Recently, this query was referred to  5-Judge Bench of the Supreme Court in the matter of Gayatri Balasamy

The facts of the case and the reference points are as under:

Gayatri Balasamy vs M/S Isg Novasoft Technologies Limited on 30 April, 2025

This reference to a Bench of five judges is primarily to decide the correctness of the judgment of this Court in Project Director, National Highways No. 45 E and 220 National Highways Authority of India Vs. M. Hakeem and Anr., (2021) 9 SCC 1. In the said judgment, this Court held that while exercising powers under Section 34 of the Arbitration and Conciliation Act, 1996 (‘A&C Act’ for short), a Court hearing the petition had no power to “Modify” the Award. A three- Judge Bench of this Court on 20.02.2024, after noticing that there are decisions of this Court which have either modified the awards of the Arbitral Tribunals or upheld orders challenging modified awards and after observing that an authoritative pronouncement is required on this issue, placed the matter before the Hon’ble Chief Justice for constitution of an appropriate Bench. On 23.01.2025, by an order, this Court directed the matter to be placed before a Constitution Bench and that is how the matter has presented itself.

THE FOLLOWING QUESTIONS OF LAW WERE REFERRED TO A LARGER BENCH:

“1. 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?

  1. 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?
  2. 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?
  3. Whether the power to modify an award can be read into the power to set aside an award under Section 34 of the    Act?
  4. Whether the judgment of this Court in Project Director NHAI vs. M. Hakeem (2021) 9 SCC 1, followed in Larsen Air Conditioning and Refrigeration company vs. Union of India, (2023) SCC OnLine SC 982 and SV Samudram vs. State of Karnataka, (2024) SCC OnLine SC 19 lay down the correct law, as other benches of two Judges (in Vedanta Limited vs. Shenzden Shandong Nuclear Power Construction Company Limited, (2019) 11 SCC 465, Oriental Structural Engineers Pvt. Ltd. vs. State of Kerala, (2021) 6 SCC 150 and M.P. Power Generation Co. Ltd. vs. Ansaldo Energia Spa, (2018) 16 SCC 661 and three Judges (in J.C. Budhraja vs. Chairman, Orissa Mining Corporation Ltd. (2008) 2 SCC 444, Tata Hydroelectric Power Supply Co. Ltd. vs. Union of India, (2003) 4 SCC 172 and Shakti Nath vs. Alpha Tiger Cyprus Investment No.3 Ltd., (2020) 11 SCC

(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 as discussed in the judgment.

(f) Hakeem (supra) is not per incuriam insofar as it held that a Section 34 Court cannot modify the award and will be read with the only exception made in this judgment now. On the principle of actus curiae neminem gravabit (act of Court shall prejudice no one) computation, clerical and typographical errors or other errors of similar nature is permissible to be corrected by the Section 34 Court, in terms of the holding above.

(g) Kinnari Mullick (supra) 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.

ANSWERS TO THE REFERENCE:-

In view of the discussion hereinabove, the reference is answered in the following terms.

Question No. 1 – As set out in the body of the judgment, while exercising power under Section 34 of the A and C Act and consequently the Courts in the appellate hierarchy do not have the power to modify the arbitral award.

Question No. 2 – Modification and severance are two different concepts while modification is not permitted under Section 34, severance of the award falling foul of Section 34 is permissible in exercise of powers under Section 34. Such a power of severance is also available to the courts in the appellate hierarchy to the Section 34 Court.

Question No. 3 & 4 – The power to set aside will not include the power to modify since the power to modify is not a lesser power subsumed in the power to set aside and, as held hereinabove, the power to set aside and power to modify do not emanate from the same genus and are qualitatively different powers in the context of the A and C Act.

Question No. 5 – The judgment in Hakeem (supra), insofar as it holds that a Section 34 Court has no power to modify the award, lays down the correct law. The only exception made in this judgment is with  regard to the power to carry out corrections in computational errors, clerical errors or typographical errors and any other errors of similar nature. This is based on the principle of actus curiae neminem gravabit (act of court shall prejudice no one).

CONCLUSION:

The Court has power to set-aside but not to amend the award. Court can however order clerical correction if required.

Shruti Desai

6th May 2025