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Synopsis

The Supreme Court has said it is necessary for the Constitution bench to provide clarity by an authoritative pronouncement on question whether courts can modify an arbitral award.

A bench of Justices Dipankar Datta, K V Vishwanathan and Sandeep Mehta on February 20, 2024 referred before the Constitution bench to authoritatively decide 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.

The court directed a special leave petition filed by Gayatri Balasamy before the Chief Justice of India for an appropriate order.

"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 before the High Courts and the District Courts," the bench pointed out.

"While one line of decisions of this court has answered the question in the negative, there are decisions which have either modified the awards of the arbitral tribunals or upheld orders under challenge modifying the awards," the bench added.

The court thus concluded that 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. 

The court further said 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 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), followed in Larsen Air Conditioning and Refrigeration Company vs Union of India (2023) and S V Samudram vs State of Karnataka (2024) lay down the correct law, as other benches of two Judges in Vedanta Limited vs Shenzden Shandong Nuclear Power Construction Company Limited (2019), Oriental Structural Engineers Pvt Ltd vs State of Kerala (2021) and MP Power Generation Co Ltd vs Ansaldo Energia Spa (2018) and three Judges in J C Budhraja vs Chairman, Orissa Mining Corporation Ltd (2008), Tata Hydroelectric Power Supply Co Ltd vs Union of India (2003) and Shakti Nath vs Alpha Tiger Cyprus Investment No 3 Ltd (2020) of this court have either modified or accepted modification of the arbitral awards under consideration?