Courts while exercising power under Section 34 of Arbitration and Conciliation Act, 1996 cannot modify the award by arbitral tribunal

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Arising out of SLP (C) No. 13020 of 2020 decided on 20.07.2021

BENCH-  R. F. Nariman, B.R. Gavai, J


The present appeal is filed by the Petitioner against the enhanced compensation by the Division Bench of the High Courts in bunch of appeal under Section 37 of Arbitration and Conciliation Act, 1996( “Act,1996” )  . It is relevant to note that the awards by the arbitral tribunal were passed in accordance with the notifications issued under the provisions of National Highways Act by the competent authority . The awards passed by the competent authority were based on the various guidelines.  and the same was under challenge as per the provision of Section 34of the Act,1996. The learned Judge in view of the Section 34 of the Act,1996 enhanced the compensation given by the competent authority and the same was challenged on the ground that the Learned Judge under Section 34 cannot modify the award passed by arbitral tribunal.


Whether the Court has power under Section 34 of the Arbitration and Conciliation Act 1996 to modify an award (as per the provisions of National Highways Act 1956) so as to enhance compensation awarded by the Arbitrator?


The Hon’ble Supreme Court rejecting the appeal on the ground that most of the awards in present cases were made 7-10 years ago and it would not, at this distance in time, be fair to send back these cases for a de novo start before the very arbitrator or some other arbitrator not consensually appointed but appointed by the Central Government. Adding to this, the ratio as observed by the Supreme Court was in favour of the Appellant and it was observed that Section 34 being in the nature of an appellate provision, it provides only for setting aside awards on very limited grounds, such grounds being contained in sub-sections (2) and (3) of Section 34. Secondly, as the marginal note of Section 34 indicates, “recourse” to a court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-sections (2) and (3). The Supreme Court said that “Recourse” is defined by P Ramanatha Aiyar’s Advanced Law Lexicon (3rd Edition) as the enforcement or method of enforcing a right. Where the right is itself truncated, enforcement of such truncated right can also be only limited in nature. The Supreme Court, furthermore, observed that from a reading of the said provisions it is clear that given the limited grounds of challenge under sub-sections (2) and (3), an application can only be made to set aside an award. This becomes even clearer when one see subsection (4) under which, on receipt of an application under subsection (1) of Section 34, the court may adjourn the Section 34 proceedings and give the arbitral tribunal an opportunity to resume the arbitral proceedings or take such action as will eliminate the grounds for setting aside the arbitral award.

The Supreme Court tracing the history of Section 34 said that it is modelled on the UNCITRAL Model Law on International Commercial Arbitration, 1985, under which no power to modify an award is given to a court hearing a challenge to an award.

The Supreme Court further went on rely on judicial precedent and stated that ‘Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131, this Court under the caption “Section 34(2)(a) does not entail a challenge to an arbitral award on merits” referred to this Court’s judgment in Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 [the “New York Convention”] and various other authorities to conclude that there could be no challenge on merits under the grounds mentioned in Section 34 – (see paras 34 to 48). This Court also held, in Maharashtra State Electricity Distribution Co. Ltd. v. Datar Switchgear Ltd., (2018) 3 SCC 133 (at 170), that the court hearing a Section 34 petition does not sit in appeal (see para 51)’

The Court concluded by stating that if one were to include the power to modify an award in Section 34, one would be crossing the Lakshman Rekha and doing what, according to the justice of a case, ought to be 45 done. In interpreting a statutory provision, a Judge must put himself in the shoes of Parliament and then ask whether Parliament intended this result. Parliament very clearly intended that no power of modification of an award exists in Section 34 of the Arbitration Act, 1996.’

[Editor’s Note: The present decision is a very paradoxical judgment because the Hon’ble Supreme Court through the bench headed by Hon’ble Justice R.F. Nariman observed, on the one hand, that the award under Section 34 cannot be modified and on the other hand the Hon’ble Supreme Court is upholding the modified award by rejecting the Special Leave Petition.]




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