Conflicting decisions on modification of arbitral award
The issue whether the Principal District Courts can modify arbitral awards under Section 34 and Section 37 of the Arbitration and Conciliation Act, 1996 (A C Act) has led to conflicting decisions by the Supreme Court (SC).
Matter has been referred to the Constitutional Bench
Therefore, the issue has been referred to a five-member constitutional bench of the SC by a three-judge bench in Gayatri Balasamy v M/S Isg Novasoft Technologies Limited.
SC Bench will hear the arguments on the issue
As per the SC orders on 23 January 2025, the SC will first hear arguments of the counsel seeking reconsideration of the ratio expressed in Project Director, NHAI v M. Hakeem. That means, the court has the power to modify an award under Sections 34 and 37 of the A C Act.
And thereafter, the SC will hear the counsel who support the view that the court does not have the power to modify an Award under Sections 34 and 37 of the A C Act.
Judgements that say the award cannot be modified
The landmark judgment of Project Director, NHAI v. M Hakeem followed in Larsen Air Conditioning and Refrigeration Company v Union of India and SV Samudram v State of Karnataka have held that the courts are not empowered to modify the arbitral award under Section 34 or 37 of A C Act. The judgements say that the Section 34 is not in the nature of an appellate provision, but it merely provides limited grounds for setting aside an arbitral award.
Judgements that say the award can be modified
The other judgments consisting of Vedanata Limited v Shenzden Shandong Nuclear Power Construction Company Limited [AIR 2018 SC 4773], J.C. Budharaja v Chairman Orissa Mining Corporation Ltd [AIR 2008 SC 1363 ], Tata Hydroelectric Power Supply Co. Ltd. v Union of India [ AIR 2003 SC1581] are the judgements, which say that the court has power to modify the award under consideration.
Expert committee recommends for the power to modify.
The Report of the Expert Committee to Examine the Working of Arbitration Law and Recommend Reforms in Arbitration and Conciliation Act, 1996, submitted to the Law Ministry on 7th February, 2024, recommends that the courts should be permitted to modify or vary an award, while setting aside such an award in exercise of their power under Section 34 of the A C Act.
The Constitutional Bench will bring quietus to the issue
The Constitutional Bench of the SC will examine the contours and scope of the power of the Court under Sections 34 and 37 of the A C Act and will decide the extent of the power of modification by the Principal District Courts.
The SC Constitution Bench, on 13 February 2025, began the hearing on the issue of whether the courts have power to modify an arbitral award made under S. 34 and 37 of the A C Act.
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