Supreme Court Judgment Regarding Modification of Arbitral Awards

Prelims (GS I) – Indian Polity and Governance.

Mains (GS II) – Structure, organization and functioning of the Executive and the Judiciary.

Why in news?

Recently, five-judge Constitution Bench of the Supreme Court headed by Chief Justice Sanjiv Khanna ruled (4:1) that courts have limited power to modify arbitral awards.

Majority Opinion (4:1)

• The majority opinion held that courts are judicially empowered under Section 34 of the Arbitration and Conciliation Act, 1996 to alter arbitral awards on restricted grounds.
• The Supreme Court affirmed it can use its inherent powers under Article 142 to do complete justice in arbitration cases with great care and caution and not in derogation or suppression of the Arbitration Act's objectives.
• Modifications that are allowed under Section 34 are,
  • Power to set aside invalid portions of an award from valid parts.
  • To correct obvious typographical, computational or clerical errors.
  • To change interest calculations post-award.

Minority Opinion

• Justice K V Viswanathan who has dissented the majority opinion held that arbitral awards cannot be modified unless expressly permitted by the arbitration statute.
• His view was that courts do not have the power to modify an arbitral award under Section 34.
• This opinion aligned with the Centre's position who was represented by Solicitor General Tushar Mehta.
• He also said that power to modify is not a lesser power than the power to set aside as the two operate in separate spheres.

Reference

The Hindu| SC upholds courts’ power to modify arbitral awards