mandates the expeditious disposal of Section 34 applications, setting a hard outer limit of one year from the date of service of notice on the other party under Section 34(5). 31. The next question that arises is whether the power to set aside an award includes the power to partially set it aside. II. Severability of Awards 32. In the present controversy, the proviso to Section 34(2)(a)(iv) is particularly relevant. It states that if the decisions on matters submitted to arbitration can be separated from those not submitted, only that part of the arbitral award which contains decisions on matters non-submitted may be set aside. The proviso, therefore, permits courts to sever the non-arbitrable portions of an award from arbitrable ones. This serves a two-fold purpose. First, it aligns with Section 16 of the 1996 Act, which affirms the principle of kompetenz-kompetenz — that is, the arbitrators’ competence to determine their own jurisdiction. Secondly, it enables the court to sever and preserve the “valid”
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 16 of 61 part(s) of the award while setting aside the “invalid” ones.34 Indeed, before us, none of the parties have argued that the court is not empowered to undertake such a segregation. 33. We hold that the power conferred under the proviso to Section 34(2)(a)(iv) is clarificatory in nature. The authority to sever the “invalid” portion of an arbitral award from the “valid” portion, while remaining within the narrow confines of Section 34, is inherent in the court’s jurisdiction when setting aside an award. 34. To this extent, the doctrine of omne majus continet in se minus—the greater power includes the lesser—applies squarely. The authority to set aside an arbitral award necessarily encompasses the power to set it aside in part, rather than in its entirety. This interpretation is practical and pragmatic. It would be incongruous to hold that power to set aside would only mean power to set aside the award in its entirety and not in part. A contrary interpretation would not only be inconsistent with the statutory framework but may also result in valid determinations being unnecessarily nullified. 35. However, we must add a caveat that not all awards can be severed or segregated into separate silos. Partial setting aside may not be feasible when the “valid” and “invalid” portions are legally and practically inseparable. In simpler words, the “valid” and “invalid” portions must not be inter-dependent or intrinsically intertwined. If they are, the award cannot be set aside in part. 34 The “validity” and “invalidity”, as used here, does not refer to legal validity or merits examination, but validity in terms of the proviso to Section 34(2)(a)(iv) of the 1996 Act.
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 17 of 61 36. The Privy Council, in Pratap Chamaria v. Durga Prasad Chamaria,35 addressed this issue with the following pertinent observations: “…If, however, the pronouncement of the arbitrators is such that matters beyond the scope of the suit are inextricably bound up with matters falling within the purview of the litigation, in that case, the court would be unable to give effect to the award because of the difficulty that it cannot determine to what extent the decision of the subject-matter of the litigation has been affected and coloured by the decision of the arbitrators in regard to matters beyond the ambit of the suit….” Thus, the power of partial setting aside should be exercised only when the valid and invalid parts of the award can be clearly segregated—particularly in relation to liability and quantum and without any corelation between valid and invalid parts. 37. We would now proceed to examine, the permissibility and scope of the court’s modification powers, within the parameters of Section 34 of the 1996 Act. In doing so, we will distinguish the court's power of modification from: (i) the court’s power of setting aside an award; (ii) the arbitrator's power under Section 33 to correct, reinterpret, and/or issue an additional award; and (iii) the power of the court to remand the award to the arbitrator under Section 34(4). III. Difference between setting aside and modification 38. This distinction lies at the heart of many arguments canvassed before us. The parties opposing the recognition a power of modification of the courts have strenuously contended that modification and setting aside are distinct and sui 35 AIR 1925 PC 293.
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 18 of 61 generis powers. While modification involves altering specific parts of an award, setting aside does not alter the award but results in its annulment. Their primary concern is that recognizing a power of modification may invite judicial interference with the merits of the dispute—something arguably inconsistent with the framework of the 1996 Act. 39. We agree with this argument, but only to a limited extent. It is true that modification and setting aside have different consequences: the former alters the award, while the latter annuls it.36 However, we do not concur with the view that recognizing any modification power will inevitably lead to an examination of the merits of the dispute. It will completely depend on the extent of the modification powers recognised by us. In the following part of our Analysis, we outline the contours of this limited power and explain why, in our view, recognizing it will ultimately yield more just outcomes. IV. A Limited Power of Modification Can Be Located in Section 34 40. A core principium of arbitration, an Alternative Dispute Resolution37 mechanism, is to provide a quicker and cost-effective alternative to courtroom litigation. While this suggests minimal judicial interference, the role of domestic courts remains crucial, as they function in a supportive capacity to facilitate 36 The words used in the statute must be interpreted contextually, taking into account the purpose, scope, and background of the provision. Many words and expressions have both narrow and broad meanings and thereby open to multiple interpretations. Legal interpretation should align with the object and purpose of the legislation. Therefore, we may not strictly apply a semantic differentiation while interpreting the words "modification" or "setting aside". Instead, a holistic and purposive interpretation of these words will be consistent with the intent behind the provision and the 1996 Act. Linguistically and even jurisprudentially, a distinction can be drawn between the expressions – modification, partial setting aside, and setting aside of an arbitral award in its entirety. However, we must note that the practical effect of partially setting aside an award is the modification of the award. 37 Hereinafter referred to as, “ADR”.
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 19 of 61 and expedite the resolution of disputes. Therefore, it follows that judicial intervention is legitimate and necessary when it furthers the ends of justice, including the resolution of disputes. 41. To deny courts the authority to modify an award—particularly when such a denial would impose significant hardships, escalate costs, and lead to unnecessary delays—would defeat the raison d'être of arbitration. This concern is particularly pronounced in India, where applications under Section 34 and appeals under Section 37 often take years to resolve. 42. Given this background, if we were to decide that courts can only set aside and not modify awards, then the parties would be compelled to undergo an extra round of arbitration, adding to the previous four stages: the initial arbitration, Section 34 (setting aside proceedings), Section 37 (appeal proceedings), and Article 136 (SLP proceedings). In effect, this interpretation would force the parties into a new arbitration process merely to affirm a decision that could easily be arrived at by the court. This would render the arbitration process more cumbersome than even traditional litigation. 43. Equally, Section 34 limits recourse to courts to an application for setting aside the award. However, Section 34 does not restrict the range of reliefs that the court can grant, while remaining within the contours of the statute. A different relief can be fashioned as long as it does not violate the guardrails of the power provided under Section 34. In other words, the power cannot contradict the
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 20 of 61 essence or language of Section 34. The court would not exercise appellate power, as envisaged by Order XLI of the Code of Civil Procedure, 190838. 44. We are of the opinion that modification represents a more limited, nuanced power in comparison to the annulment of an award, as the latter entails a more severe consequence of the award being voided in toto. Read in this manner, the limited and restricted power of severing an award implies a power of the court to vary or modify the award. It will be wrong to argue that silence in the 1996 Act, as projected, should be read as a complete prohibition. 45. We are thus of the opinion that the Section 34 court can apply the doctrine of severability and modify a portion of the award while retaining the rest. This is subject to parts of the award being separable, legally and practically, as stipulated in Part II of our Analysis. 46. Mustill and Boyd have observed that an order varying an award is not equivalent to an appellate process.39 The authors suggest that a modification order would only be appropriate where the modification, including any adjustment of costs, follows inevitably from the tribunal’s determination of a question of law.40 This approach would be beneficial, as it would reduce costs and delays. The courts need not engage in any fact-finding exercise. By acknowledging the Court’s power to modify awards, the judiciary is not rewriting the statute. We hold that the power of judicial review under Section 38 Hereinafter referred to as, “Code”. 39 Sir Michael J. Mustill & Stewart C Boyd QC, Commercial Arbitration, p. 617 (2nd ed. 2001). 40 Ibid.
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 21 of 61 34, and the setting aside of an award, should be read as inherently including a limited power to modify the award within the confines of Section 34. V. Court can modify the award despite Sections 33 and 34(4) 47. Section 33 of the 1996 Act (Annexure A) empowers an arbitrator, upon request, to correct and/or re-interpret the arbitral award, on limited grounds. This includes the correction of computational, clerical or typographical errors, as well as giving interpretation on a specific point or a part of the award, when mutually agreed upon by the parties. Section 33(3) enables the tribunal to suo moto correct any errors within thirty days of delivering the award. Section 33(4) grants wider powers. It permits the arbitral tribunal, upon compliance with specified manner of request, to make an additional award on claims presented before the arbitral proceedings but omitted from the arbitral award. 48. Section 33(7) states that Section 31 (Annexure A) shall apply where correction, interpretation or any addition is made to the arbitral award. Section 31 deals with form and content requirements for arbitral awards. Consequently, an order passed by the arbitral tribunal under Section 33 amounts to an arbitral award. Under Section 34(3), where a request is made under Section 33, the limitation period for filing an application to set aside the award commences from the date on which the arbitral tribunal disposes of the Section 33 request. 49. Notwithstanding Section 33, we affirm that a court reviewing an award under Section 34 possesses the authority to rectify computational, clerical, or typographical errors, as well as other manifest errors, provided that such modification does not necessitate a merits-based evaluation. There are certain
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 22 of 61 powers inherent to the court, even when not explicitly granted by the legislature. The scope of these inherent powers depends on the nature of the provision, whether it pertains to appellate, reference, or limited jurisdiction as in the case of Section 34. The powers are intrinsically connected as they are part and parcel of the jurisdiction exercised by the court. 50. In Grindlays Bank Ltd. v. Central Government Industrial Tribunal and Others,41 this Court has held that every tribunal or court is endowed with certain ancillary or incidental powers which are necessary to discharge its functions effectively for the purpose of doing justice between the parties. In that case, the simple question was whether an ex parte award passed on merits, when sought to be set aside by an application showing sufficient cause, amounts to seeking a review on merits of the dispute. The Court held that a procedural review differs from a review on merits of the dispute. The former is a power inherent in every court or tribunal and inadvertent errors committed by another tribunal can be corrected by the court/tribunal. This would not amount to a review on merits. The reasoning distinguishing between procedural and merits review is reproduced below: “The expression “review” is used in the two distinct senses, namely (1) a procedural review which is either inherent or implied in a court or Tribunal to set aside a palpably erroneous order passed under a misapprehension by it, and (2) a review on merits when the error sought to be corrected is one of law and is apparent on the face of the record. It is in the latter sense that the court in Patel Narshi Thakershi case held that no review lies on merits unless a statute specifically provides for it. Obviously when a review is sought due to a procedural defect, the inadvertent error committed by the Tribunal must be corrected ex debito 41 1980 Supp SCC 420.
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 23 of 61 justitiae to prevent the abuse of its process, and such power inheres in every court or Tribunal.” 51. Reference may also be made to the power of recall, which every court possesses, as recognized by this Court in Budhia Swain and Others v. Gopinath Deb and Others42. The availability of this power enables the court to address various situations efficiently, rather than remanding the matter to the arbitral tribunal under Section 34(4). Lastly, one may also refer to the power of granting interim relief if the circumstances so warrant. 52. The doctrine of implied power is to only effectuate and advance the object of the legislation, i.e., the 1996 Act and to avoid the hardship. It would, therefore, be wrong to say that the view expressed by us falls foul of express provisions of the 1996 Act. 53. Under Section 152 of the Code,43 a court executing a decree has the power to correct clerical or arithmetic mistakes in judgments, orders, or decrees arising from any accidental slips or omissions. This Court, in Century Textiles Industries Limited v. Deepak Jain and Another,44 held that clerical or arithmetical errors may be corrected by the executing court, however, the court must take the decree according to its tenor and cannot go behind the decree. 54. In the same vein as these judgments, we hold that inadvertent errors, including typographical and clerical errors can be modified by the court in an application under Section 34. However, such a power must not be conflated with the 42 (1999) 4 SCC 396. 43 “152. Amendment of judgments, decrees or orders.— Clerical or arithmetical mistakes in judgments, decrees or orders or errors arising therein from any accidental slip or omission may at any time be corrected by the Court either of its own motion or on the application of any of the parties.” 44 (2009) 5 SCC 634.
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 24 of 61 appellate jurisdiction of a higher court or the power to review a judgment of a lower court. The key distinction between Section 33 and Section 34 lies in the fact that, under Section 34, the court must have no uncertainty or doubt when modifying an award. If the modification is debatable or a doubt arises regarding its appropriateness, i.e., if the error is not apparent on the face of the record, the court will be left unable to proceed, its hands bound by the uncertainty. In such instances, it would be more appropriate for the party to seek recourse under Section 33 before the tribunal or under Section 34(4). VI. To Modify or to Remit? Addressing the court’s quandary. 55. As elucidated above, if a fog of uncertainty obscures the exercise of modification powers, the courts must not modify the award. Instead, they should avail their remedial power and remand the award to the tribunal under Section 34(4). Under the sub-section, either party—whether the one challenging the award under Section 34 or the one defending against such a challenge—may request the court to adjourn the proceedings for a specified period. If the court deems it appropriate, it may grant such an adjournment, allowing the arbitral tribunal to resume proceedings or take necessary corrective measures to eliminate the grounds for setting aside the award. Thus, Section 34(4) provides a second opportunity for a party to seek recourse through arbitral channel. 56. However, the power of remand permits the court only to send the award to the tribunal for reconsideration of specific aspects. It is not an open-ended process; rather, it is a limited power, confined to limited circumstances and issues identified by the court. Upon remand, the arbitral tribunal may proceed
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 25 of 61 in a manner warranted by the situation – including recording additional evidence, affording a party an opportunity to present its case if previously denied, or taking any other corrective measures necessary to cure the defect. In contrast, the exercise of modification powers does not allow for such flexibility. Courts must act with certainty when modifying an award – like a sculptor working with a chisel, needing precision and exactitude. Therefore, the argument that remand powers make modification unnecessary is misconceived. They are distinct powers and are to be exercised differently. 57. Section 34(4), derived from the Model Law, is discretionary in nature. This is evident from the use of the word “may” in the provision. The Court may invoke this power when it identifies a defect in the award that could lead to its setting aside. In such cases, the court may seek to prevent this outcome by granting the arbitral tribunal an opportunity to rectify the defect. 58. While it is not appropriate to establish rigid parameters or a straitjacket formula for the exercise of this power, it is clear that Section 34(4) does not authorize the arbitral tribunal to rewrite the award on merits or to set it aside. Rather, it serves as a curative mechanism available to the tribunal when permitted by the court. The primary objective is to preserve the award if the identified defect can be cured, thereby avoiding the need to set aside the award. Accordingly, a court may not grant a remand when the defect in the award is inherently irreparable. A key consideration is the proportionality between the harm caused by the defect and the means available to remedy it. 59. While exercising this power, the court must also remain mindful that the arbitral tribunal has already rendered its decision. If the award suffers from serious
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 26 of 61 acts of omission, commission, substantial injustice, or patent illegality, the same may not be remedied through an order of remand. Clearly, there cannot be a lack of confidence in the tribunals’ ability to come to a fair and balanced decision when an order of remit is passed. 60. Thus, an order of remand should not be passed when such order would place the arbitral tribunal in an invidious or embarrassing position. Additionally, remand may be inappropriate when it does not serve the interests of the parties, particularly in time-sensitive matters or where it would lead to undue costs and inefficiencies. Once an order of remand is granted, the arbitral tribunal has the authority to vary, correct, review, add to, or modify the award. Notably, under Section 34(4), the tribunal’s powers, though confined, remain nonetheless substantial. This stands in contrast to the court’s narrow role under the rest of Section 34. 61. This Court, in Kinnari Mullick and Another v. Ghanshyam Das Damani,45 referred to and laid down the preconditions for exercising the power of remand under Section 34(4). It held that the court cannot exercise the power of remand suo motu in the absence of a written request by one of the parties. Secondly, once an application under Section 34(1) has been decided and the award set aside, the court becomes functus officio and cannot thereafter remand the matter to the arbitral tribunal. Consequently, the power under Section 34(4) cannot be invoked after the court has disposed of the Section 34(1) application. 45 (2018) 11 SCC 328.
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 27 of 61 62. We are unable to accept the view taken in Kinnari Mullick (supra), which insists that an application or request under Section 34(4) must be made by a party in writing. The request may be oral. Nevertheless, there should be a request which is recorded by the court. We are also unable to agree that the request must be exercised before the application under Section 34(1) is decided. Section 37 (Annexure A) permits an appeal against any order setting aside or refusing to set aside an arbitral award under Section 34. To this extent, the appellate jurisdiction under Section 37 is coterminous with, and as broad as, the jurisdiction of the court deciding objections under Section 34. Hence, the contention that the tribunal becomes functus officio after the award is set aside is misplaced. The Section 37 court still possesses the power of remand stipulated in Section 34(4). Of course, the appellate court, while exercising power under Section 37, should be mindful when the award has been upheld by the Section 34 court. But the Section 37 court still possesses the jurisdiction to remand the matter to the arbitral tribunal. 63. Our reasoning does not breach the principle of party autonomy.46 Neither does it confer appellate powers on the courts. Instead, it adheres strictly to the parameters stipulated in Sections 34 and 37 of the 1996 Act. The power of the appellate court in civil proceedings under Order XLI of the Code, is as broad as that of a trial court, both in terms of facts and law. Contrastingly, the court’s 46 Rather, it acknowledges that the parties opting for arbitration also consent to be governed by the applicable statute governing arbitration—in this case, the 1996 Act. Further, principle of party autonomy should not be extended to an extreme to urge that the party misunderstood the law and consequently the consent is invalid. While it is true that a mistake of law may vitiate consent in certain contexts, the interpretation here restricts the court's role to that of limited judicial scrutiny in terms of the 1996 Act.
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 28 of 61 authority under Sections 34 and 37 of the 1996 Act is limited by the silhouette of Section 34. 64. In Dyna Technologies Private Limited v. Crompton Greaves Limited,47 this Court emphasized that the issuance of a reasoned award is not a mere formality under the 1996 Act. For an award to be termed “reasoned”, it must meet three essential yardsticks: it must be proper, intelligible, and adequate. The purpose behind Section 34(4) is clear: it allows for an award to become enforceable after granting the tribunal an opportunity to cure any defects. This power is exercisable when the arbitral tribunal has failed to give any reasoning or the award exhibits gaps in reasoning and these defects can be cured, thereby preventing unnecessary challenges. The underlying intent is to provide an effective, expeditious forum for addressing curable defects, which Section 34(4) facilitates. 65. In I-Pay Clearing Services Private Limited v. ICICI Bank Limited,48 this Court clarified that Section 34(4) does not grant the authority to review or reconsider previous findings or conclusions. As discussed earlier in this judgment, the scope of the power under Section 34(4) is not to be restricted to a rigid, straitjacket formula. Rather, it depends on the specific facts and circumstances of each case. Being a discretionary power, it is to be exercised by the Court judiciously, keeping in mind the grounds raised in the application under Section 34(1). The Court should be prima facie satisfied that the wrong and illegality in the award are curable. While doing so, the Court need not 47 (2019) 20 SCC 1. 48 (2022) 3 SCC 121.
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 29 of 61 record the final finding on the contentious issue at hand; however, not every request for such relief is warranted. The discretion must be exercised with caution, and only when it is evident that an adjournment will allow the arbitral tribunal to resolve the issues and remove the grounds for setting aside the award. However, Section 34(4) is an enabling provision—it does not compel the tribunal to take corrective action, leaving it free to either amend or refuse to amend the award. VII. Doctrine of Merger and the New York Convention 66. The reliance placed on doctrine of merger, coupled with the argument that court orders partially setting aside or modifying an award would render the amended award unenforceable under the New York Convention, is unfounded and must be rejected as misconceived. We are of the view that, once Section 34 is reinterpreted to include a limited power to modify awards, this authority will not affect the international commercial arbitration regime or the enforcement of foreign awards. 67. Section 48 of the 1996 Act (Annexure A), which is similarly worded as Article V of the New York Convention, delineates situations when the enforcement of a foreign award may be refused. Section 48(1)(e) states the award may not be enforced when it has not become binding on the parties or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made. In simpler words, the award must become “binding on the parties” in terms of the law of the seat before enforcement. Sub-clause (e) therefore recognizes that, for enforcement, the domestic law of the country where the award is made shall prevail and have supremacy. Thus,
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 30 of 61 this Court’s interpretation, reading modification powers into Section 34, would not be at loggerheads with the New York Convention. The Convention requires the enforcement court to consider whether an award has become binding in terms of the law of the seat. 68. In any case, the New York Convention, as explained by this Court in Brace Transport Corporation of Monrovia, Bermuda v. Orient Middle East Lines Limited, Saudi Arabia and Others,49 speaks of “recognition and enforcement” of an award. An award may be recognized without being enforced; but if it is enforced, then it is necessarily recognized. Recognition may act as a shield against re-agitation of issues which the award deals with. A party successful in arbitration, may seek and rely upon recognition, if proceedings are brought against him on issues already dealt with by an award. A defensive shield is then erected on the award. 69. Based on the above discussion, the argument that several countries like Singapore, Kenya, and the United Kingdom (Annexure B) – though originally following the Model Law – now allow courts to modify an award in limited cases, while the 1996 Act does not, is only linguistically correct. However, it is not convincing jurisprudentially or in principle. The limited power under Section 34 allows the court to vary or modify the award. The effect thereof is that the award would be read as modified by the judgment/order. 49 1995 Supp (2) SCC 280.
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 31 of 61 VIII. NHAI Act – Expansive Modification of Arbitral Awards is Impermissible 70. It has been argued that Section 34 should be expansively interpreted to permit modification of awards under the NHAI Act. In particular, it is suggested that courts should be allowed to modify the quantum of compensation awarded, as the Act involves statutory arbitration. This argument is, however, untenable. The jurisdiction conferred under Section 34 does not distinguish between statutory and non-statutory arbitration in terms of the scope of courts’ power of review. Hence, this argument stands rejected. 71. We refrain from expressing any opinion on the validity of the provisions under the NHAI Act, which is presently under judicial consideration in a separate writ petition. Neither do we adjudicate upon whether or in what manner awards issued by statutory authorities may be challenged. IX. Post-Award Interest 72. The next question that arises is: do courts possess the power to declare or modify interest, especially post award interest? In respect of pendente lite interest, Section 31(7)(a) (Annexure A), states that unless otherwise agreed by the parties, the arbitral tribunal may include in its sum for the award, interest, at such rate it deems reasonable on whole or part of the money for whole or part of the period on which the cause of action arose and the date on which the award is made. In respect of post-award interest, Section 31(7)(b) (Annexure A) states that unless an award provides for interest on a sum directed to be paid by it, the sum will carry an interest at a 2% higher rate than the current rate of interest prevalent on the date of the award, from the date of
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 32 of 61 the award till the date of payment. The explanation defines the expression ‘current rate of interest’. 73. There can be instances of violation of Section 31(7)(a), and the pendente lite interest awarded may be contrary to the contractual provision. We are of the opinion that, in such cases, the court while examining objections under Section 34 of the 1996 Act will have two options. First is to set aside the rate of interest or second, recourse may be had to the powers of remand under Section 34(4). 74. For the post award interest in terms of Section 31(7)(b), the courts will retain the power to modify the interest where the facts justify such modification. This is why the standard rate stipulated in clause (b) applies when the award itself does not specify the applicable post award interest. There can be a situation where the party to be paid money is at fault and is guilty of delay which may require a modification in the rate of interest. In the absence of grant of post award interest in the award, the court also possesses the power to grant post award interest. Clearly, as per the legislative mandate, it is not the sole prerogative of the arbitrator. 75. Compare Section 31 of the 1996 Act with Section 31 of the Model Law. While both sections are titled similarly – “Form and Contents of Award” – only the 1996 Act addresses interest in Section 31(7). The Model Law does not provide standards governing the determination of interest rates. Thus, Section 31(7) is a unique creation of the Indian legislature. It was not borrowed from the Model Law. Specifically, under Section 31(7)(b), the legislature has established a standard rate of interest to guide the arbitrator’s discretion when it comes to determining the post-award interest rate. While the arbitrator retains his
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 33 of 61 flexibility based on facts and circumstances of the case, the standard set by the legislature must weigh in on their consideration. Further, as there is a standard prescribed by the legislature, the post-award interest awarded can be scrutinized by courts against the standards prescribed. 76. Our reasoning is bolstered when considering the practical aspects. Arbitral tribunals, when determining post-award interest, cannot foresee future issues that may arise. Post award interest is inherently future-oriented and depends on facts and circumstances that unfold after the award is issued. Since the future is unpredictable and unknown to the arbitrator at the time of the award, it would be unreasonable to suggest that the arbitrator, as a soothsayer, could have anticipated or predicted future events with certainty. Therefore, it is appropriate for the Section 34 court to have the authority to intervene and modify the post-award interest if the facts and circumstances justify such a change. 77. Inherent in the discussion above, is the court's power to both increase or decrease the post-award interest rate. It would be incorrect to state that the court's power to interfere with this interest rate is limited solely to decreasing the interest rate. Situations may arise where the rate should be increased due to delays or obstructions in the execution of the award. Interest rates may also fluctuate over time. 78. However, the court, while exercising this power, must be cautious and mindful not to overstep its role by altering the interest rate unless there are compelling and well-founded reasons to do so. In exercising this power, the court is not acting in an appellate capacity, but rather under limited authority. For instance,
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 34 of 61 the 1996 Act stipulates a standard post-award interest rate. When the statute itself benchmarks a standard, unless there are special and specific reasons, the rate of interest stipulated by the statute should be applied. 79. Nevertheless, this limited power is significant, as it can help avoid further rounds of litigation. Without it, the court may be forced to set aside the entire award or order a fresh round of arbitration because of an erroneous interest rate rather than simply adjusting this rate. X. Post-Award Settlements 80. We are also of the opinion that the parties are entitled to enter into an agreement or settlement even after an award is pronounced. Such a settlement should be in accordance with the provisions of Order XXIII of the Code. The law of the land does not bar the parties from entering into a post award or post decree settlement. The only legal requirement is that such settlement must be verifiable and in accordance with law i.e., the settlement is not a result of undue influence, force, fraud, coercion, etc. XI. Limitation Period – Section 34 81. This brings us to Section 43(4) (Annexure A) of the 1996 Act. It clarifies the legal position re limitation and setting aside. For context, once an award is set aside, it becomes null and void, but the original dispute may still require resolution. The 1996 Act, vide Section 43(4), enables the parties to initiate fresh arbitration or court proceedings in relation to the dispute. However, the question that arises is: how do we calculate the limitation period within which the fresh arbitration or court proceedings are to be commenced? Section 43(4)
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 35 of 61 stipulates that the period between the commencement of arbitration and the Court’s order setting aside the award is excluded for the purposes of calculating the limitation period under the Limitation Act, 1963. In essence, the time during which the award is in force is not counted. We are also cognizant that there could be a situation that, on setting aside of the award, the entire dispute gets resolved and decided. However, we need not go into this question. What is relevant is that Section 43(4) provides liberty for the parties to invoke either arbitration or court proceedings, as applicable, following the annulment of the award. XII. Supreme Court’s Power to Do Complete Justice 82. As far as the applicability of Article 142 of the Constitution is concerned, this power is to be exercised by this Court with great care and caution. Article 142 enables the Court to do complete justice in any cause or matter pending before it. The exercise of this power has to be in consonance with the fundamental principles and objectives behind the 1996 Act and not in derogation or in suppression thereof. 83. In Shilpa Sailesh v. Varun Sreenivasan,50 a Constitution Bench of this Court summarized the scope of its power under Article 142 of the Constitution as follows: “19. Given the aforesaid background and judgments of this Court, the plenary and conscientious power conferred on this Court under Article 142(1) of the Constitution of India, seemingly unhindered, is tempered or bounded by restraint, which must be exercised based on fundamental considerations of general and specific public policy. Fundamental general conditions of public policy refer to 50 (2023) 14 SCC 231.
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 36 of 61 the fundamental rights, secularism, federalism, and other basic features of the Constitution of India. Specific public policy should be understood as some express pre-eminent prohibition in any substantive law, and not stipulations and requirements to a particular statutory scheme. It should not contravene a fundamental and non-derogable principle at the core of the statute. Even in the strictest sense, it was never doubted or debated that this Court is empowered under Article 142(1) of the Constitution of India to do “complete justice” without being bound by the relevant provisions of procedure, if it is satisfied that the departure from the said procedure is necessary to do “complete justice” between the parties.” 84. While exercising power under Article 142, this Court must be conscious of the aforesaid dictum. In our opinion, the power should not be exercised where the effect of the order passed by the court would be to rewrite the award or modify the award on merits. However, the power can be exercised where it is required and necessary to bring the litigation or dispute to an end. Not only would this end protracted litigation, but it would also save parties’ money and time. CONCLUSIONS 85. Accordingly, the questions of law referred to by Gayatri Balasamy (supra) are answered by stating that the Court has a limited power under Sections 34 and 37 of the 1996 Act to modify the arbitral award. This limited power may be exercised under the following circumstances: I. when the award is severable, by severing the “invalid” portion from the “valid” portion of the award, as held in Part II of our Analysis. II. by correcting any clerical, computational or typographical errors which appear erroneous on the face of the record, as held in Part IV and V of our Analysis;
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 37 of 61 III. post award interest may be modified in some circumstances as held in Part IX of our Analysis; and/or IV. Article 142 of the Constitution applies, albeit, the power must be exercised with great care and caution and within the limits of the constitutional power as outlined in Part XII of our Analysis. …….......................................CJI. (SANJIV KHANNA) …….…......................................J. (B.R. GAVAI) …….…......................................J. (SANJAY KUMAR) …….…......................................J. (AUGUSTINE GEORGE MASIH) NEW DELHI; APRIL 30, 2025.
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 38 of 61 ANNEXURE - A “5. Extent of judicial intervention.— Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part. 31. Form and contents of arbitral award.—(1) An arbitral award shall be made in writing and shall be signed by the members of the arbitral tribunal. (2) For the purposes of sub-section (1), in arbitral proceedings with more than one arbitrator, the signatures of the majority of all the members of the arbitral tribunal shall be sufficient so long as the reason for any omitted signature is stated. (3) The arbitral award shall state the reasons upon which it is based, unless— (a) the parties have agreed that no reasons are to be given; or (b) the award is an arbitral award on agreed terms under Section 30. (4) The arbitral award shall state its date and the place of arbitration as determined in accordance with Section 20 and the award shall be deemed to have been made at that place. (5) After the arbitral award is made, a signed copy shall be delivered to each party. (6) The arbitral tribunal may, at any time during the arbitral proceedings, make an interim arbitral award on any matter with respect to which it may make a final arbitral award. (7)(a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made. (b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of two per cent higher than the current rate of interest prevalent on the date of award, from the date of award to the date of payment. Explanation.—The expression “current rate of interest” shall have the same meaning as assigned to it under clause (b) of Section 2 of the Interest Act, 1978 (14 of 1978). (8) The costs of an arbitration shall be fixed by the arbitral tribunal in accordance with Section 31-A. 33. Correction and interpretation of award; additional award.— (1) Within thirty days from the receipt of the arbitral award, unless another period of time has been agreed upon by the parties—
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 39 of 61 (a) a party, with notice to the other party, may request the arbitral tribunal to correct any computation errors, any clerical or typographical errors or any other errors of a similar nature occurring in the award; (b) if so agreed by the parties, a party, with notice to the other party, may request the arbitral tribunal to give an interpretation of a specific point or part of the award. (2) If the arbitral tribunal considers the request made under sub-section (1) to be justified, it shall make the correction or give the interpretation within thirty days from the receipt of the request and the interpretation shall form part of the arbitral award. (3) The arbitral tribunal may correct any error of the type referred to in clause (a) of sub-section (1), on its own initiative, within thirty days from the date of the arbitral award. (4) Unless otherwise agreed by the parties, a party with notice to the other party, may request, within thirty days from the receipt of the arbitral award, the arbitral tribunal to make an additional arbitral award as to claims presented in the arbitral proceedings but omitted from the arbitral award. (5) If the arbitral tribunal considers the request made under sub-section (4) to be justified, it shall make the additional arbitral award within sixty days from the receipt of such request. (6) The arbitral tribunal may extend, if necessary, the period of time within which it shall make a correction, give an interpretation or make an additional arbitral award under sub-section (2) or sub-section (5). (7) Section 31 shall apply to a correction or interpretation of the arbitral award or to an additional arbitral award made under this section. 34. Application for setting aside arbitral award.— (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3). (2) An arbitral award may be set aside by the Court only if— (a) the party making the application establishes on the basis of the record of the arbitral tribunal that— (i) a party was under some incapacity; or
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 40 of 61 (ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or (v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or (b) the Court finds that— (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii) the arbitral award is in conflict with the public policy of India. [Explanation 1.— For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,— (i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice.
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 41 of 61 Explanation 2.— For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute. [(2-A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award: Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence. (3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under Section 33, from the date on which that request had been disposed of by the arbitral tribunal: Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter. (4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award. (5) An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement. (6) An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in sub-section (5) is served upon the other party. 37. Appealable orders.— (1) Notwithstanding anything contained in any other law for the time being in force, an appeal shall lie from the following orders (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order, namely:— (a) refusing to refer the parties to arbitration under Section 8;
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 42 of 61 (b) granting or refusing to grant any measure under Section 9; (c) setting aside or refusing to set aside an arbitral award under Section 34. (2) Appeal shall also lie to a court from an order of the arbitral tribunal— (a) accepting the plea referred to in sub-section (2) or sub-section (3) of Section 16; or (b) granting or refusing to grant an interim measure under Section 17. (3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court. 43. Limitations.— (1) The Limitation Act, 1963 (36 of 1963), shall apply to arbitrations as it applies to proceedings in court. (2) For the purposes of this section and the Limitation Act, 1963 (36 of 1963), an arbitration shall be deemed to have commenced on the date referred in Section 21. (3) Where an arbitration agreement to submit future disputes to arbitration provides that any claim to which the agreement applies shall be barred unless some step to commence arbitral proceedings is taken within a time fixed by the agreement, and a dispute arises to which the agreement applies, the Court, if it is of opinion that in the circumstances of the case undue hardship would otherwise be caused, and notwithstanding that the time so fixed has expired, may on such terms, if any, as the justice of the case may require, extend the time for such period as it thinks proper. (4) Where the Court orders that an arbitral award be set aside, the period between the commencement of the arbitration and the date of the order of the Court shall be excluded in computing the time prescribed by the Limitation Act, 1963 (36 of 1963), for the commencement of the proceedings (including arbitration) with respect to the dispute so submitted. 48. Conditions for enforcement of foreign awards.— (1) Enforcement of a foreign award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the Court proof that—
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 43 of 61 (a) the parties to the agreement referred to in Section 44 were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or (b) the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (c) the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be enforced; or (d) the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or (e) the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made. (2) Enforcement of an arbitral award may also be refused if the Court finds that— (a) the subject-matter of the difference is not capable of settlement by arbitration under the law of India; or (b) the enforcement of the award would be contrary to the public policy of India. Explanation 1.—For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,— (i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice.
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 44 of 61 Explanation 2.—For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.] (3) If an application for the setting aside or suspension of the award has been made to a competent authority referred to in clause (e) of sub-section (1) the Court may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security.”
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 45 of 61 ANNEXURE - B S. NO. COUNTRY RELEVANT PROVISION 1. Singapore Sections 47 and 49 of the Singapore Arbitration Act, 2001 47. No judicial review of award The Court does not have jurisdiction to confirm, vary, set aside or remit an award on an arbitration agreement except where so provided in this Act. 49. Appeal against award (1) A party to arbitral proceedings may (upon notice to the other parties and to the arbitral tribunal) appeal to the Court on a question of law arising out of an award made in the proceedings. (2) Despite subsection (1), the parties may agree to exclude the jurisdiction of the Court under this section and an agreement to dispense with reasons for the arbitral tribunal’s award is to be treated as an agreement to exclude the jurisdiction of the Court under this section. (3) An appeal must not be brought under this section except — (a) with the agreement of all the other parties to the proceedings; or (b) with the permission of the Court. (4) The right to appeal under this section is subject to the restrictions in section 50. (5) Permission to appeal is to be given only if the Court is satisfied that — (a) the determination of the question will substantially affect the rights of one or more of the parties; (b) the question is one which the arbitral tribunal was asked to determine; (c) on the basis of the findings of fact in the award— (i) the decision of the arbitral tribunal on the question is obviously wrong; or (ii) the question is one of general public importance and the decision of the arbitral tribunal is at least open to serious doubt; and
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 46 of 61 (d) Despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the Court to determine the question. (6) An application for permission to appeal under this section must identify the question of law to be determined and state the grounds on which it is alleged that permission to appeal should be granted. (7) The permission of the appellate court is required for any appeal from a decision of the Court under this section to grant or refuse permission to appeal. (8) On an appeal under this section, the Court may by order — (a) confirm the award; (b) vary the award; (c) remit the award to the arbitral tribunal, in whole or in part, for reconsideration in the light of the Court’s determination; or (d) set aside the award in whole or in part. (9) The Court is not to exercise its power to set aside an award, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the arbitral tribunal for reconsideration. (10) The decision of the Court on an appeal under this section is to be treated as a judgment of the Court for the purposes of an appeal to the appellate court. (11) The appellate court may give permission to appeal against the decision of the Court in subsection (10) only if the question of law before it is one of general importance, or one which for some other special reason should be considered by the appellate court. 2. United Kingdom Section 30, 67(3), 68 and 69(7) of the Arbitration Act, 1996 30. Competence of tribunal to rule on its own jurisdiction. (1) Unless otherwise agreed by the parties, the arbitral tribunal may rule on its own substantive jurisdiction, that is, as to— (a)whether there is a valid arbitration agreement, (b) whether the tribunal is properly constituted, and (c) what matters have been submitted to arbitration in accordance with the arbitration agreement. (2) Any such ruling may be challenged by any available arbitral process of appeal or review or in accordance with the provisions of this Part.
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 47 of 61 67. Challenging the award: substantive jurisdiction. (1) A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court— (a) challenging any award of the arbitral tribunal as to its substantive jurisdiction; or (b) for an order declaring an award made by the tribunal on the merits to be of no effect, in whole or in part, because the tribunal did not have substantive jurisdiction. A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3). (2) The arbitral tribunal may continue the arbitral proceedings and make a further award while an application to the court under this section is pending in relation to an award as to jurisdiction. (3) On an application under this section challenging an award of the arbitral tribunal as to its substantive jurisdiction, the court may by order— (a) confirm the award (b) vary the award, or (c) set aside the award in whole or in part. (4) The leave of the court is required for any appeal from a decision of the court under this section. 68. Court may set aside award (1) A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award. A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3). (2) Serious irregularity means an irregularity of one or more of the following kinds which the court considers has caused or will cause substantial injustice to the applicant— (a) failure by the tribunal to comply with section 33 (general duty of tribunal); (b) the tribunal exceeding its powers (otherwise than by exceeding its substantive jurisdiction: see section 67);
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 48 of 61 (c) failure by the tribunal to conduct the proceedings in accordance with the procedure agreed by the parties; (d) failure by the tribunal to deal with all the issues that were put to it; (e) any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award exceeding its powers; (f) uncertainty or ambiguity as to the effect of the award; (g) the award being obtained by fraud or the award or the way in which it was procured being contrary to public policy; (h) failure to comply with the requirements as to the form of the award; or (i) any irregularity in the conduct of the proceedings or in the award which is admitted by the tribunal or by any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award. (3) If there is shown to be serious irregularity affecting the tribunal, the proceedings or the award, the court may— (a) remit the award to the tribunal, in whole or in part, for reconsideration, (b) set the award aside in whole or in part, or (c) declare the award to be of no effect, in whole or in part. The court shall not exercise its power to set aside or to declare an award to be of no effect, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the tribunal for reconsideration. (4) The leave of the court is required for any appeal from a decision of the court under this section. 69 Appeal on point of law (1) Unless otherwise agreed by the parties, a party to arbitral proceedings may (upon notice to the other parties and to the tribunal) appeal to the court on a question of law arising out of an award made in the proceedings. An agreement to dispense with reasons for the tribunal’s award shall be considered an agreement to exclude the court’s jurisdiction under this section. (2) An appeal shall not be brought under this section except—
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 49 of 61 (a) with the agreement of all the other parties to the proceedings, or (b) with the leave of the court. The right to appeal is also subject to the restrictions in section 70(2) and (3). (3) Leave to appeal shall be given only if the court is satisfied— (a) that the determination of the question will substantially affect the rights of one or more of the parties, (b) that the question is one which the tribunal was asked to determine, (c) that, on the basis of the findings of fact in the award— (i) the decision of the tribunal on the question is obviously wrong, or (ii) the question is one of general public importance and the decision of the tribunal is at least open to serious doubt, and (d) that, despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the court to determine the question. (4) An application for leave to appeal under this section shall identify the question of law to be determined and state the grounds on which it is alleged that leave to appeal should be granted. (5) The court shall determine an application for leave to appeal under this section without a hearing unless it appears to the court that a hearing is required. (6) The leave of the court is required for any appeal from a decision of the court under this section to grant or refuse leave to appeal. (7) On an appeal under this section the court may by order— (a) confirm the award, (b) vary the award, (c) remit the award to the tribunal, in whole or in part, for reconsideration in the light of the court’s determination, or (d) set aside the award in whole or in part. The court shall not exercise its power to set aside an award, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the tribunal for reconsideration. (8) The decision of the court on an appeal under this section shall be treated as a judgment of the court for the purposes of a further appeal.
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 50 of 61 But no such appeal lies without the leave of the court which shall not be given unless the court considers that the question is one of general importance or is one which for some other special reason should be considered by the Court of Appeal. 3. United States of America Section 10 and 11 of the Federal Arbitration Act, 1925 Section 10. Same; vacation; grounds; rehearing (a) In any of the following cases the United States court in and for the district wherein the award was made may make an order vacating the award upon the application of any party to the arbitration (1) Where the award was procured by corruption, fraud, or undue means. (2) Where there was evident partiality or corruption in the arbitrators, or either of them. (3) Where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced. (4) Where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made. (5) Where an award is vacated and the time within which the agreement required the award to be made has not expired the court may, in its discretion, direct a rehearing by the arbitrators. (b) The United States district court for the district wherein an award was made that was 6(10) issued pursuant to section 590 of title 5 may make an order vacating the award upon the application of a person, other than a party to the arbitration, who is adversely affected or aggrieved by the award, if the use of arbitration or the award is clearly inconsistent with the factors set forth in section 582 of Title 5. Section 11. Same; modification or correction; grounds; order In either of the following cases the United States court in and for the district wherein the award was made may make an order modifying or correcting the award upon the application of any party to the arbitration (a) Where there was an evident material miscalculation of figures or an evident material mistake in the description of any person, thing, or property referred to in the award.
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 51 of 61 (b) Where the arbitrators have awarded upon a matter not submitted to them, unless it is a matter not affecting the merits of the decision upon the matter submitted. (c) Where the award is imperfect in matter of form not affecting the merits of the controversy. The order may modify and correct the award, so as to effect the intent thereof and promote justice between the parties. 4. France Article 1502 of Code of Civil Procedure Article 1502 Application for revision of an arbitral award may be made in the circumstances provided in Article 595 for court judgments, and under the conditions set forth in Articles 594, 596, 597 and 601 through 603. Application shall be made to the arbitral tribunal. However, if the arbitral tribunal cannot be reconvened, application shall be made to the Court of Appeal which would have had jurisdiction to hear other forms of recourse against the award. Article 595 An application for revision of a judgment may be made only where: 1. it comes to light, after the judgment is handed down, that it was obtained fraudulently by the party in whose favour it was rendered; 2. decisive evidence that had been withheld by another party is recovered after the judgment was handed down; 3. the judgment is based on documents that have since been proven or have been held by a court to be false; 4. the judgment is based on affidavits, testimonies or oaths that have been held by a court to be false. In all four cases, an application for revision shall be admissible only where the applicant was not able, through no fault of his or her own, to raise such objection before the judgment became res judicata. 5. Australia Section 34A of the Commercial Arbitration Act, 2017 (Australian Capital Territory) 34A Appeals against awards (1) An appeal lies to the court on a question of law arising out of an award if—
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 52 of 61 (a) the parties agree, before the end of the appeal period referred to in subsection (6), that an appeal may be made under this section; and (b) the court grants leave. (2) An appeal under this section may be brought by any of the parties to an arbitration agreement. (3) The court must not grant leave unless it is satisfied— (a)the determination of the question will substantially affect the rights of 1 or more of the parties; and (b)the question is one which the arbitral tribunal was asked to determine; and (c)on the basis of the findings of fact in the award— (i) the decision of the tribunal on the question is obviously wrong; or (ii) the question is one of general public importance and the decision of the tribunal is at least open to serious doubt; and (d) despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the court to determine the question. (4) An application for leave to appeal must identify the question of law to be determined and state the grounds on which it is alleged that leave to appeal should be granted. (5) The court is to determine an application for leave to appeal without a hearing unless it appears to the court that a hearing is required. (6) An appeal may not be made under this section after 3 months have elapsed from the date on which the party making the appeal received the award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal (in this section referred to as the appeal period). (7) On the determination of an appeal under this section the court may by order— (a) confirm the award; or (b) vary the award; or (c) remit the award, together with the court’s opinion on the question of law which was the subject of the appeal, to the arbitrator for reconsideration or, where a new arbitrator has been appointed, to that arbitrator for consideration; or
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 53 of 61 (d) set aside the award in whole or in part. (8) The court must not exercise its power to set aside an award, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the arbitral tribunal for reconsideration. (9) Where the award is remitted under subsection (7) (c) the arbitrator must, unless the order otherwise directs, make the award within 3 months after the date of the order. (10) The court may make any leave which it grants under subsection (3) (c) subject to the applicant complying with any conditions it considers appropriate. (11) Where the award of an arbitrator is varied on an appeal under this section, the award as varied has effect (except for this section) as if it were the award of the arbitrator. 6. New Zealand Section 5 and 6 of Schedule 2 (Additional optional rules applying to arbitration), Arbitration Act, 1996 5. Appeals on questions of law (1) Notwithstanding anything in articles 5 or 34 of Schedule 1, any party may appeal to the High Court on any question of law arising out of an award— (a) if the parties have so agreed before the making of that award; or (b) with the consent of every other party given after the making of that award; or (c) with the leave of the High Court. (2) The High Court shall not grant leave under subclause (1)(c) unless it considers that, having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of 1 or more of the parties. (3) The High Court may grant leave under subclause (1)(c) on such conditions as it sees fit. (4) On the determination of an appeal under this clause, the High Court may, by order,— (a) confirm, vary, or set aside the award; or (b) remit the award, together with the High Court’s opinion on the question of law which was the subject of the appeal, to the
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 54 of 61 arbitral tribunal for reconsideration or, where a new arbitral tribunal has been appointed, to that arbitral tribunal for consideration,— and, where the award is remitted under paragraph (b), the arbitral tribunal shall, unless the order otherwise directs, make the award not later than 3 months after the date of the order. (5) With the leave of the High Court, any party may appeal to the Court of Appeal from any refusal of the High Court to grant leave or from any determination of the High Court under this clause. (6) If the High Court refuses to grant leave to appeal under subclause (5), the Court of Appeal may grant special leave to appeal. (7) Where the award of an arbitral tribunal is varied on an appeal under this clause, the award as varied shall have effect (except for the purposes of this clause) as if it were the award of the arbitral tribunal; and the party relying on the award or applying for its enforcement under article 35(2) of Schedule 1 shall supply the duly authenticated original order of the High Court varying the award or a duly certified copy. (8) Article 34(3) and (4) of Schedule 1 apply to an appeal under this clause as they do to an application for the setting aside of an award under that article. (9) For the purposes of article 36 of Schedule 1,— (a) an appeal under this clause shall be treated as an application for the setting aside of an award; and (b) an award which has been remitted by the High Court under subclause (4)(b) to the original or a new arbitral tribunal shall be treated as an award which has been suspended. (10) For the purposes of this clause, question of law— (a) includes an error of law that involves an incorrect interpretation of the applicable law (whether or not the error appears on the record of the decision); but (b) does not include any question as to whether (i) the award or any part of the award was supported by any evidence or any sufficient or substantial evidence; and (ii) the arbitral tribunal drew the correct factual inferences from the relevant primary facts. 7. Canada Section 45 of the Arbitration Act, 1991 Ontario
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 55 of 61 45. Appeals Appeal on question of law (1) If the arbitration agreement does not deal with appeals on questions of law, a party may appeal an award to the court on a question of law with leave, which the court shall grant only if it is satisfied that, (a) the importance to the parties of the matters at stake in the arbitration justifies an appeal; and (b) determination of the question of law at issue will significantly affect the rights of the parties. 1991, c. 17, s. 45 (1). Idem (2) If the arbitration agreement so provides, a party may appeal an award to the court on a question of law. 1991, c. 17, s. 45 (2). Appeal on question of fact or mixed fact and law (3) If the arbitration agreement so provides, a party may appeal an award to the court on a question of fact or on a question of mixed fact and law. 1991, c. 17, s. 45 (3). Powers of court (4) The court may require the arbitral tribunal to explain any matter. 1991, c. 17, s. 45 (4). Idem (5) The court may confirm, vary or set aside the award or may remit the award to the arbitral tribunal with the court’s opinion on the question of law, in the case of an appeal on a question of law, and give directions about the conduct of the arbitration. 1991, c. 17, s. 45 (5). Family arbitration award (6) Any appeal of a family arbitration award lies to, (a) the Family Court, in the areas where it has jurisdiction under subsection 21.1 (4) of the Courts of Justice Act; (b) the Superior Court of Justice, in the rest of Ontario. 2006, c. 1, s. 1 (6). 8. South Africa Section 31 of Arbitration Act 42 of 1965 31. Award may be made an order of court (1) An award may, on the application to a court of competent jurisdiction by any party to the reference after due notice to the other party or parties, be made an order of court.
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 56 of 61 (2) The court to which application is so made, may, before making the award an order of court, correct in the award any clerical mistake or any patent error arising from any accidental slip or omission. (3) (3) An award which has been made an order of court may be enforced in the same manner as any judgment or order to the same effect. 9. Hong Kong Section 5 of Schedule 2 (Provisions that may be Expressly Opted for or Automatically Apply) of Cap. 609 Arbitration Ordinance 5.Appeal against arbitral award on question of law (1) Subject to section 6 of this Schedule, a party to arbitral proceedings may appeal to the Court on a question of law arising out of an award made in the arbitral proceedings. (2) An agreement to dispense with the reasons for an arbitral tribunal’s award is to be treated as an agreement to exclude the Court’s jurisdiction under this section. (3) The Court must decide the question of law which is the subject of the appeal on the basis of the findings of fact in the award. (4) The Court must not consider any of the criteria set out in section 6(4)(c)(i) or (ii) of this Schedule when it decides the question of law under subsection (3). (5) On hearing an appeal under this section, the Court may by order— (a)confirm the award; (b)vary the award; (c)remit the award to the arbitral tribunal, in whole or in part, for reconsideration in the light of the Court’s decision; or (d)set aside the award, in whole or in part. (6) If the award is remitted to the arbitral tribunal, in whole or in part, for reconsideration, the tribunal must make a fresh award in respect of the matters remitted— (a)within 3 months of the date of the order for remission; or (b)within a longer or shorter period that the Court may direct.
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 57 of 61 (7) The Court must not exercise its power to set aside an award, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the arbitral tribunal for reconsideration. (8) The leave of the Court or the Court of Appeal is required for any further appeal from an order of the Court under subsection (5). (9) Leave to further appeal must not be granted unless— (a)the question is one of general importance; or (b)the question is one which, for some other special reason, should be considered by the Court of Appeal. (10) Sections 6 and 7 of this Schedule also apply to an appeal or further appeal under this section. 10. Kenya Section 39 of Arbitration Act, 1995 39. Questions of law arising in domestic arbitration (1) Where in the case of a domestic arbitration, the parties have agreed that— (a) an application by any party may be made to a court to determine any question of law arising in the course of the arbitration; or (b) an appeal by any party may be made to a court on any question of law arising out of the award, such application or appeal, as the case may be, may be made to the High Court. (2) On an application or appeal being made to it under subsection (1) the High Court shall— (a) determine the question of law arising; (b) confirm, vary or set aside the arbitral award or remit the matter to the arbitral tribunal for re-consideration or, where another arbitral tribunal has been appointed, to that arbitral tribunal for consideration. (3) Notwithstanding sections 10 and 35 an appeal shall lie to the Court of Appeal against a decision of the High Court under subsection (2)— (a) if the parties have so agreed that an appeal shall lie prior to the delivery of the arbitral award; or (b) the Court of Appeal, being of the opinion that a point of law of general importance is involved the determination of which will substantially affect the rights of one or more of the parties, grants
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 58 of 61 leave to appeal, and on such appeal the Court of Appeal may exercise any of the powers which the High Court could have exercised under subsection (2). (4) An application or appeal under this section shall be made within the time limit and in the manner prescribed by the Rules of Court applicable, as the case may be, in the High Court or the Court of Appeal. (5) When an arbitral award has been varied on appeal under this section, the award so varied shall have effect as if it were the award of the arbitral tribunal concerned. 11. Brunei Darussalam Sections 47 and 49 of the Arbitration Order, 2009 47. No judicial review of award The Court does not have jurisdiction to confirm, vary, set aside or remit an award on an arbitration agreement except where so provided in this Order. Appeal against award 49. Appeal against award (1) A party to arbitral proceedings may, upon notice to the other parties and to the arbitral tribunal, appeal to the Court on a question of law arising out of an award made in the proceedings. (2) Notwithstanding subsection (1), the parties may agree to exclude the jurisdiction of the Court under this section and an agreement to dispense with reasons for the arbitral tribunal’s award shall be treated as an agreement to exclude the jurisdiction of the Court under this section. (3) An appeal must not be brought under this section except — (a) with the agreement of all the other parties to the proceedings; or (b) with the leave of the Court. (4) The right to appeal under this section is subject to the restrictions in section 50. (5) Leave to appeal is to be given only if the Court is satisfied that — (a) the determination of the question will substantially affect the rights of one or more of the parties; (b) the question is one which the arbitral tribunal was asked to determine;
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 59 of 61 (c) on the basis of the findings of fact in the award— (i) the decision of the arbitral tribunal on the question is obviously wrong; or (ii) the question is one of general public importance and the decision of the arbitral tribunal is at least open to serious doubt; and (d) Despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the Court to determine the question. (6) An application for leave to appeal under this section shall identify the question of law to be determined and state the grounds on which it is alleged that leave to appeal should be granted. (7) The leave of the Court shall be required for any appeal from a decision of the Court under this section to grant or refuse leave to appeal. (8) On an appeal under this section, the Court may by order — (a) confirm the award; (b) vary the award; (c) remit the award to the arbitral tribunal, in whole or in part, for reconsideration in the light of the Court’s determination; or (d) set aside the award in whole or in part. (9) The Court shall not exercise its power to set aside an award, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the arbitral tribunal for reconsideration. (10) The decision of the Court on an appeal under this section shall be treated as a judgment of the Court for the purposes of an appeal to the Court of Appeal. (11) The Court may give leave to appeal against the decision of the Court in subsection (10) only if it considers that the question of law before it is one of general importance, or is one which for some other special reason should be considered by the Court of Appeal. 12. Philippines Section 41 of the Republic Act No. 9285 (2004) or the Alternative Dispute Resolution Act of 2004 read with Section 25 of the Republic Act No. 876 41. Vacation Award
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 60 of 61 A party to a domestic arbitration may question the arbitral award with the appropriate regional trial court in accordance with the rules of procedure to be promulgated by the Supreme Court only on those grounds enumerated in Section 25 of Republic Act No. 876. Any other ground raised against a domestic arbitral award shall be disregarded by the regional trial court. 25. Grounds for modifying or correcting award In any one of the following cases, the court must make an order modifying or correcting the award, upon the application of any party to the controversy which was arbitrated: (a) Where there was an evident miscalculation of figures, or an evident mistake in the description of any person, thing or property referred to in the award; or (b) Where the arbitrators have awarded upon a matter not submitted to them, not affecting the merits of the decision upon the matter submitted; or (c) Where the award is imperfect in a matter of form not affecting the merits of the controversy, and if it had been a commissioner's report, the defect could have been amended or disregarded by the court. The order may modify and correct the award so as to effect the intent thereof and promote justice between the parties. Section 46 of the Republic Act No. 9285 (2004), or the Alternative Dispute Resolution Act of 2004 46. Appeal from Court Decisions on Arbitral Awards A decision of the regional trial court confirming, vacating, setting aside, modifying or correcting an arbitral award may be appealed to the Court of Appeals in accordance with the rules of procedure to be promulgated by the Supreme Court. The losing party who appeals from the judgment of the court confirming an arbitral award shall required by the appellant court to post counterbond executed in favour of the prevailing party equal to the amount of the award in accordance with the rules to be promulgated by the Supreme Court. 31. Award may be made an order of court
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Open this page in the original PDFCivil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 61 of 61 (1) An award may, on the application to a court of competent jurisdiction by any party to the reference after due notice to the other party or parties, be made an order of court. (2) The court to which application is so made, may, before making the award an order of court, correct in the award any clerical mistake or any patent error arising from any accidental slip or omission. (3) An award which has been made an order of court may be enforced in the same manner as any judgment or order to the same effect. 13. Sri Lanka Section 687 and 688 of the Civil Procedure Code 687. Application to set aside or correct the award Within fifteen days from the date of receipt of notice of the filing of the award any party to the arbitration may by petition apply to the court to set aside the award, or to modify or to correct the award, or to remit the award to the arbitrators for reconsideration, on grounds mentioned in the following sections. 688. When court may correct award. The court may, by order, modify or correct an award- (a) where it appears that a part of the award is upon a matter not referred to arbitration, provided such part can be separated from the other part and does not affect the decision on the matter referred ; or (b) where the award is imperfect in form, or contains any obvious error which can be amended without affecting such decision.
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Open this page in the original PDF1 REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOS. ___ __ 2025 (@ SPECIAL LEA VE PETITION (CIVIL) NOS. 15336-15337 OF 2021) GAYATRI BALASAMY APPELLANT(S) VERSUS M/S ISG NOV ASOFT TECHNOLOGIES LIMITED RESPONDENT(S) With CIVIL APPEAL NO. ___ __ 2025 (@ SLP(C) No. 21301/2024) CIVIL APPEAL NO. ___ __ 2025 (@ SLP(C) No. 17941/2019) CIVIL APPEAL NO. ___ __ 2025 (@ SLP(C) No. 7973/2022) CIVIL APPEAL NOS. ___ __ 2025 (@ SLP(C) Nos. 4961-4962/2024) CIVIL APPEAL NO. ___ __ 2025 (@ SLP (C) No. 2025) (@ Diary No. 7789/2024) CIVIL APPEAL NOS. ___ __ 2025 (@ SLP(C) Nos. 18656-18663/2024) CIVIL APPEAL NO. 8183 OF 2016 AND CIVIL APPEAL NO. 8184 OF 2016
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Open this page in the original PDF2 J U D G M E N T K.V . VISWANATHAN, J. A. HOLDING IN PROJECT DIRECTOR, NHAI VS. M. HAKEEM AND ANR……...5 B. ORDER OF REFERENCE…………………………………………………………...9 C. CONTENTION OF LEARNED COUNSELS……………………………………....10 i. CONCEPTUAL DISTINCTION BETWEEN “MODIFICATION” AND “SEVERANCE”..11 ii. CONTENTIONS FA VOURING THE POWER TO MODIFY………………………………..12 iii. CONTENTIONS OPPOSING THE POWER TO MODIFY……………………………….....19 D. THE ECO SYSTEM OF ARBITRATION…………………………………………………..29 i. HISTORICAL, TEXTUAL AND THE CONTEXTUAL SETTING………………………….29 ii. SCHEME OF THE A&C ACT, 1996……………………………………………………………33 E. SOME CASES CITED IN THE REFERRAL ORDER……………………………51 F. ANALYSIS OF THE CONTENTIONS AND REASONING……………………...57 i. CAN WORDS BE READ INTO SECTION 34? ……………………………………………...57 ii. THE FALLACY IN THE ‘HARDSHIP’ ARGUMENT………………………………………60 iii. CONTRACTUAL OUSTER OF THE NORMAL JUDICIAL PROCESS………………….65 iv. CONTRAST WITH THE APPELLATE POWER UNDER CPC…………………………...66 v. IS POWER TO ‘MODIFY’ A LESSER POWER? …………………………………………..70 vi. LEGAL MAXIMS – TO BE DEPLOYED AFTER ASCERTAINING CONTEXT………..80
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Open this page in the original PDF3 vii. THE ARGUMENT ON INHERENT POWERS……………………………………………..81 viii. DOCTRINE OF IMPLIED POWERS……………………………………………………….83 ix. PARTY AUTONOMY………………………………………………………………………...85 x. CAN ARTICLE 142 POWERS BE EXERCISED TO MODIFY? ………………………..87 xi. LAYING DOWN GUARDRAILS FOR SECTION 34 – IS IT AN OPTION FOR THIS COURT? ……………………………………………………………………………………...92 xii. SUBMISSIONS BASED ON PECULIARITIES IN STATUTORY ARBITRATIONS …94 xiii. COMPLICATIONS DUE TO MODIFICATIONS IN NEW YORK CONVENTION AWARDS ……………………………………………………………………………………..96 xiv. IS HAKEEM (SUPRA) PER INCURIAM? …………………………………………….......99 xv. POWERS UNDER SECTION 33 AND 34 (4) OF THE A&C ACT – THE ‘SAFETY V ALVES’ …………………………………………………………………………………….100 xvi. AWARD OF INTEREST- USE OF SECTION 34(4) POWER …………………………..107 xvii. SUO MOTO EXERCISE OF SECTION 34(4) POWER ………………………………..108 xviii. COMPUTATION, CLERICAL AND TYPOGRAPHICAL ERROR OR ANY OTHER ERROR OF SIMILAR NATURE - ACTUS CURIAE NEMINEM GRAVABIT PRINCIPLE…………………………………………………………………………………109 xix. SEVERABILITY UNDER SECTION 34 …………………………………………………113 xx. ABANDONMENT OF CLAIMS - COMPROMISE ARRIVED AT BETWEEN THE PARTIES……………………………………………………………………………………..124 G. CONCLUSION…………………………………………………………………...125 H. ANSWERS TO THE REFERENCE…………………………………………….127
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Open this page in the original PDF4 1. Delay in refiling the Special Leave Petition is condoned. 2. Leave granted. 3. This reference to a Bench of five judges is primarily to decide the correctness of the judgment of this Court in Project Director, National Highways No. 45 E and 220 National Highways Authority of India Vs. M. Hakeem and Anr., (2021) 9 SCC 1. In the said judgment, this Court held that while exercising powers under Section 34 of the Arbitration and Conciliation Act, 1996 (‘A&C Act’ for short), a Court hearing the petition had no power to “Modify” the Award. A three - Judge Bench of this Court on 20.02.2024, after noticing that there are decisions of this Court which have either modified the awards of the Arbitral Tribunals or upheld orders challenging modified awards and after observing that an authoritative pronouncement is required on this issue, placed the matter before the Hon’ble Chief Justice for constitution of an appropriate Bench. On 23.01.2025, by an order, this Court directed the matter to be placed before a Constitution Bench and that is how the matter has presented itself.
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Open this page in the original PDF5 THE HOLDING IN HAKEEM (SUPRA):- 4. The facts in Hakeem (Supra) were that pursuant to the notifications issued under the provisions of the National Highways Act, 1956 for acquisition of lands by the National Highways Authority of India (NHAI), awards came to be passed by the competent authority under the said Act. A Petition under Section 34 of the A&C Act resulted in enhancement of the award by the District Court which was upheld on further appeal with only a remand to determine compensation for certain trees and crops. The NHAI challenged the same before this Court and contended that in exercise of powers under Section 34, no modification could be made since it was not a challenge on the merits of the award. The contentions of NHAI were that powers under Section 34 were qualitatively different from an appellate power and the only option open was to set aside the award or remit the award under Section 34 (4) in the event of the contingencies provided thereon arising. A contrast was made with the provisions of the Arbitra tion Act, 1940 which contained express provisions to modify the award under Section 15 therein. NHAI further argued that since the A&C Act was based on the UNCITRAL Model Law on International Commercial Arbitration,
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Open this page in the original PDF6 1985, the grounds of challenge were restricted. The land losers in Hakeem (Supra) contended that power to set aside in Section 34 included a “power to modify” and relied on the judgment of the learned Single Judge of the Madras High Court in Gayatri Balaswamy Vs. ISG Novasoft Technologies Limited , 2014 SCC OnLine Mad 6568 . [Coincidentally, Gayatri Balas wamy (supra) is the first case in this reference after travelling through the Division Bench of the High Court.] 5. This Court in Hakeem (Supra) held as under:- (i) Section 34 of the A&C Act was different from a provision of appeal since the Section contemplates setting aside awards on very limited grounds provided in the sub-Sections thereof. (Para 16) (ii) “Recourse” in Section 34 meant enforcement or method of enforcing a right and where the right itself is truncated, enforcement of such right would also be only limited in nature. (Para 16)
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Open this page in the original PDF7 (iii) That enforcement is truncated was further clear from Section 34(4) which provides that on receipt of an application under Section 34(1), the Court may, where it is appropriate and it is so requested by a party, adjourn for a period of time the Sectio n 34 proceedings to give the Arbitral Tribunal an opportunity to resume the Arbitral proceedings or to take such other action as in the opinion of the Arbitral Tribunal will eliminate the grounds for setting aside the Arbitral Award. It was the opinion of the Arbitral Tribunal which ultimately counted in order to eliminate the grounds for setting aside the award, which may be indicated by the Court. (Para 16) (iv) That Section 34 was modelled on the UNCITRAL Model Law and no power to modify was given to the Court. (Para 17) (v) Eminent authors like Redfern and Hunter have opined that the Reviewing Court can neither alter the
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Open this page in the original PDF8 terms of an award nor can it decide the dispute based on its own vision of the merits. (Para 18) (vi) Minimal judicial interference is called for in Arbitral Awards under the UNCITRAL Model Law and unlike the 1940 Act there is no power to modify. (Para 19 & 20) (vii) In a challenge under Section 34 , there is no challenge to the merits of the award as held in a long line of judgments of this Court (Para 23, 24) (viii) This Court in McDermott International Inc. Vs. Burn Standard Co. Ltd. , (2006) 11 SCC 181 has held that Court cannot correct the errors of the Arbitrators and that it can only quash the award leaving the parties free to begin the arbitration afresh. (Para 25) (ix) That in England, the United States, Canada, Australia and Singapore there are express legislative provisions permitting the varying of an Award , unlike Section 34 of the A&C Act. (Para 43)
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Open this page in the original PDF9 ORDER OF REFERENCE: - 6. In the referral order of 20.02.2024, this Court, while framing certain questions for consideration, observed as under:- “2. 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 befor e the High Courts and the District Courts. 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. 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. 3. We are of the considered view that the following questions need to be referred to a larger Bench for answers: "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
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Open this page in the original PDF10 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 (2021) 9 SCC 1 , followed in Larsen Air Conditioning and Refrigeration Company vs. Union of India , (2023) SCC OnLine SC 982 and SV Samudram vs. State of Karnataka, (2024) SCC OnLine SC 19 lay down the correct law, as other benches of two Judges (in Vedanta Limited vs. Shenzden Shandong Nuclear Power Construction Company Limited , (2019) 11 SCC 465 , Oriental Structural Engineers Pvt. Ltd. vs. State of Kerala, (2021) 6 SCC 150 and M.P . Power Generation Co. Ltd. vs. Ansaldo Energia Spa, (2018) 16 SCC 661 and three Judges (in J.C. Budhraja vs. Chairman, Orissa Mining Corporation Ltd. (2008) 2 SCC 444 , Tata Hydroelectric Power Supply Co. Ltd. vs. Union of India, (2003) 4 SCC 172 and Shakti Nath vs. Alpha Tiger Cyprus Investment No.3 Ltd. , (2020) 11 SCC 685) of this Court have either modified or accepted modification of the arbitral awards under consideration?” 4. The special leave petitions may be placed before the Hon’ble the Chief Justice of India for an appropriate order.” CONTENTIONS OF LEARNED COUNSELS: - 7. Wide ranging arguments have been canvassed to contend that a Court under Section 34 of the A&C Act has the power to “modify” the award and equally strong arguments were canvassed contending for the
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Open this page in the original PDF11 position that Hakeem (Supra) is correctly decided and there was no power in the Section 34 Court to modify. The only unanimity in the submission was with regard to the power under Section 34 to sever parts of the award subject to the condition that the Severed part is a standalone part and is not inseparably intertwined with the other parts of the award. CONCEPTUAL DISTINCTION BETWEEN “MODIFICATION” AND “SEVERANCE”: - 8. This judgment approaches the issue by maintaining the conceptual distinction between “modification” and “severance”. Wherever modification is discussed, it is to examine whether a Section 34 Court can change, vary or qualify an award. Wherever severance i s discussed it has to be understood to mean “to separate” and “disjoin”. Parties have also canvassed arguments based on that distinction. While the rival parties were at daggers drawn on the aspect of the power to “modify” in a Section 34 Court, there was unanimity on the power to “sever” subject to conditions compatible with severability.
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Open this page in the original PDF12 CONTENTIONS FA VOURING THE POWER TO MODIFY: - 9. Mr. Arvind Datar, learned Senior Counsel made bold to suggest that the Court read words into Section 34. According to the learned Senior Counsel, the words “ and , to the extent ” be read as opening words in Section 34(2) (b) and further that the words “ or modified, and “to the extent ” be added in Section 34(2)(a). According to the learned Senior Counsel , the Court is not powerless to add words and cited a large number of authorities where , according to the counsel , words have been added to avoid irreconcilable conflict and in situations where absurdity and injustice had to be averted. The learned Senior Counsel further contended that Hakeem (supra) is per incuriam as it is contrary to several three-Judge and two-Judge Bench judgments of this Court. Learned Senior Counsel further contended that the only option of setting aside the award will cause enormous hardship to the litigants as that will result in recommencem ent of the arbitration proceedings. Learned Senior Co unsel further argued that power to “set aside” the award will include power to modify as the larger power would include the smaller power. Learned Counsel relied on the legal maxim omne majus continet in se minus which meant the greater contains the less.
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Open this page in the original PDF13 10. Mr. Darius Khambata, learned Senior Counsel contended that certain foreign jurisdictions have statutorily enabled Courts to modify awards including on a question of law . Referring to passages from “Mustill & Boyd” on Commercial Arbitration, learned Senior Counsel contended that it would be unjust for an obviously wrong decision on an important question of law not to be put right by the Court and any variation which inevitably flows from the Court’s determination of the question of law would be perfectl y justified. Learned Senior Counsel reiterated the submission that power to modify, if available to the Court, would ensure resolution of dispute in a speedy, effective, inexpensive and expeditious manner. Learned Senior Counsel referred to the Expert Committee Report headed by Dr. T.K. Viswanathan to contend that even the Committee has recommended legislative changes to permit modification of the award. Learned Senior Counsel contended that none of the provisions in the Act including Section 34 prohibit Co urts from modifying the award and argued that silence in the Act cannot be read as a prohibition. 11. Learned Senior Counsel canvassed that Courts should have the power to iron out the creases and supported the submission that the
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Open this page in the original PDF14 larger power of setting aside ought to include the limited power to modify when such modification inevitably flows from the correction of illegality within the confines of Section 34. Illustrative cases where this Court exercised powers under Article 142 were referred to. 12. Learned Senior Counsel sought to peg the power to modify under Section 151 of the Code of Civil Procedure which saved the inherent powers of Court and contended that inherent powers were always available to a Civil Court exercising powers under Section 34. Learned Senior Counsel contended that any fear that power to modify will result in Section 34 power being turned into an appellate power can be checked, by prescribing guardrails to prevent abuse of the power to modify. Learned Senior Counsel contended that if the modification required reconsideration of facts on merits, Courts’ ought to remit the award under Section 34(4), if the remission is to be on narrowly defined issues for pure application to facts. Learned Senior counsel contended that if remission is to be allowed, the correct position of law should be determined by the Court and after recording a finding the remission ought to be made. Learned Senior Counsel contended that severability is well accepted during the course of exercise of power unde r Section
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Open this page in the original PDF15 34, which according to the counsel, was after all a facet of modification and there is no reason why power to modify generally cannot be read into Section 34. 13. Mr. Shekhar Naphade, learned Senior Counsel contended that if impugned award grants reliefs which cannot be granted due to factors specified in sub -clauses (i), (ii), (iv) and (v) of clause (a) of Section 34(2) and sub-clause (i) of clause (b) of Section 34(2), then there was no question of modifying or substituting an award. According to the learned Senior Counsel, the only option then was to set aside the award. Learned Senior Counsel contends that if the award is passed in violation of natural justice then the question would arise as to what the Court ought to do. Equally so with regard to awards infested with corruption and wrongful rejection of claims, learned Senior Counsel contends that mere setting aside would not put an end to the lis. Merely setting aside the award in such circumstances would defeat the purpose of resolving disputes expeditiously, contends Mr. Naphade. According to the learned Senior Counsel, it will also be contrary to fundamental notions of justice since there should be some remedy for every wrong and the consequence will be that the proceedings will revive and
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Open this page in the original PDF16 continue ‘ ad infinitum ’ involving enormous delay and huge costs. According to the learned Senior Counsel the only possible solution therefore, is that after setting aside the award the Court itself either modifies or substitutes the award and when the Court does so, it is only passing an order which the arbitral Tribunal ought to have passed and being a final step in the proceeding it is consistent with the scheme of the Act. 14. Learned Senior Counsel contends that since a Section 34 application is heard by a Court as defined in Section 2(1)(e), the general principle that every Civil Court has inherent jurisdiction to deal with matters of civil nature and pass such orders as are permissible in law ought to apply. According to learned Senior Counsel, under Section 151 C.P.C., a Court is competent to pass such orders as are necessary to meet the ends of justice. 15. Mr. Naphade contends that rules of statutory interpretation require the Court to make every endeavour to avoid a case of casus omissus. Drawing particular attention to the provisions of the NHAI Act and the acquisition made thereunder, learned Senior Counsel contends that such matters involved public law elements unlike
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Open this page in the original PDF17 contractual arbitration which involves commercial considerations. Hence, where lands are acquired with paltry compensation and with no remedy to seek a reference for enhancement like under the normal Land Acquisition Laws, the only remedy available is to e nable the Section 34 Court to enhance compensation and a restricted view of Section 34 in Statutory arbitrations like in NHAI would render the Section itself ultra vires Article 14. 16. Mr. Ritin Rai, learned senior counsel reiterated the submission that ‘recourse’, is a wider term. He further reiterated that there is no prohibition to modify in the Act. Mr. Ritin Rai submitted that if the conclusion to modify axiomatically follows a finding, then modification should be allowed. 17. Mr. Prashanto Chandra Sen, Dr. Manish Singhvi, Learned Senior Counsels and Mr. Abhishek Kumar Rao, learned Counsel reiterated the arguments of other Senior Counsel s. Dr. Manish Sing hvi, learned Senior Counsel argued that competent authorities under the NHAI are not legally trained minds and the compensation granted by them cannot be treated as final and the Section 34 Court should have power to enhance. Learned Senior Counsel contended that restrictive parameters
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Open this page in the original PDF18 should not be available for compulsory arbitration as opposed to consensual arbitration. 18. Mr. Sumeet Pushkarna, learned Senior Counsel, M/s Ashwin Shanker, Vaibhav Dang, Amit George and Jinendra Jain by and large reiterated the submissions of Mr. Datar and Mr. Khambata. Mr. Vaibhav Dang and Mr. Jinendra Jain supplemented the submissions by ad ding that substantial cost will be incurred if re -arbitration is to commence and that Hakeem (supra) did not consider modification by mutual consent and correction of computation and clerical errors by the Section 34 Court. It was further argued by Mr. Amit George that power to grant interest, reduce or increase interest should be read into Section 34 without relegating parties for fresh arbitration. It was argued that if the award of the Tribunal is contrary to the agreement between the parties on intere st, modifying the same would not require any elaborate inquiry. Learned Counsel also argues that if in an enquiry under Section 34, the Court finds that modifying the award was the only one conclusion possible, it will be a useless formality to set aside a nd let parties reagitate in arbitration. It was contended that the word
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Open this page in the original PDF19 “recourse” to Court will include the power to modify as, “recourse” is a method of enforcement of right”. 19. Mr. Pallav Mongia, learned Counsel contended that any modification should only be through the mechanism of Section 34(4). Learned counsel canvassed the application of the principle of proportionality as modification through the mechanism of Section 34(4) would be a better option than setting aside the award in entirety. Learned Counsel contended that the procedural preconditions mentioned in Section 34(4) should be read as discretionary. CONTENTIONS OPPOSING THE POWER TO MODIFY: - 20. Mr. Tushar Mehta, learned Solicitor General (SG) , who, in fact, opened the arguments at the reference contended that the power to modify has to be statutorily conferred and cannot be exercised otherwise. The learned Solicitor General, referred to several statutes of other jurisdictions to contend that wherever power to modify was to be recognized, such powers were expressly conferred by the legislature. Learned SG referred to the provisions in UK, USA, Singapore, Canada and a whole host of other countries to demonstrate the existence of
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Open this page in the original PDF20 specific power to modify/vary in their respective arbitration statutes. According to the learned SG, Section 34 of the Arbitration Act has a strong resemblance with the UN CITRAL Model Law, both of which delineate limited grounds for setting aside an Arbitral award. The learned SG made extensive reference to the debates during the preparation of the Model Law to contend that setting aside was the only recourse available in India as at present and that the power to remit under Section 34(4) is intended to pre vent annulment on grounds specified therein. Learned SG referred to the 76 th Report of the Law Commission on the Arbitration Act to contend that no power to modify was recommended even though the precursor Act, namely, the 1940 Act had in Section 15 a specific power to modify. Learned SG contended that the scope of setting aside p roceedings are not akin to Appellate proceedings where evidence is re -evaluated and decision is examined for its correctness on merits. According to the learned SG, the power of modification cannot be subsumed in the power to “set aside” as both exist on different judicial plane s requiring application of differing judicial parameters.
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Open this page in the original PDF21 21. Learned SG particularly emphasized on Section 5 of the A&C Act to canvass for limited judicial intervention in a manner provided in the statute and nothing more. Learned SG referred to Section 34(4) as the solution, provided the grounds mentioned in the Section are made out. The learned SG distinguished the cases where this Court had exercised power to modify. Learned SG contended that Article 142 power cannot be exercised in contravention of statutory power and not being a situation similar to the one in Vishaka and Others Vs. State of Rajasthan and Others , (1997) 6 SCC 241 , no guardrails can be laid down by the Court. Learned SG referred to the cardinal rule of interpretation that the words should be given their plain and natural meaning and that it was not the duty of the Court to enlarge the language of the provision where the provisio n is otherwise plain and unambiguous. Learned SG concluded by contending that the exclusion of the power to modify in the UNCITRAL Model law was a conscious decision and it was left to the respective countries to incorporate a provision if it was so desire d and that in the absence of any power to modify the only option was to set aside or pending the proceedings , remit under Section 34(4). Learned SG submitted that even the Expert
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Open this page in the original PDF22 Committee, namely, the Vishwanathan Committee had only recommended the statutory amendment. 22. Mr. Saurabh Kirpal, learned Senior Advocate contended that Courts cannot modify clear words of the Statute. According to the counsel, there was no reason to consider the provisions of the A&C Act as unworkable since, it has worked well for the past three d ecades. Reiterating the application of the golden rule of interpretation, learned Senior Counsel urged that the plain meaning be given to Section 34. According to the learned Senior Counsel, ‘setting aside’ clearly meant quashing the decision. According to the learned senior counsel, granting power of modification may only further delay the proceedings by never ending appeals and the question of speedy justice is a matter for Parliament to decide. According to the learned senior counsel, letting in power to modify into Section 34 will cause uncertainty which is an anathema to business and commerce. Learned Senior Counsel contends that party autonomy and non-interference by Court is a golden thread that runs through the Act and that granting power to modify will drag the Courts into a merits review, which the parties have chosen not to opt, when they decided to arbitrate. Learned Senior Counsel
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Open this page in the original PDF23 contends that the principle that greater power will include lesser power has no application and such a principle will apply only if the scope of law is of the same genus. According to the learned Senior Counsel, this Court has already held before the judgment in Hakeem (supra) that Section 34 does not encompass the power to modify. 23. Mr. Gourab Banerji, learned Senior Counsel contended that the UNCITRAL Model Law and the A&C Act permit only “setting aside” of awards; that countries which have derogated from the Model Law have specifically empowered the Courts to modify, confirm or vary an award in whole or in part, in addition to powers of setting aside; that power to annul is inconsistent with a power to appeal; that no judicially manageable standards exist to determine the c ontours of modification and the only way forward is by legislation. The learned senior counsel contended that the A&C Act was based on the UNCITRAL Model Law and provides finality and binding nature of the award and minimal judicial intervention. Learned Senior Counsel further contended that the statutory scheme under the A&C Act, 1996 differs from that of the Act of 1940; that Section 34 does not provide a merits challenge nor is it an appellate jurisdiction; that parties consciously opt to exclude the
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Open this page in the original PDF24 Court’s jurisdiction and choose arbitration for its expediency and finality and that the “limited remedy” under Section 34 is co -terminus with the “limited right” to set aside or remit within the meaning of Section 34(4). According to the learned Senior C ounsel, the consequence of a complete annulment is recommencement of proceedings and any new submission will have to be argued before the new Tribunal. 24. Learned senior counsel contended that the setting aside of the award would not affect the validity of the Arbitration agreement. Adverting to Section 34(4), learned Senior Counsel contended that curing defects is limited to cases where award provides no reasoning or there are gaps in reasoning or those which can otherwise be cured to avoid a setting aside. Learned Senior Counsel contends that Section 34(4) excludes reconsideration of the award for the purpose of eliminating the grounds on which the awar d can be set aside. Dealing with severability, learned senior counsel contended that an award can be segregated and upheld after exclusion of the infirmity, where there are multiple claims and counter claims which are severable and not inter-dependent. The Court in Section 34 can set aside or uphold the
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Open this page in the original PDF25 Arbitrator’s decision on individual and severable claims, without setting aside the whole award, depending upon the facts and circumstances of the case. 25. Learned Senior Counsel flagged a very important concern if power to modification is permitted. According to the learned Senior Counsel, it will lead to enforcement issues under the New York Convention, apart from other anomalies. Learned Senior Counsel contends that parties clamoring for modification are treating an award akin to a judgment and Section 34 proceedings akin to an appeal. Before the Arbitrator, even the misapplication or misinterpretation of law would bind the parties. Learned Senior Counsel argued that internationally various forms of recourse are recognized and referred to the power to confirm present in the English Act; the power to vary; the power to correct; the power to remit and powers to set aside/annul/vacate. According to the learned Senior Counsel , once the award is set aside, it is quashed, and it never exists in the eye of law. This would mean that parties would be relegated to their original litigating position.
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Open this page in the original PDF26 26. According to the learned Senior Counsel, the argument that grave injustice will occur if there is no power to modify is a misconceived submission. Learned Senior Counsel submits that having taken a conscious decision to exclude Court’s jurisdiction, it does not lie in the mouth of the parties to draw this red herring and contended that any sanction of power to modify would affect finality and binding nature of the awards. Learned Senior Counsel contended that reading in guardrails would amount to judici al legislation. According to the learned Senior Counsel, permitting modification would compel the Court to do a two-fold exercise, namely, first to decide whether award suffers from any infirmity and then to decide what the correct outcome would be on the facts of the case. 27. Learned senior counsel contends that the power of modification, if permitted, the original award will be rendered incapable of enforcement, particularly in the New York Convention awards and cited how other jurisdictions have handled it by incorporating specific provisions, namely, Section 71 of the English Arbitration Act, Section 5(7) of Schedule 2 of the New Zealand Arbitration Act, 1996 and Section 39(5) of t he Kenyan Arbitration Act, 1995. According to the
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Open this page in the original PDF27 learned Senior Counsel, absent such legislative shield, India seated arbitrations would be vulnerable and unattractive and the awards would potentially be in breach of the New York Convention. 28. Dealing with statutory arbitrations, learned Senior Counsel contends that solutions to the maladies of the statutory arbitrations must be sourced to the respective statutes mandating these arbitrations and not to the A&C Act and suggests that public law remedies like writ jurisdiction in those cases may provide appropriate remedy. 29. Mr. Gaurav Pachnanda, learned Senior Advocate contended that only if the portion is severable could the court under Section 34 sever the award, and even here, according to the learned Senior Counsel, an exercise has to be undertaken to examine whether the good parts of the award can be separately identified both in terms of liability and quantum without any correlation to the bad parts of the award. According to the learned Senior Counsel, if good parts are intermingled with the bad parts of the award in a manner that it is impossible to sever the bad parts , then principle s of severability cannot be applied. To illustrate, the learned Senior Counsel contends that if a final award is arrived at by netting of claims and counter claims, principles of
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Open this page in the original PDF28 severability cannot be applied. According to the learned Senior Counsel, netting of claims and counter claims results in composite awards where a single amount is enforceable by the successful parties. According to the learned Senior Counsel , this would also impact the Stamp duty. 30. Learned Senior Counsel argued that the doctrine of merger does not apply to an order of the Court under Section 34. Arguing from that perspective, learned Senior Counsel contended that jurisdiction under Section 34 does not extend to modification, variation or reversal of the Arbitral Tribunal award and the Court can only efface or annul the arbitral award. According to the Learned Senior Counsel, doctrine of merger would not apply if the nature and scope of the power of the superior forum is not ident ical with the nature and scope of power of the subordinate fora. Learned Senior Counsel contended that a statutory scheme of merger is recognized in UK and Singapore and the same is absent in our country. Learned Senior Counsel contended that the power under Section 151 CPC cannot be resorted to when the mandate of Section 34 is clear.
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Open this page in the original PDF29 31. These submissions have been reiterated by Ms. Archana Pathak Dave, learned ASG, Mr. Naresh Markanda, Mr. Surjendu Sankar Das, Mr. Saurav Agarwal , Mr. Saket Sikri and Mr. R ahul G. Tanwani, learned counsels. 32. Both sides referred to a large number of authorities in support of their respective positions. THE ECO SYSTEM OF ARBITRATION:- HISTORICAL, TEXTUAL AND THE CONTEXTUAL SETTING: 33. Before the core issue is answered, certain fundamental concepts highlighting the difference between the adjudication of disputes by the procedure in Courts and the procedure in Arbitration needs to be emphasized. The judicial power of the State is exercised by the judiciary and disputes are adjudicated through the mechanism of the Courts at different hierarchical level s. If dispute s were to be adjudicated in Courts , normal procedural laws would govern the disposal. For example , while the Code of Crimi nal Procedure , 1973 (The Bhar atiya Nagarik Suraksha Sanhita , 2023) would govern the
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Open this page in the original PDF30 procedure in Criminal Courts , the Code of Civil Procedure of 1908 amended in 1976 and thereafter, would govern the procedure in the Civil Courts. 34. The Indian Contract Act , 1872, while otherwise holding that Agreements in restraint of legal proceedings would be void in Section 28, saves Arbitration references. For the sake of convenience, relevant portions of Section 28 of the Contract Act, are set out hereinbelow:- “28. Agreements in restraint of legal proceedings, void .— Every Agreement,- (a) by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights; or (b) which extinguishes the rights of any party thereto, or discharges any party thereto from any liability, under or in respect of any contract on the expiry of a specified period so as to restrict any party from enforcing his rights, is void to that extent. Exception 1 .—Saving of contract to refer to arbitration dispute that may arise.—This section shall not render illegal a contract, by which two or more persons agree that any dispute which may arise between them in respect of any subject or class of subjects shall be referred to arbitration, and that only the amount awarded in such arb itration shall be recoverable in respect of the dispute so referred. Exception 2.—Saving of contract to refer questions that have already arisen. —Nor shall this section render illegal any contract in writing, by which two or more persons agree to refer to arbitration any question between them which has already arisen, or affect any provision of any law in force for the time being as to references to arbitration”.
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Open this page in the original PDF31 35. It is by virtue of this provision that Arbitration clauses in contracts by which parties voluntarily agreed to step out of the process of normal legal proceedings through Courts and decide to refer to Arbitration their disputes, is saved. The logic behind the provision is that when two parties with open eyes agree to submit their dispute to a third party in whom they have confidence, such contracts should not be held as void. 36. The earliest statute which exclusively dealt with Arbitration was the Indian Arbitration Act of 1899. Thereafter came the Arbitration Act of 1940 (‘1940 Act’ for short) , which has since been replaced by the A&C Act. What is important to note is that contracts referring parties to Arbitration were regulated by statutes. Parties contracting with open eyes were aware that once they opt for Arbitration , the parameters for Arbitration were to be governed by the statute regulating the same and that the normal remedies available to a litigant who is resorting to the existing Courts could not be applicable and a different procedure would govern the same. 37. The 1940 Act dealt with: - Arbitration without intervention of a Court (Sections 3 to 19); Arbitration with intervention of a Court where
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Open this page in the original PDF32 there is no suit pending (Section 20); Arbitration in suits (Section s 21 to 25) and further Section 27 enabled the Arbitrator to make an interim award and in Section 30 grounds for setting aside the award were provided. What is important to note is that Section 15 of the Act of 1940 provided for a power in the Court to modify the award and Section 16 reserved an express power to remit the award. 38. Sections 15 and 16 of the 1940 Act read as under:- “15. Power of Court to modify award . -The Court may by order modify or correct an award- (a) where it appears that a part of the award is upon a matter not referred to arbitration and such part can be separated from the other part and does not affect the decision on the matter referred; or (b) where the award is imperfect in form, or contains any obvious error which can be amended without affecting such decision; or (c) where the award contains a clerical mistake or an error arising from an accidental slip or omission. 16. Power to remit award .-(1) The Court may from time to time remit the award or any matter referred to arbitration to the arbitrators or umpire for reconsideration upon such terms as it thinks fit- (a) where the award has left undetermined any of the matters referred to arbitration, or where it determines any matter not referred to arbitration and such matter cannot be separated without affecting the determination of the matters referred; or (b)where the award is so indefinite as to be incapable of execution; or
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Open this page in the original PDF33 (c)where an objection to the legality of the award is apparent upon the face of it.” (Emphasis supplied) 39. Thereafter, in Section 30 of the 1940 Act, grounds for setting aside the award were provided. Section 30 reads as follows:- 30. Grounds for setting aside award .-An award shall not be set aside except on one or more of the following grounds, namely:- (a) that an arbitrator or umpire has misconducted himself or the proceedings; (b) that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under section 35; (c) that an award has been improperly procured or is otherwise invalid. (Emphasis supplied) 40. It is important to note that Section 30 of the 1940 Act opened with the phrase “ an award shall not be set aside except on one or more of the following grounds ”. These words are exhaustive and limit the setting aside to the three grounds set out therein. SCHEME OF THE A&C ACT, 1996: - 41. Reverting to the A&C Act, the Statement of Objects and Reasons sets out that the UNCITRAL Model Law and Rules harmonize the concepts on arbitration and conciliation of different legal systems of
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Open this page in the original PDF34 the world and contain provisions for universal application; though the UNCITRAL Model Law and Rules are intended to deal with international commercial arbitration and conciliation, they could with appropriate modifications also serve as a model for legisla tion on domestic arbitration and conciliation; that the present Bill sought to consolidate and amend the law relating to domestic arbitration, international commercial arbitration, enforcement of foreign arbitral awards and to define the law relating to co nciliation, taking into account the UNCITRAL Model Law and Rules. Among the main objectives set out were to minimize the role of the courts in the arbitral process. The Statement of Objects and Reasons of the 1996 Act is extracted herein below:- “STATEMENT OF OBJECTS AND REASONS 1. The law on arbitration in India is at present substantially contained in three enactments, namely, the Arbitration Act, 1940, the Arbitration (Protocol and Convention) Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, 1961. It is widely f elt that the 1940 Act, which contains the general law of arbitration, has become outdated. The Law Commission of India, several representative bodies of trade and industry and experts in the field of arbitration have proposed amendments to this Act to make it more responsive to contemporary requirements. It is also recognised that our economic reforms may not become fully effective if the law dealing with settlement of both domestic and international commercial disputes remains out of tune with such reforms . Like arbitration, conciliation is also getting increasing worldwide
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Open this page in the original PDF35 recognition as an instrument for settlement of disputes. There is, however, no general law on the subject in India. 2. The United Nations Commission on International Trade Law (UNCITRAL) adopted in 1985 the Model Law on International Commercial Arbitration. The General Assembly of the United Nations recommended that all countries give due consideration to the said Model Law, in view of the desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practice. The UNCITRAL also adopted in 1980 a set of Conciliation Rules. The General Assembly of the United Nations recommended the use of these Rules in cases where the disputes arise in the context of international commercial relations and the parties seek amicable settlement of their disputes by recourse to conciliation. An important feature of the UNCITRAL Model Law and Rules is that they have harmonised concepts on arb itration and conciliation of different legal systems of the world and thus contain provisions which are designed for universal application. 3. Though the said UNCITRAL Model Law and Rules are intended to deal with international commercial arbitration and conciliation, they could, with appropriate modifications, also serve as a model for legislation on domestic arbitration and conciliation. The present Bill seeks to consolidate and amend the law relating to domestic arbitration, international commercial arbitration, enforcement of foreign arbitral awards and to define the law relating to conciliation, taking into account the said UNCITRAL Model Law and Rules. 4. The main objectives of the Bill are as under:- (i) to comprehensively cover international commercial arbitration and conciliation as also domestic arbitration and conciliation; (ii) to make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of the specific arbitration; (iii) to provide that the arbitral tribunal gives reasons for its arbitral award; (iv) to ensure that the arbitral tribunal remains within the limits of its jurisdiction;
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Open this page in the original PDF36 (v) to minimise the supervisory role of courts in the arbitral process; (vi) to permit an arbitral tribunal to use mediation, conciliation or other procedures during the arbitral proceedings to encourage settlement of disputes; (vii) to provide that every final arbitral award is enforced in the same manner as if it were a decree of the court; (viii) to provide that a settlement agreement reached by the parties as a result of conciliation proceedings will have the same status and effect as an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal; and (ix) to provide that, for purposes of enforcement of foreign awards, every arbitral award made in a country to which one of the two international Conventions relating to foreign arbitral awards to which India is a party applies, will be treated as a foreign award. 5. The Bill seeks to achieve the above objects. (Emphasis supplied) The Act has since been amended in 2015, 2019 and 2021. 42. It is time now to analyse the conspectus of the legal provisions of the A&C Act that are relevant for answering the issue at hand. Section 5 is an important provision which reads as under:- “5. Extent of judicial intervention. —Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part. (Emphasis Supplied) 43. It will be noticed that the section begins with a non -obstante clause and states that notwithstanding anything contained in any other law for the time being in force, in matters governed by Part -I, no judicial authority shall intervene except where so provided in Part-I.
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Open this page in the original PDF37 Section 7 defines “arbitration agreement” and mandates that it shall be in writing in the manner as provided in sub -clause (4) therein. Section 8 is an important section, which mandates that a judicial authority before which an action is brought in a manner which is subject to arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies in the circumstance set out therein, the judicial authority shall refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists; Section 9 deals with interim measures; Section 10 deals with number of arbitrators and Section 11 provides for the method of appointment of arbitrators. Sections 12 and 13 deal with bias and procedure for challenging the continuance of an arbitrator. 44. What is important to notice is where a challenge to an arbitrator on the grounds of bias fails, the Arbitral Tribunal is mandated to continue the arbitral proceedings. Section 13(5) provides that where an arbitral award is made under sub-section (4), the party challenging the arbitrator may make an application for setting aside such an arbitral award in accordance with Section 34. The point to be noted is that judicial intervention is postponed till the conclusion of the arbitral
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Open this page in the original PDF38 proceedings and courts are kept at bay from interfering before the making of an award. This is in line with the mandate of Section 5 which states that except where so provided it shall be a judicial hands-off. 45. Section 14 deals with failure or impossibility of the arbitrator to act and Section 15 deals with termination of mandate and substitution of arbitrator. Section 16 deals with the competence of the Arbitral Tribunal to rule on its own jurisdiction. This section, based on the Principle of Kompetenz- Kompetenz, vests the arbitral tribunal to decide upon its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement. Section 16(2) mandates that a plea that the arbitral tribuna l does not have jurisdiction is to be raised not later than the submission of the statement of defence; sub -section (5) of Section 16 states that where the arbitral tribunal takes a decision rejecting t he objection under sub- sections (2) and (3) it shall continue with the arbitral proceedings and make the award and any such decision upholding the jurisdiction or authority is challengeable only at the sta ge of Section 34 and no court will intervene pending the proceedings before the arbitrator. However, Section 37(2) provides an appeal to the court in case the arbitrator
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Open this page in the original PDF39 upholds the objection to jurisdiction or authority. Here again judicial hands-off is specifically provided and wherever intervention was permitted it took care to make specific provisions for the same. Section 29A is a specific instance in point where Courts’ intervention is provided for in the context of extension of time for completion of proceedings. Thereafter, for the purpose of this reference, the next set of sections that would merit discussion is Sections 31 to 43. 46. Section 31 deals with form and contents of arbitral award. Sub - section (1) mandates that the arbitral award shall be made in writing and signed by the members of the arbitral tribunal. Sub -section (4) states that the award shall state its date and the pl ace of arbitration. Sub-section 7(a) deals with manner of award of post -award interest. Sub-section 7(b) states that unless the award otherwise directs any sum directed to be paid by the tribunal shall carry interest at the rate of two per cent higher than the current rate of interest prevalent on the date of award. Sub-section (8) states that the costs of arbitration shall be fixed by the arbitral tribunal in accordance with Section 31A. Sub -section (3) of Section 32 states that subject to Section 33 and sub-section (4) of
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Open this page in the original PDF40 Section 34, the mandate of the arbitral tribunal was to terminate with the termination of the arbitral proceedings. 47. Section 33 deals with correction and interpretation of award; additional award. Section 33 is extracted herein below:- “33. Correction and interpretation of award; additional award.—(1) Within thirty days from the receipt of the arbitral award, unless another period of time has been agreed upon by the parties— (a) a party, with notice to the other party, may request the arbitral tribunal to correct any computation errors, any clerical or typographical errors or any other errors of a similar nature occurring in the award; (b) if so agreed by the parties, a party, with notice to the other party, may request the arbitral tribunal to give an interpretation of a specific point or part of the award. (2) If the arbitral tribunal considers the request made under sub - section (1) to be justified, it shall make the correction or give the interpretation within thirty days from the receipt of the request and the interpretation shall form part of the arbitral award. (3) The arbitral tribunal may correct any error of the type referred to in clause (a) of sub -section (1), on its own initiative, within thirty days from the date of the arbitral award. (4) Unless otherwise agreed by the parties, a party with notice to the other party, may request, within thirty days from the receipt of the arbitral award, the arbitral tribunal to make an additional arbitral award as to claims presented in the arbitral pr oceedings but omitted from the arbitral award. (5) If the arbitral tribunal considers the request made under sub - section (4) to be justified, it shall make the additional arbitral award within sixty days from the receipt of such request. (6) The arbitral tribunal may extend, if necessary, the period of time within which it shall make a correction, give an interpretation or make an additional arbitral award under sub -section (2) or sub - section (5).
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Open this page in the original PDF41 (7) Section 31 shall apply to a correction or interpretation of the arbitral award or to an additional arbitral award made under this section.” 48. A careful reading of Section 33 would indicate that post the award and subject to the conditions prescribed therein, (a) either party after notice to the other may request the arbitral tribunal to correct any computation errors and any clerical or typographical errors or any errors of a similar nature occurring in the award; (b) if so agreed by the parties, any party, with notice to the other party, may request the arbitral tribunal to give an interpretation of a specific point or part of the award; (c) such requests, as mentioned above, is to be dealt with by the arbitral tribunal within 30 days from the date of receipt of request and any such interpretation given shall form part of the award; (d) that on its own initiative, the arbitral tribunal may correct any error or nature of a computation clerical or typographical error within 30 days from the date of the award; (e) Subject to any contract to the contrary , a party with notice to the other party within 30 days from the receipt of the arbitral award, request
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Open this page in the original PDF42 the tribunal to make an additional arbitral award as to claims presented in the arbitral proceedings but omitted from the arbitral award; (f) such additional award shall be made within 60 days from the receipt of such request; that the tribunal may extend the period of time within which it shall make correction, give an interpretation and make an additional award under sub-Section (2) of sub-Section (5) (g) for such correction or interpretation of the arbitral award or to an additional award, Section 31 was to apply. 49. This section is set out only for the reason that after the award is made, situations necessitating correction of computation errors, clerical or typographical errors are provided for to be remedied by approaching the arbitrator. This will have a bearing while interpreting Section 33 & Section 34(4) together, a little later in this judgment. 50. While Section 34 deals with application for setting aside arbitral award, Section 35 speaks of finality of arbitral awards and Section 36 speaks of enforcement. The epicenter for this reference, however, is Section 34, the scope, sweep and ambit of which this reference is directly concerned.
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Open this page in the original PDF43 51. Section 34 occur s in Chapter VII under the heading “Recourse against arbitral award”, which reads as under:- “34. Application for setting aside arbitral award.—(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub - section (2) and sub-section (3). (2) An arbitral award may be set aside by the Court only if— (a) the party making the application establishes on the basis of the record of the arbitral tribunal that— (i) a party was under some incapacity, or (ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or (v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or (b) the Court finds that— (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii) the arbitral award is in conflict with the public policy of India. Explanation 1.—For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,—
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Open this page in the original PDF44 (i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice. Explanation 2.—For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute. (2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award: Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence. (3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that reque st had been disposed of by the arbitral tribunal: Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months It may entertain the application within a further period of thirty days, but not thereafter. (4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award. (5) An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement. (6) An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in sub -section (5) is served upon other party.” (Emphasis Supplied)
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Open this page in the original PDF45 52. A careful reading of the section reveals that it provides the procedure and grounds for filing an application for setting aside arbitral awards. It opens with the phrase “recourse to a Court against an arbitral award which is to be made only by an application for setting aside in accordance with sub -section (2) and (3) ”. “ Hence, an application can only be for setting aside” the award which should be in accordance with the grounds under sub-section (2) and (3). Sub-section (2) opens with the phrase “an arbitral award may be set aside by the court” and “only if” the party make out the grounds set out therein. 53. Section 34(2)(a) deals with parties being under some incapacity; arbitration agreement not being valid under the law to which the parties have subjected it or under the law for the time being in force; no proper notice of the appointment of arbitrator or the arbitral proceedings being given or the party being otherwise unable to present the case or that the arbitral award dealt with disputes not contemplated by or not falling within the terms of the submission to arbitration or it contained decisions on matters beyond the scope of arbitration; 54. Section 34(2)(a)(iv) has an important proviso which states that if the decisions on matters submitted to arbitration can be separated from
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Open this page in the original PDF46 those not so submitted, only that part of the arbitral award which contained decisions on matters not submitted to arbitration may be set aside; Section 34(2)(a)(v) deals with the composition of the arbitral tribunal or the arbitral procedure not being in accordance with the agreement of the parties , unless such agreement itself was in conflict with a provision of Part-I from which parties cannot derogate or failing such agreement was not in accordance with Part-I. 55. Section 34 (2)(b) enables awards to be set aside if the subject - matter of the dispute is not capable of settlement by arbitration under the law for the time being in force or the arbitral award is in conflict with the public policy of India. Explanation I sets out the clarification as to when the award will be in conflict with the public policy of India and it states that if the making the award was induced or affected by fraud or corruption or was in violation of Section 75 (confidentiality in conciliation) or Section 81 (adducing evidence contrary to the mandate of Section 81); where the award is contrary to the fundamental policy of India or was in conflict with the most basic notions of morality o r justice. Explanation II clarifies that the test as to whether there is a
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Open this page in the original PDF47 contravention with the fundamental policy of India shall not entail a review on the merits of the dispute. 56. Section 34(2A) is significant since it permits patent illegality appearing on the face of the award as a ground to set aside the award for domestic arbitrations and does not extend the said ground for international commercial arbitrations. The proviso appe nded clarifies that the award was not to be set aside merely on the ground of an erroneous application of the law or by re-appreciation of evidence. 57. Section 34(4) is a very significant section which came in for considerable deliberation at the hearing. Under this provision, a “safety valve” is provided to prevent awards from being set aside by the Section 34 court by providing an opportunity to the arbitral tribunal to resume the arbitral proceeding s or to take such other action as in the opinion of the arbitral tribunal will eliminate the grounds for setting aside the award. This section has come in for judicial interpretation and will be discussed later in the course of this judgment.
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Open this page in the original PDF48 58. One other Section which ought to be referred to is Section 43(4) which deals with the situation post the setting aside of the award. Section 43(4) reads as under:- “Section 43(4)- Where the Court orders that an arbitral award be set aside, the period between the commencement of the arbitration and the date of the order of the Court shall be excluded in computing the time prescribed by the Limitation Act, 1963 (36 of 1963), for the commencement of the proceedings (including arbitration) with respect to the dispute so submitted.” 59. The overarching note of restraint in judicial intervention as set out in Section 5; the proscription for intervention set out in Section 13(5) and 16(5); the range of options under Section 33 for the parties and the arbitrator to carry out repairs to the a ward in the manner set out there in; the limited option to seek recourse to set aside on prescribed grounds with the shackle “only if” in Section 34(2) and the further safety valve available in Section 34(4), to go back to the arbitrator under circumstances mentioned therein are clear pointers about the acutely circumscribed nature of the power in the Section 34 court. This, viewed in the background of the fact that parties have with open eyes contracted to go for arbitration and subject themselves to the parameters prescribed in the act after ousting the normal judicial process, clearly indicates that parties were conscious of the limited role
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Open this page in the original PDF49 for courts in the review of arbitral awards. The absence of express powers to modify for a court hearing objections against the award, when such a power existed in the Precursor act also points to the legislative intent. It is in this background that the arguments of the parties clamouring for a reading in of the power of modification, needs to be tested. 60. A Seven -Judge Bench of this Court in Interplay Between Arbitration Agreements under Arbitration and Conciliation Act, 1996 & Stamp Act, 1899, In re , [(2024) 6 SCC 1] interpreting Section 5 of the A&C Act had the following to say: “81. One of the main objectives of the Arbitration Act is to minimise the supervisory role of Courts in the arbitral process. Party autonomy and settlement of disputes by an Arbitral Tribunal are the hallmarks of arbitration law. Section 5 gives effect to the true intention of the parties to have their disputes resolved through arbitration in a quick, efficient and effective manner by minimising judicial interference in the arbitral proceedings. [Food Corpn. of India v. Indian Council of Arbitration, (2003) 6 SCC 564.] Parliament enacted Section 5 to minimise the supervisory role of Courts in the arbitral process to the bare minimum, and only to the extent “so provided” under the Part I of the Arbitration Act . In doing so, the legislature did not altogether exclude the role of Courts or judicial authorities in arbitral proceedings, but limited it to circumstances where the support of judicial authorities is required for the successful implementation and enforc ement of the arbitral process. [ Union of India v. Popular Construction Co., (2001) 8
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Open this page in the original PDF50 SCC 470; P . Anand Gajapathi Raju v. P .V .G. Raju, (2000) 4 SCC 539] The Arbitration Act envisages the role of Courts to “support arbitration process” [Swiss Timing Ltd. v. Commonwealth Games 2010 Organising Committee, (2014) 6 SCC 677 : (2014) 3 SCC (Civ) 642] by providing necessary aid and assistance when required by law in certain situations. 86. Similar to Article 5 of the Model Law, Section 5 uses the expression “in matters governed by this Part”. The use of this expression circumscribes the scope of judicial intervention to matters expressly governed by Part I of the Arbitration Act. The matters governed by Part I inter alia include: 86.1. Section 8 which mandates judicial authorities to refer parties to arbitration when prima facie there is a valid arbitration agreement; 86.2. Section 9 which allows Courts to issue interim measures on an application made by a party to an arbitration agreement; 86.3. Section 11 which empowers the Supreme Court or the High Courts to appoint arbitrators on an application made by parties to an arbitration agreement; 86.4. Section 27 which allows the Arbitral Tribunal to request the Court for assistance in taking evidence; and 86.5. Section 34 which empowers the Court to set aside an arbitral award on the basis of the limited grounds mentioned therein. 87. Section 5 has two facets — positive and negative. The positive facet vests judicial authorities with jurisdiction over arbitral proceedings in matters expressly allowed in or dealt with under Part I of the Arbitration Act. The flip side to this approac h is that judicial authorities are prohibited from intervening in arbitral proceedings in situations where the Arbitral Tribunal has been bestowed with exclusive jurisdiction. This is the negative facet of Section 5. The non obstante clause limits the exte nt of judicial intervention in respect of matters expressly provided under the Arbitration Act. [Secur Industries Ltd. v. Godrej & Boyce Mfg. Co. Ltd., (2004) 3 SCC 447] In Bhaven
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Open this page in the original PDF51 Construction v. Sardar Sarovar Narmada Nigam Ltd. [Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd., (2022) 1 SCC 75 : (2022) 1 SCC (Civ) 374] , a Bench of three Judges of this Court observed that the : (Bhaven Construction case [Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd., (2022) 1 SCC 75 : (2022) 1 SCC (Civ) 374] , SCC p. 82, para 12) “12. … non obstante clause is provided to uphold the intention of the legislature as provided in the Preamble to adopt UNCITRAL Model Law and Rules, to reduce excessive judicial interference which is not contemplated under the Arbitration Act.” 89. Section 5 is of aid in interpreting the extent of judicial interference under Sections 8 and 11 of the Arbitration Act. Section 5 contains a general rule of judicial non -interference. Therefore, every provision of the Arbitration Act ought to be construed in view of Section 5 to give true effect to the legislative intention of minimal judicial intervention.” (Emphasis supplied) SOME CASES CITED IN THE REFERRAL ORDER:- 61. Before the contentions of the respective parties are addressed, the deck needs to be cleared by discussing the judgments set out in question No.5 in the referral order of 20.02.2024, particularly those cases referred to therein where modification of the award was ordered or an imprimatur was put on the modifications already made, to understand the circumstances under which they came to be done. Considering that this is a Bench of five, those judgments would not be binding. However,
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Open this page in the original PDF52 the endeavour here is to understand the rationale behind the said judgments to see whether it will be of any assistance herein. 62. The earliest case referred is Tata Hydro-Electric Power Supply Co. Ltd. and Others vs. Union of India, (2003) 4 SCC 172. In the said judgment, while setting aside the judgment of the High Court and upholding the Award, a three -Judge Bench of this Court without discussing the legal issue as to whether the power to modify existed in a Section 34 Court or not , modified the date of commencement of interest from the awarded date of August, 1993 to 30.03.1998 , which was the date when the Award came to be passed. This authority is of little help since the issue that arises for consideration was not debated and it was on the assumption that the power existed. 63. Insofar as the judgment in J.C. Budhraja vs. Chairman, Orissa Mining Corporation Ltd. and Another , (2008) 2 SCC 444 is concerned, that case arose under the Arbitration Act, 1940. In the said case, the Arbitrator awarded a sum of Rs.1,02,66,901.36 (which was more than the claim of Rs. 95,96,616.00) with interest @ 12% p.a. from 01.08.1997 till date of Award and future interest @ 6% p.a. from the expiry of one month from the date of the Award till date of decree. The
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Open this page in the original PDF53 Award was in respect of 35 claims. Claim Nos. 1 -16 related to the schedule of items under the contra ct and claim Nos. 17 to 34 were in respect of work which did not form part of the contract schedule and Claim No. 35 related to escalation in cost of labour and material on account of delay in execution. The Civil Judge (Senior Division) Bhubaneshwar, overruling the objections of the award debtor made the award a rule of the court. While the award debtor filed Misc . Appeal challenging the decision of the Civil Judge in the High Court, the contractor also filed Misc . Appeal and Civil Revision claiming future interest from the date of decree as the judgment of the Civil Court was silent. By a common judgment, the High Court held that claims of the contractor to be barred by limitation and set aside the Award. It allowed the award debtor’s appeal and dismissed the award holders appeal and revision. On further appeal to this Court, this Court held that out of the total claim of Rs.95,96,616.00 the claim for only Rs.28,32,128.00 was within time. The remaining claims aggregating to Rs.67,44,488.00 were fresh claims which were not pending claims in respect of which the acknowledgement was made. Therefore, the fresh claims were held barred by limitation. Therafter, this Court in para 34 held as under:-
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Open this page in the original PDF54 “34. Does it mean that the entire award should be set aside? The answer is, no. That part of the award which is valid and separable can be upheld. That part relates to the claims which were validly made before the arbitrator, which were part of the existing or pending claims of Rs 50,15,820 and which were not barred by limitation. As stated above they were the claims which were existing or pending in 1978, 1979 and 1980 (considered by the committee and payment made by OMC) which were carried before the arbi trator to an extent of Rs 28,32,128. Only the amounts awarded by the arbitrator against those claims can be considered as award validly made in arbitration, falling within jurisdiction. They are clearly severable from the other portions of the award. 64. It is clear that apart from the fact that the said judgment arose under the old Act, it was a case where the principle of severability was applied. In any event , being a matter under the 1940 Act, power to modify clearly existed. Hence, the judgment cannot be of any help in deciding the scope of power under Section 34 of the A&C Act. 65. Insofar as the judgment in Madhya Pradesh Power Generation Company Limited and Another vs. Ansaldo Energia Spa and Another, (2018) 16 SCC 661 is concerned, as is clear from paras 38 & 39 of the said judgment, this Court on the finding that the bank guarantees dated 22.02.2000 and 23.02.2000 were towards the amounts advanced by the Board to the contractor severed the amounts involved
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Open this page in the original PDF55 in the bank guarantee of the said two dates. Para s 38 & 39 read as under:- “38. The bank guarantee given on 24 -2-2000 was a performance bank guarantee and the claimant is entitled for return of the amount for which the bank guarantee was given. The Arbitral Tribunal, however, failed to take notice of the fact that the other two bank guarantees were given for the amounts to be advanced by the Board. In fact, the Board had advanced the said amounts to the claimants. We are of the opinion that the claimant is not entitled for return of the amounts involved in the bank guarantees dated 22 -2-2000 and 23 -2-2000 as they were towards the amounts advanced by the Board. The rejection of the claim pertaining to the damages mentioned in Ext. HH of the statement of claim which includes loss of profit, overheads and loss of commercial opportunities clearly indicates that the Arbitral Tribunal never intended to grant any damages to the claimant. The claims allowed by the Arbitral Tribunal pertained only to the return of the claimants' money involved in the bank guarantees and the amounts actually spent by the claimants. 39. We uphold the award of the Arbitral Tribunal with the modification that the claimants are not entitled for the amounts involved in the bank guarantees dated 22-2-2000 and 23-2-2000 given by the claimants.” 66. Since the severed portion was a standalone portion not inseparably intertwined with other portions of the award, this Court had no difficulty in severing. Hence, really it is not a case of modification of any portion of the award but a case of severance. 67. Now coming to the judgment in Vedanta Limited vs. Shenzhen Shandong Nuclear Power Construction Company Limited, (2019) 11 SCC 465, this Court modified the interest with regard to the EUR
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Open this page in the original PDF56 component and held that in respect of the award rate of 9% on the EUR component, the award debtor will be liable to pay interest @ LIBOR rate + 3 percentage points , prevailing on the date of the award. The question as to whether interest can be modified, has been dealt with in the later part of this judgment. 68. Shakti Nath and Others vs. Alpha Tiger Cyprus Investment No.3 Limited and Others , (2020) 11 SCC 685 was a case where , by consent of parties, the interest and penal interest was modified. Para 4 of the said judgment reads as follows:- “4. After having heard the counsel appearing for all the parties, the challenge to the ICC award is hereby rejected. With respect to the amount awarded towards interest and penal interest under the award, the same has been modified by consent of parties, as a prudent commercial decision, …” 69. Oriental Structural Engineers Private Limited vs. State of Kerala, (2021) 6 SCC 150 was against a case where interest was modified from 12% to 8% which is an aspect discussed hereinbelow.
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Open this page in the original PDF57 ANALYSIS OF THE CONTENTIONS AND REASONING: - CAN WORDS BE READ INTO SECTION 34? 70. The contention that the words “and, to the extent” and the words “or modified”, and “to the extent” be read into parts of Section 34 is only to be stated to be rejected. The justification for this argument that the Court can iron out the creases is not appealing at all because what is sought to be done is virtual mutilation of the fabric and not just t he ironing out of the creases. It is also very well settled that where the language is plain and clear, the Court will prefer the plain meaning rule and when there is no casus omissus, the Court cannot interpret a statute as to create one. 71. This Court in CIT, Central Calcutta vs. National Taj Traders , (1980) 1 SCC 370 has lucidly captured this, in the following words :- “10. Two principles of construction — one relating to casus omissus and the other in regard to reading the statute as a whole — appear to be well settled. In regard to the former the following statement of law appears in Maxwell on Interpretation of Statutes (12th Edn.) at p. 33: “Omissions not to be inferred. —It is a corollary to the general rule of literal construction that nothing is to be added to or taken from a statute unless there are adequate grounds to justify the inference that the legislature intended something which it
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Open this page in the original PDF58 omitted to express. Lord Morsey said: ‘It is a strong thing to read into an Act of Parliament words which are not there, and in the absence of clear necessity it is a wrong thing to do’ . ‘We are not entitled’, said Lord Loreburn L.C., ‘to read words into an Act of Parliament unless clear reason for it is to be found within the four corners of the Act itself’. A case not provided for in a statute is not to be dealt with merely because there seems no good reason why it should have been omitted, and the omissi on appears in consequence to have been unintentional.” In regard to the latter principle the following statement of law appears in Maxwell at p. 47: “A statute is to be read as a whole. —It was resolved in the case of Lincoln College [(1595) 3 Co. Rep. 58b at p. 59b] that the good expositor of an Act of Parliament should ‘make construction on all the parts together, and not of one part only by itself’. Every clause of a statute is to ‘be construed with reference to the context and other clauses of the Act, so as, as far as possible, to make a consistent enactment of the whole statute’.” (Per Lord Davey in Canada Sugar Refining Co. Ltd. v.R., 1898 AC 735.)” (Emphasis supplied) 72. The case law cited by Mr. Datar, learned Senior Counsel to read words into have no application to the present case. As the cited cases indicate they were done in situations where irreconcilable conflict was to be avoided; where failure to do so would have resulted in absurdities and injustice; where it was needed to bring the provision in consonance with reason and justice and where parts of the statute would otherwise have been rendered ineffective and meaningless. That is not the situation here.
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Open this page in the original PDF59 73. Section 34 speaks of ‘Recourse’ being taken against an arbitral award. The word ‘Recourse’ has been defined in P. Ramanatha Aiyar’s Advanced Law Lexicon Third Edition to mean: “the act of seeking help or advice; enforcement or method of enforcing a right.” Further, Section 34 of the A&C Act clearly states that an arbitral award may be “Set aside” by the Court “only if” the prescribed circumstances are established. 74. The expression “ Set aside ” has been defined in P. Ramnatha Aiyar’s Advanced Law Lexicon (third edition) to mean “to annul, quash, render, void or negatory”. 75. Further, the phrase “ only if” in the context in which it is used makes it amply clear that only if the grounds prescribed are established could the award be set aside. The word “only” has been interpreted by this Court to mean to be a phrase ordinarily used as an exclusionary term and it has been held that in ascertaining its meaning its placement is material, as also the context in which the word is used (See Ramesh Rout v. Rabindra Nath Rout, (2012) 1 SCC 762).
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Open this page in the original PDF60 76. The combined use of the phrase “set aside” and “only if” read with the phrase “recourse” makes it amply clear that the only manner of interfering with the award as permitted in the Act and as reinforced by Section 5 of the said Act is to file an application to set aside or annul the award by establishing the grounds prescrib ed therein. As already pointed out, Section 5 mandates that no judicial authority is to intervene except where so provided under the A&C Act. THE FALLACY IN THE ‘HARDSHIP’ ARGUMENT: - 77. The argument that absurdities will result and hardship will be caused if power to modify is not read in has no merit. There are at least two compelling reasons to hold so. The A&C Act in Section 43(4) itself contemplates that on the setting aside of the award the option is to commence proceedings including arbitration with respect to the dispute. The law makers are fully conscious of the situation that setting aside of the award will result in the dispute continuing to be thrown open at large since notwithstanding the setting aside of the award the legal position is that the arbitration agreement survives, except in situations where the order setting aside has findings impi nging on the validity of the arbitration agreement itself.
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Open this page in the original PDF61 78. Though said in the context of Section 19 of the 1940 Act, Juggilal Kamlapat v. General Fibre Dealers Ltd. , 1961 SCC OnLine SC 402 , reinforces the point that the arbitration agreement can survive the setting aside of award. It was said that when a court sets aside an arbitral award, it retains the discretion to either supersede the reference to arbitration or allow it to continue, a power peculiar to the arbitration Act of 1940. If the court decides to supersede the reference, it must also order that the arbitration agreement ceases to have effect concerning the dispute referred. However, if the court does not supersede the reference, both the arbitration agreement and the reference remain valid, enabling the parties to proceed with further arbitration. This Court in Juggilal Kamlapat (supra) observed: “8. …..The intention of the legislature in making this change in the consequences to follow the setting aside of an award is clear in as much as the provision recognises that there may be different kinds of arbitration agreements, some of which might be ex hausted by the reference already made and the award following thereon which has been set aside while others may be of a more comprehensive nature and may contemplate continuation of the reference relating to the same dispute or successive references relating to different disputes covered by the arbitration agreement. ….. ……It will thus be seen that the discretion vested in the court under Section 19 depends upon the nature of the arbitration agreement in particular cases and it is on a consideration of those terms that the court may decide in one case to supersede the
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Open this page in the original PDF62 reference and order the arbitration agreement to cease to have effect after taking into account the reasons which have impelled it to set aside the award and in another not to set aside the reference with the result that the reference and the arbitration agreement subsist; and if the arbitration agreement provides for machinery to have further arbitration on the same dispute or other disputes arising under the arbitration agreement it is permissible to have further arbitration on the same dispute or other disputes. ….” (Emphasis supplied) 79. This Court in Mcdermott International Inc. (Supra) pertinently observed that “The court cannot correct errors of the arbitrators . It can only quash the award leaving the parties free to begin the arbitration again if it is desired.” (Emphasis supplied) 80. Chief Justice, Sundaresh Menon of the Supreme Court of Singapore explains this concept in AKN vs. ALC, 2015 SGCA 63, thus: “51. There is simply nothing to warrant the conclusion that where an award has been set aside, the tribunal which made that award would somehow resume the ability and mandate to determine afresh the matters that had been dealt with in the award. But, as alluded to above, this goes to the mandate of that particular tribunal. The fact that the award has been set aside would not, in and of itself, affect the continued validity and force of the arbitration agreement between the parties, save in the situation where t he award was set aside on the ground that there was no arbitration agreement between the parties. In L W Infrastructure (HC), Belinda Ang J described this as “Situation 2” and observed as follows (at [48]): Similarly, where an arbitral award is “beyond pow er” in the sense that the tribunal lacks jurisdiction to deal with the dispute
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Open this page in the original PDF63 altogether (for instance, where there is no valid agreement to arbitrate, where a party to the arbitration agreement was under some incapacity or where the arbitral tribunal has not been properly appointed) ... that would clearly be the end of the enquiry and the tribunal would obviously not be vested with jurisdiction to deal with the matter merely because the award has been set aside by the court. [emphasis in original] 52. We agree with this analysis. But save in this situation, the arbitration agreement will generally survive the setting aside of an award. On this basis, it may be open, subject to certain other limitations, to which we will briefly turn, for a party which has successfully obtained an a ward in the arbitration and then seen that set aside by the court, to start a fresh arbitration. This follows given that: (a) The dispute has not yet been resolved since the award has been set aside; and (b) The arbitration agreement remains binding on the parties as to how they will resolve their disputes.” 54. Against this background, we return to the possible limitations that we alluded to at [52] above, which might stand in the way of a party seeking to commence fresh arbitration proceedings after an award was set aside. This is by no means an exhaustive l ist but it seems to us that there are at least three possibly significant matters that would have to be considered, quite apart from practical considerations of cost and time, which are mentioned in some of the extracts from the academic commentaries that we have referred to: (a) It is possible that a limitations defence might have accrued by the time the fresh set of proceedings is commenced. This possibility also has been alluded to in some of the academic commentaries that we have referred to above. We note that it is possib le for this to be addressed in appropriate circumstances pursuant to s 8A(2) of the IAA, which empowers the court in the exercise of its discretion to extend
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Open this page in the original PDF64 time for the commencement of proceedings by excluding from consideration the period between the commencement of the arbitration and the setting aside of the award. We comment further on s 8A(2) below (at [64]–[67]). (b) We have said that the arbitration agreement will generally survive the setting aside of the award. This would entail, however, the recommencement of fresh arbitration proceedings and in general, one would expect a new tribunal to be constituted. It is of course possible for both parties to agree to reconstitute the previous tribunal as the new one. But in the absence of such agreement, there remains the possibility that objections might yet be taken by one of the parties to any attempt by the other to r e-appoint a member of the previous tribunal, on the grounds that there exist justifiable doubts as to the impartiality of the prospective appointee by reason of his or her prior involvement in the matter and in the award that has been set aside. This will plainly be a fact-sensitive inquiry and we say no more about this. (c) We think it is inevitable that in attempting to commence a fresh arbitration, consideration will have to be given to the issue of res judicata. We deal with this in the next section of this judgment. (Emphasis supplied) 81. Hence, recommencement of proceedings including arbitration proceedings- wherever legally maintainable - being expressly contemplated in the statute the same cannot be brushed aside on the grounds of causing hardship to the parties. Parties, no doubt, will have all contentions and defences open as are available to them in law.
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Open this page in the original PDF65 CONTRACTUAL OUSTER OF THE NORMAL JUDICIAL PROCESS: - 82. The second reason is equally compelling. As briefly discussed earlier, when parties agree to arbitrate, they consciously with open eyes agree to step out of the normal judicial process and submit their dispute to a third party. Parties then are also conscious that when they agree to arbitrate their rights and liabilities wil l be governed by the regulating Act, which in this case is the A&C Act. In that sense , there is a contractual ouster subject to the terms of the A&C Act of the normal judicial process and the said course of action is sanctified under Section 28 of the Contract Act since such agreements are expressly held not to be opposed to public policy. 83. In the normal judicial process, the dispute would be adjudicated by the Court of first instance and appeals as provided in the Code of Civil Procedure , 1908 (C.P.C. for short) would ordinarily have been available to the aggrieved parties.
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Open this page in the original PDF66 CONTRAST WITH THE APPELLATE POWER UNDER CPC: - 84. A perusal of the conspectus of the scope of the appellate power under the C.P.C. would bring the contrast between the normal appellate power and the powers available to a Section 34 Court under the A&C Act. Part VII of the Code of Civil Procedure, 1908, as amended in 1976, read with Order XLI sets out the scope of the power of an Appellate Court. Section 107 and 108 reads as under: “107. Powers of Appellate Court.—(1) Subject to such conditions and limitations as may be prescribed, an Appellate Court shall have power— (a) to determine a case finally; (b) to remand a case; (c) to frame issues and refer them for trial; (d) to take additional evidence or to require such evidence to be taken. (2) Subject as aforesaid, the Appellate Court shall have the same powers and shall perform as nearly as may be the same duties as are conferred and imposed by this Code on Courts of original jurisdiction in respect of suits instituted therein. 108. Procedure in appeals from appellate decrees and orders.— The provisions of this Part relating to appeals from original decrees shall, so far as may be, apply to appeals— (a) from appellate decrees, and (b) from orders made under this Code or under any special or local law in which a different procedure is not provided.” (Emphasis supplied)
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Open this page in the original PDF67 85. Order XLI of the CPC prescribes certain rules, some of which are relevant herein. Rule 31, 32 and 33 are extracted hereinbelow: 31. Contents, date and signature of judgment.—The judgment of the Appellate Court shall be in writing and shall state— (a) the points for determination; (b) the decision thereon; (c) the reasons for the decision; and (d) where the decree appealed from is reversed or varied, the relief to which the appellant is entitled ; and shall at the time that it is pronounced be signed and dated by the Judge or by the Judges concurring therein. 32. What judgment may direct. —The judgment may be for confirming, varying or reversing the decree from which the appeal is preferred, or, if the parties to the appeal agree as to the form which the decree in appeal shall take, or as to the order to be made in appeal, the Appellate Court may pass a decree or make an order accordingly. 33. Power of Court of Appeal .—The Appellate Court shall have power to pass any decree and make any order which ought to have been passed or made and to pass or make such further or other decree or order as the case may require, and this power may be exercised by the Court notwithstan ding that the appeal is as to part only of the decree and may be exercised in favour of all or any of the respondents or parties, although such respondents or parties may not have filed any appeal or objection, and may, where there have been decrees in cross-suits or where two or more decrees are passed in one suit, be exercised in respect of all or any of the decrees, although an appeal may not have been filed against such decrees: Provided that the Appellate Court shall not make any order under section 35A, in pursuance of any objection on which the Court from whose decree the appeal is preferred has omitted or refused to make such order.” (Emphasis supplied)
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Open this page in the original PDF68 86. It will be noticed that an Appellate Court under the normal judicial process has powers coextensive with the original Court (Section 107(2) CPC). The respondent in an appeal can challenge the findings against him ( Order XLI Rule 22). The Appellate Court can confirm, vary, reverse the decree and if the parties to the appeal agree as to the form which the decree in appeal is to take or as to the order to be made in appeal, the Appellate Court may pass a decree or make an order (order XLI Rule 31 and 32) and the Appellate Court shall have the power to pass any decree and make any order which ought to have been passed or made and pass or ma ke such further or other decree or order. Further, the Appellate Court may exercise the power notwithstanding that the appeal was only to a part of the decree and may be exercised in favour of all or any of the respondents or parties , although such respondents or parties may not have filed any appeal or objection (Order XLI Rule 33). 87. This wide power is not available to a Court under Section 34 of the A&C Act while entertaining an application to set aside the arbitral award. The word ‘modify’ has been defined in P. Ramanatha Aiyar’s Advanced Law Lexicon Third Edition to mean:
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Open this page in the original PDF69 ‘To change, or vary, to qualify or reduce’. The position that the Court does not sit in appeal over the arbitral award is well- settled by now. This Court in Dyna Technologies Private Limited v. Crompton Greaves Limited, (2019) 20 SCC 1, observed:- “24. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Section 34 is differen t in its approach and cannot be equated with a normal appellate jurisdiction . The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated. 25. Moreover, umpteen number of judgments of this Court have categorically held that the courts should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The courts need to be cautious and should defer to the view taken by the Arbitral Tribunal e ven if the reasoning provided in the award is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act.” 88. There is a sound jurisprudential reason for the same. Arbitration has its origin in the contract between parties where parties have stepped
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Open this page in the original PDF70 out of the ordinary judicial process and in that sense there is an ouster of the jurisdiction of the Court’s power to adjudicate. 89. In view of this, the Section 34 Court unless expressly authorized by law cannot modify or vary the award since it will be tantamount to exercising the power of merits review, when parties have contracted to have their disputes referred to a third party outside the normal judicial process, for adjudication by arbitration. 90. It will be difficult to countenance the argument that words be read into, to confer that power to modify, as it will tantamount to exercising legislative power. Modification or variation of the award in the absence of an express legislative sanction would tantamount to courts usurping the power of the arbitrator when there is no legislative sanction for the same. IS POWER TO ‘MODIFY’ A LESSER POWER? 91. Parties have contended that the power to set aside is a larger power and hence a power to modify is after all a lesser power which should be subsumed in the larger power. They have relied on the legal maxim omne majus continet in se minus:- the greater contains the less.
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Open this page in the original PDF71 At first blush , though the argument seems attractive, a close scrutiny reveals that the argument has really no substance. As explained hereinabove, the qualitative nature of an appellate power is different from the power under Section 34. The two operate in different spheres and are not of the same genus. They do not have similar characteristics. It cannot be said just on a first blush understanding that power to set aside is larger and power to modify is smaller or lesser without keeping the context in whi ch Section 34 occurs in the Act and without considering the very ecosystem of the arbitration process. 92. There is a useful authority albeit from the criminal jurisdiction which brings out this concept. In Shamnsaheb M. Multtani vs. State of Karnataka, (2001) 2 SCC 577, a question arose whether an accused charged under Section 302 Indian Penal Code could be at the trial convicted for offences under Section 304 -B of the Indian Penal Code and as to whether Section 304 -B could be said to be a minor offence. Answering in the negative, this Court, speaking through K.T. Thomas, J., felicitously explained the principle thus. “15. Section 222(1) of the Code deals with a case “when a person is charged with an offence consisting of several particulars”. The section permits the court to convict the accused “of the minor
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Open this page in the original PDF72 offence, though he was not charged with it”. Sub-section (2) deals with a similar, but slightly different situation. “222. (2) When a person is charged with an offence and facts are proved which reduce it to a minor offence, he may be convicted of the minor offence, although he is not charged with it.” 16. What is meant by “a minor offence” for the purpose of Section 222 of the Code? Although the said expression is not defined in the Code it can be discerned from the context that the test of minor offence is not merely that the prescribed punishment is l ess than the major offence. The two illustrations provided in the section would bring the above point home well. Only if the two offences are cognate offences, wherein the main ingredients are common, the one punishable among them with a lesser sentence can be regarded as minor offence vis -à-vis the other offence. 17. The composition of the offence under Section 304-B IPC is vastly different from the formation of the offence of murder under Section 302 IPC and hence the former cannot be regarded as minor offence vis -à-vis the latter. However, the position would be different when the charge also contains the offence under Section 498-A IPC (husband or relative of husband of a women subjecting her to cruelty). As the word “cruelty” is explained as including, inter alia, “harassment of th e woman where such harassment is with a view to coercing her or any person related to her to meet any unlawful demand for any property or valuable security or is on account of failure by her or any person related to her to meet such demand”. 18. So when a person is charged with an offence under Sections 302 and 498-A IPC on the allegation that he caused the death of a bride after subjecting her to harassment with a demand for dowry, within a period of 7 years of marriage, a situation may arise, as in this case, that the offence of murder is not established as against the accused. Nonetheless, all other ingredients necessary for the offence under Section 304-B IPC would stand established. Can the
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Open this page in the original PDF73 accused be convicted in such a case for the offence under Section 304-B IPC without the said offence forming part of the charge? 34. In such a situation, if the trial court finds that the prosecution has failed to make out the case under Section 302 IPC, but the offence under Section 304-B IPC has been made out, the court has to call upon the accused to enter on his defence in respe ct of the said offence. Without affording such an opportunity to the accused, a conviction under Section 304 -B IPC would lead to real and serious miscarriage of justice. Even if no such count was included in the charge, when the court affords him an opport unity to discharge his burden by putting him to notice regarding the prima facie view of the court that he is liable to be convicted under Section 304 -B IPC, unless he succeeds in disproving the presumption, it is possible for the court to enter upon a conviction of the said offence in the event of his failure to disprove the presumption. 35. As the appellant was convicted by the High Court under Section 304-B IPC, without such an opportunity being granted to him, we deem it necessary in the interest of justice to afford him that opportunity. The case in the trial court should proceed against the appellant (not against the other two accused whose acquittal remains unchallenged now) from the stage of defence evidence. He is put to notice that unless he disproves the presumption, he is liable to be convicted under Section 304-B IPC.” (Emphasis supplied) 93. Hence, power to modify which would include the Court entering the arena of adjudicating the dispute on merits when parties have contractually agreed to go to the arbitrator, cannot be said to be subsumed in the power to “set aside”. It will be a different matter if the power to modify or power to vary is conferred by the legislature itself. Post the UNCITRAL Convention when the participating countries
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Open this page in the original PDF74 legislated, while India did not recognize in the statute the power to modify or vary, several jurisdictions like U.K. and Singapore positively legislated. The provision in the U.K. State Arbitration Act and the Singapore Arbitration Act are set out hereinbelow to bring home the point. Relevant provisions under the English Arbitration Act, 1996 “67. Challenging the award: substantive jurisdiction. (1)A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court— (a)challenging any award of the arbitral tribunal as to its substantive jurisdiction; or (b)for an order declaring an award made by the tribunal on the merits to be of no effect, in whole or in part, because the tribunal did not have substantive jurisdiction. A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3). (2)The arbitral tribunal may continue the arbitral proceedings and make a further award while an application to the court under this section is pending in relation to an award as to jurisdiction. (3)On an application under this section challenging an award of the arbitral tribunal as to its substantive jurisdiction, the court may by order— (a)confirm the award, (b)vary the award, or (c)set aside the award in whole or in part.
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Open this page in the original PDF75 (4)The leave of the court is required for any appeal from a decision of the court under this section. 69. Appeal on point of law. (1)Unless otherwise agreed by the parties, a party to arbitral proceedings may (upon notice to the other parties and to the tribunal) appeal to the court on a question of law arising out of an award made in the proceedings. An agreement to dispense with reasons for the tribunal’s award shall be considered an agreement to exclude the court’s jurisdiction under this section. (2)An appeal shall not be brought under this section except— (a)with the agreement of all the other parties to the proceedings, or (b)with the leave of the court. The right to appeal is also subject to the restrictions in section 70(2) and (3). (3)Leave to appeal shall be given only if the court is satisfied— (a)that the determination of the question will substantially affect the rights of one or more of the parties, (b)that the question is one which the tribunal was asked to determine, (c)that, on the basis of the findings of fact in the award— (i)the decision of the tribunal on the question is obviously wrong, or (ii)the question is one of general public importance and the decision of the tribunal is at least open to serious doubt, and (d)that, despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the court to determine the question.
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Open this page in the original PDF76 (4)An application for leave to appeal under this section shall identify the question of law to be determined and state the grounds on which it is alleged that leave to appeal should be granted. (5)The court shall determine an application for leave to appeal under this section without a hearing unless it appears to the court that a hearing is required. (6)The leave of the court is required for any appeal from a decision of the court under this section to grant or refuse leave to appeal. (7)On an appeal under this section the court may by order— (a)confirm the award, (b) vary the award, (c)remit the award to the tribunal, in whole or in part, for reconsideration in the light of the court’s determination, or (d)set aside the award in whole or in part. The court shall not exercise its power to set aside an award, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the tribunal for reconsideration. (8) The decision of the court on an appeal under this section shall be treated as a judgment of the court for the purposes of a further appeal. But no such appeal lies without the leave of the court which shall not be given unless the court considers that the question is one of general importance or is one which for some other special reason should be considered by the Court of Appeal.” Relevant provisions of the Singapore Arbitration Act, 2001:- “No judicial review of award 47. The Court does not have jurisdiction to confirm, vary, set aside or remit an award on an arbitration agreement except where so provided in this Act.
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Open this page in the original PDF77 Appeal against award (8) On an appeal under this section, the Court may by order — (a) confirm the award; (b) vary the award; (c) remit the award to the arbitral tribunal, in whole or in part, for reconsideration in the light of the Court’s determination; or (d) set aside the award in whole or in part. (9) The Court is not to exercise its power to set aside an award, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the arbitral tribunal for reconsideration.” (Emphasis supplied) 94. The Act of 1940 in our country had an express power to modify. When the A&C Act was enacted , for reasons best known to the legislature, the power was not incorporated. Dr. T.K. Viswanathan Committee which examined reforms to the A&C Act has recommended for the incorporation of the provision in its report but as yet the legislature has not enacted a provision to modify. The relevant portions are extracted herein below – “3.25.8 The Committee has examined the proposal to permit courts to modify or vary an award, while setting aside such an award in exercise of its section 34 jurisdiction. This is proposed to be achieved by amending sub-section (2) and sub-section (2A) of section 34. 3.25.9 Such orders must, however, be made only in exceptional circumstances to meet the ends of justice. This will enable a section 34 Court to provide a quietus to the matter, so as to avoid further
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Open this page in the original PDF78 litigation. It is proposed to substitute the words “set aside by the Court” with the words “set aside in whole or in part by the Court” and add a proviso for partly varying the award in exceptional circumstances. 3.25.10 The Committee feels that the pr oposed amendment will provide relief to parties in situations where the findings in the arbitral award can be varied, having regard to the arbitral records. Needless to state, any such modification to the arbitral award can only be ordered by the Court if the strict parameters for setting aside the arbitral award under section 34 of the Act are made out, and there is no need to adduce fresh evidence. 3.25.11 An express provision incorporated in the Act is likely to streamline the process, saving time, effort, and resources for all the parties involved. Thus, granting the Courts the authority to modify awards within well -defined limits would help strike a balance between preserving finality of the arbitral process and ensuring fairness. 3.25.12 The Committee recommends amendment to sub-sections (2) and (2A) of section 34 to substitute the words “set aside by the Court”, with the words “set aside in whole or in part by the Court” and to add the following proviso, namely “Provided that in c ases where the Court sets aside the arbitral award in whole or in part, the Court may make consequential orders varying the award only in exceptional circumstances to meet the ends of justice.”. Recommendation It is proposed to amend section 34- (i) to insert a new sub section(1A) to provide that an application for setting aside an award under sub-section (1) shall be accompanied by the original award and where the parties have not been given the original award, they may file a copy of the award s igned by the arbitrators; (ii) in sub-section (2) - (a) for the words “An arbitral award may be set aside by the Court”, the words “An arbitral award may be set aside in whole or in part by the Court” be substituted; (b) after clause (b) and before Explana tion 1 the following proviso shall be inserted, namely:- Provided that in cases where the Court sets aside the arbitral award in whole or in part, the Court may make consequential orders
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Open this page in the original PDF79 varying the award only in exceptional circumstances to meet the ends of justice” (iii) in sub-section (2-A)- (a) for the words “An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the court”, the words “An arbitral award arising out of arbitrations other than internat ional commercial arbitrations, may also be set aside in whole or in part by the Court” shall be substituted. (b) after the proviso the following proviso shall be inserted namely: - “Provided further that in cases where the Court sets aside the arbitral award in whole or in part, the Court may make consequential orders varying the award only in exceptional circumstances to meet the ends of justice” 95. In a 2006 judgment of this Court in Mcdermott International Inc. (supra), itself this Court expressly observed that there is no power in a Section 34 Court to modify. The relevant passage from Mcdermott (supra) reads as follows: “52. The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. So, the scheme of the provision aims at keeping the supervisory role of th e court at minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the court's jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it.” (Emphasis supplied)
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Open this page in the original PDF80 96. Notwithstanding the fact that there have been three occasions for the Parliament to amend the A&C Act in 2015, 2019 and 2021, the power to modify has not been incorporated. Hence, for the Court to read the power would be completely untenable and the submissions on that score are rejected. LEGAL MAXIMS – TO BE DEPLOYED AFTER ASCERTAINING CONTEXT: 97. It is apt to observe herein that mechanical deployment of the legal maxims unless they apply on all fours to a case should be discouraged. Legal maxims, no doubt, are very useful tools but its application has to be with great caution, for in law things are not cut and dried and nicely weighed in all situations. There will be shades of grey and sometimes legal maxims if deployed without adequate attention may lead t o pitfalls. Justice Benjamin Cardozo, in Berkey Vs. Third Avenue Railway Co., 244 N.Y, 84, speaking of metaphors in law had the following caution to administer:- “Metaphors in law are to be narrowly watched, for starting as devices to liberate thought, they end often by enslaving it.” What Cardozo J. said of metaphors is equally true of legal maxims.
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Open this page in the original PDF81 THE ARGUMENT ON INHERENT POWERS: - 98. Parties in support of the power to modify sought to seek refuge in Section 151 of the Code of Civil Procedure which saved the inherent powers of the Court. Section 151 CPC reads as under: “151. Saving of inherent powers of Court.—Nothing in this Code shall be deemed to limit or otherwise affect the inherent power of the Court to make such orders as may be necessary for the ends of justice or to prevent abuse of the process of the Court.” 99. The contention was that Section 34 recourse is taken in the normal Civil Courts as defined in Section 2(e) of the A&C Act and those Courts being Civil Courts of Original jurisdiction or the High Courts the inherent power vested in them should be available to modify awards. There is no merit in this submission. As the discussion hereinabove would reveal Section 34 is couched in clear terms and the parameters for setting aside the award are clearly laid out in mandatory terms. Could inherent powers under CPC be exercised in a manner t o be in conflict with the expressly provided powers by the legislature? The answer has to be an emphatic ‘No’. Almost six decades ago , a four- Judge Bench of this Court in Manohar Lal Chopra Vs. Rai Bahadur Rao Raja Seth Hiralal, 1961 SCC OnLine SC 17 , speaking through
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Open this page in the original PDF82 Raghubar Dayal J. following the holding in Padam Sen Vs. State of Uttar Pradesh , (1961) 1 SCR 884, made the following telling observations: “21. A similar question about the powers of the Court to issue a commission in the exercise of its powers under s. 151 of the Code in circumstances not covered by s. 75 and Order XXVI, arose in Padam Sen v. The State of Uttar Pradesh (1) and this Court held that the Court can issue a commission in such circumstances. It observed at page 887 thus: "The inherent powers of the Court are in addition to the powers specifically conferred on the Court by the Code. They are complementary to those powers and therefore it must be held that the Court is free to exercise them for the purpose mentioned in s. 15 1 of the Code when the exercise of those powers is not in any way in conflict with what has been expressly provided in the Code or against the intentions of the Legislature." These observations clearly mean that the inherent powers are not in any way controlled by the provisions of the Code as has been specifically stated in s. 151 itself. But those powers are not to be exercised when their exercise may be in conflict with what had been expressly provided in the Code or against the intentions of the Legislature. This restriction, for practical purposes, on the exercise of these powers is not because these powers are controlled by the provisions of the Code but because it should be presumed that the procedure specifically provided by the Legislature for orders in certain circumstances is dictated by the interests of justices.” (Emphasis supplied) Nothing more needs to be said on this aspect of the matter.
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Open this page in the original PDF83 DOCTRINE OF IMPLIED POWERS:- 100. Undeterred, an attempt was made to fall back upon the doctrine of implied powers to somehow vest in Section 34 Court a power to modify the award. It is well settled that if a statu te conferring a power to be exercised on certain conditions, the conditions prescribed are normally held to be mandatory and a power inconsistent with those conditions is impliedly negatived. No doubt, there is a principle in law that a Court must as far as possible adopt a construction which effectuates the legislative intent and purpose and that an express grant of a statutory power carries wi th it by necessary implication the authority to use all reasonable means to make such grant effective. 101. In Savitri Vs. Govind Singh Rawat, (1985) 4 SCC 337, Justice E. S. Venkataramiah (as the learned Chief Justice then was) set out the principle thus:- “Every court must be deemed to possess by necessary intendment all such powers as are necessary to make its orders effective. This principle is embodied in the maxim "ubi aliquid conceditur, conceditur et id sine quo res ipsa esse non potest" (Where anythi ng is conceded, there is conceded also anything without which the thing itself cannot exist). [Vide Earl Jowitt's Dictionary of English Law, 1959 Edn., p. 1797.] Whenever anything is required to be done by law and it is found impossible to do that thing un less something
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Open this page in the original PDF84 not authorised in express terms be also done then that something else will be supplied by necessary intendment. Such a construction though it may not always be admissible in the present case however would advance the object of the legislation under consideration. A contrary view is likely to result in grave hardship to the applicant, who may have no means passed to subsist until the final order is passed. (Emphasis supplied) 102. As is clear, the doctrine of implied powers is invoked to effectuate the final power. Where it is impossible to effectuate the final power unless something not authorized in express terms be also done, in such an event , the power will be supplied by necessary intendment as an exception. The exceptional situation is to advance the object of the legislation under consideration and to avoid grave hardship. 103. This doctrine has no application to the question under consideration herein. The objects of the statute are very clear and have been elucidated hereinabove. The difference between the normal judicial procedure and the arbitration process contractually agreed upon with all its qualitative differences is also well established. No implied power is needed to e ffectuate the final power provided under Section 34 and, as set out earlier, there is no impediment to exercise the final power. In the teeth of the legislature expressly contemplating fresh
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Open this page in the original PDF85 arbitrations and other legal proceedings under Section 43(4), it cannot be said on some conjectured assumptions that hardship will cause to the parties. PARTY AUTONOMY:- 104. It is time now to discuss the concept of party autonomy, which is the underlying theme of the arbitration process. Gary B . Born, in his commentary “International Commercial Arbitration”, South Asian Reprint Edition published by Wolters Kluwer discussed the concept of party autonomy in the following terms. “A further objective, and perceived advantage, of international commercial arbitration is the effort to maximize party autonomy and provide procedural flexibility. As discussed below, leading international arbitration conventions and national laws accord parties broad autonomy to agree upon the substantive laws and procedures applicable to "their" arbitrations. This emphasis on the importance of party autonomy parallels applications of the doctrine throughout the field of contemporary private international law, and commercial law more generally, but has particular significance in the field of international commercial arbitration. One of the principal reasons that this procedural autonomy is granted is to enable the parties and arbitrators to dispense with the technical formalities and procedures of national court proceedings and instead fashion procedures tailored to particular dis putes. Thus, technically - complex disputes can include specialized procedures for testing and presenting expert evidence, or "fast track" procedures can be adopted where time is of the essence, or tailor -made dispute resolution mechanisms can be adopted in particular commercial markets. More
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Open this page in the original PDF86 generally, parties are typically free to agree upon the existence and scope of discovery or disclosure, the modes for presentation of fact and expert evidence, the length of the hearing, the timetable and other matters. The parties' ability to adopt (or, f ailing agreement, the tribunal's power to prescribe) flexible procedures is a central attraction of international arbitration - again, as evidenced by empirical research and commentary.” (Emphasis Supplied) 105. As would be clear , party autonomy enables parties to dispense with technical formalities and procedures of National Court proceedings, contractually. They agree to abide by the terms of the statute regulating arbitration which they perceive as advantageous. Having done so, they cannot be allowed to cry afoul, when it does not suit their need s and clamor for certain procedures which are legislatively not sanctioned in the arbitration process and are available in the normal machinery of the Courts. 106. Further, as held earlier , a Section 34 Court cannot be invited to enter into the merits. The limited recourse available is the one provided under Section 34 and when the Section is plain and clear the historical, textual and the contextual interpretation does not permit the reading in of any implied power to expand the scope of Section 34.
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Open this page in the original PDF87 107. The Judgment in Centrotrade Minerals & Metal Inc. vs. Hindustan Copper Ltd. , (2017) 2 SCC 228 cited by learned Senior Counsel, Mr. Darius Khambata that it is not always that acts not mentioned in the statute are impermissible has no application herein. In that case , this Court was concerned with not any Statutory Court procedure but with an appeal procedure mutually agreed upon by the parties in a contract, which the Court sanctioned inter alia referring to principles of party autonomy. CAN ARTICLE 142 POWERS BE EXERCISED TO MODIFY? 108. Parties have referred to cases where this Court in some cases exercised powers under Article 142 in modifying the award particularly the percentage of interest awarded by the arbitrators. The aspect of award of interest is discussed hereinbelow, while dealing with Section 34(4). In this segment of the judgment the only question considered is whether power under Article 142 of the Constitution would be exercised by this Court to modify in any manner an arbitral award when matters come up after initiation of proceedings under Section 34.
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Open this page in the original PDF88 109. A Constitution Bench of this Court in Supreme Court Bar Association vs. Union of India and Another, (1998) 4 SCC 409, while delving on the scope of this Court’s power under Article 142, held that the power under Article 142 cannot be used to “supplant ” substantive law applicable to the case or cause under consideration of the Court. It has been held that express statutory provisions cannot be ignored and Article 142 cannot be used to achieve indirectly what cannot be achieved directly. It has been held that to balance the equities between conflicting claims of the litigating parties “ironing out the creases” in a cause or matter before it could be done but, in no circumstance will substantive statutory provision dealing with the subject matter be given a go bye. It has been clarified that though the powers of this Court cannot be controlled by any statutory provisions, however, when the exercise of power comes directly in conflict with what has been expressly provided in a statute, the power under Article 142 is not to be exercised. 110. We need to do nothing more than to extract Para 47 and 48 of the judgment in Supreme Court Bar Association (supra).
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Open this page in the original PDF89 “47. “The plenary powers of this Court under Article 142 of the Constitution are inherent in the Court and are complementary to those powers which are specifically conferred on the Court by various statutes though are not limited by those statutes. These powers also exist independent of the statutes with a view to do complete justice between the parties. These powers are of very wide amplitude and are in the nature of supplementary powers. This power exists as a separate and independent basis of jurisdictio n apart from the statutes. It stands upon the foundation and the basis for its exercise may be put on a different and perhaps even wider footing, to prevent injustice in the process of litigation and to do complete justice between the parties. This plenary jurisdiction is, thus, the residual source of power which this Court may draw upon as necessary whenever it is just and equitable to do so and in particular to ensure the observance of the due process of law, to do complete justice between the parties, while administering justice according to law. There is no doubt that it is an indispensable adjunct to all other powers and is free from the restraint of jurisdiction and operates as a valuable weapon in the hands of the Court to prevent “clogging or obstruction of the stream of justice”. It, however, needs to be remembered that the powers conferred on the Court by Article 142 being curative in nature cannot be construed as powers which authorise the Court to ignore the substantive rights of a litigant while dealing with a cause pending before it. This power cannot be used to “supplant” substantive law applicable to the case or cause under consideration of the Court. Article 142, even with the width of its amplitude, cannot be used to build a new edifice where none existed earlier, by ignoring expre ss statutory provisions dealing with a subject and thereby to achieve something indirectly which cannot be achieved directly. Punishing a contemner advocate, while dealing with a contempt of court case by suspending his licence to practice, a power otherwise statutorily available only to the Bar Council of India, on the ground that the contemner is also an advocate, is, therefore, not permissible in exercise of the jurisdiction under Article 142. The construction of Article 142 must be functionally informed by the salutary purposes of the article, viz., to do complete justice between the parties. It
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Open this page in the original PDF90 cannot be otherwise. As already noticed in a case of contempt of court, the contemner and the court cannot be said to be litigating parties. 48. “The Supreme Court in exercise of its jurisdiction under Article 142 has the power to make such order as is necessary for doing complete justice “between the parties in any cause or matter pending before it”. The very nature of the power must lead the Court to set limits for itself within which to exercise those powers and ordinarily it cannot disregard a statutory provision governing a subject, except perhaps to balance the equities between the conflicting cla ims of the litigating parties by “ironing o ut the creases” in a cause or matter before it. Indeed this Court is not a court of restricted jurisdiction of only dispute -settling. It is well recognised and established that this Court has always been a law - maker and its role travels beyond merely dispute -settling. It is a “problem-solver in the nebulous areas” but the substantive statutory provisions dealing with the subject-matter of a given case cannot be altogether ignored by this Court, while making an order under Article 142. Indeed, these constit utional powers cannot, in any way, be controlled by any statutory provisions but at the same time these powers are not meant to be exercised when their exercise may come directly in conflict with what has been expressly provided for in a statute dealing expressly with the subject”. 111. Recently, a Constitution Bench of this Court , while sounding a note of caution on the exercise of powers under Article 142 in Shilpa Sailesh vs. Varun Sreenivasan, (2023) 14 SCC 231, had the following to say. “19. Given the aforesaid background and judgments of this Court, the plenary and conscientious power conferred on this Court under Article 142(1) of the Constitution of India, seemingly unhindered, is tempered or bounded by restraint, which must be exercised based on fundamental considerations of general and specific public policy. Fundamental general conditions
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Open this page in the original PDF91 of public policy refer to the fundamental rights, secularism, federalism, and other basic features of the Constitution of India. Specific public policy should be understood as some express pre- eminent prohibition in any substantive law, and not stipulations and requirements to a particular statutory scheme. It should not contravene a fundamental and non -derogable principle at the core of the statute. Even in the strictest sense, it was never doubted or debated that his Court is empowered under Article 142(1 ) of the Constitution of India to do “complete justice” without being bound by the relevant provisions of procedure, if it is satisfied that the departure from the said procedure is necessary to do “complete justice” between the parties.” 112. A careful reading of the above paragraph reveals that the power under Article 142 will not be exercised if it would contravene a fundamental and non -derogable principle at the core of a statute. Further, it has been held that the power under Article 142 is to be tempered or bounded by restraint based on fundamental considerations of general and specific public policy. Amplifying further , it was held that specific public policy should be understood as some express pre - eminent prohibition in any substantive law and not mere stipulations and requirements to a particular statutory scheme. 113. From the reasons stated in the earlier part of the judgment , it is crystal clear that Courts exercising powers under Section 34, which will include the appellate hierarchy cannot change, vary, or qualify “arbitrary awards” as it strikes at the very core and root of the ethos of
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Open this page in the original PDF92 the arbitration process. Such an exercise of power will derogate from the core aspect s of the A&C Act and will breach a pre -eminent prohibition in the said Act. 114. Apart from the above, if power is reserved for this Court to modify, at the fag end of the litigation, contracting parties will have grave uncertainties as they would not be sure of how the matter will play out when it reaches the apex Court. It will be a ntithetical to arbitration as an alternative and efficacious mode of dispute resolution. 115. Hence, in matters arising out of Section 34 of the A&C Act, this Court will refrain from exercising its power under Article 142, in view of the law laid down in SCBA (supra) and Shilpa Shailesh(supra). LAYING DOWN GUARDRAILS FOR SECTION 34 – IS IT AN OPTION FOR THIS COURT? 116. Parties aspiring for the power to modify to be vested in Section 34 contend that any possible abuse of power to modify, if vested in a Court hearing a Section 34 application, can be checked by prescription of guardrails. Learned counsels have contended that any modification or variation which inevitably flows fro m the Courts determination of
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Open this page in the original PDF93 the question of law should be permitted. Equally , learned counsels contended that modification should be permitted to align the award with the contractual provision. Counsels have referred to the theory of useless formality, where in certain scenarios only one conclusion is possible and implore this Court to lay down parameters for modification. 117. The contention is without merit . As has been rightly contended by the learned Solicitor General, the situation here is not a situation akin to what arose in Vishaka (supra). In Vishaka (supra) noticing the absence of any enacted law to provide for effective enforcement of basic human rights of gender equality and guarantee against sexual harassment and abuse at workplaces and in exercise of powers under Article 32 for enforcement of fundamental rights, this Court, pending enactment of a statute , laid down guidelines to prevent sexual harassment at the workplace. The interpretation of the A&C Act is not akin to the situation that obtained in Vishaka (supra) and other cases where recognising certain positive obligation s in the State, this Court filled the gap by setting out guidelines. Further, as rightly contended by Mr. Gourab Banerji, learned Senior Counsel , there are no judicially
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Open this page in the original PDF94 manageable standards and this Court cannot venture into formulating guidelines as myriad situations will arise when Section 34 applications are heard before the appropriate Courts. Further , as rightly contended by the learned Senior Counsel, it would amount to judicial legislation which we are loathe to do. Learned Counsel for the parties, in support of their plea to lay down guardrails, referred to a judgment of this Court in Oil and Natural Gas Corporation Limited vs. Afcons Gunanusa JV , 2022 SCC OnLine S C 1122 . We have carefully examined the judgment. That case concerned the rights of arbitrator(s) to unilaterally fix fees for their sittings in arbitration. Negating the plea , the Court ruled that there was no sanction for the same in terms of the A&C Act. The guidelines for ad-hoc arbitrations were only on the modalities for arriving at the consensus and there was no deviation from the statute. That case has no relevance here. SUBMISSIONS BASED ON PECULIARITIES IN STATUTORY ARBITRATIONS:- 118. Submissions were made that if power to modify is not recognised in Section 34, enormous hardship will be caused in cases where the A&C Act has been made applicable to some statutes. Example of the
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Open this page in the original PDF95 National Highways Authority Act was given. It was contended that against the order awarding compensation for acquisition by the competent authority, reference is made to the arbitrator appointed by the Central Government and against his award only a recour se to Section 34 is available. The contention was that, these are compulsory arbitrations and not consensual arbitrations. Learned Senior Counsel Mr. Gourab Banerji, responded to this submission by arguing that the interpretation to the A&C Act has to be u niform and if there are any maladies in the other statu tes by which arbitrators are appointed , the solution will have to be found by addressing the grievances prevalent in those statutes and not by truncating the interpretation of the A&C Act. 119. By no stretch of imagination can we bifurcate the interpretation of Section 34 and offer one set of interpretations for commercial arbitrations and another for statutory arbitrations to which the A&C Act is applicable. Hence, the submission for a differential interpretation of the A&C Act for some statutory arbitrations alone is rejected. 120. Equally, for this reason, the submissions of Mr. Darius Khambata, learned Senior Counsel that power to modify be at least restricted to
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Open this page in the original PDF96 domestic arbitrations where patent illegality is found in the award cannot be accepted. There is neither any scope nor any legal basis for such a course of action to be adopted. COMPLICATIONS DUE TO MODIFICATIONS IN NEW YORK CONVENTION AWARDS:- 121. Mr. Gourab Banerji, learned Senior Counsel and Mr. Gaurav Pachnanda, learned Senior Counsel drew the attention of this Court to certain specific statutory provisions obtaining in the UK, Singapore, New Zealand and Kenya. This was to drive home the point that not only were there express provisions to modify awards in those statutes by the Court hearing the setting aside application, there are also express provisions recognising that the award will hitherto be read in the modified form. Learned Senior Counsels contended that in the absence of similar statutory regime serious complications will arise in enforcement of New York Convention awards and will constitute a serious threat to India sea ted arbitrations under the New York Conventions.
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Open this page in the original PDF97 122. In particular, attention was drawn to Section 71 of the UK English Arbitration Act which we deem it appropriate to set out hereinbelow:- “71. Challenge or appeal: effect of order of court. (1) The following provisions have effect where the court makes an order under section 67, 68 or 69 with respect to an award. (2) Where the award is varied, the variation has effect as part of the tribunal’s award. (3) Where the award is remitted to the tribunal, in whole or in part, for reconsideration, the tribunal shall make a fresh award in respect of the matters remitted within three months of the date of the order for remission or such longer or shorter period as the court may direct. (4) Where the award is set aside or declared to be of no effect, in whole or in part, the court may also order that any provision that an award is a condition precedent to the bringing of legal proceedings in respect of a matter to which the arbitration agreement applies, is of no effect as regards the subject matter of the award or, as the case may be, the relevant part of the award.” (Emphasis supplied) 123. It will be noticed that in the United Kingdom and certain other countries, clear statutory provisions exist stating that where the award is varied the variation has the effect as part of the Tribunal’s award. It will be noticed that to give effect to the New York Convention, like the A&C Act has provisions in Part II , several other countries have also adopted statutory provisions for recognition and enforcement of foreign awards. Learned Senior Counsels submit that if the award is
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Open this page in the original PDF98 modified by the Section 34 Court in India, any enforcement brought abroad will run into complications as objections will be taken that what is sought to be enforced is not the award but the judgment of the Court. There is merit in the submission and this is one another reason why these matters are best left for the legislature to be comprehensively addressed. Enforcement of foreign judgements and enforcement of foreign awards are distinct legal concepts and hence, the argument cannot be characterized as not convincing jurisprudentially or in principle. 124. Learned Senior Counsel, Mr. Gaurav Pachnanda, pressed the argument that when a Section 34 Court passes an order there is no application of the doctrine of merger. This Court in Kunhayammed & Others Vs. State of Kerala and Another , (2000) 6 SCC 359, has discussed the doctrine of merger and held that doctrine of merger is not a doctrine of universal or unlimited application. 125. Considering the holding in this judgment that there is no power under Section 34 court to modify , in the absence of a statutory enablement, it is not considered necessary to go into the aspect of the applicability of the Doctrine of merger.
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Open this page in the original PDF99 IS HAKEEM (SUPRA) PER INCURIAM? 126. In National Insurance Co. Ltd. Vs. Pranay Sethi and Others, (2017) 16 SCC 680, a Constitution Bench of this Court held as follows: a decision or judgment can be per incuriam if any provision in a statute, rule or regulation was not brought to the notice of the court. (Para 28) It was also held that a decision or judgment can be per incuriam if it is not possible to reconcile its ratio with that of a previously pronounced judgement of a co-equal or a larger bench. We find that the judgement in Hakeem (supra) has rightly interpreted the provisions of A&C Act and is in no manner conflict ing with any ratio of a co -equal or larger Bench. In the earlier parts of the judgement, we have distinguished the other judgements referred to in the referral order. Hakeem (supra) itself distinguished certain other earlier pronouncements. Hakeem (supra ) will now be read in accordance with the ratio laid down in the present judgment. 127. Reliance was placed on Oil and Natural Gas Corporation Ltd. vs. Western Geco International Ltd. , (2014) 9 SCC 263, to contend that Hakeem (supra) did not consider the said judgment. It was argued that power to modify in Section 34 Court was recognised in Western
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Open this page in the original PDF100 Geco (supra). A close reading of Para 40 of Western Geco (Supra) , indicates that though the word ‘modified’ occurs in the judgment, it was clearly in the context of severability, an aspect Hakeem (supra) was not concerned with. Hence, it cannot be said that Hakeem (supra) is per incuriam for not noticing Western Geco (supra) . The other judgments prior to Hakeem (supra) have not discuss ed the aspect whether power to modify exists in a Section 34 Court. Hence, we reject the argument of parties that Hakeem (supra) is per incuriam. Hakeem (supra) insofar as it held that a Section 34 Court has no power to modify the award, is not per incuriam. POWERS UNDER SECTION 33 AND 34 (4) OF THE A&C ACT – THE ‘SAFETY V ALVES’:- 128. As to what errors could be corrected and how it could be done has been first provided for in Section 33 of the A&C Act. Section 33 deals with correction and interpretation of award and making of additional award by the arbitrator. The provision has already been discussed in the earlier part of this judgment. Section 33(i)(a) deals with correction of computation error, clerical or typographical error or any other error of a similar nature occurring in the award. This provision is akin to Section
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Open this page in the original PDF101 15 (b) and (c) of the 1940 Act . Power is also there in the arbitral Tribunal to Suo Moto correct these errors. Even in the Code of Civil Procedure, Section 152 provides for a similar power for the Courts. Section 152 is set out hereinbelow: “152. Amendment of judgments, decrees or orders. —Clerical or arithmetical mistakes in judgments, decrees or orders or errors arising therein from any accidental slip or omission may at any time be corrected by the Court either of its own motion or on the application of any of the parties.” 129. Even if any claim is not adjudicated, parties could move to arbitral Tribunal for the same and an additional award can be made. 130. Now turning to Section 34(4), it reads as follows:- “34.(4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to res ume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.” Section 34(4) occurs in sequence after 34(1), 34(2), 34(2A), 34(3). After recourse is made under Section 34(1) and the Court has applied the rigors of 34(1), (2), (2A), the Court would be fairly clear as to whether any ground has been made out for setting aside the arbitral
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Open this page in the original PDF102 award or not. At th is stage, Section 34(4) comes into the picture and provides that:- (i) On receipt of an application under sub-section (1), the Court may; (ii) Where it is appropriate and it is so requested by a party; (iii) Adjourn the proceedings for a period of time determined by it; (iv) In order to give the arbitral Tribunal an opportunity; (v) To resume the arbitral proceedings or to take such other action as in the opinion of arbitral Tribunal will eliminate the grounds for setting aside the arbitral award. 131. It must be noticed that all that the Section mentions is a request being made and there is no prescription that the request should be in writing. In this regard, the holding in Kinnari Mullick & Anr. vs. Ghanshyam Das Damani , (2018) 11 SCC 328 to the effect that discretion available under Section 34(4) to give an opportunity to the arbitrator can be exercised only upon a written application made in that behalf by a party is not the correct legal position. To that extent Kinnari Mullick (supra) does not lay down the correct law.
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Open this page in the original PDF103 132. It cannot be disputed that ordinarily the stage of Section 34(4) would arise when the Court has put the award through the test of fire under the prior clauses of Section 34 and entertains the opinion that there are grounds for setting aside the arbitral award. At this stage, in given cases where it considers appropriate and a request is made by a party even orally, the Court may adjourn the proceeding for a period of time in order to give the arbitral Tribunal an opportunity to resume the arbitral proceeding or to take such other action as in the opinion of the arbitral Tribunal will eliminate the grounds for setting aside the award. The Court shall in the order indicate its reasons for entertaining the opinion and as to why it considers that there are grounds for setting aside the arbitral award. Ordinarily, it will be the award holder, who will be the respondent in the Section 34 application, who will be interested in sustaining the award. The very fact that he is stoutly defending the award is a clear indication that he wants the award to be sustained and grounds, if any, which exist to set aside the award are eliminated. The grounds may be of different hues. 133. To illustrate, Section 31 which speaks of form and contents of the arbitral award has the following prescription: - (i) The award shall be
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Open this page in the original PDF104 signed by the members of the Tribunal. (ii) The award shall state the reasons. (iii) The award shall state the date and place of arbitration. (iv) The cost s of the arbitration to be fixed in accordance with Section 31(A). (v) The award may deal with disputes not contemplated or falling within the terms of the submissions to arbitration. (vi) The award may have decision on matters beyond the scope of submissio ns of arbitration . I n a given case any of the above aspects could be attracted. 134. The above are only illustrative aspects. This Court in I-Pay Clearing Services (P) Ltd. v. ICICI Bank Ltd., (2022) 3 SCC 121 quoted the decisions in Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd., (2019) 20 SCC 1 and Som Datt Builders Ltd. v. State of Kerala, (2009) 10 SCC 259 and held as follows:- “34. In the judgment in Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd. [Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd., (2019) 20 SCC 1] , it was a case where there was no inquiry under Section 34(4) of the Act and in the said case, this Court has held that the legislative intention behind Section 34(4) of the Act, is to make the award enforceable, after giving an opportunity to the Tribunal to undo the curable defects. It was not a case of patent illegality in the award, but deficiency in the awa rd due to lack of reasoning for a finding which was already recorded in the award. In the very same case, it is also clearly held that when there is a complete perversity
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Open this page in the original PDF105 in the reasoning, then the same is a ground to challenge the award under Section 34(1) of the Act. 35.Som Datt Builders Ltd. v. State of Kerala [Som Datt Builders Ltd. v. State of Kerala, (2009) 10 SCC 259 : (2009) 4 SCC (Civ) 153] is also a case where no reasons are given for the finding already recorded in the award, as such, this Court held that in view of Section 34(4) of the Act, the High Court [State of Kerala v. Somdatt Builders Ltd. Arbitration Appeal No. 16 of 2005, order dated 3-6-2005 (Ker)] ought to have given the Arbitral Tribunal an opportunity to give reasons.” In para 37 to 43 in I-Pay (supra), this Court held as under:- “37. In our view, Section 34(4) of the Act can be resorted to record reasons on the finding already given in the award or to fill up the gaps in the reasoning of the award. There is a difference between “finding” and “reasons” as pointed out by the learned Senior Counsel appearing for the respondent in the judgment in ITO v. Murlidhar Bhagwan Das [ITO v. Murlidhar Bhagwan Das, AIR 1965 SC 342] . It is clear from the aforesaid judgment that “finding is a decision on an issue”. Further, in the judgment in J. Ashoka v. University of Agricultural Sciences [J. Ashoka v. University of Agricultural Sciences, (2017) 2 SCC 609 : (2017) 1 SCC (L&S) 517] , this Court has held that “reasons are the links between the materials on which certain conclusions are based and the actual conclusions”. 38. In absence of any finding on Point 1, as pleaded by the respondent and further, it is their case that relevant material produced before the arbitrator to prove “accord and satisfaction” between the parties, is not considered, and the same amounts to pa tent illegality, such aspects are to be considered by the Court itself. It cannot be said that it is a case where additional reasons are to be given or gaps in the reasoning, in absence of a finding on Point 1 viz. “whether the contract was illegally and abruptly terminated by the respondent?”. 39. Further, Section 34(4) of the Act itself makes it clear that it is the discretion vested with the Court for remitting the matter to
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Open this page in the original PDF106 Arbitral Tribunal to give an opportunity to resume the proceedings or not. The words “where it is appropriate” itself indicate that it is the discretion to be exercised by the Court, to remit the matter when requested by a party. When application is filed under Section 34(4) of the Act, the same is to be considered keeping in mind the grounds raised in the application under Section 34(1) of the Act by the party, who has questioned the award of the Arbitral Tribunal and the grounds raised in the application filed under Section 34(4) of the Act and the reply thereto. 40. Merely because an application is filed under Section 34(4) of the Act by a party, it is not always obligatory on the part of the Court to remit the matter to Arbitral Tribunal. The discretionary power conferred under Section 34(4) of the Act, is to be exercised where there is inadequate reasoning or to fill up the gaps in the reasoning, in support of the findings which are already recorded in the award. 41. Under the guise of additional reasons and filling up the gaps in the reasoning, no award can be remitted to the arbitrator, where there are no findings on the contentious issues in the award. If there are no findings on the contentious issues in the award or if any findings are recorded ignoring the material evidence on record, the same are acceptable grounds for setting aside the award itself. Under the guise of either additional reasons or filling up the gaps in the reasoning, the power conferred on the Court cannot be relegated to the arbitrator. In absence of any finding on contentious issue, no amount of reasons can cure the defect in the award. 42. A harmonious reading of Sections 31, 34(1), 34(2-A) and 34(4) of the Arbitration and Conciliation Act, 1996, make it clear that in appropriate cases, on the request made by a party, Court can give an opportunity to the arbitrator to resume the arbitral proceedings for giving reasons or to fill up the gaps in the reasoning in support of a finding, which is already rendered in the award. But at the same time, when it prima facie appears that there is a patent illegality in the award itself, by not recordi ng a finding on a contentious issue, in such cases, Court may not accede to the request of a party for giving an opportunity to the Arbitral Tribunal to resume the arbitral proceedings.
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Open this page in the original PDF107 43. Further, as rightly contended by the learned counsel appearing for the respondent, that on the plea of “accord and satisfaction” on further consideration of evidence, which is ignored earlier, even if the Arbitral Tribunal wants to consciously hold tha t there was “accord and satisfaction” between the parties, it cannot do so by altering the award itself, which he has already passed.” (Emphasis supplied) It is clear from the above that the power to remit under Section 34(4) can be exercised for undoing the curable defects. AWARD OF INTEREST- USE OF SECTION 34(4) POWER:- 135. Equally, in a given case where the Court feels that interest has not been awarded or interest beyond the terms of the agreement have been awarded or excessive interest have been awarded or abysmally low interest is awarded, the Court under Section 34 canno t modify the interest. The course of action to be adopted would be to record reasons in the order and remit the matter to the arbitrator for the arbitral Tribunal to make the necessary course correction. It is true that if only on account of interest if aw ards are to be set aside, the whole exercise will have to be undertaken again. If the Court in a Section 34 proceeding (which will include the courts in that appellate hierarchy) is of the opinion that interest a spect needs a relook, the correct course of action to be adopted is to remit the matter under Section 34(4) for
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Open this page in the original PDF108 the purpose of enabling the arbitrator to take a call. If thereafter again, when the matter comes back to the Court, the Court feels that the grounds for setting aside the award are not eliminated, it will have no choice except to set aside the award. SUO MOTO EXERCISE OF THE SECTION 34(4) POWER:- 136. Section 34(4) is the safety valve provided in the A&C Act by the legislature to prevent awards being set aside and to offer a chance to the arbitral Tribunal to adopt a course correction. In this regard, considering the purpose for which Section 34(4) was intended, and since the respondent is defending the award and attempting to sustain it, if the Court deems it appropriate after arriving at an opinion with reasons recorded in writing, that there exists ground for setting aside the arbitral award the Court is even Suo Moto empowered to invoke powers under Section 34(4) in accordance with the parameters set out hereinabove. There is nothing in Section 34(4) which detracts from such an interpretation. There will be on record an application under Section 34(1) by the applicant to set aside the award and the award holder invariably is stoutly defending the award and is straining every nerve to uphold the same. After the court has passed through the
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Open this page in the original PDF109 motions of Section 34(2)(a) (b) and 2 A, it would have arrived at an opinion as to whether the award is susceptible or whether it is sustainable. If it arrives at an opinion that the award is vulnerable and the threat of setting aside is looming large and if within the parameters laid down in Section 34(4) the grounds for setting aside can be eliminated - the case is appropriate and time is ripe for exercise of power under Section 34(4). The need for an application oral or in writing is really directory and does not militate against the exercise of Suo Moto powers in given cases by the Court. COMPUTATION, CLERICAL AND TYPOGRAPHICAL ERROR OR ANY OTHER ERROR OF SIMILAR NATURE - ACTUS CURIAE NEMINEM GRAVABIT PRINCIPLE:- 137. Section 33 enables parties to move the Arbitral Tribunal to correct any computational error, any clerical error or typographical error or any other errors of similar nature. Section 33(3) enables the arbitral Tribunal itself to correct any of those errors. No doubt, a time limit of 30 days has been prescribed for the parties to move unless there is a contract to the contrary. Equally, sub -Section 2 of Section 33 directs that the correction should be made within 30 days and sub-Section 6 of
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Open this page in the original PDF110 Section 33 states that the arbitral Tribunal may if necessary extend the period of time within which it shall make a correction. 138. In this regard, it is useful to refer to the recent judgment of this Court in North Delhi Municipal Corporation v. M/S. S.A. Builders Ltd., 2024 INSC 988, wherein it was held as under: “45.1. As per sub-Section (1), within 30 days from the date of receipt of the arbitral award, a party with notice to the other party, may request the arbitral tribunal to correct any computation errors, any clerical or typographical errors or any other errors of a similar nature occurring in the award. Further, if the parties agree, a party with notice to the other party, may request the arbitral tribunal to give an interpretation of a specific point or part of the award. The period of 30 days contemplated under subSection (1) may stand extended to another period of time if agreed upon by the parties. Therefore, ordinarily the time limit for correction of errors or for interpretation of a specific point or part of the award is 30 days from the date of receipt of the arbitral award. However, the limitation of 30 days can be waived for another period of time, if agreed upon by the parties. Question for consideration is what would be the contours of the expression unless another period of time has been agreed up on by the parties, as appearing in sub-Section (1) of Section 33. 45.2. Sub -Section (7) of Section 33 clarifies that correction or interpretation of arbitral award or passing of additional arbitral award would attract Section 31 of the 1996 Act as discussed supra. Therefore, the language of sub -Section (1) of Section 33 makes it abundantly clear that the period of 30 days as provided in Section 33(1) is not an inflexible period. If the parties agree, the said period can be extended. 45.3. There is no dispute to the proposition of law laid down in Harshad Chiman Lal Modi (supra), relied upon by the appellant, that where a court has no jurisdiction over the subject matter of the suit
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Open this page in the original PDF111 by reason of any limitation imposed by the statute, charter or commission, it cannot take up the cause or matter; an order passed by the court having no such jurisdiction is a nullity. Question is whether such a proposition would have any application to th e facts and circumstances of the present case. As we have seen, there was no embargo on the Arbitral Tribunal to exercise jurisdiction over the subject matter. The only limitation was that the correction and/or interpretation of the award should be done wi thin 30 days from the date of receipt of the arbitral award unless another period of time has been agreed upon by the parties. Therefore, the expression unless another period of time has been agreed upon by the parties assumes critical significance.” (Emphasis supplied) 139. With regard to computational errors, clerical or typographical error or any other error of similar nature – (the expression any other error of similar nature will be read ejusdem generis and will apply to errors similar to computational errors, clerical or typographical errors), what should be the course of action if the party has not moved under Section 33 or having moved the arbitrator has mechanically rejected the correction? 140. With regard to Section 152 CPC, this Court after holding that Section 152 is founded on the maxim - actus curiae neminem gravabit speaking through Dr. Arijit Pasayat J. in U.P . SRTC vs. Imtiaz Hussain, (2006) 1 SCC 380 lucidly explained the position thus.
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Open this page in the original PDF112 “8. The basis of the provision under Section 152 of the Code is founded on the maxim “actus curiae neminem gravabit” i.e. an act of court shall prejudice no man. The maxim “is founded upon justice and good sense; and affords a safe and certain guide for the administration of the law”, said Cresswell, J. in Freeman v. Tranah [12 CB 406 : 138 ER 964] (ER p. 967). An unintentional mistake of the court which may prejudice the cause of any party must and alone could be rectified. In Master Construction Co. (P) Ltd. v. State of Orissa [(1966) 3 SCR 99 : AIR 1966 SC 1047] it was observed that the arithmetical mistake is a mistake of calculation, a clerical mistake is a mistake in writing or typing whereas an error arising out of or occurring from accidental slip or omission is an error due to careless mistake on the part of the court liable to be corrected. To illustrate this point it was said that in a case where the order contains something which is not mentioned in the decree, it would be a case of unintentional omission or mistake as the mistake or omission is attributable to the court which may say something or omit to say something which it did not intend to say or omit. No new arguments or rearguments on merits can be entertained to facilitate such rectification of mistakes. The provision cannot be invoked to modify, alter or add to the terms of the original order or decree so as to, in effect, pass an effective judicial order after the judgment in the case.” (Emphasis supplied) 141. Ordinarily errors of the nature set out above like computational error, clerical or typographical error or any other error of a similar nature would not be objected by other party. However, in the unlikely event of an objection and in a scenario where the arbitrator has not been moved under Section 33 or having moved the Arbitral Tribunal has been obstinate in not correcting, a Court in Section 34 to uphold the
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Open this page in the original PDF113 maxim actus curiae neminem gravabit can invoke the power and correct computational errors, clerical or typographical errors or any other errors of similar nature without modifying, altering or adding to the original award. It should not be forgotten that under Section 35 finality is granted to the arbitral awards subject to the provisions in part I and under Section 36 where the time for making an application to set aside the arbitral award under Section 34 has expired, then subject to the provisions of sub -Section 2 such award shall be enforced in accordance with the provisions of the Code of Civil Procedure in the same manner as it were a decree of the Court. Hence, a limited exception alone to the holding in Hakeem (supra) is made. SEVERABILITY UNDER SECTION 34:- 142. If there was one aspect on which there was a chorus among the rival factions, it was on the aspect of Section 34 Court having power to sever that part of the award which fell foul of Section 34 from the good part. 143. According to P. Ramanatha Aiyar’s Advanced Law Lexicon (third edition):
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Open this page in the original PDF114 “Sever – ‘to separate; to insist upon a plea distinct from that of other co-defendants; to disjoin and severable – ‘capable to being separated’,” A bare perusal of Section 34 indicates that the power to sever an award is recognised in Section 34(2)(a)(iv) which reads as under. “34(2)(a)(iv). the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside;” 144. A reading of the above sub-Section reveals that where the arbitral award deals with disputes not contemplated by or not falling within the terms of the submission to arbitration or it contains decision on matters beyond the scope of the submission to arbitration, the award can be set aside. 145. However, the proviso states that if the decisions on matters submitted to arbitration can be separated from those not so submitted,
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Open this page in the original PDF115 only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside. 146. So, severance as a concept is recognised intrinsically in Section 34 itself on the aspect mentioned hereinabove. But the question is when there are several claims adjudicated and if awards on a few claims fall foul of Section 34 and if each of the claims whic h fall foul of Section 34 are capable of separation could the awards on those claims be set aside? This issue was not discussed in Hakeem (supra). However, the consistent view of this Court has been that such standalone claims falling foul of Section 34 can be set aside as long as they are capable of being severed without affecting the other parts of the award. In other words, if the claims falling foul of Section 34 are not inseparably intertwined with the good portion of the award, the award can be severed. 147. In J.G. Engineers (P) Ltd. vs. Union of India & Anr ., (2011) 5 SCC 758, R.V . Raveendran J. speaking for the Court clearly set out the principle as follows:- “25. It is now well settled that if an award deals with and decides several claims separately and distinctly, even if the court finds that
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Open this page in the original PDF116 the award in regard to some items is bad, the court will segregate the award on items which did not suffer from any infirmity and uphold the award to that extent. As the award on Items 2, 4, 6, 7, 8 and 9 was upheld by the civil court and as the High Court in appeal did not find any infirmity in regard to the award on those claims, the judgment of the High Court setting aside the award in regard to Claims 2, 4, 6, 7, 8 and 9 of the appellant, cannot be sustained. The judgment to that extent is liable to be set aside and the award has to be upheld in regard to Claims 2, 4, 6, 7, 8 and 9.” 148. This Court in Madhya Pradesh Power Generation Company (supra) had severed the award with regard to the return of amounts ordered on the Bank guarantee s dated 22.02.2000 and 23.02.2000 which pertained towards the amount advanced by the award debtor therein. 149. During the course of the submissions, the concern expressed by the several learned counsels were that severability should be carefully invoked and the exorcised portion of the award should not be inseparably intertwined with the other portions which are upheld and ought not to be inter dependent on the good parts of the award. The further concern expressed was that the Section 34 Court wanting to sever portions of the award should perform an exercise to see whether the good part of the award can be separately identified both in terms of variability and quantum without any co-relation to the bad parts of the
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Open this page in the original PDF117 award. The submission was that if the good parts are intermingled with the bad parts of the award in a manner that it is impossible to sever the bad parts, the principle of severability cannot be applied. Mr. Gaurav Pachnanda, learned Senior Counsel illust rated the submission by submitting that if a final award is arrived by netting off claims and counter claims, principles of severability cannot be applied as what is available in the award was a composite award with a single amount mentioned therein enforc eable by the successful party. There is merit in this submission and such prerequisites are essential while severing parts of the award. 150. A Full Bench of the High Court of Judicature at Bombay, in R.S. Jiwani vs. Ircon International Ltd., 2009 SCC OnLine Bom 2021, held as under. “20. The cases would be different where it is not possible or permissible to sever the award. In other words, where the bad part of the award was intermingled and interdependent upon the good parts of the award there it is practically not possible to sever the award as the illegality may affect the award as a whole. In such cases, it may not be possible to set aside the award partially. However, there appears to be no bar in law in applying the doctrine of severability to the awards which are severable.”
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Open this page in the original PDF118 151. Sanjay Kumar J., (as His Lordship then was) in the High Court of Judicature at Hyderabad for the State of Telangana in Saptarishi Hotels Pvt. Ltd. vs. National Institute of Tourism & Hospitality Management, 2019 SCC OnLine TS 1765, following J.G. Engineers (supra) held as follows. “33. In J.G. ENGINEERS PVT. LTD. v. UNION OF INDIA, the Supreme Court observed that it is now well settled that if an Award deals with and decides several claims separately and distinctly and if such Award is found to be bad in regard to some items, the Court would be entitled to seg regate the Award on the items which did not suffer from any infirmity so that it could be upheld to that extent.” 152. A learned Single Judge of the Delhi High Court addressing the issue of severability in National Highways Authority of India vs. Trichy Thanjavur Expressway Ltd., 2023 SCC OnLine Del 5183, set out the principle thus. “38. In our considered opinion, therefore, the answer to the question which stands posed would have to be rendered on an interpretation of the phrase “setting aside” as ultimately adopted and forming part of Section 34. As was noticed hereinbefore, Section 34(2)(a)(iii) does speak of an award being set aside in part. We find that the key to understanding the intent underlying the placement of the Proviso in sub - clause (iv) of Section 34(2)(a) is in the nature of the grounds for setting aside which are spoke n of in clause (a). As would be manifest from a reading of the five sub -clauses which are
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Open this page in the original PDF119 positioned in Section 34(2)(a), those constitute grounds which would strike at the very heart of the arbitral proceedings. The grounds for setting aside which are set forth in clause (a) strike at the very foundation of validity of arbitration proceedings. Sub-Clauses (i) to (v) thus principally constitute grounds which would render the arbitration proceedings void ab initio. Although the Section 34(2)(a)(iv) ground for setting aside also falls in the same genre of a fundamental invalidity, the Legislature has sought to temper the potential fallout of the award being set aside in toto on that score. The Proviso to sub- clause (iv) seeks to address a comprehensibly conceivable situation where while some parts of the award may have dealt with non-arbitrable issues or disputes falling outside the scope of the reference, its other components or parts constitute an adjudication which could have been validly undertaken by the AT. The Proviso thus seeks to address such a situation and redeems as well as rescues the v alid parts of an award. This saves the parties from the spectre of commencing arbitral proceedings all over and from scratch in respect of all issues including those which could have validly formed part of the arbitration. 39. The grounds for setting aside encapsulated in Section 34(2)(b) on the other hand relate to the merits of the challenge that may be raised in respect of an award and really do not deal with fundamental invalidity. However, the mere fact that the Proviso found in sub-clause (iv) of Section 34(2)(a) is not replicated or reiterated in clause (b) of that provision would not lead one to conclude that partial setting aside is considered alien when a court is considering a challenging to an award on a ground re ferable to that clause. In fact, the Proviso itself provides a befitting answer to any interpretation to the contrary. The Proviso placed in Section 34(2)(a)(iv) is not only an acknowledgment of partial setting aside not being a concept foreign to the setting aside power but also of parts of
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Open this page in the original PDF120 the award being legitimately viewed as separate and distinct. The Proviso itself envisages parts of an award being severable, capable of segregation and being carved out. The Proviso is, in fact, the clearest manifestation of both an award being set aside in part as well as an award comprising of distinct components and parts. 40. Undoubtedly, an award may comprise a decision rendered on multiple claims. Each claim though arising out of a composite contract or transaction may be founded on distinct facts and flowing from separate identifiable obligations. Just as claims may come to be preferred resting on a particular contractual right and corresponding obligation, the decision which an AT may render on a particular claim could also be based on a construction of a particular covenant and thus stand independently without drawing s ustenance on a decision rendered in the context of another. If such claims be separate, complete and self -contained in themselves, any decision rendered thereon would hypothetically be able to stand and survive irrespective of an invalidity which may taint a decision on others. As long as a claim is not subordinate, in the sense of being entwined or interdependent upon another, a decision rendered on the same by the AT would constitute an award in itself. While awards as conventionally drawn, arranged and prepared may represent an amalgam of decisions rendered by the AT on each claim, every part thereof is, in fact, a manifestation of the decision rendered by it on each claim that may be laid before it. The award rendered on each such claim rules on the enti tlement of the claimant and the right asserted in that regard. One could, therefore, validly, subject of course to the facts of a particular case, be entitled to view and acknowledge them as binding decisions rendered by the AT on separate and distinct claims. 41. The Court notes in this regard that Mr. Mukhopadhaya, Mr. Rajshekhar Rao, learned senior counsels as well as Mr.
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Open this page in the original PDF121 Ashim Sood had urged that while an award as ultimately rendered may contain findings on numerous claims, the decision rendered in respect of each such claim is entitled to be viewed as an award in itself. This, according to learned counsels, clearly flows from the power of the AT to not just render a final award but also and in the course of arbitral proceedings render interim awards in respect of various claims. It was rightly pointed out by learned counsels that each such decision on a claim could stand i ndependently and be final and binding in itself. Those findings or decisions in relation to various claims that stand placed before the AT may each constitute an award itself and the operative directions framed representing the disposition of all such claims. As was rightly contended by Mr. Mukhopadhaya, the declaration with respect to entitlement and the award of a money claim consequent thereto would be liable to be viewed as independent Arbitral Awards. Mr. Sood had chosen to describe such a disposition of claims as being an “agglomeration” of awards. The Court accords its emphatic and wholehearted acceptance to the aforenoted submissions and comes to the conclusion that an award is thus liable to be viewed and understood accordingly. It thus comes to con clude that each such decision rendered by an AT could be validly viewed as the decision rendered on a particular claim and thus constituting an independent award in itself. 42. Once an award is understood as comprising of separate components, each standing separately and independent of the other, there appears to be no hurdle in the way of courts adopting the doctrine of severability and invoking a power to set aside an award partly. The power so wielded would continue to remain one confined to “setting aside” as the provision bids one to do and would thus constitute a valid exercise of jurisdiction under Section 34 of the Act. Conclusion:
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Open this page in the original PDF122 G. Undoubtedly, an award may comprise a decision rendered on multiple claims. Each claim though arising out of a composite contract or transaction may be founded on distinct facts and flowing from separate identifiable obligations. Just as claims may come to be preferred resting on a particular contractual right and corresponding obligation, the decision which an AT may render on a particular claim could also be based on a construction of a particular covenant and thus stand independently without drawing su stenance on a decision rendered in the context of another. If such claims be separate, complete and self -contained in themselves, any decision rendered thereon would hypothetically be able to stand and survive irrespective of an invalidity which may taint a decision on others. As long as a claim is not subordinate, in the sense of being entwined or interdependent upon another, a decision rendered on the same by the AT would constitute an award in itself. H. While awards as conventionally drawn, arranged an d prepared may represent an amalgam of decisions rendered by the AT on each claim, every part thereof is, in fact, a manifestation of the decision rendered by it on each claim that may be laid before it. The award rendered on each such claim rules on the entitlement of the claimant and the right asserted in that regard. One could, therefore, validly, subject of course to the facts of a particular case, be entitled to view and acknowledge them as binding decisions rendered by the AT on separate and distinct claims. I. Once an award is understood as consisting of separate components, each standing separately and independent of the other, there appears to be no hurdle in the way of courts adopting the doctrine of severability and invoking a power to set aside an award partly. The power so wielded would continue to remain one confined to “setting aside” as the
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Open this page in the original PDF123 provision bids one to do and would thus constitute a valid exercise of jurisdiction under Section 34 of the Act. L. The power to partially sever an offending part of the award would ultimately depend on whether the said decision is independent and distinct and whether an annulment of that part would not disturb or impact any other finding or declaration that may have been returned by the AT. The question of severability would have to be decided bearing in mind whether the claims are interconnected or so intertwined that one cannot be segregated from the other. This for the obvious reason that if the part which is soug ht to be set aside is not found to stand independently, it would be legally impermissible to partially set aside the award. A partial setting aside should not lead to a component of the award being rendered vulnerable or unsustainable. It is only when the award relates to a claim which is found to stand on its own and its setting aside would not have a cascading impact that the Court could consider adopting the aforesaid mode. M. The Court is thus of the firm opinion that the power to set aside an award in part would have to abide by the considerations aforenoted mindful of the imperatives of walking a line which would not dislodge or disturb another part of the award. However a s long as the part which is proposed to be annulled is independent and stands unattached to any other part of the award and it could be validly incised without affecting the other components of the award, the recourse to partial setting aside would be valid and justified. (Emphasis supplied) 153. The views expressed in the judgment, referred to hereinabove, are correct and the power to set aside will include the power to partially set
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Open this page in the original PDF124 aside and sever the portions of the award which fall foul of Section 34 subject to the riders engrafted hereinabove. ABANDONMENT OF CLAIMS - COMPROMISE ARRIVED AT BETWEEN THE PARTIES: 154. Situation may arise where claims for which awards have been granted may be abandoned or parties may arrive at compromises contrary to the terms of the award. If the compromise has the effect only of severing a standalone portion of the award with it being not inseparably intertwined with any other portion, a Section 34 Court can give effect to compromise and sever that portion of the award in accordance with the principles of severability set out hereinabove. 155. Equally, with regard to abandonment or giving up of claims by a successful party, the same principle will apply. However, if the aspects are not severable and the abandonment/giving up has the effect of impinging upon the award and is inseparably intertw ined and permeates the warp and woof of the award, then the option available to the Section 34 Court is to set aside the award. In case of settlements
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Open this page in the original PDF125 which are not severable , the option will be to dismiss the Section 34 application as not pressed, in view of the settlement arrived at. 156. I have since had the benefit of reading the judgment of the Hon’ble Chief Justice. In my judgment, I have independently given my reasons on each of the issues arising herein. The judgment of the Hon’ble Chief Justice grants power to the Section 34 Court to modify the post-award interest. I am not able to agree with the said view for the reasons stated hereinabove. Equally, the judgment of the Hon’ble Chief Justice permits the exercise of power under Article 142 of the Constitution of India to modify the award, though it has been stated in the judgment that the power must be exercised with caution. Here again, I am not able to agree with the said view for the reasons stated in my judgment. CONCLUSION:- (a) The Courts exercising power under Section 34 and Courts hearing appeals thereunder have no power to “modify” an award.
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Open this page in the original PDF126 (b) The power to modify is not a lesser power to that of the power to set aside, as the two operate in separate spheres and are not of the same genus. (c) The inherent power under Section 151 C.P.C. cannot be used to modify awards as it will be contrary to the express power mentioned in Section 34. Similarly, there is no scope for applying the doctrine of implied power to modify awards. (d) Article 142 of the Constitution of India will not be exercised by this Court to modify awards passed by arbitrators as it is well settled that the Article 142 power cannot be used to give a go by to the substantive statutory provision. (e) Interest awarded also cannot be modified in exercise of powers of setting aside and the course of action under Section 34(4) will have to be adopted as discussed in the judgment. (f) Hakeem (supra) is not per incuriam insofar as it held that a Section 34 Court cannot modify the award and will be read with the only exception made in this judgment now. On the principle of actus curiae neminem gravabit (act of Court shall prejudice no one)
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Open this page in the original PDF127 computation, clerical and typographical errors or other errors of similar nature is permissible to be corrected by the Section 34 Court, in terms of the holding above. (g) Kinnari Mullick (supra) does not lay down the correct law insofar as it holds that the request under Section 34(4) to the Court by a party to grant an opportunity to the Arbitral Tribunal to resume proceedings or to take such other action has to be in writing. Even an oral request under Section 34(4) can be entertained by the Court. (h) The power under Section 34(4) can be exercised by the Court Suo Moto also under the circumstances set out hereinabove. (i) A Court under Section 34 and the Courts hearing appeals thereafter have the power to “sever” parts of the award in exercise of the powers of setting aside awards under Section 34. However, while severing, the parameters set out hereinabove and flowing from the judicial precedents discussed therein have to be followed. ANSWERS TO THE REFERENCE:- 157. In view of the discussion hereinabove, the reference is answered in the following terms.
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Open this page in the original PDF128 Question No. 1 - As set out in the body of the judgment , while exercising power under Section 34 of the A&C Act and consequently the Courts in the appell ate hierarchy do not have the power to modify the arbitral award. Question No. 2 - Modification and severance are two different concepts while modification is not permitted under Section 34 , severance of the award falling foul of Section 34 is permissible in exercise of powers under Section 34. Such a power of severance is also available to the courts in the appellate hierarchy to the Section 34 Court. Question No. 3 & 4 - The power to set aside will not include the power to modify since the power to modify is not a lesser power subsumed in the power to set aside and, as held hereinabove, the power to set aside and power to modify do not emanate from the same genus and are qualitatively different powers in the context of the A&C Act. Question No. 5 - The judgment in Hakeem (supra), insofar as it holds that a Section 34 Court has no power to modify the award, lays down the correct law. The only exception made in this judgment is with
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Open this page in the original PDF129
regard to the power to carry out corrections in computational errors,
clerical errors or typographical errors and any other errors of similar
nature. This is based on the principle of actus curiae neminem gravabit
(act of court shall prejudice no one).
158. Appreciation is recorded for the painstaking effort s put in by the
learned Solicitor General and all the Learned Senior
Counsels/Counsels who addressed arguments and to the teams assisting
them.
159. The reference is disposed of in the above terms.
……….........................J.
[K. V. VISWANATHAN]
New Delhi,
30th April, 2025.