Court under Sections 34 and 37 of the Arbitration and Conciliation Act 1996 have limited powers to modify an arbitral award
In a recent judgment, Hon’ble Supreme Court has held that the Court under Sections 34 and 37 of the Arbitration and Conciliation Act 1996 have limited powers to modify an arbitral award in certain circumstances.
ABCAUS Case Law Citation:
4541 (2025) (04) abcaus.in SC
Important Case Laws relied upon by Parties:
Project Director, National Highways Authority of India Vs. M. Hakeem and Anr.
Kinnari Mullick and Another v. Ghanshyam Das Daman
In 2024, a Full Bench of the Hon’ble Supreme Court had referred to the Hon’ble Chief Justice of India the question as to 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? Accordingly, a Constitution Bench of five-Judges had been constituted to decide the questions referred.
The main legal controversy seeks an answer as to whether Indian courts jurisdictionally empowered to modify an arbitral award? If so, to what extent? It is notable that the Arbitration and Conciliation Act, 1996 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.
Therefore, divergent and contrasting judicial opinions exist on this question. Even, the Hon’ble Supreme Court, on several instances, modified the arbitral awards, seeking to minimize protracted litigation and foster the ends of justice. In contrast, some judgments have held that Indian courts cannot modify awards, due to the narrowly defined scope of Section 34.
In a lengthy judgment, Hon’ble Four Judges including CJI by a common order held 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.
(ii) by correcting any clerical, computational or typographical errors which appear erroneous on the face of the record,
(iii) post award interest may be modified in some circumstances 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.
However, Hon’ble Justice K. V. Vishwanathan gave is dissenting judgment separately and held as under:
(a) The Courts exercising power under Section 34 and Courts hearing appeals thereunder have no power to “modify” an award.
(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.
(f) Judgment in Hakeem is not per incuriam insofar as it held that a Section 34 Court cannot modify the award will be read with the only exception made in this judgment now. On the principle of actus curiae neminem gravabit computation, clerical and typographical errors or other errors of similar nature is permissible to be corrected made by the Section 34 Court, in terms of the holding above. Kinnari Mullick case 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.
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