2025 INSC 605

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 1 of 61

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. OF 2025

(Arising out of S.L.P.(C) Nos.15336-15337 of 2021)

GAYATRI BALASAMY ..... APPELLANT

VERSUS

M/S. ISG NOVASOFT TECHNOLOGIES LIMITED ..... RESPONDENT

W I T H

CIVIL APPEAL NO. OF 2025

(Arising out of S.L.P.(C) No.21301 of 2024)

CIVIL APPEAL NO. OF 2025

(Arising out of S.L.P.(C) No.17941 of 2019)

CIVIL APPEAL NO. OF 2025

(Arising out of S.L.P.(C) No.7973 of 2022)

CIVIL APPEAL NOS. OF 2025

(Arising out of S.L.P.(C) Nos.4961-4962 of 2024)

CIVIL APPEAL NO. OF 2025

(Arising out of S.L.P.(C) No. of 2025 @ S.L.P.(C) Diary No.7789 of 2024)

CIVIL APPEAL NOS. OF 2025

(Arising out of S.L.P.(C) Nos.18656-18663 of 2024)

CIVIL APPEAL NO.8183 OF 2016

CIVIL APPEAL NO.8184 OF 2016

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 2 of 61

J U D G M E N T

SANJIV KHANNA, CJI.

A three-Judge Bench of this Court, vide order dated 20

th

February 2024,

directed that the Special Leave Petitions in Gayatri Balasamy v. ISG

Novasoft Technologies Limited,

1

be placed before the Chief Justice of India

for an appropriate order. The matter was to be examined to determine the need

to refer the following questions of law 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 m

2. If the power to m

such power can be exercised only where the award is

severable, and a part thereof can be m

3. Whether the power to set aside an award under Section

34 of the Act, being a larger power, will include the power

to m

4. Whether the power to m

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,

2

followed in Larsen Air Conditioning

and Refrigeration Company vs. Union of India,

3

and SV

Samudra vs. State of Karnataka,

4

lay down the correct

law, as other benches of two Judges (in Vedanta Limited

vs. Shenzden Shandong Nuclear Power Construction

Company Limited,

5

Oriental Structural Engineers Pvt. Ltd.

vs. State of Kerala,

6

and M.P. Power Generation Co. Ltd.

vs. Ansaldo Energia Spa)

7

and three Judges (in J.C.

1

2024 SCC OnLine SC 1681.

2

(2021) 9 SCC 1.

3

(2023) 15 SCC 472.

4

(2024) 3 SCC 623.

5

(2019) 11 SSC 465.

6

(2021) 6 SCC 150.

7

(2018) 16 SCC 661.

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 3 of 61

Budhraja vs. Chairman, Orissa Mining Corporation Ltd.,

8

Tata Hydroelectric Power Supply Co. Ltd. vs. Union of

India,

9

and Shakti Nath vs. Alpha Tiger Cyprus Investment

No.3 Ltd.

10

) of this Court have either m

mication of the arbitral awards under consideration?”

2. Accordingly, this Bench of five-Judges has been constituted to decide the

questions referred.

3. The fulcru of the legal controversy rests on the following question(s): Are

Indian courts jurisdictionally empowered to modify an arbitral award? If so, to

what extent? The controversy arises because the Arbitration and Conciliation

Act, 1996,

11

does not expressly empower courts to m vary an arbitral

award. Section 34 of the 1996 Act only confers upon courts the power to set

aside an award. Nevertheless, this Court, on several instances, has been

compelled to m arbitral awards, seeking to minimize protracted litigation

and foster the ends of justice. In contrast, some judgments have posited that

Indian courts cannot m , due to the narrowly defined scope of

Section 34. Therefore, divergent and contrasting judicial opinions exist on this

question.

4. Annexure A to this judgment reproduces Section 34, and other pertinent

provisions of the 1996 Act – namely Sections 5, 31, 33, 37, 43 and 48.

Annexure B provides a compilation of prevailing stances adopted by foreign

jurisdictions vis-à-vis the question of m

8

(2008) 2 SCC 444.

9

(2003) 4 SCC 172.

10

(2020) 11 SCC 685.

11

Hereinafter referred to as, “1996 Act”.

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 4 of 61

5. Before addressing the arguments raised, it would be useful to capture the

divergence of judicial opinions on the question of m . These

conflicting judgments provide context to the legal controversy and the

arguments presented.

A. JUDICIAL DIVERGENCE ON MODIFICATION POWERS

6. In McDermott International Inc. v. Burn Standard Co. Ltd. and Others,

12

this Court explained the difference between judicial interference permitted by

the 1996 Act vis-à-vis the Arbitration and Conciliation Act, 1940

13

. The 1996

Act limits the supervisory role of the court to specific grounds under Section

34, while the 1940 Act gave courts broader powers under Sections 30 and 33.

The Court clarified that under Section 34, the court does not act as an appellate

authority for factual findings, evidence, or questions of law dealt with by the

arbitral tribunal. At the same time, the 1996 Act mandates that arbitrators issue

a reasoned award, which was not a requirement under the 1940 Act.

7. Further, the judgment clarifies the role of arbitrators in determining claims and

counterclaims. The court cannot correct the arbitrator's mistakes, whether

factual or legal. Rather, its role is confined to setting aside the award, leaving

the parties the option to initiate fresh arbitration proceedings if they wish.

However, when it came to the rate of interest, the Court invoked its power

under Article 142 of the Constitution

14

to vary the award, reducing the interest

12

(2006) 11 SCC 181.

13

Hereinafter referred to as, “1940 Act”.

14

“142. Enforcement of decrees and orders of Supreme Court and orders as to discovery, etc.—

(1) The Supreme Court in the exercise of its jurisdiction may pass such decree or make such order as

is necessary for doing complete justice in any cause or matter pending before it, and any decree so

passed or order so made shall be enforceable throughout the territory of India in such manner as may

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 5 of 61

fro 10% per annum (as awarded by the tribunal) to 7.5% per annum. It felt

compelled to do so as there was a significant lapse of time. Two earlier

decisions were relied upon: Pure Helium India (P) Limited v. Oil & Natural

Gas Commission,

15

where the rate of interest was reduced fro 18% per

annu to 6% per annum, and Mukand Ltd. v. Hindustan Petroleum Corpn.

Ltd.,

16

where the interest rate was lowered fro 11% per annu to 7.5% per

annum.

8. In Vedanta Limited v. Shenzhen Shandong Nuclear Power Construction

Company Limited,

17

this Court, in the context of an international award,

highlighted the need to consider the differing impact of interest rates when the

parties operate in different currencies. The rate of interest had to be aligned

with the applicable currency of each party. Accordingly, the Court held that

applying a unifor interest rate for both the INR and Euro components was not

justified. While maintaining the interest rate at 9% per annu for the INR

component, the interest on the Euro component was m London

Interbank Offered Rate (LIBOR) rate plus 3 percentage points. Furtherm

the Court deleted the interest rate of 15% per annum, which was applicable if

the awarded su was not paid within 120 days. Significantly, this judgment did

not reference the Court's power under Article 142 of the Constitution.

be prescribed by or under any law made by Parliament and, until provision in that behalf is so made,

in such manner as the President may by order prescribe.

(2) Subject to the provisions of any law made in this behalf by Parliament, the Supreme Court shall, as

respects the whole of the territory of India, have all and every power to make any order for the purpose

of securing the attendance of any person, the discovery or production of any documents, or the

investigation or punishment of any contempt of itself.”

15

(2003) 8 SCC 593.

16

(2006) 9 SCC 383.

17

(2019) 11 SCC 465.

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 6 of 61

9. In Oil and Natural Gas Corporation Limited v. Western GECO International

Limited,

18

a three Judge Bench of this Court observed that when an arbitral

tribunal, upon considering the facts presented before it, fails to draw an

inference that ought to have been drawn or, conversely, draws an inference

that is manifestly untenable, resulting in a gross miscarriage of justice, such an

award becomes amenable to challenge. In such circumstances, the award may

be set aside or m g part of the award

is severable or not.

10. Earlier, a two-Judges Bench of this Court in Numaligarh Refinery Ltd. v.

Daelim Industrial Co. Ltd.,

19

held that courts should ordinarily refrain fro

substituting their interpretation for that of the arbitrator. However, where the

parties, with full knowledge, have consented to refer the matter to arbitration,

the court may intervene and m hen it is dem

reasonably justified. For example, when an arbitrator acts without jurisdiction

or adopts an interpretation that is contrary to established law, the court has the

authority to interfere and set the matter right.

11. In an earlier decision of this Court in Tata Hydro-Electric Power Supply Co.

Ltd. and Others v. Union of India,

20

this Court exercised its power to m

the effective date fro which the awarded interest would apply. However,

similar to Numaligarh Refinery Ltd. (supra), this decision did not specifically

address the restricted grounds of Section 34.

18

(2014) 9 SCC 263.

19

(2007) 8 SCC 466.

20

(2003) 4 SCC 172.

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 7 of 61

12. In a catena of judgments of this Court, it has been consistently held that the

arbitral tribunal is the master of evidence. The scope of judicial intervention

under Section 34 is confined to the limited grounds expressly provided

therein.

21

The Court does not possess the power to correct errors of fact,

reconsider costs, or engage in a review of the merits of the arbitral award.

13. In Ssangyong Engineering and Construc tion Company Limited v.

National Highways Authority of India (NHAI),

22

a two-judge bench of this

Court ruled that interference based on public policy violations under Section

34(2)(b)(ii) is limited to the fundamental policy of Indian law. The court cannot

interfere merely because the arbitrator lacked a “judicial approach”.

23

Albeit in

the said case, an issue arose which went beyond the narrow scope of Section

34. The fundamental principle of justice was stated to be violated due to a

unilateral change or addition to the contract by the arbitral tribunal. The Court

emphasized that such changes, made without the affected party’s consent,

cannot be allowed. As a result, the majority award was set aside, along with

the judgments of the Single Judge and the Division Bench of the High Court

that had upheld the award. To ensure full justice, this Court, using its power

under Article 142 of the Constitution, upheld the minority award and the interest

it stipulated.

21

See Maharashtra State Electricity Distribution Company Limited v. Datar Switchgear Limited and

Others, (2018) 3 SCC 133; Parsa Kente Collieries Limited v. Rajasthan Rajya Vidyut Utpadan Nigam

Limited, (2019) 7 SCC 236; and M.P. Power Generation Co. Ltd. v. ANSALDO Energia SpA, (2018)

16 SCC 661.

22

(2019) 15 SCC 131.

23

For domestic awards made in India, an additional ground of interference is available – patent illegality

appearing on the face of the award – in terms of Section 34(2A) of the 1996 Act.

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 8 of 61

14. In Oriental Structural Engineers Private Limited v. State of Kerala,

24

this

Court upheld the award for being in consonance with the contract but

intervened to m . It was observed that the principles laid

down in Secretary, Irrigation Department, Government of Orissa and

Others v. G.C. Roy,

25

for determining the interest rate would be equally

applicable to the 1996 Act. In fact, Section 31(7)(a) of the 1996 Act,

incorporates this principle. Simple interest at the rate of 8% per annu was

directed to be paid on the su left unpaid.

15. In Project Director, National Highways No. 45 E and 220 National

Highways Authority of India v. M. Hakeem and Another,

26

a two-judge

bench of this Court held that Section 34 allows arbitral awards to be set aside

only on the limited grounds specified in sub-sections (2) and (3). When a right

is limited, its enforceability is coterminous with its limited nature, i.e., it can only

be enforced in line with those limitations. As a result, the award can either be

set aside or remanded to the arbitral tribunal. Section 34(4) facilitates such

remand by allowing the court to adjourn the proceedings, and hence providing

the arbitral tribunal a chance to eliminate the grounds for setting it aside. Here

again, the tribunal’s opinion is key in determining whether the grounds for

setting aside have been resolved.

16. The Court also noted that Section 34 is m the UNCITRAL Model

Law on International Comercial Arbitration, 1985,

27

which does not allow

courts to m s. Unlike the broader powers available under the 1940

24

(2021) 6 SCC 150.

25

(1992) 1 SCC 508.

26

(2021) 9 SCC 1.

27

Hereinafter referred to as, “Model Law”.

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 9 of 61

Act, the court’s powers under the 1996 Act are narrower. The Court cited

previous judgments of this Court and various High Courts, emphasizing that

allowing m

as only the legislature has the power to change the law. Any expansion of

Section 34’s powers to include m quire a legislative

amendment.

B. ARGUMENTS RAISED

I. In Favour of Modification

17. First, it is contended that the judgment in M. Hakeem (supra) warrants

reconsideration, as it conflicts with several decisions rendered by Benches of

two and three Judges of this Court, in which awards were m

This Court has also upheld the m

District Courts on other occasions. Second, it is claimed that the Model Law,

based on the United Nations Convention on the Recognition and Enforcement

of Foreign Arbitral Awards, 1958

28

, permits a broader scope of judicial

intervention. Several signatory countries to the Model Law have enacted

provisions for domestic awards that permit m and/or variation

(Annexure B), in addition to allowing for the setting aside of awards. This

international perspective, it is argued, reflects a broader understanding of the

court’s powers in arbitrations. Lastly, the principle that a greater power includes

a lesser power is invoked. Since Section 34 allows for the setting aside of an

28

Hereinafter referred to as, “New York Convention”.

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 10 of 61

award, it is argued that this power inherently includes the ability to m

award, as m

18. Reference is made to Ahmedabad St. Xavier College Society and Another

v. State of Gujarat and Another,

29

where a nine-Judge Bench of this Court

applied the maxim “omne majus continent in se minus” – the greater contains

the lesser. Applying this maxim, it is contended that the power to set aside will

include power to m It is also submitted that

the power to m

is in conflict with public policy in terms of Section 34(2)(b)(ii) or to the extent it

is vitiated by patent illegality in terms of Section 34(2A) of the 1996 Act. This

approach aligns with the jurisprudence of other jurisdictions such as the United

Kingdom, Australia, Singapore, and other countries (Annexure B), where

similar powers are vested in the courts.

19. Three additional and ancillary arguments were raised. The first argument was

that the expression, 'recourse', used in Section 34, is broad in scope, and it

can include any action to enforce a right. Thus, the recourse to set aside an

award includes within its ambit the recourse to m The second

argument relates to the public law aspect of land acquisition under the National

Highways Act, 1956

30

. As this Act mandates arbitration on public law issues, it

is contended that comercial considerations can neither be factored in nor

applied. Further, the court, while examining a petition under Section 34, has

the power to enhance compensation for acquired land. Lastly, it was contended

29

(1974) 1 SCC 717.

30

Hereinafter referred to as, “NHAI Act”.

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 11 of 61

that the power to grant, reduce, or increase interest should be read into Section

34, without requiring the parties to go through a fresh arbitration process. The

granting of interest does not necessitate an elaborate inquiry that would justify

the need for re-arbitration.

II. Against Modification

20. The learned counsel opposing the court’s power of m

Model Law was the result of a collective effort by several countries to establish

a unifor and cohesive legal framework. During discussions, it was decided

that courts should not have the power to m

power, it could result in a situation where a court order or decree replaces the

arbitral award, which in arbitration jurisprudence is unacceptable. It may carry

international repercussions when awards are sought to be enforced under

foreign conventions.

21. For example, under the New York Convention, only arbitral awards are

recognized and enforceable, not court decrees/orders that m

awards. A court decree cannot substitute an arbitral award, especially when

the award is examined under the limited jurisdiction of Section 34. Section 36

treats awards as enforceable in the same way as court decrees. However,

unless Indian law legislatively empowers courts to m this power

cannot be assumed fro the power to set aside an award under Section 34.

While some countries have granted courts the specific power to m

an award under their domestic laws, Indian law does not permit the same.

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 12 of 61

22. It is further submitted that the maxim omne majus continent in se minus – the

greater contains the lesser – should not be applied in the present case. The

power to set aside an award is a sui generis power, which is intrinsically

different fro the m when an award is set aside, it

results in the annulment of the award. Annulment means that the award no

longer exists. Something that does not exist cannot be m

Similarly, it is submitted that the arbitral tribunal after rendering an award,

becomes functus officio. Thus, the exercise of any m , would lead to

the courts adopting appellate powers. Without appellate powers, which the

court does not possess, an award cannot be m . Therefore, assuming

m would be contrary to both the express language and the

intent behind Section 34 of the 1996 Act.

23. Lastly, it is submitted that the doctrine of merger does not apply to court

m . The nature and scope of the power of a

court, being distinct fro an arbitral tribunal, the m

with the arbitral award. In simpler words, any m

the court to the arbitral award would not be subsumed into the arbitral award.

For instance, if the court m

original award will not be deemed to have been amended to reflect this new

interest rate. This could cause issues at the enforcement stage, as the New

York Convention allows only the enforcement of an arbitral award, not a court's

judgment/order.

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 13 of 61

C. ANALYSIS

24. Given this background, we have to determine whether, and under what

circumstances, the courts have the power to m arbitral awards.

25. We recognize that the legal controversy carries significant implications. The

arguments canvassed symbolize the longstanding conflict between equity and

justice, on the one hand, and the fetters imposed by the court’s jurisdictional

limits, on the other. Therefore, in addressing the questions referred, it is crucial

to adopt a balanced approach. While we may favour an equitable and

pragmatic view, our interpretation must not be at odds with the express or

implied legislative intent underlying the 1996 Act. The question therefore is –

to what extent can we weave the principles of equity and justice while not

offending the jurisdictional fabric of Section 34?

26. We begin by examining the scope and ambit of the power of ‘recourse’ under

Section 34 of the 1996 Act.

I. Contours of Section 34, 1996 Act

27. Section 5 of the 1996 Act limits judicial intervention in an arbitral award to what

is authorized by Part I of the Act. Section 34(1) stipulates that ‘recourse’ to a

court against an arbitral award may be made only by an application for setting

aside the award in accordance with Section 34(2) and 34(3).

28. Section 34(2)(a) enumerates specific grounds on which an award can be set

aside. These include – the incapacity of a party, invalidity of an arbitration

agreement in law, improper notice for appointment of an arbitrator or arbitral

proceedings, denying the opportunity to a party to present their case, the award

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 14 of 61

being beyond the scope of submission to arbitration, and the composition of

the arbitral tribunal or the arbitral procedure not being by the agreement of the

parties in certain circumstances. The proviso to Section 34(2)(a)(iv) outlines

the concept of “severability of awards”. This has been addressed separately in

Part II of our Analysis.

29. Section 34(2)(b) stipulates that an arbitral award may be set aside when the

subject matter of the dispute cannot be settled by arbitration per the applicable

law or if the arbitral award conflicts with the public policy of India. Explanation

I clarifies that an award can conflict with public policy of India only if (i) the

award is induced or affected by fraud, corruption or is in violation of Section

75

31

or Section 81

32

of the 1996 Act; (ii) when it is in contravention with the

fundamental policy of Indian law;

33

or (iii) when it conflicts with the m

notions of m Explanation 2 mandates that no review on the

merits shall be undertaken when determining a contravention of the

fundamental policy of Indian law.

31

“75. Confidentiality.— Notwithstanding anything contained in any other law for the time being in

force, the conciliator and the parties shall keep confidential all matters relating to the conciliation

proceedings. Confidentiality shall extend also to the settlement agreement, except where its disclosure

is necessary for purposes of implementation and enforcement.”

32

“81. Admissibility of evidence in other proceedings.— The parties shall not rely on or introduce

as evidence in arbitral or judicial proceedings, whether or not such proceedings relate to the dispute

that is the subject of the conciliation proceedings,—

(a) views expressed or suggestions made by the other party in respect of a possible settlement of the

dispute;

(b) admissions made by the other party in the course of the conciliation proceedings;

(c) proposals made by the conciliator;

(d) the fact that the other party had indicated his willingness to accept a proposal for settlement made

by the conciliator.”

33

In Ssangyong Engineering and Construction Company Limited v. National Highways Authority of

India (NHAI), (2019) 15 SCC 131 the scope of the public policy ground for setting aside awards was

narrowed and confined to violations of the fundamental policy of Indian law.

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 15 of 61

30. Section 34(2-A) stipulates that an award may be set aside when it is vitiated

by patent illegality appearing on the face of the award. The proviso clarifies

that such determination shall not be made solely because there is an

erroneous application of law or through reappreciation of evidence. Section

34(3) provides timelines which needs to be adhered to while filing an

application under Section 34. Section 34(4) stipulates the court’s power of

remanding an award to the arbitral tribunal. We have addressed this remand

power in Part VI of our Analysis. Section 34(5) outlines notice requirements,

while Section 34(6) mandates the expeditious disposal of Section 34

applications, setting a hard outer limit of one year fro the date of service of

notice on the other party under Section 34(5).

31. The next question that arises is whether the power to set aside an award

includes the power to partially set it aside.

II. Severability of Awards

32. In the present controversy, the proviso to Section 34(2)(a)(iv) is particularly

relevant. It states that if the decisions on matters submitted to arbitration can

be separated fro those not submitted, only that part of the arbitral award

which contains decisions on matters non-submitted may be set aside. The

proviso, therefore, permits courts to sever the non-arbitrable portions of an

award fro arbitrable ones. This serves a two-fold purpose. First, it aligns with

Section 16 of the 1996 Act, which affirms the principle of kompetenz-

kompetenz — that is, the arbitrators’ competence to determine their own

jurisdiction. Secondly, it enables the court to sever and preserve the “valid”

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 16 of 61

part(s) of the award while setting aside the “invalid” ones.

34

Indeed, before us,

none of the parties have argued that the court is not empowered to undertake

such a segregation.

33. We hold that the power conferred under the proviso to Section 34(2)(a)(iv) is

clarificatory in nature. The authority to sever the “invalid” portion of an arbitral

award fro the “valid” portion, while remaining within the narrow confines of

Section 34, is inherent in the court’s jurisdiction when setting aside an award.

34. To this extent, the doctrine of omne majus continet in se minus—the greater

power includes the lesser—applies squarely. The authority to set aside an

arbitral award necessarily encompasses the power to set it aside in part, rather

than in its entirety. This interpretation is practical and pragmatic. It would be

incongruous to hold that power to set aside would only mean power to set aside

the award in its entirety and not in part. A contrary interpretation would not

only be inconsistent with the statutory framework but may also result in valid

determinations being unnecessarily nullified.

35. However, we must add a caveat that not all awards can be severed or

segregated into separate silos. Partial setting aside may not be feasible when

the “valid” and “invalid” portions are legally and practically inseparable. In

simpler words, the “valid” and “invalid” portions must not be inter-dependent or

intrinsically intertwined. If they are, the award cannot be set aside in part.

34

The “validity” and “invalidity”, as used here, does not refer to legal validity or merits examination, but

validity in terms of the proviso to Section 34(2)(a)(iv) of the 1996 Act.

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 17 of 61

36. The Privy Council, in Pratap Chamaria v. Durga Prasad Chamaria,

35

addressed this issue with the following pertinent observations:

“…If, however, the pronouncement of the arbitrators is

such that matters beyond the scope of the suit are

inextricably bound up with matters falling within the

purview of the litigation, in that case, the court would be

unable to give effect to the award because of the difficulty

that it cannot determine to what extent the decision of the

subject-matter of the litigation has been affected and

coloured by the decision of the arbitrators in regard to

matters beyond the ambit of the suit….”

Thus, the power of partial setting aside should be exercised only when the valid

and invalid parts of the award can be clearly segregated—particularly in

relation to liability and quantu and without any corelation between valid and

invalid parts.

37. We would now proceed to examine, the permissibility and scope of the court’s

m , within the parameters of Section 34 of the 1996 Act. In

doing so, we will distinguish the court's power of m the

court’s power of setting aside an award; (ii) the arbitrator's power under Section

33 to correct, reinterpret, and/or issue an additional award; and (iii) the power

of the court to remand the award to the arbitrator under Section 34(4).

III. Difference between setting aside and modification

38. This distinction lies at the heart of many arguments canvassed before us. The

parties opposing the recognition a power of m of the courts have

strenuously contended that m and sui

35

AIR 1925 PC 293.

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 18 of 61

generis powers. While modification involves altering specific parts of an award,

setting aside does not alter the award but results in its annulment. Their

primary concern is that recognizing a power of m

interference with the merits of the dispute—something arguably inconsistent

with the framework of the 1996 Act.

39. We agree with this argument, but only to a limited extent. It is true that

m : the former alters

the award, while the latter annuls it.

36

However, we do not concur with the view

that recognizing any m

of the merits of the dispute. It will completely depend on the extent of the

m In the following part of our Analysis,

we outline the contours of this limited power and explain why, in our view,

recognizing it will ultimately yield m

IV. A Limited Power of Modification Can Be Located in Section 34

40. A core principium of arbitration, an Alternative Dispute Resolution

37

mechanism, is to provide a quicker and cost-effective alternative to courtroo

litigation. While this suggests minimal judicial interference, the role of domestic

courts remains crucial, as they function in a supportive capacity to facilitate

36

The words used in the statute must be interpreted contextually, taking into account the purpose,

scope, and background of the provision. Many words and expressions have both narrow and broad

meanings and thereby open to multiple interpretations. Legal interpretation should align with the object

and purpose of the legislation. Therefore, we may not strictly apply a semantic differentiation while

interpreting the words "modification" or "setting aside". Instead, a holistic and purposive interpretation

of these words will be consistent with the intent behind the provision and the 1996 Act. Linguistically

and even jurisprudentially, a distinction can be drawn between the expressions – modification, partial

setting aside, and setting aside of an arbitral award in its entirety. However, we must note that the

practical effect of partially setting aside an award is the modification of the award.

37

Hereinafter referred to as, “ADR”.

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and expedite the resolution of disputes. Therefore, it follows that judicial

intervention is legitimate and necessary when it furthers the ends of justice,

including the resolution of disputes.

41. To deny courts the authority to m —particularly when such a

denial would impose significant hardships, escalate costs, and lead to

unnecessary delays—would defeat the raison d'être of arbitration. This

concern is particularly pronounced in India, where applications under Section

34 and appeals under Section 37 often take years to resolve.

42. Given this background, if we were to decide that courts can only set aside and

not m , then the parties would be compelled to undergo an extra

round of arbitration, adding to the previous four stages: the initial arbitration,

Section 34 (setting aside proceedings), Section 37 (appeal proceedings), and

Article 136 (SLP proceedings). In effect, this interpretation would force the

parties into a new arbitration process merely to affir a decision that could

easily be arrived at by the court. This would render the arbitration process m

cumbersome than even traditional litigation.

43. Equally, Section 34 limits recourse to courts to an application for setting aside

the award. However, Section 34 does not restrict the range of reliefs that the

court can grant, while remaining within the contours of the statute. A different

relief can be fashioned as long as it does not violate the guardrails of the power

provided under Section 34. In other words, the power cannot contradict the

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 20 of 61

essence or language of Section 34. The court would not exercise appellate

power, as envisaged by Order XLI of the Code of Civil Procedure, 1908

38

.

44. We are of the opinion that mification represents a m

power in comparison to the annulment of an award, as the latter entails a m

severe consequence of the award being voided in toto. Read in this manner,

the limited and restricted power of severing an award implies a power of the

court to vary or m

1996 Act, as projected, should be read as a complete prohibition.

45. We are thus of the opinion that the Section 34 court can apply the doctrine of

severability and m

subject to parts of the award being separable, legally and practically, as

stipulated in Part II of our Analysis.

46. Mustill and Boyd have observed that an order varying an award is not

equivalent to an appellate process.

39

The authors suggest that a m

order would only be appropriate where the m , including any

adjustment of costs, follows inevitably fro the tribunal’s determination of a

question of law.

40

This approach would be beneficial, as it would reduce costs

and delays. The courts need not engage in any fact-finding exercise. By

acknowledging the Court’s power to m

rewriting the statute. We hold that the power of judicial review under Section

38

Hereinafter referred to as, “Code”.

39

Sir Michael J. Mustill & Stewart C Boyd QC, Commercial Arbitration, p. 617 (2

nd

ed. 2001).

40

Ibid.

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 21 of 61

34, and the setting aside of an award, should be read as inherently including a

limited power to m confines of Section 34.

V. Court can modify the award despite Sections 33 and 34(4)

47. Section 33 of the 1996 Act (Annexure A) empowers an arbitrator, upon

request, to correct and/or re-interpret the arbitral award, on limited grounds.

This includes the correction of computational, clerical or typographical errors,

as well as giving interpretation on a specific point or a part of the award, when

mutually agreed upon by the parties. Section 33(3) enables the tribunal to suo

moto correct any errors within thirty days of delivering the award. Section 33(4)

grants wider powers. It permits the arbitral tribunal, upon compliance with

specified manner of request, to make an additional award on claims presented

before the arbitral proceedings but omitted fro the arbitral award.

48. Section 33(7) states that Section 31 (Annexure A) shall apply where

correction, interpretation or any addition is made to the arbitral award. Section

31 deals with for and content requirements for arbitral awards. Consequently,

an order passed by the arbitral tribunal under Section 33 am

award. Under Section 34(3), where a request is made under Section 33, the

limitation period for filing an application to set aside the award comences

fro the date on which the arbitral tribunal disposes of the Section 33 request.

49. Notwithstanding Section 33, we affir that a court reviewing an award under

Section 34 possesses the authority to rectify computational, clerical, or

typographical errors, as well as other manifest errors, provided that such

m does not necessitate a merits-based evaluation. There are certain

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 22 of 61

powers inherent to the court, even when not explicitly granted by the

legislature. The scope of these inherent powers depends on the nature of the

provision, whether it pertains to appellate, reference, or limited jurisdiction as

in the case of Section 34. The powers are intrinsically connected as they are

part and parcel of the jurisdiction exercised by the court.

50. In Grindlays Bank Ltd. v. Central Government Industrial Tribunal and

Others,

41

this Court has held that every tribunal or court is endowed with

certain ancillary or incidental powers which are necessary to discharge its

functions effectively for the purpose of doing justice between the parties. In

that case, the simple question was whether an ex parte award passed on

merits, when sought to be set aside by an application showing sufficient cause,

am

procedural review differs fro a review on merits of the dispute. The former is

a power inherent in every court or tribunal and inadvertent errors comitted by

another tribunal can be corrected by the court/tribunal. This would not am

to a review on merits. The reasoning distinguishing between procedural and

merits review is reproduced below:

“The expression “review” is used in the two distinct senses,

namely (1) a procedural review which is either inherent or

implied in a court or Tribunal to set aside a palpably

erroneous order passed under a misapprehension by it,

and (2) a review on merits when the error sought to be

corrected is one of law and is apparent on the face of the

record. It is in the latter sense that the court in Patel Narshi

Thakershi case held that no review lies on merits unless a

statute specifically provides for it. Obviously when a review

is sought due to a procedural defect, the inadvertent error

comitted by the Tribunal must be corrected ex debito

41

1980 Supp SCC 420.

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 23 of 61

justitiae to prevent the abuse of its process, and such

power inheres in every court or Tribunal.”

51. Reference may also be made to the power of recall, which every court

possesses, as recognized by this Court in Budhia Swain and Others v.

Gopinath Deb and Others

42

. The availability of this power enables the court

to address various situations efficiently, rather than remanding the matter to

the arbitral tribunal under Section 34(4). Lastly, one may also refer to the power

of granting interi relief if the circumstances so warrant.

52. The doctrine of implied power is to only effectuate and advance the object of

the legislation, i.e., the 1996 Act and to avoid the hardship. It would, therefore,

be wrong to say that the view expressed by us falls foul of express provisions

of the 1996 Act.

53. Under Section 152 of the Code,

43

a court executing a decree has the power to

correct clerical or arithmetic mistakes in judgments, orders, or decrees arising

fro any accidental slips or omissions. This Court, in Century Textiles

Industries Limited v. Deepak Jain and Another,

44

held that clerical or

arithmetical errors may be corrected by the executing court, however, the court

must take the decree according to its tenor and cannot go behind the decree.

54. In the same vein as these judgments, we hold that inadvertent errors, including

typographical and clerical errors can be m

under Section 34. However, such a power must not be conflated with the

42

(1999) 4 SCC 396.

43

“152. Amendment of judgments, decrees or orders.— Clerical or arithmetical mistakes in

judgments, decrees or orders or errors arising therein from any accidental slip or omission may at any

time be corrected by the Court either of its own motion or on the application of any of the parties.”

44

(2009) 5 SCC 634.

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 24 of 61

appellate jurisdiction of a higher court or the power to review a judgment of a

lower court. The key distinction between Section 33 and Section 34 lies in the

fact that, under Section 34, the court must have no uncertainty or doubt when

m debatable or a doubt arises regarding

its appropriateness, i.e., if the error is not apparent on the face of the record,

the court will be left unable to proceed, its hands bound by the uncertainty. In

such instances, it would be m party to seek recourse

under Section 33 before the tribunal or under Section 34(4).

VI. To Modify or to Remit? Addressing the court’s quandary.

55. As elucidated above, if a fog of uncertainty obscures the exercise of

m m

should avail their remedial power and remand the award to the tribunal under

Section 34(4). Under the sub-section, either party—whether the one

challenging the award under Section 34 or the one defending against such a

challenge—may request the court to adjourn the proceedings for a specified

period. If the court deems it appropriate, it may grant such an adjournment,

allowing the arbitral tribunal to resume proceedings or take necessary

corrective measures to eliminate the grounds for setting aside the award. Thus,

Section 34(4) provides a second opportunity for a party to seek recourse

through arbitral channel.

56. However, the power of remand permits the court only to send the award to the

tribunal for reconsideration of specific aspects. It is not an open-ended

process; rather, it is a limited power, confined to limited circumstances and

issues identified by the court. Upon remand, the arbitral tribunal may proceed

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 25 of 61

in a manner warranted by the situation – including recording additional

evidence, affording a party an opportunity to present its case if previously

denied, or taking any other corrective measures necessary to cure the defect.

In contrast, the exercise of m such

flexibility. Courts must act with certainty when m d – like a

sculptor working with a chisel, needing precision and exactitude. Therefore,

the argument that remand powers make m is

misconceived. They are distinct powers and are to be exercised differently.

57. Section 34(4), derived fro the Model Law, is discretionary in nature. This is

evident fro the use of the word “may” in the provision. The Court may invoke

this power when it identifies a defect in the award that could lead to its setting

aside. In such cases, the court may seek to prevent this outcome by granting

the arbitral tribunal an opportunity to rectify the defect.

58. While it is not appropriate to establish rigid parameters or a straitjacket formula

for the exercise of this power, it is clear that Section 34(4) does not authorize

the arbitral tribunal to rewrite the award on merits or to set it aside. Rather, it

serves as a curative mechanis available to the tribunal when permitted by

the court. The primary objective is to preserve the award if the identified defect

can be cured, thereby avoiding the need to set aside the award. Accordingly,

a court may not grant a remand when the defect in the award is inherently

irreparable. A key consideration is the proportionality between the har

caused by the defect and the means available to remedy it.

59. While exercising this power, the court must also remain mindful that the arbitral

tribunal has already rendered its decision. If the award suffers fro serious

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acts of omission, comission, substantial injustice, or patent illegality, the

same may not be remedied through an order of remand. Clearly, there cannot

be a lack of confidence in the tribunals’ ability to come to a fair and balanced

decision when an order of remit is passed.

60. Thus, an order of remand should not be passed when such order would place

the arbitral tribunal in an invidious or embarrassing position. Additionally,

remand may be inappropriate when it does not serve the interests of the

parties, particularly in time-sensitive matters or where it would lead to undue

costs and inefficiencies. Once an order of remand is granted, the arbitral

tribunal has the authority to vary, correct, review, add to, or m

Notably, under Section 34(4), the tribunal’s powers, though confined, remain

nonetheless substantial. This stands in contrast to the court’s narrow role

under the rest of Section 34.

61. This Court, in Kinnari Mullick and Another v. Ghanshyam Das Damani,

45

referred to and laid down the preconditions for exercising the power of remand

under Section 34(4). It held that the court cannot exercise the power of remand

suo motu in the absence of a written request by one of the parties. Secondly,

once an application under Section 34(1) has been decided and the award set

aside, the court becomes functus officio and cannot thereafter remand the

matter to the arbitral tribunal. Consequently, the power under Section 34(4)

cannot be invoked after the court has disposed of the Section 34(1) application.

45

(2018) 11 SCC 328.

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62. We are unable to accept the view taken in Kinnari Mullick (supra), which

insists that an application or request under Section 34(4) must be made by a

party in writing. The request may be oral. Nevertheless, there should be a

request which is recorded by the court. We are also unable to agree that the

request must be exercised before the application under Section 34(1) is

decided. Section 37 (Annexure A) permits an appeal against any order setting

aside or refusing to set aside an arbitral award under Section 34. To this extent,

the appellate jurisdiction under Section 37 is coterminous with, and as broad

as, the jurisdiction of the court deciding objections under Section 34. Hence,

the contention that the tribunal becomes functus officio after the award is set

aside is misplaced. The Section 37 court still possesses the power of remand

stipulated in Section 34(4). Of course, the appellate court, while exercising

power under Section 37, should be mindful when the award has been upheld

by the Section 34 court. But the Section 37 court still possesses the jurisdiction

to remand the matter to the arbitral tribunal.

63. Our reasoning does not breach the principle of party autonomy.

46

Neither does

it confer appellate powers on the courts. Instead, it adheres strictly to the

parameters stipulated in Sections 34 and 37 of the 1996 Act. The power of the

appellate court in civil proceedings under Order XLI of the Code, is as broad

as that of a trial court, both in terms of facts and law. Contrastingly, the court’s

46

Rather, it acknowledges that the parties opting for arbitration also consent to be governed by the

applicable statute governing arbitration—in this case, the 1996 Act. Further, principle of party

autonomy should not be extended to an extreme to urge that the party misunderstood the law and

consequently the consent is invalid. While it is true that a mistake of law may vitiate consent in certain

contexts, the interpretation here restricts the court's role to that of limited judicial scrutiny in terms of

the 1996 Act.

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authority under Sections 34 and 37 of the 1996 Act is limited by the silhouette

of Section 34.

64. In Dyna Technologies Private Limited v. Crompton Greaves Limited,

47

this

Court emphasized that the issuance of a reasoned award is not a mere

formality under the 1996 Act. For an award to be termed “reasoned”, it must

meet three essential yardsticks: it must be proper, intelligible, and adequate.

The purpose behind Section 34(4) is clear: it allows for an award to become

enforceable after granting the tribunal an opportunity to cure any defects. This

power is exercisable when the arbitral tribunal has failed to give any reasoning

or the award exhibits gaps in reasoning and these defects can be cured,

thereby preventing unnecessary challenges. The underlying intent is to provide

an effective, expeditious foru for addressing curable defects, which Section

34(4) facilitates.

65. In I-Pay Clearing Services Private Limited v. ICICI Bank Limited,

48

this

Court clarified that Section 34(4) does not grant the authority to review or

reconsider previous findings or conclusions. As discussed earlier in this

judgment, the scope of the power under Section 34(4) is not to be restricted to

a rigid, straitjacket formula. Rather, it depends on the specific facts and

circumstances of each case. Being a discretionary power, it is to be exercised

by the Court judiciously, keeping in mind the grounds raised in the application

under Section 34(1). The Court should be prima facie satisfied that the wrong

and illegality in the award are curable. While doing so, the Court need not

47

(2019) 20 SCC 1.

48

(2022) 3 SCC 121.

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 29 of 61

record the final finding on the contentious issue at hand; however, not every

request for such relief is warranted. The discretion must be exercised with

caution, and only when it is evident that an adjournment will allow the arbitral

tribunal to resolve the issues and rem e the

award. However, Section 34(4) is an enabling provision—it does not compel

the tribunal to take corrective action, leaving it free to either amend or refuse

to amend the award.

VII. Doctrine of Merger and the New York Convention

66. The reliance placed on doctrine of merger, coupled with the argument that

court orders partially setting aside or m the

amended award unenforceable under the New York Convention, is unfounded

and must be rejected as misconceived. We are of the view that, once Section

34 is reinterpreted to include a limited power to m

will not affect the international comercial arbitration regime or the

enforcement of foreign awards.

67. Section 48 of the 1996 Act (Annexure A), which is similarly worded as Article

V of the New York Convention, delineates situations when the enforcement of

a foreign award may be refused. Section 48(1)(e) states the award may not be

enforced when it has not become binding on the parties or has been set aside

or suspended by a competent authority of the country in which, or under the

law of which, that award was made. In simpler words, the award must become

“binding on the parties” in terms of the law of the seat before enforcement.

Sub-clause (e) therefore recognizes that, for enforcement, the domestic law of

the country where the award is made shall prevail and have supremacy. Thus,

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this Court’s interpretation, reading m

not be at loggerheads with the New York Convention. The Convention requires

the enforcement court to consider whether an award has become binding in

terms of the law of the seat.

68. In any case, the New York Convention, as explained by this Court in Brace

Transport Corporation of Monrovia, Bermuda v. Orient Middle East Lines

Limited, Saudi Arabia and Others,

49

speaks of “recognition and enforcement”

of an award. An award may be recognized without being enforced; but if it is

enforced, then it is necessarily recognized. Recognition may act as a shield

against re-agitation of issues which the award deals with. A party successful in

arbitration, may seek and rely upon recognition, if proceedings are brought

against hi on issues already dealt with by an award. A defensive shield is

then erected on the award.

69. Based on the above discussion, the argument that several countries like

Singapore, Kenya, and the United Kingdom (Annexure B) – though originally

following the Model Law – now allow courts to m d in limited

cases, while the 1996 Act does not, is only linguistically correct. However, it is

not convincing jurisprudentially or in principle. The limited power under Section

34 allows the court to vary or m . The effect thereof is that the

award would be read as m by the judgment/order.

49

1995 Supp (2) SCC 280.

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VIII. NHAI Act – Expansive Modification of Arbitral Awards is Impermissible

70. It has been argued that Section 34 should be expansively interpreted to permit

m under the NHAI Act. In particular, it is suggested that

courts should be allowed to m quantu of compensation awarded, as

the Act involves statutory arbitration. This argument is, however, untenable.

The jurisdiction conferred under Section 34 does not distinguish between

statutory and non-statutory arbitration in terms of the scope of courts’ power of

review. Hence, this argument stands rejected.

71. We refrain fro expressing any opinion on the validity of the provisions under

the NHAI Act, which is presently under judicial consideration in a separate writ

petition. Neither do we adjudicate upon whether or in what manner awards

issued by statutory authorities may be challenged.

IX. Post-Award Interest

72. The next question that arises is: do courts possess the power to declare or

modify interest, especially post award interest? In respect of pendente lite

interest, Section 31(7)(a) (Annexure A), states that unless otherwise agreed

by the parties, the arbitral tribunal may include in its su for the award, interest,

at such rate it deems reasonable on whole or part of the m

part of the period on which the cause of action arose and the date on which

the award is made. In respect of post-award interest, Section 31(7)(b)

(Annexure A) states that unless an award provides for interest on a su

directed to be paid by it, the su will carry an interest at a 2% higher rate than

the current rate of interest prevalent on the date of the award, fro the date of

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the award till the date of payment. The explanation defines the expression

‘current rate of interest’.

73. There can be instances of violation of Section 31(7)(a), and the pendente lite

interest awarded may be contrary to the contractual provision. We are of the

opinion that, in such cases, the court while examining objections under Section

34 of the 1996 Act will have two options. First is to set aside the rate of interest

or second, recourse may be had to the powers of remand under Section 34(4).

74. For the post award interest in terms of Section 31(7)(b), the courts will retain

the power to m This

is why the standard rate stipulated in clause (b) applies when the award itself

does not specify the applicable post award interest. There can be a situation

where the party to be paid m is guilty of delay which may

require a m in the rate of interest. In the absence of grant of post

award interest in the award, the court also possesses the power to grant post

award interest. Clearly, as per the legislative mandate, it is not the sole

prerogative of the arbitrator.

75. Compare Section 31 of the 1996 Act with Section 31 of the Model Law. While

both sections are titled similarly – “For and Contents of Award” – only the

1996 Act addresses interest in Section 31(7). The Model Law does not provide

standards governing the determination of interest rates. Thus, Section 31(7) is

a unique creation of the Indian legislature. It was not borrowed fro the Model

Law. Specifically, under Section 31(7)(b), the legislature has established a

standard rate of interest to guide the arbitrator’s discretion when it comes to

determining the post-award interest rate. While the arbitrator retains his

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flexibility based on facts and circumstances of the case, the standard set by

the legislature must weigh in on their consideration. Further, as there is a

standard prescribed by the legislature, the post-award interest awarded can be

scrutinized by courts against the standards prescribed.

76. Our reasoning is bolstered when considering the practical aspects. Arbitral

tribunals, when determining post-award interest, cannot foresee future issues

that may arise. Post award interest is inherently future-oriented and depends

on facts and circumstances that unfold after the award is issued. Since the

future is unpredictable and unknown to the arbitrator at the time of the award,

it would be unreasonable to suggest that the arbitrator, as a soothsayer, could

have anticipated or predicted future events with certainty. Therefore, it is

appropriate for the Section 34 court to have the authority to intervene and

m -award interest if the facts and circumstances justify such a

change.

77. Inherent in the discussion above, is the court's power to both increase or

decrease the post-award interest rate. It would be incorrect to state that the

court's power to interfere with this interest rate is limited solely to decreasing

the interest rate. Situations may arise where the rate should be increased due

to delays or obstructions in the execution of the award. Interest rates may also

fluctuate over time.

78. However, the court, while exercising this power, must be cautious and mindful

not to overstep its role by altering the interest rate unless there are compelling

and well-founded reasons to do so. In exercising this power, the court is not

acting in an appellate capacity, but rather under limited authority. For instance,

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the 1996 Act stipulates a standard post-award interest rate. When the statute

itself benchmarks a standard, unless there are special and specific reasons,

the rate of interest stipulated by the statute should be applied.

79. Nevertheless, this limited power is significant, as it can help avoid further

rounds of litigation. Without it, the court may be forced to set aside the entire

award or order a fresh round of arbitration because of an erroneous interest

rate rather than simply adjusting this rate.

X. Post-Award Settlements

80. We are also of the opinion that the parties are entitled to enter into an

agreement or settlement even after an award is pronounced. Such a settlement

should be in accordance with the provisions of Order XXIII of the Code. The

law of the land does not bar the parties fro entering into a post award or post

decree settlement. The only legal requirement is that such settlement must be

verifiable and in accordance with law i.e., the settlement is not a result of undue

influence, force, fraud, coercion, etc.

XI. Limitation Period – Section 34

81. This brings us to Section 43(4) (Annexure A) of the 1996 Act. It clarifies the

legal position re limitation and setting aside. For context, once an award is set

aside, it becomes null and void, but the original dispute may still require

resolution. The 1996 Act, vide Section 43(4), enables the parties to initiate

fresh arbitration or court proceedings in relation to the dispute. However, the

question that arises is: how do we calculate the limitation period within which

the fresh arbitration or court proceedings are to be commenced? Section 43(4)

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stipulates that the period between the comencement of arbitration and the

Court’s order setting aside the award is excluded for the purposes of

calculating the limitation period under the Limitation Act, 1963. In essence, the

time during which the award is in force is not counted. We are also cognizant

that there could be a situation that, on setting aside of the award, the entire

dispute gets resolved and decided. However, we need not go into this question.

What is relevant is that Section 43(4) provides liberty for the parties to invoke

either arbitration or court proceedings, as applicable, following the annulment

of the award.

XII. Supreme Court’s Power to Do Complete Justice

82. As far as the applicability of Article 142 of the Constitution is concerned, this

power is to be exercised by this Court with great care and caution. Article 142

enables the Court to do complete justice in any cause or matter pending before

it. The exercise of this power has to be in consonance with the fundamental

principles and objectives behind the 1996 Act and not in derogation or in

suppression thereof.

83. In Shilpa Sailesh v. Varun Sreenivasan,

50

a Constitution Bench of this Court

sumarized the scope of its power under Article 142 of the Constitution as

follows:

“19. Given the aforesaid background and judgments of this

Court, the plenary and conscientious power conferred on

this Court under Article 142(1) of the Constitution of India,

seemingly unhindered, is tempered or bounded by

restraint, which must be exercised based on fundamental

considerations of general and specific public policy.

Fundamental general conditions of public policy refer to

50

(2023) 14 SCC 231.

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 36 of 61

the fundamental rights, secularism, federalism, and other

basic features of the Constitution of India. Specific public

policy should be understood as some express pre-eminent

prohibition in any substantive law, and not stipulations and

requirements to a particular statutory scheme. It should

not contravene a fundamental and non-derogable principle

at the core of the statute. Even in the strictest sense, it was

never doubted or debated that this Court is empowered

under Article 142(1) of the Constitution of India to do

“complete justice” without being bound by the relevant

provisions of procedure, if it is satisfied that the departure

fro the said procedure is necessary to do “complete

justice” between the parties.”

84. While exercising power under Article 142, this Court must be conscious of the

aforesaid dictum. In our opinion, the power should not be exercised where the

effect of the order passed by the court would be to rewrite the award or m

the award on merits. However, the power can be exercised where it is required

and necessary to bring the litigation or dispute to an end. Not only would this

end protracted litigation, but it would also save parties’ m and time.

CONCLUSIONS

85. Accordingly, the questions of law referred to by Gayatri Balasamy (supra) are

answered by stating that the Court has a limited power under Sections 34 and

37 of the 1996 Act to m . This limited power may be

exercised under the following circumstances:

I. when the award is severable, by severing the “invalid” portion from the

“valid” portion of the award, as held in Part II of our Analysis.

II. by correcting any clerical, computational or typographical errors which

appear erroneous on the face of the record, as held in Part IV and V of

our Analysis;

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III. post award interest may be m in some circumstances as held in

Part IX of our Analysis; and/or

IV. Article 142 of the Constitution applies, albeit, the power must be exercised

with great care and caution and within the limits of the constitutional

power as outlined in Part XII of our Analysis.

…….......................................CJI.

(SANJIV KHANNA)

…….…......................................J.

(B.R. GAVAI)

…….…......................................J.

(SANJAY KUMAR)

…….…......................................J.

(AUGUSTINE GEORGE MASIH)

NEW DELHI;

APRIL 30, 2025.

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 38 of 61

ANNEXURE - A

“5. Extent of judicial intervention.— Notwithstanding anything

contained in any other law for the time being in force, in matters

governed by this Part, no judicial authority shall intervene except

where so provided in this Part.

31. Form and contents of arbitral award.—(1) An arbitral award

shall be made in writing and shall be signed by the members of

the arbitral tribunal.

(2) For the purposes of sub-section (1), in arbitral proceedings

with m

the members of the arbitral tribunal shall be sufficient so long as

the reason for any omitted signature is stated.

(3) The arbitral award shall state the reasons upon which it is

based, unless—

(a) the parties have agreed that no reasons are to be given; or

(b) the award is an arbitral award on agreed terms under Section

30.

(4) The arbitral award shall state its date and the place of

arbitration as determined in accordance with Section 20 and the

award shall be deemed to have been made at that place.

(5) After the arbitral award is made, a signed copy shall be

delivered to each party.

(6) The arbitral tribunal may, at any time during the arbitral

proceedings, make an interi arbitral award on any matter with

respect to which it may make a final arbitral award.

(7)(a) Unless otherwise agreed by the parties, where and in so

far as an arbitral award is for the payment of m

tribunal may include in the su for which the award is made

interest, at such rate as it deems reasonable, on the whole or any

part of the m iod between

the date on which the cause of action arose and the date on which

the award is made.

(b) A su directed to be paid by an arbitral award shall, unless

the award otherwise directs, carry interest at the rate of two per

cent higher than the current rate of interest prevalent on the date

of award, fro the date of award to the date of payment.

Explanation.—The expression “current rate of interest” shall have

the same meaning as assigned to it under clause (b) of

Section 2 of the Interest Act, 1978 (14 of 1978).

(8) The costs of an arbitration shall be fixed by the arbitral tribunal

in accordance with Section 31-A.

33. Correction and interpretation of award; additional

award.— (1) Within thirty days fro the receipt of the arbitral

award, unless another period of time has been agreed upon by

the parties—

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(a) a party, with notice to the other party, may request the

arbitral tribunal to correct any computation errors, any

clerical or typographical errors or any other errors of a

similar nature occurring in the award;

(b) if so agreed by the parties, a party, with notice to the other

party, may request the arbitral tribunal to give an

interpretation of a specific point or part of the award.

(2) If the arbitral tribunal considers the request made under sub-

section (1) to be justified, it shall make the correction or give the

interpretation within thirty days fro the receipt of the request and

the interpretation shall for part of the arbitral award.

(3) The arbitral tribunal may correct any error of the type referred

to in clause (a) of sub-section (1), on its own initiative, within thirty

days fro the date of the arbitral award.

(4) Unless otherwise agreed by the parties, a party with notice to

the other party, may request, within thirty days fro the receipt of

the arbitral award, the arbitral tribunal to make an additional

arbitral award as to claims presented in the arbitral proceedings

but omitted fro the arbitral award.

(5) If the arbitral tribunal considers the request made under sub-

section (4) to be justified, it shall make the additional arbitral

award within sixty days fro the receipt of such request.

(6) The arbitral tribunal may extend, if necessary, the period of

time within which it shall make a correction, give an interpretation

or make an additional arbitral award under sub-section (2) or sub-

section (5).

(7) Section 31 shall apply to a correction or interpretation of the

arbitral award or to an additional arbitral award made under this

section.

34. Application for setting aside arbitral award.— (1)

Recourse to a Court against an arbitral award may be made only

by an application for setting aside such award in accordance with

sub-section (2) and sub-section (3).

(2) An arbitral award may be set aside by the Court only if—

(a) the party making the application establishes on the basis of

the record of the arbitral tribunal that—

(i) a party was under some incapacity; or

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(ii) the arbitration agreement is not valid under the law to

which the parties have subjected it or, failing any

indication thereon, under the law for the time being in

force; or

(iii) the party making the application was not given proper

notice of the appointment of an arbitrator or of the

arbitral proceedings or was otherwise unable to present

his case; or

(iv) the arbitral award deals with a dispute not contemplated

by or not falling within the terms of the submission to

arbitration, or it contains decisions on matters beyond

the scope of the submission to arbitration:

Provided that, if the decisions on matters submitted to

arbitration can be separated fro those not so

submitted, only that part of the arbitral award which

contains decisions on matters not submitted to

arbitration may be set aside; or

(v) the composition of the arbitral tribunal or the arbitral

procedure was not in accordance with the agreement of

the parties, unless such agreement was in conflict with

a provision of this Part fro which the parties cannot

derogate, or, failing such agreement, was not in

accordance with this Part; or

(b) the Court finds that—

(i) the subject-matter of the dispute is not capable of

settlement by arbitration under the law for the time

being in force, or

(ii) the arbitral award is in conflict with the public policy of

India.

[Explanation 1.— For the avoidance of any doubt, it is clarified

that an award is in conflict with the public policy of India, only if,—

(i) the making of the award was induced or affected by fraud or

corruption or was in violation of Section 75 or Section 81; or

(ii) it is in contravention with the fundamental policy of Indian law;

or

(iii) it is in conflict with the m

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Explanation 2.— For the avoidance of doubt, the test as to

whether there is a contravention with the fundamental policy of

Indian law shall not entail a review on the merits of the dispute.

[(2-A) An arbitral award arising out of arbitrations other than

international comercial arbitrations, may also be set aside by

the Court, if the Court finds that the award is vitiated by patent

illegality appearing on the face of the award:

Provided that an award shall not be set aside merely on the

ground of an erroneous application of the law or by reappreciation

of evidence.

(3) An application for setting aside may not be made after three

m

that application had received the arbitral award or, if a request

had been made under Section 33, fro the date on which that

request had been disposed of by the arbitral tribunal:

Provided that if the Court is satisfied that the applicant was

prevented by sufficient cause fro making the application within

the said period of three m

within a further period of thirty days, but not thereafter.

(4) On receipt of an application under sub-section (1), the Court

may, where it is appropriate and it is so requested by a party,

adjourn the proceedings for a period of time determined by it in

order to give the arbitral tribunal an opportunity to resume the

arbitral proceedings or to take such other action as in the opinion

of arbitral tribunal will eliminate the grounds for setting aside the

arbitral award.

(5) An application under this section shall be filed by a party only

after issuing a prior notice to the other party and such application

shall be accompanied by an affidavit by the applicant endorsing

compliance with the said requirement.

(6) An application under this section shall be disposed of

expeditiously, and in any event, within a period of one year fro

the date on which the notice referred to in sub-section (5) is

served upon the other party.

37. Appealable orders.— (1) Notwithstanding anything

contained in any other law for the time being in force, an appeal

shall lie fro the following orders (and fro no others) to the

Court authorised by law to hear appeals fro original decrees of

the Court passing the order, namely:—

(a) refusing to refer the parties to arbitration under Section 8;

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(b) granting or refusing to grant any measure under Section 9;

(c) setting aside or refusing to set aside an arbitral award under

Section 34.

(2) Appeal shall also lie to a court fro an order of the arbitral

tribunal—

(a) accepting the plea referred to in sub-section (2) or sub-section

(3) of Section 16; or

(b) granting or refusing to grant an interi measure under Section

17.

(3) No second appeal shall lie fro an order passed in appeal

under this section, but nothing in this section shall affect or take

away any right to appeal to the Supreme Court.

43. Limitations.— (1) The Limitation Act, 1963 (36 of 1963), shall

apply to arbitrations as it applies to proceedings in court.

(2) For the purposes of this section and the Limitation Act, 1963

(36 of 1963), an arbitration shall be deemed to have comenced

on the date referred in Section 21.

(3) Where an arbitration agreement to submit future disputes to

arbitration provides that any clai to which the agreement applies

shall be barred unless some step to comence arbitral

proceedings is taken within a time fixed by the agreement, and a

dispute arises to which the agreement applies, the Court, if it is

of opinion that in the circumstances of the case undue hardship

would otherwise be caused, and notwithstanding that the time so

fixed has expired, may on such terms, if any, as the justice of the

case may require, extend the time for such period as it thinks

proper.

(4) Where the Court orders that an arbitral award be set aside,

the period between the comencement of the arbitration and the

date of the order of the Court shall be excluded in computing the

time prescribed by the Limitation Act, 1963 (36 of 1963), for the

comencement of the proceedings (including arbitration) with

respect to the dispute so submitted.

48. Conditions for enforcement of foreign awards.— (1)

Enforcement of a foreign award may be refused, at the request

of the party against who it is invoked, only if that party furnishes

to the Court proof that—

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(a) the parties to the agreement referred to in Section 44 were,

under the law applicable to them, under some incapacity, or the

said agreement is not valid under the law to which the parties

have subjected it or, failing any indication thereon, under the law

of the country where the award was made; or

(b) the party against who the award is invoked was not given

proper notice of the appointment of the arbitrator or of the arbitral

proceedings or was otherwise unable to present his case; or

(c) the award deals with a difference not contemplated by or not

falling within the terms of the submission to arbitration, or it

contains decisions on matters beyond the scope of the

submission to arbitration:

Provided that, if the decisions on matters submitted to arbitration

can be separated fro those not so submitted, that part of the

award which contains decisions on matters submitted to

arbitration may be enforced; or

(d) the composition of the arbitral authority or the arbitral

procedure was not in accordance with the agreement of the

parties, or, failing such agreement, was not in accordance with

the law of the country where the arbitration took place; or

(e) the award has not yet become binding on the parties, or has

been set aside or suspended by a competent authority of the

country in which, or under the law of which, that award was made.

(2) Enforcement of an arbitral award may also be refused if the

Court finds that—

(a) the subject-matter of the difference is not capable of

settlement by arbitration under the law of India; or

(b) the enforcement of the award would be contrary to the public

policy of India.

Explanation 1.—For the avoidance of any doubt, it is clarified that

an award is in conflict with the public policy of India, only if,—

(i) the making of the award was induced or affected by fraud or

corruption or was in violation of Section 75 or Section 81; or

(ii) it is in contravention with the fundamental policy of Indian law;

or

(iii) it is in conflict with the m

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Explanation 2.—For the avoidance of doubt, the test as to

whether there is a contravention with the fundamental policy of

Indian law shall not entail a review on the merits of the dispute.]

(3) If an application for the setting aside or suspension of the

award has been made to a competent authority referred to in

clause (e) of sub-section (1) the Court may, if it considers it

proper, adjourn the decision on the enforcement of the award and

may also, on the application of the party claiming enforcement of

the award, order the other party to give suitable security.”

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ANNEXURE - B

S. NO. COUNTRY RELEVANT PROVISION

1. Singapore Sections 47 and 49 of the Singapore Arbitration Act, 2001

47. No judicial review of award

The Court does not have jurisdiction to confirm, vary, set aside or remit

an award on an arbitration agreement except where so provided in this

Act.

49. Appeal against award

(1) A party to arbitral proceedings may (upon notice to the other parties

and to the arbitral tribunal) appeal to the Court on a question of law arising

out of an award made in the proceedings.

(2) Despite subsection (1), the parties may agree to exclude the

jurisdiction of the Court under this section and an agreement to dispense

with reasons for the arbitral tribunal’s award is to be treated as an

agreement to exclude the jurisdiction of the Court under this section.

(3) An appeal must not be brought under this section except —

(a) with the agreement of all the other parties to the proceedings;

or

(b) with the permission of the Court.

(4) The right to appeal under this section is subject to the restrictions in

section 50.

(5) Permission to appeal is to be given only if the Court is satisfied that —

(a) the determination of the question will substantially affect the

rights of one or m

(b) the question is one which the arbitral tribunal was asked to

determine;

(c) on the basis of the findings of fact in the award—

(i) the decision of the arbitral tribunal on the question is

obviously wrong; or

(ii) the question is one of general public importance and

the decision of the arbitral tribunal is at least open to

serious doubt; and

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(d) Despite the agreement of the parties to resolve the matter by

arbitration, it is just and proper in all the circumstances for the

Court to determine the question.

(6) An application for permission to appeal under this section must identify

the question of law to be determined and state the grounds on which it is

alleged that permission to appeal should be granted.

(7) The permission of the appellate court is required for any appeal fro

a decision of the Court under this section to grant or refuse permission to

appeal.

(8) On an appeal under this section, the Court may by order —

(a) confirm the award;

(b) vary the award;

(c) remit the award to the arbitral tribunal, in whole or in part,

for reconsideration in the light of the Court’s determination;

or (d) set aside the award in whole or in part.

(9) The Court is not to exercise its power to set aside an award, in whole

or in part, unless it is satisfied that it would be inappropriate to remit the

matters in question to the arbitral tribunal for reconsideration.

(10) The decision of the Court on an appeal under this section is to be

treated as a judgment of the Court for the purposes of an appeal to the

appellate court.

(11) The appellate court may give permission to appeal against the

decision of the Court in subsection (10) only if the question of law before

it is one of general importance, or one which for some other special

reason should be considered by the appellate court.

2. United

Kingdom

Section 30, 67(3), 68 and 69(7) of the Arbitration Act, 1996

30. Competence of tribunal to rule on its own jurisdiction.

(1) Unless otherwise agreed by the parties, the arbitral tribunal may rule

on its own substantive jurisdiction, that is, as to—

(a)whether there is a valid arbitration agreement,

(b) whether the tribunal is properly constituted, and

(c) what matters have been submitted to arbitration in accordance

with the arbitration agreement.

(2) Any such ruling may be challenged by any available arbitral process

of appeal or review or in accordance with the provisions of this Part.

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67. Challenging the award: substantive jurisdiction.

(1) A party to arbitral proceedings may (upon notice to the other parties

and to the tribunal) apply to the court—

(a) challenging any award of the arbitral tribunal as to its

substantive jurisdiction; or

(b) for an order declaring an award made by the tribunal on the

merits to be of no effect, in whole or in part, because the tribunal

did not have substantive jurisdiction.

A party may lose the right to object (see section 73) and the right to apply

is subject to the restrictions in section 70(2) and (3).

(2) The arbitral tribunal may continue the arbitral proceedings and make

a further award while an application to the court under this section is

pending in relation to an award as to jurisdiction.

(3) On an application under this section challenging an award of the

arbitral tribunal as to its substantive jurisdiction, the court may by

order—

(a) confirm the award

(b) vary the award, or

(c) set aside the award in whole or in part.

(4) The leave of the court is required for any appeal fro a decision of the

court under this section.

68. Court may set aside award

(1) A party to arbitral proceedings may (upon notice to the other

parties and to the tribunal) apply to the court challenging an award

in the proceedings on the ground of serious irregularity affecting

the tribunal, the proceedings or the award.

A party may lose the right to object (see section 73) and the right to

apply is subject to the restrictions in section 70(2) and (3).

(2) Serious irregularity means an irregularity of one or m

following kinds which the court considers has caused or will cause

substantial injustice to the applicant—

(a) failure by the tribunal to comply with section 33 (general duty of

tribunal);

(b) the tribunal exceeding its powers (otherwise than by exceeding

its substantive jurisdiction: see section 67);

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(c) failure by the tribunal to conduct the proceedings in accordance

with the procedure agreed by the parties;

(d) failure by the tribunal to deal with all the issues that were put to

it;

(e) any arbitral or other institution or person vested by the parties

with powers in relation to the proceedings or the award exceeding

its powers;

(f) uncertainty or ambiguity as to the effect of the award;

(g) the award being obtained by fraud or the award or the way in

which it was procured being contrary to public policy;

(h) failure to comply with the requirements as to the for of the

award; or

(i) any irregularity in the conduct of the proceedings or in the award

which is admitted by the tribunal or by any arbitral or other

institution or person vested by the parties with powers in relation

to the proceedings or the award.

(3) If there is shown to be serious irregularity affecting the tribunal, the

proceedings or the award, the court may—

(a) remit the award to the tribunal, in whole or in part, for

reconsideration,

(b) set the award aside in whole or in part, or

(c) declare the award to be of no effect, in whole or in part. The

court shall not exercise its power to set aside or to declare an

award to be of no effect, in whole or in part, unless it is satisfied

that it would be inappropriate to remit the matters in question to the

tribunal for reconsideration.

(4) The leave of the court is required for any appeal fro a decision of the

court under this section.

69 Appeal on point of law

(1) Unless otherwise agreed by the parties, a party to arbitral

proceedings may (upon notice to the other parties and to the

tribunal) appeal to the court on a question of law arising out of an

award made in the proceedings.

An agreement to dispense with reasons for the tribunal’s award

shall be considered an agreement to exclude the court’s

jurisdiction under this section.

(2) An appeal shall not be brought under this section

except—

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(a) with the agreement of all the other parties to the proceedings,

or

(b) with the leave of the court.

The right to appeal is also subject to the restrictions in section 70(2) and

(3).

(3) Leave to appeal shall be given only if the court is satisfied—

(a) that the determination of the question will substantially affect

the rights of one or m

(b) that the question is one which the tribunal was asked to

determine,

(c) that, on the basis of the findings of fact in the award—

(i) the decision of the tribunal on the question is obviously

wrong, or

(ii) the question is one of general public importance and the

decision of the tribunal is at least open to serious doubt, and

(d) that, despite the agreement of the parties to resolve the matter

by arbitration, it is just and proper in all the circumstances for the

court to determine the question.

(4) An application for leave to appeal under this section shall identify the

question of law to be determined and state the grounds on which it is

alleged that leave to appeal should be granted.

(5) The court shall determine an application for leave to appeal under this

section without a hearing unless it appears to the court that a hearing is

required.

(6) The leave of the court is required for any appeal fro a decision of the

court under this section to grant or refuse leave to appeal.

(7) On an appeal under this section the court may by order—

(a) confirm the award,

(b) vary the award,

(c) remit the award to the tribunal, in whole or in part, for

reconsideration in the light of the court’s determination, or

(d) set aside the award in whole or in part.

The court shall not exercise its power to set aside an award, in whole

or in part, unless it is satisfied that it would be inappropriate to remit

the matters in question to the tribunal for reconsideration.

(8) The decision of the court on an appeal under this section shall be

treated as a judgment of the court for the purposes of a further appeal.

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But no such appeal lies without the leave of the court which shall not be

given unless the court considers that the question is one of general

importance or is one which for some other special reason should be

considered by the Court of Appeal.

3. United

States of

America

Section 10 and 11 of the Federal Arbitration Act, 1925

Section 10. Same; vacation; grounds; rehearing

(a) In any of the following cases the United States court in and for the

district wherein the award was made may make an order vacating the

award upon the application of any party to the arbitration

(1) Where the award was procured by corruption, fraud, or undue

means.

(2) Where there was evident partiality or corruption in the

arbitrators, or either of them.

(3) Where the arbitrators were guilty of misconduct in refusing to

postpone the hearing, upon sufficient cause shown, or in refusing

to hear evidence pertinent and material to the controversy; or of

any other misbehavior by which the rights of any party have been

prejudiced.

(4) Where the arbitrators exceeded their powers, or so imperfectly

executed the that a mutual, final, and definite award upon the

subject matter submitted was not made.

(5) Where an award is vacated and the time within which the

agreement required the award to be made has not expired the

court may, in its discretion, direct a rehearing by the arbitrators.

(b) The United States district court for the district wherein an award was

made that was 6(10) issued pursuant to section 590 of title 5 may

make an order vacating the award upon the application of a person,

other than a party to the arbitration, who is adversely affected or

aggrieved by the award, if the use of arbitration or the award is clearly

inconsistent with the factors set forth in section 582 of Title 5.

Section 11. Same; modification or correction; grounds; order

In either of the following cases the United States court in and for the

district wherein the award was made may make an order modifying

or correcting the award upon the application of any party to the

arbitration

(a) Where there was an evident material miscalculation of

figures or an evident material mistake in the description of

any person, thing, or property referred to in the award.

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(b) Where the arbitrators have awarded upon a matter not

submitted to them, unless it is a matter not affecting the

merits of the decision upon the matter submitted.

(c) Where the award is imperfect in matter of form not

affecting the merits of the controversy.

The order may modify and correct the award, so as to effect the

intent thereof and promote justice between the parties.

4. France Article 1502 of Code of Civil Procedure

Article 1502

Application for revision of an arbitral award may be made in the

circumstances provided in Article 595 for court judgments, and under the

conditions set forth in Articles 594, 596, 597 and 601 through 603.

Application shall be made to the arbitral tribunal. However, if the arbitral

tribunal cannot be reconvened, application shall be made to the Court of

Appeal which would have had jurisdiction to hear other forms of recourse

against the award.

Article 595

An application for revision of a judgment may be made only where:

1. it comes to light, after the judgment is handed down, that it was

obtained fraudulently by the party in whose favour it was rendered;

2. decisive evidence that had been withheld by another party is

recovered after the judgment was handed down;

3. the judgment is based on documents that have since been

proven or have been held by a court to be false;

4. the judgment is based on affidavits, testim

have been held by a court to be false.

In all four cases, an application for revision shall be admissible only where

the applicant was not able, through no fault of his or her own, to raise

such objection before the judgment became res judicata.

5. Australia Section 34A of the Commercial Arbitration Act, 2017

(Australian Capital Territory)

34A Appeals against awards

(1) An appeal lies to the court on a question of law arising out of an award

if—

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(a) the parties agree, before the end of the appeal period referred

to in subsection (6), that an appeal may be made under this

section; and

(b) the court grants leave.

(2) An appeal under this section may be brought by any of the parties to

an arbitration agreement.

(3) The court must not grant leave unless it is satisfied—

(a)the determination of the question will substantially affect the

rights of 1 or m

(b)the question is one which the arbitral tribunal was asked to

determine; and

(c)on the basis of the findings of fact in the award—

(i) the decision of the tribunal on the question is obviously

wrong; or

(ii) the question is one of general public importance and the

decision of the tribunal is at least open to serious doubt; and

(d) despite the agreement of the parties to resolve the matter by

arbitration, it is just and proper in all the circumstances for the court

to determine the question.

(4) An application for leave to appeal must identify the question of law to

be determined and state the grounds on which it is alleged that leave to

appeal should be granted.

(5) The court is to determine an application for leave to appeal without a

hearing unless it appears to the court that a hearing is required.

(6) An appeal may not be made under this section after 3 m

elapsed fro the date on which the party making the appeal received the

award or, if a request had been made under section 33, fro the date on

which that request had been disposed of by the arbitral tribunal (in this

section referred to as the appeal period).

(7) On the determination of an appeal under this section the court

may by order—

(a) confirm the award; or

(b) vary the award; or

(c) remit the award, together with the court’s opinion on

the question of law which was the subject of the appeal,

to the arbitrator for reconsideration or, where a new

arbitrator has been appointed, to that arbitrator for

consideration; or

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(d) set aside the award in whole or in part.

(8) The court must not exercise its power to set aside an award, in whole

or in part, unless it is satisfied that it would be inappropriate to remit the

matters in question to the arbitral tribunal for reconsideration.

(9) Where the award is remitted under subsection (7) (c) the arbitrator

must, unless the order otherwise directs, make the award within 3 m

after the date of the order.

(10) The court may make any leave which it grants under subsection (3)

(c) subject to the applicant complying with any conditions it considers

appropriate.

(11) Where the award of an arbitrator is varied on an appeal under this

section, the award as varied has effect (except for this section) as if it

were the award of the arbitrator.

6. New

Zealand

Section 5 and 6 of Schedule 2 (Additional optional rules

applying to arbitration), Arbitration Act, 1996

5. Appeals on questions of law

(1) Notwithstanding anything in articles 5 or 34 of Schedule 1, any party

may appeal to the High Court on any question of law arising out of an

award—

(a) if the parties have so agreed before the making of that award;

or

(b) with the consent of every other party given after the making of

that award; or

(c) with the leave of the High Court.

(2) The High Court shall not grant leave under subclause (1)(c) unless it

considers that, having regard to all the circumstances, the determination

of the question of law concerned could substantially affect the rights of 1

or m

(3) The High Court may grant leave under subclause (1)(c) on such

conditions as it sees fit.

(4) On the determination of an appeal under this clause, the High

Court may, by order,—

(a) confirm, vary, or set aside the award; or

(b) remit the award, together with the High Court’s opinion on

the question of law which was the subject of the appeal, to the

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arbitral tribunal for reconsideration or, where a new arbitral

tribunal has been appointed, to that arbitral tribunal for

consideration,— and, where the award is remitted under

paragraph (b), the arbitral tribunal shall, unless the order

otherwise directs, make the award not later than 3 months

after the date of the order.

(5) With the leave of the High Court, any party may appeal to the Court of

Appeal fro any refusal of the High Court to grant leave or fro any

determination of the High Court under this clause.

(6) If the High Court refuses to grant leave to appeal under subclause (5),

the Court of Appeal may grant special leave to appeal.

(7) Where the award of an arbitral tribunal is varied on an appeal under

this clause, the award as varied shall have effect (except for the purposes

of this clause) as if it were the award of the arbitral tribunal; and the party

relying on the award or applying for its enforcement under article 35(2) of

Schedule 1 shall supply the duly authenticated original order of the High

Court varying the award or a duly certified copy.

(8) Article 34(3) and (4) of Schedule 1 apply to an appeal under this clause

as they do to an application for the setting aside of an award under that

article.

(9) For the purposes of article 36 of Schedule 1,—

(a) an appeal under this clause shall be treated as an application

for the setting aside of an award; and

(b) an award which has been remitted by the High Court under

subclause (4)(b) to the original or a new arbitral tribunal shall be

treated as an award which has been suspended.

(10) For the purposes of this clause, question of law—

(a) includes an error of law that involves an incorrect interpretation

of the applicable law (whether or not the error appears on the

record of the decision); but

(b) does not include any question as to whether

(i) the award or any part of the award was supported by any

evidence or any sufficient or substantial evidence; and

(ii) the arbitral tribunal drew the correct factual inferences

fro the relevant primary facts.

7. Canada Section 45 of the Arbitration Act, 1991 Ontario

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 55 of 61

45. Appeals

Appeal on question of law

(1) If the arbitration agreement does not deal with appeals on

questions of law, a party may appeal an award to the court on a

question of law with leave, which the court shall grant only if it is

satisfied that,

(a) the importance to the parties of the matters at stake in the

arbitration justifies an appeal; and

(b) determination of the question of law at issue will significantly

affect the rights of the parties. 1991, c. 17, s. 45 (1).

Idem

(2) If the arbitration agreement so provides, a party may appeal an

award to the court on a question of law. 1991, c. 17, s. 45 (2).

Appeal on question of fact or mixed fact and law

(3) If the arbitration agreement so provides, a party may appeal an

award to the court on a question of fact or on a question of mixed

fact and law. 1991, c. 17, s. 45 (3).

Powers of court

(4) The court may require the arbitral tribunal to explain any matter.

1991, c. 17, s. 45 (4).

Idem

(5) The court may confirm, vary or set aside the award or may remit

the award to the arbitral tribunal with the court’s opinion on the

question of law, in the case of an appeal on a question of law, and

give directions about the conduct of the arbitration. 1991, c. 17, s.

45 (5).

Family arbitration award

(6) Any appeal of a family arbitration award lies to,

(a) the Family Court, in the areas where it has jurisdiction

under subsection 21.1 (4) of the Courts of Justice Act;

(b) the Superior Court of Justice, in the rest of Ontario. 2006,

c. 1, s. 1 (6).

8.

South

Africa

Section 31 of Arbitration Act 42 of 1965

31. Award may be made an order of court

(1) An award may, on the application to a court of competent

jurisdiction by any party to the reference after due notice to the

other party or parties, be made an order of court.

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 56 of 61

(2) The court to which application is so made, may, before making the

award an order of court, correct in the award any clerical mistake

or any patent error arising fro any accidental slip or omission.

(3) (3) An award which has been made an order of court may be

enforced in the same manner as any judgment or order to the

same effect.

9. Hong Kong Section 5 of Schedule 2 (Provisions that may be Expressly

Opted for or Automatically Apply) of Cap. 609 Arbitration

Ordinance

5.Appeal against arbitral award on question of law

(1) Subject to section 6 of this Schedule, a party to arbitral proceedings

may appeal to the Court on a question of law arising out of an award made

in the arbitral proceedings.

(2) An agreement to dispense with the reasons for an arbitral tribunal’s

award is to be treated as an agreement to exclude the Court’s jurisdiction

under this section.

(3) The Court must decide the question of law which is the subject of the

appeal on the basis of the findings of fact in the award.

(4) The Court must not consider any of the criteria set out in section

6(4)(c)(i) or (ii) of this Schedule when it decides the question of law under

subsection (3).

(5) On hearing an appeal under this section, the Court may by

order—

(a)confirm the award;

(b)vary the award;

(c)remit the award to the arbitral tribunal, in whole or in part,

for reconsideration in the light of the Court’s decision; or

(d)set aside the award, in whole or in part.

(6) If the award is remitted to the arbitral tribunal, in whole or in part, for

reconsideration, the tribunal must make a fresh award in respect of the

matters remitted—

(a)within 3 m order for remission; or

(b)within a longer or shorter period that the Court may direct.

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 57 of 61

(7) The Court must not exercise its power to set aside an award, in whole

or in part, unless it is satisfied that it would be inappropriate to remit

the matters in question to the arbitral tribunal for reconsideration.

(8) The leave of the Court or the Court of Appeal is required for any further

appeal fro an order of the Court under subsection (5).

(9) Leave to further appeal must not be granted unless—

(a)the question is one of general importance; or

(b)the question is one which, for some other special reason, should be

considered by the Court of Appeal.

(10) Sections 6 and 7 of this Schedule also apply to an appeal or further

appeal under this section.

10. Kenya Section 39 of Arbitration Act, 1995

39. Questions of law arising in domestic arbitration

(1) Where in the case of a domestic arbitration, the parties have agreed

that—

(a) an application by any party may be made to a court to determine

any question of law arising in the course of the arbitration; or

(b) an appeal by any party may be made to a court on any question of

law arising out of the award, such application or appeal, as the

case may be, may be made to the High Court.

(2) On an application or appeal being made to it under subsection

(1) the High Court shall—

(a) determine the question of law arising;

(b) confirm, vary or set aside the arbitral award or remit the

matter to the arbitral tribunal for re-consideration or, where

another arbitral tribunal has been appointed, to that arbitral

tribunal for consideration.

(3) Notwithstanding sections 10 and 35 an appeal shall lie to the Court of

Appeal against a decision of the High Court under subsection (2)—

(a) if the parties have so agreed that an appeal shall lie prior to the

delivery of the arbitral award; or

(b) the Court of Appeal, being of the opinion that a point of law of

general importance is involved the determination of which will

substantially affect the rights of one or m

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 58 of 61

leave to appeal, and on such appeal the Court of Appeal may

exercise any of the powers which the High Court could have

exercised under subsection (2).

(4) An application or appeal under this section shall be made within the

time limit and in the manner prescribed by the Rules of Court applicable,

as the case may be, in the High Court or the Court of Appeal.

(5) When an arbitral award has been varied on appeal under this section,

the award so varied shall have effect as if it were the award of the arbitral

tribunal concerned.

11. Brunei

Darussalam

Sections 47 and 49 of the Arbitration Order, 2009

47. No judicial review of award

The Court does not have jurisdiction to confirm, vary, set aside or remit

an award on an arbitration agreement except where so provided in this

Order. Appeal against award

49. Appeal against award

(1) A party to arbitral proceedings may, upon notice to the other parties

and to the arbitral tribunal, appeal to the Court on a question of law arising

out of an award made in the proceedings.

(2) Notwithstanding subsection (1), the parties may agree to exclude the

jurisdiction of the Court under this section and an agreement to dispense

with reasons for the arbitral tribunal’s award shall be treated as an

agreement to exclude the jurisdiction of the Court under this section.

(3) An appeal must not be brought under this section except —

(a) with the agreement of all the other parties to the proceedings;

or

(b) with the leave of the Court.

(4) The right to appeal under this section is subject to the restrictions in

section 50.

(5) Leave to appeal is to be given only if the Court is satisfied that —

(a) the determination of the question will substantially affect the

rights of one or m

(b) the question is one which the arbitral tribunal was asked to

determine;

Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021 Page 59 of 61

(c) on the basis of the findings of fact in the award—

(i) the decision of the arbitral tribunal on the question is

obviously wrong; or

(ii) the question is one of general public importance and

the decision of the arbitral tribunal is at least open to

serious doubt; and

(d) Despite the agreement of the parties to resolve the matter by

arbitration, it is just and proper in all the circumstances for the

Court to determine the question.

(6) An application for leave to appeal under this section shall identify the

question of law to be determined and state the grounds on which it is

alleged that leave to appeal should be granted.

(7) The leave of the Court shall be required for any appeal fro a decision

of the Court under this section to grant or refuse leave to appeal.

(8) On an appeal under this section, the Court may by order —

(a) confirm the award;

(b) vary the award;

(c) remit the award to the arbitral tribunal, in whole or in part,

for reconsideration in the light of the Court’s determination;

or

(d) set aside the award in whole or in part.

(9) The Court shall not exercise its power to set aside an award, in whole

or in part, unless it is satisfied that it would be inappropriate to remit the

matters in question to the arbitral tribunal for reconsideration.

(10) The decision of the Court on an appeal under this section shall be

treated as a judgment of the Court for the purposes of an appeal to the

Court of Appeal.

(11) The Court may give leave to appeal against the decision of the Court

in subsection (10) only if it considers that the question of law before it is

one of general importance, or is one which for some other special reason

should be considered by the Court of Appeal.

12. Philippines Section 41 of the Republic Act No. 9285 (2004) or the

Alternative Dispute Resolution Act of 2004 read with Section

25 of the Republic Act No. 876

41. Vacation Award

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A party to a domestic arbitration may question the arbitral award with the

appropriate regional trial court in accordance with the rules of procedure

to be promulgated by the Supreme Court only on those grounds

enumerated in Section 25 of Republic Act No. 876. Any other ground

raised against a domestic arbitral award shall be disregarded by the

regional trial court.

25. Grounds for modifying or correcting award

In any one of the following cases, the court must make an order

modifying or correcting the award, upon the application of any party

to the controversy which was arbitrated:

(a) Where there was an evident miscalculation of figures, or an

evident mistake in the description of any person, thing or property

referred to in the award; or

(b) Where the arbitrators have awarded upon a matter not submitted

to them, not affecting the merits of the decision upon the matter

submitted; or

(c) Where the award is imperfect in a matter of form not affecting the

merits of the controversy, and if it had been a commissioner's

report, the defect could have been amended or disregarded by the

court.

The order may modify and correct the award so as to effect the intent

thereof and promote justice between the parties.

Section 46 of the Republic Act No. 9285 (2004), or the Alternative

Dispute Resolution Act of 2004

46. Appeal from Court Decisions on Arbitral Awards

A decision of the regional trial court confirming, vacating, setting aside,

m

Appeals in accordance with the rules of procedure to be promulgated by

the Supreme Court.

The losing party who appeals fro the judgment of the court confirming

an arbitral award shall required by the appellant court to post counterbond

executed in favour of the prevailing party equal to the am

in accordance with the rules to be promulgated by the Supreme Court.

31. Award may be made an order of court

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(1) An award may, on the application to a court of competent jurisdiction

by any party to the reference after due notice to the other party or parties,

be made an order of court.

(2) The court to which application is so made, may, before making the

award an order of court, correct in the award any clerical mistake or any

patent error arising fro any accidental slip or omission.

(3) An award which has been made an order of court may be enforced in

the same manner as any judgment or order to the same effect.

13. Sri Lanka Section 687 and 688 of the Civil Procedure Code

687. Application to set aside or correct the award

Within fifteen days fro the date of receipt of notice of the filing of the

award any party to the arbitration may by petition apply to the court to set

aside the award, or to m

to the arbitrators for reconsideration, on grounds mentioned in the

following sections.

688. When court may correct award.

The court may, by order, modify or correct an award-

(a) where it appears that a part of the award is upon a matter

not referred to arbitration, provided such part can be

separated from the other part and does not affect the decision

on the matter referred ; or (b) where the award is imperfect in

form, or contains any obvious error which can be amended

without affecting such decision.

1

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. ___ __ 2025

(@ SPECIAL LEAVE PETITION (CIVIL) NOS. 15336-15337 OF 2021)

GAYATRI BALASAMY APPELLANT(S)

VERSUS

M/S ISG NOVASOFT

TECHNOLOGIES LIMITED RESPONDENT(S)

With

CIVIL APPEAL NO. ___ __ 2025

(@ SLP(C) No. 21301/2024)

CIVIL APPEAL NO. ___ __ 2025

(@ SLP(C) No. 17941/2019)

CIVIL APPEAL NO. ___ __ 2025

(@ SLP(C) No. 7973/2022)

CIVIL APPEAL NOS. ___ __ 2025

(@ SLP(C) Nos. 4961-4962/2024)

CIVIL APPEAL NO. ___ __ 2025

(@ SLP (C) No. 2025)

(@ Diary No. 7789/2024)

CIVIL APPEAL NOS. ___ __ 2025

(@ SLP(C) Nos. 18656-18663/2024)

CIVIL APPEAL NO. 8183 OF 2016

AND

CIVIL APPEAL NO. 8184 OF 2016

2

J U D G M E N T

K.V. VISWANATHAN, J.

A. HOLDING IN PROJECT DIRECTOR, NHAI VS. M. HAKEEM AND ANR……...5

B. ORDER OF REFERENCE ……………………………………………………… …...9

C. CONTENTION OF LEARNED COUNSELS …………………………………… ....10

i. CONCEPTUAL DISTINCTION BETWEEN “MODIFICATION” AND “SEVERANCE” ..11

ii. CONTENTIONS FAVOURING THE POWER TO MODIFY …………………………… …..12

iii. CONTENTIONS OPPOSING THE POWER TO MODIFY ………………………………. ....19

D. THE ECO SYSTEM OF ARBITRATION ……………………………………… …………..29

i. HISTORICAL, TEXTUAL AND THE CONTEXTUAL SETTING ………………………… .29

ii. SCHEME OF THE A&C ACT , 1996………………………………………………………… …33

E. SOME CASES CITED IN THE REFERRAL ORDER …………………………… 51

F. ANALYSIS OF THE CONTENTIONS AND REASONING …………………… ...57

i. CAN WORDS BE READ INTO SECTION 34? …………………………………………… ...57

ii. THE FALLACY IN THE ‘HARDSHIP’ ARGUMENT ……………………………………… 60

iii. CONTRACTUAL OUSTER OF THE NORMAL JUDICIAL PROCESS ………………… .65

iv. CONTRAST WITH THE APPELLATE POWER UNDER CPC ………………………… ...66

v. IS POWER TO ‘MODIFY’ A LESSER POWER? ………………………………………… ..70

vi. LEGAL MAXIMS – TO BE DEPLOYED AFTER ASCERTAINING CONTEXT ………..80

3

vii. THE ARGUMENT ON INHERENT POWERS …………………………………………… ..81

viii. DOCTRINE OF IMPLIED POWERS ……………………………………………………… .83

ix. PARTY AUTONOMY ……………………………………………………………………… ...85

x. CAN ARTICLE 142 POWERS BE EXERCISED TO MODIFY? ……………………… ..87

xi. LAYING DOWN GUARDRAILS FOR SECTION 34 – IS IT AN OPTION FOR THIS

COURT? …………………………………………………………………………………… ...92

xii. SUBMISSIONS BASED ON PECULIARITIES IN STATUTORY ARBITRATIONS …94

xiii. COMPLICATIONS DUE TO MODIFICATIONS IN NEW YORK CONVENTION

AWARDS …………………………………………………………………………………… ..96

xiv. IS HAKEEM (SUPRA) PER INCURIAM? …………………………………………… .......99

xv. POWERS UNDER SECTION 33 AND 34 (4) OF THE A&C ACT – THE ‘SAFETY

VALVES’ …………………………………………………………………………………… .100

xvi. AWARD OF INTEREST- USE OF SECTION 34(4) POWER ………………………… ..107

xvii. SUO MOTO EXERCISE OF SECTION 34(4) POWER ………………………… ……..108

xviii. COMPUTATION, CLERICAL AND TYPOGRAPHICAL ERROR OR ANY OTHER

ERROR OF SIMILAR NATURE - ACTUS CURIAE NEMINEM GRAVABIT

PRINCIPLE…………………………………………………………………………………109

xix. SEVERABILITY UNDER SECTION 34 ……………………………………………… …113

xx. ABANDONMENT OF CLAIMS - COMPROMISE ARRIVED AT BETWEEN THE

PARTIES…………………………………………………………………………………… ..124

G. CONCLUSION………………………………………………………………… ...125

H. ANSWERS TO THE REFERENCE ………………………… …………………. 127

4

1. Delay in refiling the Special Leave Petition is condoned.

2. Leave granted.

3. 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.

5

THE HOLDING IN HAKEEM (SUPRA):-

4. The facts in Hakeem (Supra) were that pursuant to the

notifications issued under the provisions of the National Highways Act,

1956 for acquisition of lands by the National Highways Authority of

India (NHAI), awards came to be passed by the competent authority

under the said Act. A Petition under Section 34 of the A&C Act resulted

in enhancement of the award by the District Court which was upheld

on further appeal with only a remand to determine compensation for

certain trees and crops. The NHAI challenged the same before this

Court and contended that in exercise of powers under Section 34, no

modification could be made since it was not a challenge on the merits

of the award. The contentions of NHAI were that powers under Section

34 were qualitatively different from an appellate power and the only

option open was to set aside the award or remit the award under Section

34 (4) in the event of the contingencies provided thereon arising. A

contrast was made with the provisions of the Arbitration Act, 1940

which contained express provisions to modify the award under Section

15 therein. NHAI further argued that since the A&C Act was based on

the UNCITRAL Model Law on International Commercial Arbitration,

6

1985, the grounds of challenge were restricted. The land losers in

Hakeem (Supra) contended that power to set aside in Section 34

included a “power to modify” and relied on the judgment of the learned

Single Judge of the Madras High Court in Gayatri Balaswamy Vs. ISG

Novasoft Technologies Limited, 2014 SCC OnLine Mad 6568.

[Coincidentally, Gayatri Balaswamy (supra) is the first case in this

reference after travelling through the Division Bench of the High

Court.]

5. This Court in Hakeem (Supra) held as under:-

(i) Section 34 of the A&C Act was different from a

provision of appeal since the Section contemplates

setting aside awards on very limited grounds provided

in the sub-Sections thereof. (Para 16)

(ii) “Recourse” in Section 34 meant enforcement or

method of enforcing a right and where the right itself is

truncated, enforcement of such right would also be only

limited in nature. (Para 16)

7

(iii) That enforcement is truncated was further clear

from Section 34(4) which provides that on receipt of an

application under Section 34(1), the Court may, where

it is appropriate and it is so requested by a party, adjourn

for a period of time the Section 34 proceedings to give

the Arbitral Tribunal an opportunity to resume the

Arbitral proceedings or to take such other action as in

the opinion of the Arbitral Tribunal will eliminate the

grounds for setting aside the Arbitral Award. It was the

opinion of the Arbitral Tribunal which ultimately

counted in order to eliminate the grounds for setting

aside the award, which may be indicated by the Court.

(Para 16)

(iv) That Section 34 was modelled on the UNCITRAL

Model Law and no power to modify was given to the

Court. (Para 17)

(v) Eminent authors like Redfern and Hunter have

opined that the Reviewing Court can neither alter the

8

terms of an award nor can it decide the dispute based on

its own vision of the merits. (Para 18)

(vi) Minimal judicial interference is called for in

Arbitral Awards under the UNCITRAL Model Law and

unlike the 1940 Act there is no power to modify. (Para

19 & 20)

(vii) In a challenge under Section 34, there is no

challenge to the merits of the award as held in a long

line of judgments of this Court (Para 23, 24)

(viii) This Court in McDermott International Inc. Vs.

Burn Standard Co. Ltd., (2006) 11 SCC 181 has held

that Court cannot correct the errors of the Arbitrators

and that it can only quash the award leaving the parties

free to begin the arbitration afresh. (Para 25)

(ix) That in England, the United States, Canada,

Australia and Singapore there are express legislative

provisions permitting the varying of an Award, unlike

Section 34 of the A&C Act. (Para 43)

9

ORDER OF REFERENCE: -

6. In the referral order of 20.02.2024, this Court, while framing

certain questions for consideration, observed as under:-

“2. 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. While one line

of decisions of this Court has answered the aforesaid

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. 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.

3. We are of the considered view that 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

10

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) 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

685) of this Court have either modified or accepted

modification of the arbitral awards under

consideration?”

4. The special leave petitions may be placed before the

Hon’ble the Chief Justice of India for an appropriate

order.”

CONTENTIONS OF LEARNED COUNSELS: -

7. Wide ranging arguments have been canvassed to contend that a

Court under Section 34 of the A&C Act has the power to “modify” the

award and equally strong arguments were canvassed contending for the

11

position that Hakeem (Supra) is correctly decided and there was no

power in the Section 34 Court to modify. The only unanimity in the

submission was with regard to the power under Section 34 to sever

parts of the award subject to the condition that the Severed part is a

standalone part and is not inseparably intertwined with the other parts

of the award.

CONCEPTUAL DISTINCTION BETWEEN “MODIFICATION”

AND “SEVERANCE”: -

8. This judgment approaches the issue by maintaining the

conceptual distinction between “modification” and “severance”.

Wherever modification is discussed, it is to examine whether a Section

34 Court can change, vary or qualify an award. Wherever severance is

discussed it has to be understood to mean “to separate” and “disjoin”.

Parties have also canvassed arguments based on that distinction. While

the rival parties were at daggers drawn on the aspect of the power to

“modify” in a Section 34 Court, there was unanimity on the power to

“sever” subject to conditions compatible with severability.

12

CONTENTIONS FAVOURING THE POWER TO MODIFY: -

9. Mr. Arvind Datar, learned Senior Counsel made bold to suggest

that the Court read words into Section 34. According to the learned

Senior Counsel, the words “and , to the extent” be read as opening

words in Section 34(2) (b) and further that the words “or modified,

and “to the extent” be added in Section 34(2)(a). According to the

learned Senior Counsel, the Court is not powerless to add words and

cited a large number of authorities where, according to the counsel,

words have been added to avoid irreconcilable conflict and in situations

where absurdity and injustice had to be averted. The learned Senior

Counsel further contended that Hakeem (supra) is per incuriam as it is

contrary to several three-Judge and two-Judge Bench judgments of this

Court. Learned Senior Counsel further contended that the only option

of setting aside the award will cause enormous hardship to the litigants

as that will result in recommencement of the arbitration proceedings.

Learned Senior Counsel further argued that power to “set aside” the

award will include power to modify as the larger power would include

the smaller power. Learned Counsel relied on the legal maxim omne

majus continet in se minus which meant the greater contains the less.

13

10. Mr. Darius Khambata, learned Senior Counsel contended that

certain foreign jurisdictions have statutorily enabled Courts to modify

awards including on a question of law. Referring to passages from

“Mustill & Boyd” on Commercial Arbitration, learned Senior Counsel

contended that it would be unjust for an obviously wrong decision on

an important question of law not to be put right by the Court and any

variation which inevitably flows from the Court’s determination of the

question of law would be perfectly justified. Learned Senior Counsel

reiterated the submission that power to modify, if available to the Court,

would ensure resolution of dispute in a speedy, effective, inexpensive

and expeditious manner. Learned Senior Counsel referred to the Expert

Committee Report headed by Dr. T.K. Viswanathan to contend that

even the Committee has recommended legislative changes to permit

modification of the award. Learned Senior Counsel contended that

none of the provisions in the Act including Section 34 prohibit Courts

from modifying the award and argued that silence in the Act cannot be

read as a prohibition.

11. Learned Senior Counsel canvassed that Courts should have the

power to iron out the creases and supported the submission that the

14

larger power of setting aside ought to include the limited power to

modify when such modification inevitably flows from the correction of

illegality within the confines of Section 34. Illustrative cases where this

Court exercised powers under Article 142 were referred to.

12. Learned Senior Counsel sought to peg the power to modify under

Section 151 of the Code of Civil Procedure which saved the inherent

powers of Court and contended that inherent powers were always

available to a Civil Court exercising powers under Section 34. Learned

Senior Counsel contended that any fear that power to modify will result

in Section 34 power being turned into an appellate power can be

checked, by prescribing guardrails to prevent abuse of the power to

modify. Learned Senior Counsel contended that if the modification

required reconsideration of facts on merits, Courts’ ought to remit the

award under Section 34(4), if the remission is to be on narrowly defined

issues for pure application to facts. Learned Senior counsel contended

that if remission is to be allowed, the correct position of law should be

determined by the Court and after recording a finding the remission

ought to be made. Learned Senior Counsel contended that severability

is well accepted during the course of exercise of power under Section

15

34, which according to the counsel, was after all a facet of modification

and there is no reason why power to modify generally cannot be read

into Section 34.

13. Mr. Shekhar Naphade, learned Senior Counsel contended that if

impugned award grants reliefs which cannot be granted due to factors

specified in sub-clauses (i), (ii), (iv) and (v) of clause (a) of Section

34(2) and sub-clause (i) of clause (b) of Section 34(2), then there was

no question of modifying or substituting an award. According to the

learned Senior Counsel, the only option then was to set aside the award.

Learned Senior Counsel contends that if the award is passed in

violation of natural justice then the question would arise as to what the

Court ought to do. Equally so with regard to awards infested with

corruption and wrongful rejection of claims, learned Senior Counsel

contends that mere setting aside would not put an end to the lis. Merely

setting aside the award in such circumstances would defeat the purpose

of resolving disputes expeditiously, contends Mr. Naphade. According

to the learned Senior Counsel, it will also be contrary to fundamental

notions of justice since there should be some remedy for every wrong

and the consequence will be that the proceedings will revive and

16

continue ‘ad infinitum’ involving enormous delay and huge costs.

According to the learned Senior Counsel the only possible solution

therefore, is that after setting aside the award the Court itself either

modifies or substitutes the award and when the Court does so, it is only

passing an order which the arbitral Tribunal ought to have passed and

being a final step in the proceeding it is consistent with the scheme of

the Act.

14. Learned Senior Counsel contends that since a Section 34

application is heard by a Court as defined in Section 2(1)(e), the general

principle that every Civil Court has inherent jurisdiction to deal with

matters of civil nature and pass such orders as are permissible in law

ought to apply. According to learned Senior Counsel, under Section 151

C.P.C., a Court is competent to pass such orders as are necessary to

meet the ends of justice.

15. Mr. Naphade contends that rules of statutory interpretation

require the Court to make every endeavour to avoid a case of casus

omissus. Drawing particular attention to the provisions of the NHAI

Act and the acquisition made thereunder, learned Senior Counsel

contends that such matters involved public law elements unlike

17

contractual arbitration which involves commercial considerations.

Hence, where lands are acquired with paltry compensation and with no

remedy to seek a reference for enhancement like under the normal Land

Acquisition Laws, the only remedy available is to enable the Section

34 Court to enhance compensation and a restricted view of Section 34

in Statutory arbitrations like in NHAI would render the Section itself

ultra vires Article 14.

16. Mr. Ritin Rai, learned senior counsel reiterated the submission

that ‘recourse’, is a wider term. He further reiterated that there is no

prohibition to modify in the Act. Mr. Ritin Rai submitted that if the

conclusion to modify axiomatically follows a finding, then

modification should be allowed.

17. Mr. Prashanto Chandra Sen, Dr. Manish Singhvi, Learned Senior

Counsels and Mr. Abhishek Kumar Rao, learned Counsel reiterated the

arguments of other Senior Counsels. Dr. Manish Singhvi, learned

Senior Counsel argued that competent authorities under the NHAI are

not legally trained minds and the compensation granted by them cannot

be treated as final and the Section 34 Court should have power to

enhance. Learned Senior Counsel contended that restrictive parameters

18

should not be available for compulsory arbitration as opposed to

consensual arbitration.

18. Mr. Sumeet Pushkarna, learned Senior Counsel, M/s Ashwin

Shanker, Vaibhav Dang, Amit George and Jinendra Jain by and large

reiterated the submissions of Mr. Datar and Mr. Khambata. Mr. Vaibhav

Dang and Mr. Jinendra Jain supplemented the submissions by adding

that substantial cost will be incurred if re-arbitration is to commence

and that Hakeem (supra) did not consider modification by mutual

consent and correction of computation and clerical errors by the Section

34 Court. It was further argued by Mr. Amit George that power to grant

interest, reduce or increase interest should be read into Section 34

without relegating parties for fresh arbitration. It was argued that if the

award of the Tribunal is contrary to the agreement between the parties

on interest, modifying the same would not require any elaborate

inquiry. Learned Counsel also argues that if in an enquiry under Section

34, the Court finds that modifying the award was the only one

conclusion possible, it will be a useless formality to set aside and let

parties reagitate in arbitration. It was contended that the word

19

“recourse” to Court will include the power to modify as, “recourse” is

a method of enforcement of right”.

19. Mr. Pallav Mongia, learned Counsel contended that any

modification should only be through the mechanism of Section 34(4).

Learned counsel canvassed the application of the principle of

proportionality as modification through the mechanism of Section

34(4) would be a better option than setting aside the award in entirety.

Learned Counsel contended that the procedural preconditions

mentioned in Section 34(4) should be read as discretionary.

CONTENTIONS OPPOSING THE POWER TO MODIFY: -

20. Mr. Tushar Mehta, learned Solicitor General (SG), who, in fact,

opened the arguments at the reference contended that the power to

modify has to be statutorily conferred and cannot be exercised

otherwise. The learned Solicitor General, referred to several statutes of

other jurisdictions to contend that wherever power to modify was to be

recognized, such powers were expressly conferred by the legislature.

Learned SG referred to the provisions in UK, USA, Singapore, Canada

and a whole host of other countries to demonstrate the existence of

20

specific power to modify/vary in their respective arbitration statutes.

According to the learned SG, Section 34 of the Arbitration Act has a

strong resemblance with the UNCITRAL Model Law, both of which

delineate limited grounds for setting aside an Arbitral award. The

learned SG made extensive reference to the debates during the

preparation of the Model Law to contend that setting aside was the only

recourse available in India as at present and that the power to remit

under Section 34(4) is intended to prevent annulment on grounds

specified therein. Learned SG referred to the 76

th

Report of the Law

Commission on the Arbitration Act to contend that no power to modify

was recommended even though the precursor Act, namely, the 1940 Act

had in Section 15 a specific power to modify. Learned SG contended

that the scope of setting aside proceedings are not akin to Appellate

proceedings where evidence is re-evaluated and decision is examined

for its correctness on merits. According to the learned SG, the power of

modification cannot be subsumed in the power to “set aside” as both

exist on different judicial planes requiring application of differing

judicial parameters.

21

21. Learned SG particularly emphasized on Section 5 of the A&C Act

to canvass for limited judicial intervention in a manner provided in the

statute and nothing more. Learned SG referred to Section 34(4) as the

solution, provided the grounds mentioned in the Section are made out.

The learned SG distinguished the cases where this Court had exercised

power to modify. Learned SG contended that Article 142 power cannot

be exercised in contravention of statutory power and not being a

situation similar to the one in Vishaka and Others Vs. State of

Rajasthan and Others, (1997) 6 SCC 241, no guardrails can be laid

down by the Court. Learned SG referred to the cardinal rule of

interpretation that the words should be given their plain and natural

meaning and that it was not the duty of the Court to enlarge the

language of the provision where the provision is otherwise plain and

unambiguous. Learned SG concluded by contending that the exclusion

of the power to modify in the UNCITRAL Model law was a conscious

decision and it was left to the respective countries to incorporate a

provision if it was so desired and that in the absence of any power to

modify the only option was to set aside or pending the proceedings,

remit under Section 34(4). Learned SG submitted that even the Expert

22

Committee, namely, the Vishwanathan Committee had only

recommended the statutory amendment.

22. Mr. Saurabh Kirpal, learned Senior Advocate contended that

Courts cannot modify clear words of the Statute. According to the

counsel, there was no reason to consider the provisions of the A&C Act

as unworkable since, it has worked well for the past three decades.

Reiterating the application of the golden rule of interpretation, learned

Senior Counsel urged that the plain meaning be given to Section 34.

According to the learned Senior Counsel, ‘setting aside’ clearly meant

quashing the decision. According to the learned senior counsel,

granting power of modification may only further delay the proceedings

by never ending appeals and the question of speedy justice is a matter

for Parliament to decide. According to the learned senior counsel,

letting in power to modify into Section 34 will cause uncertainty which

is an anathema to business and commerce. Learned Senior Counsel

contends that party autonomy and non-interference by Court is a golden

thread that runs through the Act and that granting power to modify will

drag the Courts into a merits review, which the parties have chosen not

to opt, when they decided to arbitrate. Learned Senior Counsel

23

contends that the principle that greater power will include lesser power

has no application and such a principle will apply only if the scope of

law is of the same genus. According to the learned Senior Counsel, this

Court has already held before the judgment in Hakeem (supra) that

Section 34 does not encompass the power to modify.

23. Mr. Gourab Banerji, learned Senior Counsel contended that the

UNCITRAL Model Law and the A&C Act permit only “setting aside”

of awards; that countries which have derogated from the Model Law

have specifically empowered the Courts to modify, confirm or vary an

award in whole or in part, in addition to powers of setting aside; that

power to annul is inconsistent with a power to appeal; that no judicially

manageable standards exist to determine the contours of modification

and the only way forward is by legislation. The learned senior counsel

contended that the A&C Act was based on the UNCITRAL Model Law

and provides finality and binding nature of the award and minimal

judicial intervention. Learned Senior Counsel further contended that

the statutory scheme under the A&C Act, 1996 differs from that of the

Act of 1940; that Section 34 does not provide a merits challenge nor is

it an appellate jurisdiction; that parties consciously opt to exclude the

24

Court’s jurisdiction and choose arbitration for its expediency and

finality and that the “limited remedy” under Section 34 is co-terminus

with the “limited right” to set aside or remit within the meaning of

Section 34(4). According to the learned Senior Counsel, the

consequence of a complete annulment is recommencement of

proceedings and any new submission will have to be argued before the

new Tribunal.

24. Learned senior counsel contended that the setting aside of the

award would not affect the validity of the Arbitration agreement.

Adverting to Section 34(4), learned Senior Counsel contended that

curing defects is limited to cases where award provides no reasoning or

there are gaps in reasoning or those which can otherwise be cured to

avoid a setting aside. Learned Senior Counsel contends that Section

34(4) excludes reconsideration of the award for the purpose of

eliminating the grounds on which the award can be set aside. Dealing

with severability, learned senior counsel contended that an award can

be segregated and upheld after exclusion of the infirmity, where there

are multiple claims and counter claims which are severable and not

inter-dependent. The Court in Section 34 can set aside or uphold the

25

Arbitrator’s decision on individual and severable claims, without

setting aside the whole award, depending upon the facts and

circumstances of the case.

25. Learned Senior Counsel flagged a very important concern if

power to modification is permitted. According to the learned Senior

Counsel, it will lead to enforcement issues under the New York

Convention, apart from other anomalies. Learned Senior Counsel

contends that parties clamoring for modification are treating an award

akin to a judgment and Section 34 proceedings akin to an appeal.

Before the Arbitrator, even the misapplication or misinterpretation of

law would bind the parties. Learned Senior Counsel argued that

internationally various forms of recourse are recognized and referred to

the power to confirm present in the English Act; the power to vary; the

power to correct; the power to remit and powers to set

aside/annul/vacate. According to the learned Senior Counsel, once the

award is set aside, it is quashed, and it never exists in the eye of law.

This would mean that parties would be relegated to their original

litigating position.

26

26. According to the learned Senior Counsel, the argument that grave

injustice will occur if there is no power to modify is a misconceived

submission. Learned Senior Counsel submits that having taken a

conscious decision to exclude Court’s jurisdiction, it does not lie in the

mouth of the parties to draw this red herring and contended that any

sanction of power to modify would affect finality and binding nature of

the awards. Learned Senior Counsel contended that reading in

guardrails would amount to judicial legislation. According to the

learned Senior Counsel, permitting modification would compel the

Court to do a two-fold exercise, namely, first to decide whether award

suffers from any infirmity and then to decide what the correct outcome

would be on the facts of the case.

27. Learned senior counsel contends that the power of modification,

if permitted, the original award will be rendered incapable of

enforcement, particularly in the New York Convention awards and

cited how other jurisdictions have handled it by incorporating specific

provisions, namely, Section 71 of the English Arbitration Act, Section

5(7) of Schedule 2 of the New Zealand Arbitration Act, 1996 and

Section 39(5) of the Kenyan Arbitration Act, 1995. According to the

27

learned Senior Counsel, absent such legislative shield, India seated

arbitrations would be vulnerable and unattractive and the awards would

potentially be in breach of the New York Convention.

28. Dealing with statutory arbitrations, learned Senior Counsel

contends that solutions to the maladies of the statutory arbitrations must

be sourced to the respective statutes mandating these arbitrations and

not to the A&C Act and suggests that public law remedies like writ

jurisdiction in those cases may provide appropriate remedy.

29. Mr. Gaurav Pachnanda, learned Senior Advocate contended that

only if the portion is severable could the court under Section 34 sever

the award, and even here, according to the learned Senior Counsel, an

exercise has to be undertaken to examine whether the good parts of the

award can be separately identified both in terms of liability and

quantum without any correlation to the bad parts of the award.

According to the learned Senior Counsel, if good parts are intermingled

with the bad parts of the award in a manner that it is impossible to sever

the bad parts, then principles of severability cannot be applied. To

illustrate, the learned Senior Counsel contends that if a final award is

arrived at by netting of claims and counter claims, principles of

28

severability cannot be applied. According to the learned Senior

Counsel, netting of claims and counter claims results in composite

awards where a single amount is enforceable by the successful parties.

According to the learned Senior Counsel, this would also impact the

Stamp duty.

30. Learned Senior Counsel argued that the doctrine of merger does

not apply to an order of the Court under Section 34. Arguing from that

perspective, learned Senior Counsel contended that jurisdiction under

Section 34 does not extend to modification, variation or reversal of the

Arbitral Tribunal award and the Court can only efface or annul the

arbitral award. According to the Learned Senior Counsel, doctrine of

merger would not apply if the nature and scope of the power of the

superior forum is not identical with the nature and scope of power of

the subordinate fora. Learned Senior Counsel contended that a statutory

scheme of merger is recognized in UK and Singapore and the same is

absent in our country. Learned Senior Counsel contended that the

power under Section 151 CPC cannot be resorted to when the mandate

of Section 34 is clear.

29

31. These submissions have been reiterated by Ms. Archana Pathak

Dave, learned ASG, Mr. Naresh Markanda, Mr. Surjendu Sankar Das,

Mr. Saurav Agarwal, Mr. Saket Sikri and Mr. Rahul G. Tanwani,

learned counsels.

32. Both sides referred to a large number of authorities in support of

their respective positions.

THE ECO SYSTEM OF ARBITRATION: -

HISTORICAL, TEXTUAL AND THE CONTEXTUAL

SETTING:

33. Before the core issue is answered, certain fundamental concepts

highlighting the difference between the adjudication of disputes by the

procedure in Courts and the procedure in Arbitration needs to be

emphasized. The judicial power of the State is exercised by the

judiciary and disputes are adjudicated through the mechanism of the

Courts at different hierarchical levels. If disputes were to be

adjudicated in Courts, normal procedural laws would govern the

disposal. For example, while the Code of Criminal Procedure, 1973

(The Bharatiya Nagarik Suraksha Sanhita, 2023) would govern the

30

procedure in Criminal Courts, the Code of Civil Procedure of 1908

amended in 1976 and thereafter, would govern the procedure in the

Civil Courts.

34. The Indian Contract Act, 1872, while otherwise holding that

Agreements in restraint of legal proceedings would be void in Section

28, saves Arbitration references. For the sake of convenience, relevant

portions of Section 28 of the Contract Act, are set out hereinbelow:-

“28. Agreements in restraint of legal proceedings, void.—

Every Agreement,-

(a) by which any party thereto is restricted absolutely from

enforcing his rights under or in respect of any contract, by the

usual legal proceedings in the ordinary tribunals, or which limits

the time within which he may thus enforce his rights; or

(b) which extinguishes the rights of any party thereto, or

discharges any party thereto from any liability, under or in

respect of any contract on the expiry of a specified period so as

to restrict any party from enforcing his rights, is void to that

extent.

Exception 1.—Saving of contract to refer to arbitration

dispute that may arise.—This section shall not render illegal a

contract, by which two or more persons agree that any dispute

which may arise between them in respect of any subject or class

of subjects shall be referred to arbitration, and that only the

amount awarded in such arbitration shall be recoverable in

respect of the dispute so referred.

Exception 2.—Saving of contract to refer questions that have

already arisen.—Nor shall this section render illegal any

contract in writing, by which two or more persons agree to refer

to arbitration any question between them which has already

arisen, or affect any provision of any law in force for the time

being as to references to arbitration”.

31

35. It is by virtue of this provision that Arbitration clauses in contracts

by which parties voluntarily agreed to step out of the process of normal

legal proceedings through Courts and decide to refer to Arbitration their

disputes, is saved. The logic behind the provision is that when two

parties with open eyes agree to submit their dispute to a third party in

whom they have confidence, such contracts should not be held as void.

36. The earliest statute which exclusively dealt with Arbitration was

the Indian Arbitration Act of 1899. Thereafter came the Arbitration Act

of 1940 (‘1940 Act’ for short), which has since been replaced by the

A&C Act. What is important to note is that contracts referring parties

to Arbitration were regulated by statutes. Parties contracting with open

eyes were aware that once they opt for Arbitration, the parameters for

Arbitration were to be governed by the statute regulating the same and

that the normal remedies available to a litigant who is resorting to the

existing Courts could not be applicable and a different procedure would

govern the same.

37. The 1940 Act dealt with:- Arbitration without intervention of a

Court (Sections 3 to 19); Arbitration with intervention of a Court where

32

there is no suit pending (Section 20); Arbitration in suits (Sections 21

to 25) and further Section 27 enabled the Arbitrator to make an interim

award and in Section 30 grounds for setting aside the award were

provided. What is important to note is that Section 15 of the Act of 1940

provided for a power in the Court to modify the award and Section 16

reserved an express power to remit the award.

38. Sections 15 and 16 of the 1940 Act read as under:-

“15. Power of Court to modify award .-The Court may by

order modify or correct an award-

(a) where it appears that a part of the award is upon a matter not

referred to arbitration and such part can be separated from the

other part and does not affect the decision on the matter referred;

or

(b) where the award is imperfect in form, or contains any

obvious error which can be amended without affecting such

decision; or

(c) where the award contains a clerical mistake or an error

arising from an accidental slip or omission.

16. Power to remit award .-(1) The Court may from time to

time remit the award or any matter referred to arbitration

to the arbitrators or umpire for reconsideration upon such

terms as it thinks fit-

(a) where the award has left undetermined any of the matters

referred to arbitration, or where it determines any matter not

referred to arbitration and such matter cannot be separated

without affecting the determination of the matters referred; or

(b)where the award is so indefinite as to be incapable of

execution; or

33

(c)where an objection to the legality of the award is apparent

upon the face of it.”

(Emphasis supplied)

39. Thereafter, in Section 30 of the 1940 Act, grounds for setting aside the

award were provided. Section 30 reads as follows:-

30. Grounds for setting aside award .-An award shall not be

set aside except on one or more of the following grounds,

namely:-

(a) that an arbitrator or umpire has misconducted himself or the

proceedings;

(b) that an award has been made after the issue of an order by

the Court superseding the arbitration or after arbitration

proceedings have become invalid under section 35;

(c) that an award has been improperly procured or is otherwise

invalid.

(Emphasis supplied)

40. It is important to note that Section 30 of the 1940 Act opened with

the phrase “an award shall not be set aside except on one or more of

the following grounds”. These words are exhaustive and limit the

setting aside to the three grounds set out therein.

SCHEME OF THE A&C ACT , 1996: -

41. Reverting to the A&C Act, the Statement of Objects and Reasons

sets out that the UNCITRAL Model Law and Rules harmonize the

concepts on arbitration and conciliation of different legal systems of

34

the world and contain provisions for universal application; though the

UNCITRAL Model Law and Rules are intended to deal with

international commercial arbitration and conciliation, they could with

appropriate modifications also serve as a model for legislation on

domestic arbitration and conciliation; that the present Bill sought to

consolidate and amend the law relating to domestic arbitration,

international commercial arbitration, enforcement of foreign arbitral

awards and to define the law relating to conciliation, taking into

account the UNCITRAL Model Law and Rules. Among the main

objectives set out were to minimize the role of the courts in the arbitral

process. The Statement of Objects and Reasons of the 1996 Act is

extracted herein below:-

“STATEMENT OF OBJECTS AND REASONS

1. The law on arbitration in India is at present substantially

contained in three enactments, namely, the Arbitration Act, 1940, the

Arbitration (Protocol and Convention) Act, 1937 and the Foreign

Awards (Recognition and Enforcement) Act, 1961. It is widely felt

that the 1940 Act, which contains the general law of arbitration, has

become outdated. The Law Commission of India, several

representative bodies of trade and industry and experts in the field of

arbitration have proposed amendments to this Act to make it more

responsive to contemporary requirements. It is also recognised that

our economic reforms may not become fully effective if the law

dealing with settlement of both domestic and international

commercial disputes remains out of tune with such reforms. Like

arbitration, conciliation is also getting increasing worldwide

35

recognition as an instrument for settlement of disputes. There is,

however, no general law on the subject in India.

2. The United Nations Commission on International Trade Law

(UNCITRAL) adopted in 1985 the Model Law on International

Commercial Arbitration. The General Assembly of the United

Nations recommended that all countries give due consideration to the

said Model Law, in view of the desirability of uniformity of the law

of arbitral procedures and the specific needs of international

commercial arbitration practice. The UNCITRAL also adopted in

1980 a set of Conciliation Rules. The General Assembly of the

United Nations recommended the use of these Rules in cases where

the disputes arise in the context of international commercial relations

and the parties seek amicable settlement of their disputes by recourse

to conciliation. An important feature of the UNCITRAL Model Law

and Rules is that they have harmonised concepts on arbitration and

conciliation of different legal systems of the world and thus contain

provisions which are designed for universal application.

3. Though the said UNCITRAL Model Law and Rules are

intended to deal with international commercial arbitration and

conciliation, they could, with appropriate modifications, also serve

as a model for legislation on domestic arbitration and conciliation.

The present Bill seeks to consolidate and amend the law relating to

domestic arbitration, international commercial arbitration,

enforcement of foreign arbitral awards and to define the law relating

to conciliation, taking into account the said UNCITRAL Model Law

and Rules.

4. The main objectives of the Bill are as under:-

(i) to comprehensively cover international commercial arbitration

and conciliation as also domestic arbitration and conciliation;

(ii) to make provision for an arbitral procedure which is fair, efficient

and capable of meeting the needs of the specific arbitration;

(iii) to provide that the arbitral tribunal gives reasons for its arbitral

award;

(iv) to ensure that the arbitral tribunal remains within the limits of its

jurisdiction;

36

(v) to minimise the supervisory role of courts in the arbitral

process;

(vi) to permit an arbitral tribunal to use mediation, conciliation or

other procedures during the arbitral proceedings to encourage

settlement of disputes;

(vii) to provide that every final arbitral award is enforced in the

same manner as if it were a decree of the court;

(viii) to provide that a settlement agreement reached by the parties as

a result of conciliation proceedings will have the same status and

effect as an arbitral award on agreed terms on the substance of the

dispute rendered by an arbitral tribunal; and

(ix) to provide that, for purposes of enforcement of foreign awards,

every arbitral award made in a country to which one of the two

international Conventions relating to foreign arbitral awards to which

India is a party applies, will be treated as a foreign award.

5. The Bill seeks to achieve the above objects.

(Emphasis supplied)

The Act has since been amended in 2015, 2019 and 2021.

42. It is time now to analyse the conspectus of the legal provisions of

the A&C Act that are relevant for answering the issue at hand. Section

5 is an important provision which reads as under:-

“5. Extent of judicial intervention.—Notwithstanding anything

contained in any other law for the time being in force, in matters

governed by this Part, no judicial authority shall intervene except

where so provided in this Part. (Emphasis Supplied)

43. It will be noticed that the section begins with a non-obstante

clause and states that notwithstanding anything contained in any other

law for the time being in force, in matters governed by Part-I, no

judicial authority shall intervene except where so provided in Part-I.

37

Section 7 defines “arbitration agreement” and mandates that it shall be

in writing in the manner as provided in sub-clause (4) therein. Section

8 is an important section, which mandates that a judicial authority

before which an action is brought in a manner which is subject to

arbitration agreement shall, if a party to the arbitration agreement or

any person claiming through or under him, so applies in the

circumstance set out therein, the judicial authority shall refer the parties

to arbitration unless it finds that prima facie no valid arbitration

agreement exists; Section 9 deals with interim measures; Section 10

deals with number of arbitrators and Section 11 provides for the method

of appointment of arbitrators. Sections 12 and 13 deal with bias and

procedure for challenging the continuance of an arbitrator.

44. What is important to notice is where a challenge to an arbitrator

on the grounds of bias fails, the Arbitral Tribunal is mandated to

continue the arbitral proceedings. Section 13(5) provides that where an

arbitral award is made under sub-section (4), the party challenging the

arbitrator may make an application for setting aside such an arbitral

award in accordance with Section 34. The point to be noted is that

judicial intervention is postponed till the conclusion of the arbitral

38

proceedings and courts are kept at bay from interfering before the

making of an award. This is in line with the mandate of Section 5 which

states that except where so provided it shall be a judicial hands-off.

45. Section 14 deals with failure or impossibility of the arbitrator to

act and Section 15 deals with termination of mandate and substitution

of arbitrator. Section 16 deals with the competence of the Arbitral

Tribunal to rule on its own jurisdiction. This section, based on the

Principle of Kompetenz- Kompetenz, vests the arbitral tribunal to

decide upon its own jurisdiction, including ruling on any objections

with respect to the existence or validity of the arbitration agreement.

Section 16(2) mandates that a plea that the arbitral tribunal does not

have jurisdiction is to be raised not later than the submission of the

statement of defence; sub-section (5) of Section 16 states that where

the arbitral tribunal takes a decision rejecting the objection under sub-

sections (2) and (3) it shall continue with the arbitral proceedings and

make the award and any such decision upholding the jurisdiction or

authority is challengeable only at the stage of Section 34 and no court

will intervene pending the proceedings before the arbitrator. However,

Section 37(2) provides an appeal to the court in case the arbitrator

39

upholds the objection to jurisdiction or authority. Here again judicial

hands-off is specifically provided and wherever intervention was

permitted it took care to make specific provisions for the same. Section

29A is a specific instance in point where Courts’ intervention is

provided for in the context of extension of time for completion of

proceedings. Thereafter, for the purpose of this reference, the next set

of sections that would merit discussion is Sections 31 to 43.

46. Section 31 deals with form and contents of arbitral award. Sub-

section (1) mandates that the arbitral award shall be made in writing

and signed by the members of the arbitral tribunal. Sub-section (4)

states that the award shall state its date and the place of arbitration.

Sub-section 7(a) deals with manner of award of post-award interest.

Sub-section 7(b) states that unless the award otherwise directs any sum

directed to be paid by the tribunal shall carry interest at the rate of two

per cent higher than the current rate of interest prevalent on the date of

award. Sub-section (8) states that the costs of arbitration shall be fixed

by the arbitral tribunal in accordance with Section 31A. Sub-section

(3) of Section 32 states that subject to Section 33 and sub-section (4) of

40

Section 34, the mandate of the arbitral tribunal was to terminate with

the termination of the arbitral proceedings.

47. Section 33 deals with correction and interpretation of award;

additional award. Section 33 is extracted herein below:-

“33. Correction and interpretation of award; additional

award.—(1) Within thirty days from the receipt of the arbitral award,

unless another period of time has been agreed upon by the parties—

(a) a party, with notice to the other party, may request the arbitral

tribunal to correct any computation errors, any clerical or

typographical errors or any other errors of a similar nature occurring

in the award;

(b) if so agreed by the parties, a party, with notice to the other party,

may request the arbitral tribunal to give an interpretation of a specific

point or part of the award.

(2) If the arbitral tribunal considers the request made under sub-

section (1) to be justified, it shall make the correction or give the

interpretation within thirty days from the receipt of the request and

the interpretation shall form part of the arbitral award.

(3) The arbitral tribunal may correct any error of the type referred to

in clause (a) of sub-section (1), on its own initiative, within thirty

days from the date of the arbitral award.

(4) Unless otherwise agreed by the parties, a party with notice to the

other party, may request, within thirty days from the receipt of the

arbitral award, the arbitral tribunal to make an additional arbitral

award as to claims presented in the arbitral proceedings but omitted

from the arbitral award.

(5) If the arbitral tribunal considers the request made under sub-

section (4) to be justified, it shall make the additional arbitral award

within sixty days from the receipt of such request.

(6) The arbitral tribunal may extend, if necessary, the period of time

within which it shall make a correction, give an interpretation or

make an additional arbitral award under sub-section (2) or sub-

section (5).

41

(7) Section 31 shall apply to a correction or interpretation of the

arbitral award or to an additional arbitral award made under this

section.”

48. A careful reading of Section 33 would indicate that post the award

and subject to the conditions prescribed therein,

(a) either party after notice to the other may request the arbitral tribunal

to correct any computation errors and any clerical or typographical

errors or any errors of a similar nature occurring in the award;

(b) if so agreed by the parties, any party, with notice to the other party,

may request the arbitral tribunal to give an interpretation of a specific

point or part of the award;

(c) such requests, as mentioned above, is to be dealt with by the arbitral

tribunal within 30 days from the date of receipt of request and any such

interpretation given shall form part of the award;

(d) that on its own initiative, the arbitral tribunal may correct any error

or nature of a computation clerical or typographical error within 30

days from the date of the award;

(e) Subject to any contract to the contrary, a party with notice to the

other party within 30 days from the receipt of the arbitral award, request

42

the tribunal to make an additional arbitral award as to claims presented

in the arbitral proceedings but omitted from the arbitral award;

(f) such additional award shall be made within 60 days from the receipt

of such request; that the tribunal may extend the period of time within

which it shall make correction, give an interpretation and make an

additional award under sub-Section (2) of sub-Section (5)

(g) for such correction or interpretation of the arbitral award or to an

additional award, Section 31 was to apply.

49. This section is set out only for the reason that after the award is

made, situations necessitating correction of computation errors, clerical

or typographical errors are provided for to be remedied by approaching

the arbitrator. This will have a bearing while interpreting Section 33 &

Section 34(4) together, a little later in this judgment.

50. While Section 34 deals with application for setting aside arbitral

award, Section 35 speaks of finality of arbitral awards and Section 36

speaks of enforcement. The epicenter for this reference, however, is

Section 34, the scope, sweep and ambit of which this reference is

directly concerned.

43

51. Section 34 occurs in Chapter VII under the heading “Recourse

against arbitral award”, which reads as under:-

“34. Application for setting aside arbitral award.—(1) Recourse to

a Court against an arbitral award may be made only by an

application for setting aside such award in accordance with sub-

section (2) and sub-section (3).

(2) An arbitral award may be set aside by the Court only if—

(a) the party making the application establishes on the basis of the

record of the arbitral tribunal that—

(i) a party was under some incapacity, or

(ii) the arbitration agreement is not valid under the law to which

the parties have subjected it or, failing any indication thereon,

under the law for the time being in force; or

(iii) the party making the application was not given proper notice

of the appointment of an arbitrator or of the arbitral proceedings

or was otherwise unable to present his case; or

(iv) the arbitral award deals with a dispute not contemplated by or

not falling within the terms of the submission to arbitration, or it

contains decisions on matters beyond the scope of the submission

to arbitration: Provided that, if the decisions on matters submitted

to arbitration can be separated from those not so submitted, only

that part of the arbitral award which contains decisions on

matters not submitted to arbitration may be set aside; or

(v) the composition of the arbitral tribunal or the arbitral procedure

was not in accordance with the agreement of the parties, unless

such agreement was in conflict with a provision of this Part from

which the parties cannot derogate, or, failing such agreement, was

not in accordance with this Part; or

(b) the Court finds that—

(i) the subject-matter of the dispute is not capable of settlement by

arbitration under the law for the time being in force, or

(ii) the arbitral award is in conflict with the public policy of India.

Explanation 1.—For the avoidance of any doubt, it is clarified that

an award is in conflict with the public policy of India, only if,—

44

(i) the making of the award was induced or affected by fraud or

corruption or was in violation of section 75 or section 81; or (ii) it

is in contravention with the fundamental policy of Indian law; or

(iii) it is in conflict with the most basic notions of morality or

justice.

Explanation 2.—For the avoidance of doubt, the test as to whether

there is a contravention with the fundamental policy of Indian law

shall not entail a review on the merits of the dispute.

(2A) An arbitral award arising out of arbitrations other than

international commercial arbitrations, may also be set aside by the

Court, if the Court finds that the award is vitiated by patent illegality

appearing on the face of the award:

Provided that an award shall not be set aside merely on the ground

of an erroneous application of the law or by reappreciation of

evidence.

(3) An application for setting aside may not be made after three

months have elapsed from the date on which the party making that

application had received the arbitral award or, if a request had been

made under section 33, from the date on which that request had been

disposed of by the arbitral tribunal:

Provided that if the Court is satisfied that the applicant was prevented

by sufficient cause from making the application within the said period

of three months It may entertain the application within a further period

of thirty days, but not thereafter.

(4) On receipt of an application under sub-section (1), the Court may,

where it is appropriate and it is so requested by a party, adjourn

the proceedings for a period of time determined by it in order to give

the arbitral tribunal an opportunity to resume the arbitral proceedings

or to take such other action as in the opinion of arbitral tribunal

will eliminate the grounds for setting aside the arbitral award.

(5) An application under this section shall be filed by a party only after

issuing a prior notice to the other party and such application shall be

accompanied by an affidavit by the applicant endorsing compliance

with the said requirement.

(6) An application under this section shall be disposed of

expeditiously, and in any event, within a period of one year from the

date on which the notice referred to in sub-section (5) is served upon

other party.” (Emphasis Supplied)

45

52. A careful reading of the section reveals that it provides the

procedure and grounds for filing an application for setting aside arbitral

awards. It opens with the phrase “recourse to a Court against an

arbitral award which is to be made only by an application for setting

aside in accordance with sub-section (2) and (3)”. “Hence, an

application can only be for setting aside” the award which should be in

accordance with the grounds under sub-section (2) and (3). Sub-section

(2) opens with the phrase “an arbitral award may be set aside by the

court” and “only if” the party make out the grounds set out therein.

53. Section 34(2)(a) deals with parties being under some incapacity;

arbitration agreement not being valid under the law to which the parties

have subjected it or under the law for the time being in force; no proper

notice of the appointment of arbitrator or the arbitral proceedings being

given or the party being otherwise unable to present the case or that the

arbitral award dealt with disputes not contemplated by or not falling

within the terms of the submission to arbitration or it contained

decisions on matters beyond the scope of arbitration;

54. Section 34(2)(a)(iv) has an important proviso which states that if

the decisions on matters submitted to arbitration can be separated from

46

those not so submitted, only that part of the arbitral award which

contained decisions on matters not submitted to arbitration may be set

aside; Section 34(2)(a)(v) deals with the composition of the arbitral

tribunal or the arbitral procedure not being in accordance with the

agreement of the parties, unless such agreement itself was in conflict

with a provision of Part-I from which parties cannot derogate or failing

such agreement was not in accordance with Part-I.

55. Section 34 (2)(b) enables awards to be set aside if the subject-

matter of the dispute is not capable of settlement by arbitration under

the law for the time being in force or the arbitral award is in conflict

with the public policy of India. Explanation I sets out the clarification

as to when the award will be in conflict with the public policy of India

and it states that if the making the award was induced or affected by

fraud or corruption or was in violation of Section 75 (confidentiality in

conciliation) or Section 81 (adducing evidence contrary to the mandate

of Section 81); where the award is contrary to the fundamental policy

of India or was in conflict with the most basic notions of morality or

justice. Explanation II clarifies that the test as to whether there is a

47

contravention with the fundamental policy of India shall not entail a

review on the merits of the dispute.

56. Section 34(2A) is significant since it permits patent illegality

appearing on the face of the award as a ground to set aside the award

for domestic arbitrations and does not extend the said ground for

international commercial arbitrations. The proviso appended clarifies

that the award was not to be set aside merely on the ground of an

erroneous application of the law or by re-appreciation of evidence.

57. Section 34(4) is a very significant section which came in for

considerable deliberation at the hearing. Under this provision, a “safety

valve” is provided to prevent awards from being set aside by the

Section 34 court by providing an opportunity to the arbitral tribunal to

resume the arbitral proceedings or to take such other action as in the

opinion of the arbitral tribunal will eliminate the grounds for setting

aside the award. This section has come in for judicial interpretation

and will be discussed later in the course of this judgment.

48

58. One other Section which ought to be referred to is Section 43(4)

which deals with the situation post the setting aside of the award.

Section 43(4) reads as under:-

“Section 43(4)- Where the Court orders that an arbitral award be set

aside, the period between the commencement of the arbitration and

the date of the order of the Court shall be excluded in computing the

time prescribed by the Limitation Act, 1963 (36 of 1963), for the

commencement of the proceedings (including arbitration) with

respect to the dispute so submitted.”

59. The overarching note of restraint in judicial intervention as set out

in Section 5; the proscription for intervention set out in Section 13(5)

and 16(5); the range of options under Section 33 for the parties and the

arbitrator to carry out repairs to the award in the manner set out there

in; the limited option to seek recourse to set aside on prescribed grounds

with the shackle “only if” in Section 34(2) and the further safety valve

available in Section 34(4), to go back to the arbitrator under

circumstances mentioned therein are clear pointers about the acutely

circumscribed nature of the power in the Section 34 court. This, viewed

in the background of the fact that parties have with open eyes

contracted to go for arbitration and subject themselves to the

parameters prescribed in the act after ousting the normal judicial

process, clearly indicates that parties were conscious of the limited role

49

for courts in the review of arbitral awards. The absence of express

powers to modify for a court hearing objections against the

award, when such a power existed in the Precursor act also points to

the legislative intent. It is in this background that the arguments of the

parties clamouring for a reading in of the power of modification, needs

to be tested.

60. A Seven-Judge Bench of this Court in Interplay Between

Arbitration Agreements under Arbitration and Conciliation Act, 1996

& Stamp Act, 1899, In re, [(2024) 6 SCC 1] interpreting Section 5 of

the A&C Act had the following to say:

“81. One of the main objectives of the Arbitration Act is to

minimise the supervisory role of Courts in the arbitral process.

Party autonomy and settlement of disputes by an Arbitral

Tribunal are the hallmarks of arbitration law. Section 5 gives

effect to the true intention of the parties to have their disputes

resolved through arbitration in a quick, efficient and effective

manner by minimising judicial interference in the arbitral

proceedings. [Food Corpn. of India v. Indian Council of

Arbitration, (2003) 6 SCC 564.] Parliament enacted Section 5 to

minimise the supervisory role of Courts in the arbitral process

to the bare minimum, and only to the extent “so provided”

under the Part I of the Arbitration Act. In doing so, the

legislature did not altogether exclude the role of Courts or judicial

authorities in arbitral proceedings, but limited it to circumstances

where the support of judicial authorities is required for the

successful implementation and enforcement of the arbitral

process. [Union of India v. Popular Construction Co., (2001) 8

50

SCC 470; P. Anand Gajapathi Raju v. P.V.G. Raju, (2000) 4 SCC

539] The Arbitration Act envisages the role of Courts to “support

arbitration process” [Swiss Timing Ltd. v. Commonwealth Games

2010 Organising Committee, (2014) 6 SCC 677 : (2014) 3 SCC

(Civ) 642] by providing necessary aid and assistance when

required by law in certain situations.

86. Similar to Article 5 of the Model Law, Section 5 uses the

expression “in matters governed by this Part”. The use of this

expression circumscribes the scope of judicial intervention to

matters expressly governed by Part I of the Arbitration Act. The

matters governed by Part I inter alia include:

86.1. Section 8 which mandates judicial authorities to refer parties

to arbitration when prima facie there is a valid arbitration

agreement;

86.2. Section 9 which allows Courts to issue interim measures on

an application made by a party to an arbitration agreement;

86.3. Section 11 which empowers the Supreme Court or the High

Courts to appoint arbitrators on an application made by parties to

an arbitration agreement;

86.4. Section 27 which allows the Arbitral Tribunal to request the

Court for assistance in taking evidence; and

86.5. Section 34 which empowers the Court to set aside an arbitral

award on the basis of the limited grounds mentioned therein.

87. Section 5 has two facets — positive and negative. The positive

facet vests judicial authorities with jurisdiction over arbitral

proceedings in matters expressly allowed in or dealt with under

Part I of the Arbitration Act. The flip side to this approach is that

judicial authorities are prohibited from intervening in arbitral

proceedings in situations where the Arbitral Tribunal has been

bestowed with exclusive jurisdiction. This is the negative facet of

Section 5. The non obstante clause limits the extent of judicial

intervention in respect of matters expressly provided under the

Arbitration Act. [Secur Industries Ltd. v. Godrej & Boyce

Mfg. Co. Ltd., (2004) 3 SCC 447] In Bhaven

51

Construction v. Sardar Sarovar Narmada Nigam Ltd. [Bhaven

Construction v. Sardar Sarovar Narmada Nigam Ltd., (2022) 1

SCC 75 : (2022) 1 SCC (Civ) 374] , a Bench of three Judges of

this Court observed that the : (Bhaven Construction case [Bhaven

Construction v. Sardar Sarovar Narmada Nigam Ltd., (2022) 1

SCC 75 : (2022) 1 SCC (Civ) 374] , SCC p. 82, para 12)

“12. … non obstante clause is provided to uphold the intention of

the legislature as provided in the Preamble to

adopt UNCITRAL Model Law and Rules, to reduce excessive

judicial interference which is not contemplated under the

Arbitration Act.”

89. Section 5 is of aid in interpreting the extent of judicial

interference under Sections 8 and 11 of the Arbitration Act.

Section 5 contains a general rule of judicial non-interference.

Therefore, every provision of the Arbitration Act ought to be

construed in view of Section 5 to give true effect to the legislative

intention of minimal judicial intervention.”

(Emphasis supplied)

SOME CASES CITED IN THE REFERRAL ORDER: -

61. Before the contentions of the respective parties are addressed, the

deck needs to be cleared by discussing the judgments set out in question

No.5 in the referral order of 20.02.2024, particularly those cases

referred to therein where modification of the award was ordered or an

imprimatur was put on the modifications already made, to understand

the circumstances under which they came to be done. Considering that

this is a Bench of five, those judgments would not be binding. However,

52

the endeavour here is to understand the rationale behind the said

judgments to see whether it will be of any assistance herein.

62. The earliest case referred is Tata Hydro-Electric Power Supply

Co. Ltd. and Others vs. Union of India, (2003) 4 SCC 172. In the said

judgment, while setting aside the judgment of the High Court and

upholding the Award, a three-Judge Bench of this Court without

discussing the legal issue as to whether the power to modify existed in

a Section 34 Court or not, modified the date of commencement of

interest from the awarded date of August, 1993 to 30.03.1998, which

was the date when the Award came to be passed. This authority is of

little help since the issue that arises for consideration was not debated

and it was on the assumption that the power existed.

63. Insofar as the judgment in J.C. Budhraja vs. Chairman, Orissa

Mining Corporation Ltd. and Another, (2008) 2 SCC 444 is

concerned, that case arose under the Arbitration Act, 1940. In the said

case, the Arbitrator awarded a sum of Rs.1,02,66,901.36 (which was

more than the claim of Rs. 95,96,616.00) with interest @ 12% p.a. from

01.08.1997 till date of Award and future interest @ 6% p.a. from the

expiry of one month from the date of the Award till date of decree. The

53

Award was in respect of 35 claims. Claim Nos. 1-16 related to the

schedule of items under the contract and claim Nos. 17 to 34 were in

respect of work which did not form part of the contract schedule and

Claim No. 35 related to escalation in cost of labour and material on

account of delay in execution. The Civil Judge (Senior Division)

Bhubaneshwar, overruling the objections of the award debtor made the

award a rule of the court. While the award debtor filed Misc. Appeal

challenging the decision of the Civil Judge in the High Court, the

contractor also filed Misc. Appeal and Civil Revision claiming future

interest from the date of decree as the judgment of the Civil Court was

silent. By a common judgment, the High Court held that claims of the

contractor to be barred by limitation and set aside the Award. It allowed

the award debtor’s appeal and dismissed the award holders appeal and

revision. On further appeal to this Court, this Court held that out of the

total claim of Rs.95,96,616.00 the claim for only Rs.28,32,128.00 was

within time. The remaining claims aggregating to Rs.67,44,488.00

were fresh claims which were not pending claims in respect of which

the acknowledgement was made. Therefore, the fresh claims were held

barred by limitation. Therafter, this Court in para 34 held as under:-

54

“34. Does it mean that the entire award should be set aside? The

answer is, no. That part of the award which is valid and separable

can be upheld. That part relates to the claims which were validly

made before the arbitrator, which were part of the existing or

pending claims of Rs 50,15,820 and which were not barred by

limitation. As stated above they were the claims which were

existing or pending in 1978, 1979 and 1980 (considered by the

committee and payment made by OMC) which were carried

before the arbitrator to an extent of Rs 28,32,128. Only the

amounts awarded by the arbitrator against those claims can be

considered as award validly made in arbitration, falling within

jurisdiction. They are clearly severable from the other portions of

the award.

64. It is clear that apart from the fact that the said judgment arose

under the old Act, it was a case where the principle of severability was

applied. In any event, being a matter under the 1940 Act, power to

modify clearly existed. Hence, the judgment cannot be of any help in

deciding the scope of power under Section 34 of the A&C Act.

65. Insofar as the judgment in Madhya Pradesh Power Generation

Company Limited and Another vs. Ansaldo Energia Spa and

Another, (2018) 16 SCC 661 is concerned, as is clear from paras 38 &

39 of the said judgment, this Court on the finding that the bank

guarantees dated 22.02.2000 and 23.02.2000 were towards the amounts

advanced by the Board to the contractor severed the amounts involved

55

in the bank guarantee of the said two dates. Paras 38 & 39 read as

under:-

“38. The bank guarantee given on 24-2-2000 was a

performance bank guarantee and the claimant is entitled for

return of the amount for which the bank guarantee was given.

The Arbitral Tribunal, however, failed to take notice of the fact

that the other two bank guarantees were given for the amounts

to be advanced by the Board. In fact, the Board had advanced

the said amounts to the claimants. We are of the opinion that the

claimant is not entitled for return of the amounts involved in the

bank guarantees dated 22-2-2000 and 23-2-2000 as they were

towards the amounts advanced by the Board. The rejection of

the claim pertaining to the damages mentioned in Ext. HH of

the statement of claim which includes loss of profit, overheads

and loss of commercial opportunities clearly indicates that the

Arbitral Tribunal never intended to grant any damages to the

claimant. The claims allowed by the Arbitral Tribunal pertained

only to the return of the claimants' money involved in the bank

guarantees and the amounts actually spent by the claimants.

39. We uphold the award of the Arbitral Tribunal with the

modification that the claimants are not entitled for the amounts

involved in the bank guarantees dated 22-2-2000 and 23-2-2000

given by the claimants.”

66. Since the severed portion was a standalone portion not

inseparably intertwined with other portions of the award, this Court had

no difficulty in severing. Hence, really it is not a case of modification

of any portion of the award but a case of severance.

67. Now coming to the judgment in Vedanta Limited vs. Shenzhen

Shandong Nuclear Power Construction Company Limited, (2019) 11

SCC 465, this Court modified the interest with regard to the EUR

56

component and held that in respect of the award rate of 9% on the EUR

component, the award debtor will be liable to pay interest @ LIBOR

rate + 3 percentage points, prevailing on the date of the award. The

question as to whether interest can be modified, has been dealt with in

the later part of this judgment.

68. Shakti Nath and Others vs. Alpha Tiger Cyprus Investment

No.3 Limited and Others, (2020) 11 SCC 685 was a case where, by

consent of parties, the interest and penal interest was modified. Para 4

of the said judgment reads as follows:-

“4. After having heard the counsel appearing for all the

parties, the challenge to the ICC award is hereby

rejected. With respect to the amount awarded towards

interest and penal interest under the award, the same has

been modified by consent of parties, as a prudent

commercial decision, …”

69. Oriental Structural Engineers Private Limited vs. State of

Kerala, (2021) 6 SCC 150 was against a case where interest was

modified from 12% to 8% which is an aspect discussed hereinbelow.

57

ANALYSIS OF THE CONTENTIONS AND REASONING: -

CAN WORDS BE READ INTO SECTION 34?

70. The contention that the words “and, to the extent” and the words

“or modified”, and “to the extent” be read into parts of Section 34 is

only to be stated to be rejected. The justification for this argument that

the Court can iron out the creases is not appealing at all because what

is sought to be done is virtual mutilation of the fabric and not just the

ironing out of the creases. It is also very well settled that where the

language is plain and clear, the Court will prefer the plain meaning rule

and when there is no casus omissus, the Court cannot interpret a statute

as to create one.

71. This Court in CIT, Central Calcutta vs. National Taj Traders,

(1980) 1 SCC 370 has lucidly captured this, in the following words :-

“10. Two principles of construction — one relating to casus

omissus and the other in regard to reading the statute as a whole

— appear to be well settled. In regard to the former the following

statement of law appears in Maxwell on Interpretation of

Statutes (12th Edn.) at p. 33:

“Omissions not to be inferred.—It is a corollary to the general

rule of literal construction that nothing is to be added to or taken

from a statute unless there are adequate grounds to justify the

inference that the legislature intended something which it

58

omitted to express. Lord Morsey said: ‘It is a strong thing to read

into an Act of Parliament words which are not there, and in the

absence of clear necessity it is a wrong thing to do’. ‘We are not

entitled’, said Lord Loreburn L.C., ‘to read words into an Act of

Parliament unless clear reason for it is to be found within the four

corners of the Act itself’. A case not provided for in a statute is not

to be dealt with merely because there seems no good reason why

it should have been omitted, and the omission appears in

consequence to have been unintentional.”

In regard to the latter principle the following statement of law appears

in Maxwell at p. 47:

“A statute is to be read as a whole.—It was resolved in the case of

Lincoln College [(1595) 3 Co. Rep. 58b at p. 59b] that the good

expositor of an Act of Parliament should ‘make construction on all

the parts together, and not of one part only by itself’. Every clause of

a statute is to ‘be construed with reference to the context and other

clauses of the Act, so as, as far as possible, to make a consistent

enactment of the whole statute’.” (Per Lord Davey in Canada Sugar

Refining Co. Ltd. v.R., 1898 AC 735.)”

(Emphasis supplied)

72. The case law cited by Mr. Datar, learned Senior Counsel to read

words into have no application to the present case. As the cited cases

indicate they were done in situations where irreconcilable conflict was

to be avoided; where failure to do so would have resulted in absurdities

and injustice; where it was needed to bring the provision in consonance

with reason and justice and where parts of the statute would otherwise

have been rendered ineffective and meaningless. That is not the

situation here.

59

73. Section 34 speaks of ‘Recourse’ being taken against an arbitral

award. The word ‘Recourse’ has been defined in P. Ramanatha Aiyar’s

Advanced Law Lexicon Third Edition to mean:

“the act of seeking help or advice; enforcement or

method of enforcing a right.”

Further, Section 34 of the A&C Act clearly states that an arbitral award

may be “Set aside” by the Court “only if” the prescribed circumstances

are established.

74. The expression “Set aside” has been defined in P. Ramnatha

Aiyar’s Advanced Law Lexicon (third edition) to mean

“to annul, quash, render, void or negatory”.

75. Further, the phrase “only if” in the context in which it is used

makes it amply clear that only if the grounds prescribed are established

could the award be set aside. The word “only” has been interpreted by

this Court to mean to be a phrase ordinarily used as an exclusionary

term and it has been held that in ascertaining its meaning its placement

is material, as also the context in which the word is used (See Ramesh

Rout v. Rabindra Nath Rout, (2012) 1 SCC 762).

60

76. The combined use of the phrase “set aside” and “only if” read

with the phrase “recourse” makes it amply clear that the only manner

of interfering with the award as permitted in the Act and as reinforced

by Section 5 of the said Act is to file an application to set aside or annul

the award by establishing the grounds prescribed therein. As already

pointed out, Section 5 mandates that no judicial authority is to intervene

except where so provided under the A&C Act.

THE FALLACY IN THE ‘HARDSHIP’ ARGUMENT: -

77. The argument that absurdities will result and hardship will be

caused if power to modify is not read in has no merit. There are at least

two compelling reasons to hold so. The A&C Act in Section 43(4) itself

contemplates that on the setting aside of the award the option is to

commence proceedings including arbitration with respect to the

dispute. The law makers are fully conscious of the situation that setting

aside of the award will result in the dispute continuing to be thrown

open at large since notwithstanding the setting aside of the award the

legal position is that the arbitration agreement survives, except in

situations where the order setting aside has findings impinging on the

validity of the arbitration agreement itself.

61

78. Though said in the context of Section 19 of the 1940 Act, Juggilal

Kamlapat v. General Fibre Dealers Ltd., 1961 SCC OnLine SC 402,

reinforces the point that the arbitration agreement can survive the

setting aside of award. It was said that when a court sets aside an arbitral

award, it retains the discretion to either supersede the reference to

arbitration or allow it to continue, a power peculiar to the arbitration

Act of 1940. If the court decides to supersede the reference, it must also

order that the arbitration agreement ceases to have effect concerning

the dispute referred. However, if the court does not supersede the

reference, both the arbitration agreement and the reference remain

valid, enabling the parties to proceed with further arbitration. This

Court in Juggilal Kamlapat (supra) observed:

“8. …..The intention of the legislature in making this change in the

consequences to follow the setting aside of an award is clear in as

much as the provision recognises that there may be different kinds

of arbitration agreements, some of which might be exhausted by

the reference already made and the award following thereon which

has been set aside while others may be of a more comprehensive

nature and may contemplate continuation of the reference

relating to the same dispute or successive references relating to

different disputes covered by the arbitration agreement. …..

……It will thus be seen that the discretion vested in the court

under Section 19 depends upon the nature of the arbitration

agreement in particular cases and it is on a consideration of those

terms that the court may decide in one case to supersede the

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reference and order the arbitration agreement to cease to have

effect after taking into account the reasons which have impelled it

to set aside the award and in another not to set aside the reference

with the result that the reference and the arbitration agreement

subsist; and if the arbitration agreement provides for

machinery to have further arbitration on the same dispute or

other disputes arising under the arbitration agreement it is

permissible to have further arbitration on the same dispute or other

disputes. ….”

(Emphasis supplied)

79. This Court in Mcdermott International Inc. (Supra) pertinently

observed that “The court cannot correct errors of the arbitrators. It can

only quash the award leaving the parties free to begin the arbitration

again if it is desired.” (Emphasis supplied)

80. Chief Justice, Sundaresh Menon of the Supreme Court of

Singapore explains this concept in AKN vs. ALC, 2015 SGCA 63, thus:

“51. There is simply nothing to warrant the conclusion that where

an award has been set aside, the tribunal which made that award

would somehow resume the ability and mandate to determine

afresh the matters that had been dealt with in the award. But, as

alluded to above, this goes to the mandate of that particular

tribunal. The fact that the award has been set aside would not,

in and of itself, affect the continued validity and force of the

arbitration agreement between the parties, save in the

situation where the award was set aside on the ground that

there was no arbitration agreement between the parties. In L

W Infrastructure (HC), Belinda Ang J described this as

“Situation 2” and observed as follows (at [48]): Similarly,

where an arbitral award is “beyond power” in the sense that

the tribunal lacks jurisdiction to deal with the dispute

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altogether (for instance, where there is no valid agreement to

arbitrate, where a party to the arbitration agreement was

under some incapacity or where the arbitral tribunal has not

been properly appointed) ... that would clearly be the end of the

enquiry and the tribunal would obviously not be vested with

jurisdiction to deal with the matter merely because the award has

been set aside by the court. [emphasis in original]

52. We agree with this analysis. But save in this situation, the

arbitration agreement will generally survive the setting aside

of an award. On this basis, it may be open, subject to certain

other limitations, to which we will briefly turn, for a party

which has successfully obtained an award in the arbitration

and then seen that set aside by the court, to start a fresh

arbitration. This follows given that:

(a) The dispute has not yet been resolved since the award has

been set aside; and

(b) The arbitration agreement remains binding on the parties

as to how they will resolve their disputes.”

54. Against this background, we return to the possible limitations

that we alluded to at [52] above, which might stand in the way of

a party seeking to commence fresh arbitration proceedings after an

award was set aside. This is by no means an exhaustive list but it

seems to us that there are at least three possibly significant matters

that would have to be considered, quite apart from practical

considerations of cost and time, which are mentioned in some of

the extracts from the academic commentaries that we have referred

to:

(a) It is possible that a limitations defence might have accrued

by the time the fresh set of proceedings is commenced. This

possibility also has been alluded to in some of the academic

commentaries that we have referred to above. We note that it

is possible for this to be addressed in appropriate

circumstances pursuant to s 8A(2) of the IAA, which

empowers the court in the exercise of its discretion to extend

64

time for the commencement of proceedings by excluding from

consideration the period between the commencement of the

arbitration and the setting aside of the award. We comment

further on s 8A(2) below (at [64]–[67]).

(b) We have said that the arbitration agreement will generally

survive the setting aside of the award. This would entail,

however, the recommencement of fresh arbitration

proceedings and in general, one would expect a new tribunal

to be constituted. It is of course possible for both parties to

agree to reconstitute the previous tribunal as the new one. But

in the absence of such agreement, there remains the possibility

that objections might yet be taken by one of the parties to any

attempt by the other to re-appoint a member of the previous

tribunal, on the grounds that there exist justifiable doubts as to

the impartiality of the prospective appointee by reason of his

or her prior involvement in the matter and in the award that has

been set aside. This will plainly be a fact-sensitive inquiry and

we say no more about this.

(c) We think it is inevitable that in attempting to commence a

fresh arbitration, consideration will have to be given to the

issue of res judicata. We deal with this in the next section of

this judgment.

(Emphasis supplied)

81. Hence, recommencement of proceedings including arbitration

proceedings- wherever legally maintainable- being expressly

contemplated in the statute the same cannot be brushed aside on the

grounds of causing hardship to the parties. Parties, no doubt, will have

all contentions and defences open as are available to them in law.

65

CONTRACTUAL OUSTER OF THE NORMAL JUDICIAL

PROCESS: -

82. The second reason is equally compelling. As briefly discussed

earlier, when parties agree to arbitrate, they consciously with open eyes

agree to step out of the normal judicial process and submit their dispute

to a third party. Parties then are also conscious that when they agree to

arbitrate their rights and liabilities will be governed by the regulating

Act, which in this case is the A&C Act. In that sense, there is a

contractual ouster subject to the terms of the A&C Act of the normal

judicial process and the said course of action is sanctified under Section

28 of the Contract Act since such agreements are expressly held not to

be opposed to public policy.

83. In the normal judicial process, the dispute would be adjudicated

by the Court of first instance and appeals as provided in the Code of

Civil Procedure, 1908 (C.P.C. for short) would ordinarily have been

available to the aggrieved parties.

66

CONTRAST WITH THE APPELLATE POWER UNDER CPC: -

84. A perusal of the conspectus of the scope of the appellate power

under the C.P.C. would bring the contrast between the normal appellate

power and the powers available to a Section 34 Court under the A&C

Act. Part VII of the Code of Civil Procedure, 1908, as amended in 1976,

read with Order XLI sets out the scope of the power of an Appellate

Court. Section 107 and 108 reads as under:

“107. Powers of Appellate Court.—(1) Subject to such conditions

and limitations as may be prescribed, an Appellate Court shall have

power—

(a) to determine a case finally;

(b) to remand a case;

(c) to frame issues and refer them for trial;

(d) to take additional evidence or to require such evidence to be

taken.

(2) Subject as aforesaid, the Appellate Court shall have the same

powers and shall perform as nearly as may be the same duties

as are conferred and imposed by this Code on Courts of original

jurisdiction in respect of suits instituted therein.

108. Procedure in appeals from appellate decrees and orders.—

The provisions of this Part relating to appeals from original decrees

shall, so far as may be, apply to appeals—

(a) from appellate decrees, and

(b) from orders made under this Code or under any special or local

law in which a different procedure is not provided.”

(Emphasis supplied)

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85. Order XLI of the CPC prescribes certain rules, some of which are

relevant herein. Rule 31, 32 and 33 are extracted hereinbelow:

31. Contents, date and signature of judgment.—The judgment of

the Appellate Court shall be in writing and shall state— (a) the points

for determination; (b) the decision thereon; (c) the reasons for the

decision; and (d) where the decree appealed from is reversed or

varied, the relief to which the appellant is entitled; and shall at

the time that it is pronounced be signed and dated by the Judge

or by the Judges concurring therein.

32. What judgment may direct.—The judgment may be for

confirming, varying or reversing the decree from which the

appeal is preferred, or, if the parties to the appeal agree as to the

form which the decree in appeal shall take, or as to the order to

be made in appeal, the Appellate Court may pass a decree or

make an order accordingly.

33. Power of Court of Appeal.—The Appellate Court shall have

power to pass any decree and make any order which ought to have

been passed or made and to pass or make such further or other decree

or order as the case may require, and this power may be exercised by

the Court notwithstanding that the appeal is as to part only of the

decree and may be exercised in favour of all or any of the respondents

or parties, although such respondents or parties may not have filed

any appeal or objection, and may, where there have been decrees in

cross-suits or where two or more decrees are passed in one suit, be

exercised in respect of all or any of the decrees, although an appeal

may not have been filed against such decrees:

Provided that the Appellate Court shall not make any order under

section 35A, in pursuance of any objection on which the Court from

whose decree the appeal is preferred has omitted or refused to make

such order.”

(Emphasis supplied)

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86. It will be noticed that an Appellate Court under the normal

judicial process has powers coextensive with the original Court

(Section 107(2) CPC). The respondent in an appeal can challenge the

findings against him (Order XLI Rule 22). The Appellate Court can

confirm, vary, reverse the decree and if the parties to the appeal agree

as to the form which the decree in appeal is to take or as to the order to

be made in appeal, the Appellate Court may pass a decree or make an

order (order XLI Rule 31 and 32) and the Appellate Court shall have

the power to pass any decree and make any order which ought to have

been passed or made and pass or make such further or other decree or

order. Further, the Appellate Court may exercise the power

notwithstanding that the appeal was only to a part of the decree and

may be exercised in favour of all or any of the respondents or parties,

although such respondents or parties may not have filed any appeal or

objection (Order XLI Rule 33).

87. This wide power is not available to a Court under Section 34 of

the A&C Act while entertaining an application to set aside the arbitral

award. The word ‘modify’ has been defined in P. Ramanatha Aiyar’s

Advanced Law Lexicon Third Edition to mean:

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‘To change, or vary, to qualify or reduce’.

The position that the Court does not sit in appeal over the arbitral

award is well- settled by now. This Court in Dyna Technologies Private

Limited v. Crompton Greaves Limited, (2019) 20 SCC 1, observed:-

“24. There is no dispute that Section 34 of the Arbitration Act limits

a challenge to an award only on the grounds provided therein or as

interpreted by various courts. We need to be cognizant of the fact

that arbitral awards should not be interfered with in a casual and

cavalier manner, unless the court comes to a conclusion that the

perversity of the award goes to the root of the matter without there

being a possibility of alternative interpretation which may sustain

the arbitral award. Section 34 is different in its approach and

cannot be equated with a normal appellate jurisdiction. The

mandate under Section 34 is to respect the finality of the arbitral

award and the party autonomy to get their dispute adjudicated by

an alternative forum as provided under the law. If the courts were

to interfere with the arbitral award in the usual course on factual

aspects, then the commercial wisdom behind opting for alternate

dispute resolution would stand frustrated.

25. Moreover, umpteen number of judgments of this Court have

categorically held that the courts should not interfere with an award

merely because an alternative view on facts and interpretation of

contract exists. The courts need to be cautious and should defer to

the view taken by the Arbitral Tribunal even if the reasoning

provided in the award is implied unless such award portrays

perversity unpardonable under Section 34 of the Arbitration Act.”

88. There is a sound jurisprudential reason for the same. Arbitration

has its origin in the contract between parties where parties have stepped

70

out of the ordinary judicial process and in that sense there is an ouster

of the jurisdiction of the Court’s power to adjudicate.

89. In view of this, the Section 34 Court unless expressly authorized

by law cannot modify or vary the award since it will be tantamount to

exercising the power of merits review, when parties have contracted to

have their disputes referred to a third party outside the normal judicial

process, for adjudication by arbitration.

90. It will be difficult to countenance the argument that words be read

into, to confer that power to modify, as it will tantamount to exercising

legislative power. Modification or variation of the award in the absence

of an express legislative sanction would tantamount to courts usurping

the power of the arbitrator when there is no legislative sanction for the

same.

IS POWER TO ‘MODIFY’ A LESSER POWER?

91. Parties have contended that the power to set aside is a larger

power and hence a power to modify is after all a lesser power which

should be subsumed in the larger power. They have relied on the legal

maxim omne majus continet in se minus:- the greater contains the less.

71

At first blush, though the argument seems attractive, a close scrutiny

reveals that the argument has really no substance. As explained

hereinabove, the qualitative nature of an appellate power is different

from the power under Section 34. The two operate in different spheres

and are not of the same genus. They do not have similar characteristics.

It cannot be said just on a first blush understanding that power to set

aside is larger and power to modify is smaller or lesser without keeping

the context in which Section 34 occurs in the Act and without

considering the very ecosystem of the arbitration process.

92. There is a useful authority albeit from the criminal jurisdiction

which brings out this concept. In Shamnsaheb M. Multtani vs. State

of Karnataka, (2001) 2 SCC 577, a question arose whether an accused

charged under Section 302 Indian Penal Code could be at the trial

convicted for offences under Section 304-B of the Indian Penal Code

and as to whether Section 304-B could be said to be a minor offence.

Answering in the negative, this Court, speaking through K.T. Thomas,

J., felicitously explained the principle thus.

“15. Section 222(1) of the Code deals with a case “when a person

is charged with an offence consisting of several particulars”. The

section permits the court to convict the accused “of the minor

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offence, though he was not charged with it”. Sub-section (2) deals

with a similar, but slightly different situation.

“222. (2) When a person is charged with an offence and facts

are proved which reduce it to a minor offence, he may be

convicted of the minor offence, although he is not charged with

it.”

16. What is meant by “a minor offence” for the purpose of Section

222 of the Code? Although the said expression is not defined in

the Code it can be discerned from the context that the test of minor

offence is not merely that the prescribed punishment is less than

the major offence. The two illustrations provided in the section

would bring the above point home well. Only if the two offences

are cognate offences, wherein the main ingredients are

common, the one punishable among them with a lesser

sentence can be regarded as minor offence vis-à-vis the other

offence.

17. The composition of the offence under Section 304-B IPC is

vastly different from the formation of the offence of murder

under Section 302 IPC and hence the former cannot be

regarded as minor offence vis-à-vis the latter. However, the

position would be different when the charge also contains the

offence under Section 498-A IPC (husband or relative of husband

of a women subjecting her to cruelty). As the word “cruelty” is

explained as including, inter alia, “harassment of the woman

where such harassment is with a view to coercing her or any person

related to her to meet any unlawful demand for any property or

valuable security or is on account of failure by her or any person

related to her to meet such demand”.

18. So when a person is charged with an offence under Sections

302 and 498-A IPC on the allegation that he caused the death of a

bride after subjecting her to harassment with a demand for dowry,

within a period of 7 years of marriage, a situation may arise, as in

this case, that the offence of murder is not established as against

the accused. Nonetheless, all other ingredients necessary for the

offence under Section 304-B IPC would stand established. Can the

73

accused be convicted in such a case for the offence under Section

304-B IPC without the said offence forming part of the charge?

34. In such a situation, if the trial court finds that the prosecution

has failed to make out the case under Section 302 IPC, but the

offence under Section 304-B IPC has been made out, the court has

to call upon the accused to enter on his defence in respect of the

said offence. Without affording such an opportunity to the accused,

a conviction under Section 304-B IPC would lead to real and

serious miscarriage of justice. Even if no such count was included

in the charge, when the court affords him an opportunity to

discharge his burden by putting him to notice regarding the prima

facie view of the court that he is liable to be convicted under

Section 304-B IPC, unless he succeeds in disproving the

presumption, it is possible for the court to enter upon a conviction

of the said offence in the event of his failure to disprove the

presumption.

35. As the appellant was convicted by the High Court under

Section 304-B IPC, without such an opportunity being granted to

him, we deem it necessary in the interest of justice to afford him

that opportunity. The case in the trial court should proceed against

the appellant (not against the other two accused whose acquittal

remains unchallenged now) from the stage of defence evidence.

He is put to notice that unless he disproves the presumption, he is

liable to be convicted under Section 304-B IPC.”

(Emphasis supplied)

93. Hence, power to modify which would include the Court entering

the arena of adjudicating the dispute on merits when parties have

contractually agreed to go to the arbitrator, cannot be said to be

subsumed in the power to “set aside”. It will be a different matter if the

power to modify or power to vary is conferred by the legislature itself.

Post the UNCITRAL Convention when the participating countries

74

legislated, while India did not recognize in the statute the power to

modify or vary, several jurisdictions like U.K. and Singapore positively

legislated. The provision in the U.K. State Arbitration Act and the

Singapore Arbitration Act are set out hereinbelow to bring home the

point.

Relevant provisions under the English Arbitration Act, 1996

“67. Challenging the award: substantive jurisdiction.

(1)A party to arbitral proceedings may (upon notice to the other

parties and to the tribunal) apply to the court—

(a)challenging any award of the arbitral tribunal as to its

substantive jurisdiction; or

(b)for an order declaring an award made by the tribunal on the

merits to be of no effect, in whole or in part, because the tribunal

did not have substantive jurisdiction.

A party may lose the right to object (see section 73) and the right

to apply is subject to the restrictions in section 70(2) and (3).

(2)The arbitral tribunal may continue the arbitral proceedings and

make a further award while an application to the court under this

section is pending in relation to an award as to jurisdiction.

(3)On an application under this section challenging an award of

the arbitral tribunal as to its substantive jurisdiction, the court may

by order—

(a)confirm the award,

(b)vary the award, or

(c)set aside the award in whole or in part.

75

(4)The leave of the court is required for any appeal from a decision

of the court under this section.

69. Appeal on point of law.

(1)Unless otherwise agreed by the parties, a party to arbitral

proceedings may (upon notice to the other parties and to the

tribunal) appeal to the court on a question of law arising out of an

award made in the proceedings.

An agreement to dispense with reasons for the tribunal’s award

shall be considered an agreement to exclude the court’s

jurisdiction under this section.

(2)An appeal shall not be brought under this section except—

(a)with the agreement of all the other parties to the proceedings,

or

(b)with the leave of the court.

The right to appeal is also subject to the restrictions in section

70(2) and (3).

(3)Leave to appeal shall be given only if the court is satisfied—

(a)that the determination of the question will substantially affect

the rights of one or more of the parties,

(b)that the question is one which the tribunal was asked to

determine,

(c)that, on the basis of the findings of fact in the award—

(i)the decision of the tribunal on the question is obviously wrong,

or

(ii)the question is one of general public importance and the

decision of the tribunal is at least open to serious doubt, and

(d)that, despite the agreement of the parties to resolve the matter

by arbitration, it is just and proper in all the circumstances for the

court to determine the question.

76

(4)An application for leave to appeal under this section shall

identify the question of law to be determined and state the grounds

on which it is alleged that leave to appeal should be granted.

(5)The court shall determine an application for leave to appeal

under this section without a hearing unless it appears to the court

that a hearing is required.

(6)The leave of the court is required for any appeal from a decision

of the court under this section to grant or refuse leave to appeal.

(7)On an appeal under this section the court may by order—

(a)confirm the award,

(b) vary the award,

(c)remit the award to the tribunal, in whole or in part, for

reconsideration in the light of the court’s determination, or

(d)set aside the award in whole or in part.

The court shall not exercise its power to set aside an award, in

whole or in part, unless it is satisfied that it would be

inappropriate to remit the matters in question to the tribunal

for reconsideration.

(8) The decision of the court on an appeal under this section shall

be treated as a judgment of the court for the purposes of a further

appeal.

But no such appeal lies without the leave of the court which shall

not be given unless the court considers that the question is one of

general importance or is one which for some other special reason

should be considered by the Court of Appeal.”

Relevant provisions of the Singapore Arbitration Act, 2001:-

“No judicial review of award

47. The Court does not have jurisdiction to confirm, vary, set aside

or remit an award on an arbitration agreement except where so

provided in this Act.

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Appeal against award

(8) On an appeal under this section, the Court may by order —

(a) confirm the award;

(b) vary the award;

(c) remit the award to the arbitral tribunal, in whole or in part,

for reconsideration in the light of the Court’s determination; or

(d) set aside the award in whole or in part.

(9) The Court is not to exercise its power to set aside an award,

in whole or in part, unless it is satisfied that it would be

inappropriate to remit the matters in question to the arbitral

tribunal for reconsideration.”

(Emphasis supplied)

94. The Act of 1940 in our country had an express power to modify.

When the A&C Act was enacted, for reasons best known to the

legislature, the power was not incorporated. Dr. T.K. Viswanathan

Committee which examined reforms to the A&C Act has recommended

for the incorporation of the provision in its report but as yet the

legislature has not enacted a provision to modify. The relevant portions

are extracted herein below –

“3.25.8 The Committee has examined the proposal to permit courts

to modify or vary an award, while setting aside such an award in

exercise of its section 34 jurisdiction. This is proposed to be achieved

by amending sub-section (2) and sub-section (2A) of section 34.

3.25.9 Such orders must, however, be made only in exceptional

circumstances to meet the ends of justice. This will enable a section

34 Court to provide a quietus to the matter, so as to avoid further

78

litigation. It is proposed to substitute the words “set aside by the

Court” with the words “set aside in whole or in part by the Court”

and add a proviso for partly varying the award in exceptional

circumstances.

3.25.10 The Committee feels that the proposed amendment will

provide relief to parties in situations where the findings in the arbitral

award can be varied, having regard to the arbitral records. Needless

to state, any such modification to the arbitral award can only be

ordered by the Court if the strict parameters for setting aside the

arbitral award under section 34 of the Act are made out, and there is

no need to adduce fresh evidence.

3.25.11 An express provision incorporated in the Act is likely to

streamline the process, saving time, effort, and resources for all the

parties involved. Thus, granting the Courts the authority to modify

awards within well-defined limits would help strike a balance

between preserving finality of the arbitral process and ensuring

fairness.

3.25.12 The Committee recommends amendment to sub-sections (2)

and (2A) of section 34 to substitute the words “set aside by the

Court”, with the words “set aside in whole or in part by the Court”

and to add the following proviso, namely “Provided that in cases

where the Court sets aside the arbitral award in whole or in part, the

Court may make consequential orders varying the award only in

exceptional circumstances to meet the ends of justice.”.

Recommendation

It is proposed to amend section 34-

(i) to insert a new sub section(1A) to provide that an application for

setting aside an award under sub-section (1) shall be accompanied by

the original award and where the parties have not been given the

original award, they may file a copy of the award signed by the

arbitrators;

(ii) in sub-section (2) - (a) for the words “An arbitral award may be

set aside by the Court”, the words “An arbitral award may be set aside

in whole or in part by the Court” be substituted; (b) after clause (b)

and before Explanation 1 the following proviso shall be inserted,

namely:- Provided that in cases where the Court sets aside the arbitral

award in whole or in part, the Court may make consequential orders

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varying the award only in exceptional circumstances to meet the ends

of justice”

(iii) in sub-section (2-A)- (a) for the words “An arbitral award arising

out of arbitrations other than international commercial arbitrations,

may also be set aside by the court”, the words “An arbitral award

arising out of arbitrations other than international commercial

arbitrations, may also be set aside in whole or in part by the Court”

shall be substituted. (b) after the proviso the following proviso shall

be inserted namely: -

“Provided further that in cases where the Court sets aside the arbitral

award in whole or in part, the Court may make consequential orders

varying the award only in exceptional circumstances to meet the ends

of justice”

95. In a 2006 judgment of this Court in Mcdermott International Inc.

(supra), itself this Court expressly observed that there is no power in a

Section 34 Court to modify. The relevant passage from Mcdermott

(supra) reads as follows:

“52. The 1996 Act makes provision for the supervisory role of courts,

for the review of the arbitral award only to ensure fairness.

Intervention of the court is envisaged in few circumstances only, like,

in case of fraud or bias by the arbitrators, violation of natural justice,

etc. The court cannot correct errors of the arbitrators. It can only

quash the award leaving the parties free to begin the arbitration

again if it is desired. So, the scheme of the provision aims at

keeping the supervisory role of the court at minimum level and

this can be justified as parties to the agreement make a conscious

decision to exclude the court's jurisdiction by opting for

arbitration as they prefer the expediency and finality offered by

it.”

(Emphasis supplied)

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96. Notwithstanding the fact that there have been three occasions for

the Parliament to amend the A&C Act in 2015, 2019 and 2021, the

power to modify has not been incorporated. Hence, for the Court to

read the power would be completely untenable and the submissions on

that score are rejected.

LEGAL MAXIMS – TO BE DEPLOYED AFTER

ASCERTAINING CONTEXT:

97. It is apt to observe herein that mechanical deployment of the legal

maxims unless they apply on all fours to a case should be discouraged.

Legal maxims, no doubt, are very useful tools but its application has to

be with great caution, for in law things are not cut and dried and nicely

weighed in all situations. There will be shades of grey and sometimes

legal maxims if deployed without adequate attention may lead to

pitfalls. Justice Benjamin Cardozo, in Berkey Vs. Third Avenue

Railway Co., 244 N.Y, 84, speaking of metaphors in law had the

following caution to administer:-

“Metaphors in law are to be narrowly watched, for starting as devices

to liberate thought, they end often by enslaving it.”

What Cardozo J. said of metaphors is equally true of legal maxims.

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THE ARGUMENT ON INHERENT POWERS: -

98. Parties in support of the power to modify sought to seek refuge in

Section 151 of the Code of Civil Procedure which saved the inherent

powers of the Court. Section 151 CPC reads as under:

“151. Saving of inherent powers of Court.—Nothing in this Code

shall be deemed to limit or otherwise affect the inherent power of the

Court to make such orders as may be necessary for the ends of justice

or to prevent abuse of the process of the Court.”

99. The contention was that Section 34 recourse is taken in the normal

Civil Courts as defined in Section 2(e) of the A&C Act and those Courts

being Civil Courts of Original jurisdiction or the High Courts the

inherent power vested in them should be available to modify awards.

There is no merit in this submission. As the discussion hereinabove

would reveal Section 34 is couched in clear terms and the parameters

for setting aside the award are clearly laid out in mandatory terms.

Could inherent powers under CPC be exercised in a manner to be in

conflict with the expressly provided powers by the legislature? The

answer has to be an emphatic ‘No’. Almost six decades ago, a four-

Judge Bench of this Court in Manohar Lal Chopra Vs. Rai Bahadur

Rao Raja Seth Hiralal, 1961 SCC OnLine SC 17, speaking through

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Raghubar Dayal J. following the holding in Padam Sen Vs. State of

Uttar Pradesh, (1961) 1 SCR 884, made the following telling

observations:

“21. A similar question about the powers of the Court to issue a

commission in the exercise of its powers under s. 151 of the Code in

circumstances not covered by s. 75 and Order XXVI, arose in Padam

Sen v. The State of Uttar Pradesh (1) and this Court held that the

Court can issue a commission in such circumstances. It observed at

page 887 thus:

"The inherent powers of the Court are in addition to the

powers specifically conferred on the Court by the Code. They

are complementary to those powers and therefore it must be

held that the Court is free to exercise them for the purpose

mentioned in s. 151 of the Code when the exercise of those

powers is not in any way in conflict with what has been

expressly provided in the Code or against the intentions

of the Legislature."

These observations clearly mean that the inherent powers are not in

any way controlled by the provisions of the Code as has been

specifically stated in s. 151 itself. But those powers are not to be

exercised when their exercise may be in conflict with what had

been expressly provided in the Code or against the intentions of

the Legislature. This restriction, for practical purposes, on the

exercise of these powers is not because these powers are

controlled by the provisions of the Code but because it should be

presumed that the procedure specifically provided by the

Legislature for orders in certain circumstances is dictated by the

interests of justices.”

(Emphasis supplied)

Nothing more needs to be said on this aspect of the matter.

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DOCTRINE OF IMPLIED POWERS: -

100. Undeterred, an attempt was made to fall back upon the doctrine

of implied powers to somehow vest in Section 34 Court a power to

modify the award. It is well settled that if a statute conferring a power

to be exercised on certain conditions, the conditions prescribed are

normally held to be mandatory and a power inconsistent with those

conditions is impliedly negatived. No doubt, there is a principle in law

that a Court must as far as possible adopt a construction which

effectuates the legislative intent and purpose and that an express grant

of a statutory power carries with it by necessary implication the

authority to use all reasonable means to make such grant effective.

101. In Savitri Vs. Govind Singh Rawat, (1985) 4 SCC 337, Justice E.

S. Venkataramiah (as the learned Chief Justice then was) set out the

principle thus:-

“Every court must be deemed to possess by necessary intendment all

such powers as are necessary to make its orders effective. This

principle is embodied in the maxim "ubi aliquid conceditur,

conceditur et id sine quo res ipsa esse non potest" (Where anything

is conceded, there is conceded also anything without which the thing

itself cannot exist). [Vide Earl Jowitt's Dictionary of English Law,

1959 Edn., p. 1797.] Whenever anything is required to be done by

law and it is found impossible to do that thing unless something

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not authorised in express terms be also done then that something

else will be supplied by necessary intendment. Such a

construction though it may not always be admissible in the

present case however would advance the object of the legislation

under consideration. A contrary view is likely to result in grave

hardship to the applicant, who may have no means passed to

subsist until the final order is passed.

(Emphasis supplied)

102. As is clear, the doctrine of implied powers is invoked to effectuate

the final power. Where it is impossible to effectuate the final power

unless something not authorized in express terms be also done, in such

an event, the power will be supplied by necessary intendment as an

exception. The exceptional situation is to advance the object of the

legislation under consideration and to avoid grave hardship.

103. This doctrine has no application to the question under

consideration herein. The objects of the statute are very clear and have

been elucidated hereinabove. The difference between the normal

judicial procedure and the arbitration process contractually agreed

upon with all its qualitative differences is also well established. No

implied power is needed to effectuate the final power provided under

Section 34 and, as set out earlier, there is no impediment to exercise the

final power. In the teeth of the legislature expressly contemplating fresh

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arbitrations and other legal proceedings under Section 43(4), it cannot

be said on some conjectured assumptions that hardship will cause to

the parties.

PARTY AUTONOMY: -

104. It is time now to discuss the concept of party autonomy, which is

the underlying theme of the arbitration process. Gary B. Born, in his

commentary “International Commercial Arbitration”, South Asian

Reprint Edition published by Wolters Kluwer discussed the concept of

party autonomy in the following terms.

“A further objective, and perceived advantage, of international

commercial arbitration is the effort to maximize party autonomy

and provide procedural flexibility. As discussed below, leading

international arbitration conventions and national laws accord parties

broad autonomy to agree upon the substantive laws and procedures

applicable to "their" arbitrations. This emphasis on the importance of

party autonomy parallels applications of the doctrine throughout the

field of contemporary private international law, and commercial law

more generally, but has particular significance in the field of

international commercial arbitration. One of the principal reasons

that this procedural autonomy is granted is to enable the parties

and arbitrators to dispense with the technical formalities and

procedures of national court proceedings and instead fashion

procedures tailored to particular disputes. Thus, technically-

complex disputes can include specialized procedures for testing and

presenting expert evidence, or "fast track" procedures can be adopted

where time is of the essence, or tailor-made dispute resolution

mechanisms can be adopted in particular commercial markets. More

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generally, parties are typically free to agree upon the existence and

scope of discovery or disclosure, the modes for presentation of fact

and expert evidence, the length of the hearing, the timetable and other

matters. The parties' ability to adopt (or, failing agreement, the

tribunal's power to prescribe) flexible procedures is a central

attraction of international arbitration - again, as evidenced by

empirical research and commentary.”

(Emphasis Supplied)

105. As would be clear, party autonomy enables parties to dispense

with technical formalities and procedures of National Court

proceedings, contractually. They agree to abide by the terms of the

statute regulating arbitration which they perceive as advantageous.

Having done so, they cannot be allowed to cry afoul, when it does not

suit their needs and clamor for certain procedures which are

legislatively not sanctioned in the arbitration process and are available

in the normal machinery of the Courts.

106. Further, as held earlier, a Section 34 Court cannot be invited to

enter into the merits. The limited recourse available is the one provided

under Section 34 and when the Section is plain and clear the historical,

textual and the contextual interpretation does not permit the reading in

of any implied power to expand the scope of Section 34.

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107. The Judgment in Centrotrade Minerals & Metal Inc. vs.

Hindustan Copper Ltd., (2017) 2 SCC 228 cited by learned Senior

Counsel, Mr. Darius Khambata that it is not always that acts not

mentioned in the statute are impermissible has no application herein. In

that case, this Court was concerned with not any Statutory Court

procedure but with an appeal procedure mutually agreed upon by the

parties in a contract, which the Court sanctioned inter alia referring to

principles of party autonomy.

CAN ARTICLE 142 POWERS BE EXERCISED TO MODIFY?

108. Parties have referred to cases where this Court in some cases

exercised powers under Article 142 in modifying the award particularly

the percentage of interest awarded by the arbitrators. The aspect of

award of interest is discussed hereinbelow, while dealing with Section

34(4).

In this segment of the judgment the only question considered is whether

power under Article 142 of the Constitution would be exercised by this

Court to modify in any manner an arbitral award when matters come

up after initiation of proceedings under Section 34.

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109. A Constitution Bench of this Court in Supreme Court Bar

Association vs. Union of India and Another, (1998) 4 SCC 409, while

delving on the scope of this Court’s power under Article 142, held that

the power under Article 142 cannot be used to “supplant” substantive

law applicable to the case or cause under consideration of the Court. It

has been held that express statutory provisions cannot be ignored and

Article 142 cannot be used to achieve indirectly what cannot be

achieved directly. It has been held that to balance the equities between

conflicting claims of the litigating parties “ironing out the creases” in a

cause or matter before it could be done but, in no circumstance will

substantive statutory provision dealing with the subject matter be given

a go bye. It has been clarified that though the powers of this Court

cannot be controlled by any statutory provisions, however, when the

exercise of power comes directly in conflict with what has been

expressly provided in a statute, the power under Article 142 is not to be

exercised.

110. We need to do nothing more than to extract Para 47 and 48 of the

judgment in Supreme Court Bar Association (supra).

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“47. “The plenary powers of this Court under Article 142 of the

Constitution are inherent in the Court and are complementary to

those powers which are specifically conferred on the Court by

various statutes though are not limited by those statutes. These

powers also exist independent of the statutes with a view to do

complete justice between the parties. These powers are of very wide

amplitude and are in the nature of supplementary powers. This power

exists as a separate and independent basis of jurisdiction apart from

the statutes. It stands upon the foundation and the basis for its

exercise may be put on a different and perhaps even wider footing,

to prevent injustice in the process of litigation and to do complete

justice between the parties. This plenary jurisdiction is, thus, the

residual source of power which this Court may draw upon as

necessary whenever it is just and equitable to do so and in particular

to ensure the observance of the due process of law, to do complete

justice between the parties, while administering justice according to

law. There is no doubt that it is an indispensable adjunct to all other

powers and is free from the restraint of jurisdiction and operates as a

valuable weapon in the hands of the Court to prevent “clogging or

obstruction of the stream of justice”. It, however, needs to be

remembered that the powers conferred on the Court by Article 142

being curative in nature cannot be construed as powers which

authorise the Court to ignore the substantive rights of a litigant while

dealing with a cause pending before it. This power cannot be used

to “supplant” substantive law applicable to the case or cause

under consideration of the Court. Article 142, even with the

width of its amplitude, cannot be used to build a new edifice

where none existed earlier, by ignoring express statutory

provisions dealing with a subject and thereby to achieve

something indirectly which cannot be achieved directly.

Punishing a contemner advocate, while dealing with a contempt of

court case by suspending his licence to practice, a power otherwise

statutorily available only to the Bar Council of India, on the ground

that the contemner is also an advocate, is, therefore, not permissible

in exercise of the jurisdiction under Article 142. The construction of

Article 142 must be functionally informed by the salutary purposes

of the article, viz., to do complete justice between the parties. It

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cannot be otherwise. As already noticed in a case of contempt of

court, the contemner and the court cannot be said to be litigating

parties.

48. “The Supreme Court in exercise of its jurisdiction under Article

142 has the power to make such order as is necessary for doing

complete justice “between the parties in any cause or matter pending

before it”. The very nature of the power must lead the Court to

set limits for itself within which to exercise those powers and

ordinarily it cannot disregard a statutory provision governing a

subject, except perhaps to balance the equities between the

conflicting claims of the litigating parties by “ironing out the

creases” in a cause or matter before it. Indeed this Court is not a

court of restricted jurisdiction of only dispute-settling. It is well

recognised and established that this Court has always been a law-

maker and its role travels beyond merely dispute-settling. It is a

“problem-solver in the nebulous areas” but the substantive statutory

provisions dealing with the subject-matter of a given case cannot be

altogether ignored by this Court, while making an order under Article

142. Indeed, these constitutional powers cannot, in any way, be

controlled by any statutory provisions but at the same time these

powers are not meant to be exercised when their exercise may

come directly in conflict with what has been expressly provided

for in a statute dealing expressly with the subject”.

111. Recently, a Constitution Bench of this Court, while sounding a

note of caution on the exercise of powers under Article 142 in Shilpa

Sailesh vs. Varun Sreenivasan, (2023) 14 SCC 231, had the following

to say.

“19. Given the aforesaid background and judgments of this

Court, the plenary and conscientious power conferred on this

Court under Article 142(1) of the Constitution of India,

seemingly unhindered, is tempered or bounded by restraint,

which must be exercised based on fundamental considerations of

general and specific public policy. Fundamental general conditions

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of public policy refer to the fundamental rights, secularism,

federalism, and other basic features of the Constitution of India.

Specific public policy should be understood as some express pre-

eminent prohibition in any substantive law, and not stipulations

and requirements to a particular statutory scheme. It should not

contravene a fundamental and non-derogable principle at the

core of the statute. Even in the strictest sense, it was never doubted

or debated that his Court is empowered under Article 142(1) of the

Constitution of India to do “complete justice” without being bound

by the relevant provisions of procedure, if it is satisfied that the

departure from the said procedure is necessary to do “complete

justice” between the parties.”

112. A careful reading of the above paragraph reveals that the power

under Article 142 will not be exercised if it would contravene a

fundamental and non-derogable principle at the core of a statute.

Further, it has been held that the power under Article 142 is to be

tempered or bounded by restraint based on fundamental considerations

of general and specific public policy. Amplifying further, it was held

that specific public policy should be understood as some express pre-

eminent prohibition in any substantive law and not mere stipulations

and requirements to a particular statutory scheme.

113. From the reasons stated in the earlier part of the judgment, it is

crystal clear that Courts exercising powers under Section 34, which will

include the appellate hierarchy cannot change, vary, or qualify

“arbitrary awards” as it strikes at the very core and root of the ethos of

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the arbitration process. Such an exercise of power will derogate from

the core aspects of the A&C Act and will breach a pre-eminent

prohibition in the said Act.

114. Apart from the above, if power is reserved for this Court to

modify, at the fag end of the litigation, contracting parties will have

grave uncertainties as they would not be sure of how the matter will

play out when it reaches the apex Court. It will be antithetical to

arbitration as an alternative and efficacious mode of dispute resolution.

115. Hence, in matters arising out of Section 34 of the A&C Act, this

Court will refrain from exercising its power under Article 142, in view

of the law laid down in SCBA (supra) and Shilpa Shailesh(supra).

LAYING DOWN GUARDRAILS FOR SECTION 34 – IS IT AN

OPTION FOR THIS COURT?

116. Parties aspiring for the power to modify to be vested in Section

34 contend that any possible abuse of power to modify, if vested in a

Court hearing a Section 34 application, can be checked by prescription

of guardrails. Learned counsels have contended that any modification

or variation which inevitably flows from the Courts determination of

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the question of law should be permitted. Equally, learned counsels

contended that modification should be permitted to align the award

with the contractual provision. Counsels have referred to the theory of

useless formality, where in certain scenarios only one conclusion is

possible and implore this Court to lay down parameters for

modification.

117. The contention is without merit. As has been rightly contended

by the learned Solicitor General, the situation here is not a situation

akin to what arose in Vishaka (supra). In Vishaka (supra) noticing the

absence of any enacted law to provide for effective enforcement of

basic human rights of gender equality and guarantee against sexual

harassment and abuse at workplaces and in exercise of powers under

Article 32 for enforcement of fundamental rights, this Court, pending

enactment of a statute, laid down guidelines to prevent sexual

harassment at the workplace. The interpretation of the A&C Act is not

akin to the situation that obtained in Vishaka (supra) and other cases

where recognising certain positive obligations in the State, this Court

filled the gap by setting out guidelines. Further, as rightly contended by

Mr. Gourab Banerji, learned Senior Counsel, there are no judicially

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manageable standards and this Court cannot venture into formulating

guidelines as myriad situations will arise when Section 34 applications

are heard before the appropriate Courts. Further, as rightly contended

by the learned Senior Counsel, it would amount to judicial legislation

which we are loathe to do. Learned Counsel for the parties, in support

of their plea to lay down guardrails, referred to a judgment of this Court

in Oil and Natural Gas Corporation Limited vs. Afcons Gunanusa JV,

2022 SCC OnLine SC 1122. We have carefully examined the

judgment. That case concerned the rights of arbitrator(s) to unilaterally

fix fees for their sittings in arbitration. Negating the plea, the Court

ruled that there was no sanction for the same in terms of the A&C Act.

The guidelines for ad-hoc arbitrations were only on the modalities for

arriving at the consensus and there was no deviation from the statute.

That case has no relevance here.

SUBMISSIONS BASED ON PECULIARITIES IN STATUTORY

ARBITRATIONS:-

118. Submissions were made that if power to modify is not recognised

in Section 34, enormous hardship will be caused in cases where the

A&C Act has been made applicable to some statutes. Example of the

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National Highways Authority Act was given. It was contended that

against the order awarding compensation for acquisition by the

competent authority, reference is made to the arbitrator appointed by

the Central Government and against his award only a recourse to

Section 34 is available. The contention was that, these are compulsory

arbitrations and not consensual arbitrations. Learned Senior Counsel

Mr. Gourab Banerji, responded to this submission by arguing that the

interpretation to the A&C Act has to be uniform and if there are any

maladies in the other statutes by which arbitrators are appointed, the

solution will have to be found by addressing the grievances prevalent

in those statutes and not by truncating the interpretation of the A&C

Act.

119. By no stretch of imagination can we bifurcate the interpretation

of Section 34 and offer one set of interpretations for commercial

arbitrations and another for statutory arbitrations to which the A&C Act

is applicable. Hence, the submission for a differential interpretation of

the A&C Act for some statutory arbitrations alone is rejected.

120. Equally, for this reason, the submissions of Mr. Darius Khambata,

learned Senior Counsel that power to modify be at least restricted to

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domestic arbitrations where patent illegality is found in the award

cannot be accepted. There is neither any scope nor any legal basis for

such a course of action to be adopted.

COMPLICATIONS DUE TO MODIFICATIONS IN NEW YORK

CONVENTION AWARDS: -

121. Mr. Gourab Banerji, learned Senior Counsel and Mr. Gaurav

Pachnanda, learned Senior Counsel drew the attention of this Court to

certain specific statutory provisions obtaining in the UK, Singapore,

New Zealand and Kenya. This was to drive home the point that not only

were there express provisions to modify awards in those statutes by the

Court hearing the setting aside application, there are also express

provisions recognising that the award will hitherto be read in the

modified form. Learned Senior Counsels contended that in the absence

of similar statutory regime serious complications will arise in

enforcement of New York Convention awards and will constitute a

serious threat to India seated arbitrations under the New York

Conventions.

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122. In particular, attention was drawn to Section 71 of the UK English

Arbitration Act which we deem it appropriate to set out hereinbelow:-

“71. Challenge or appeal: effect of order of court.

(1) The following provisions have effect where the court makes an

order under section 67, 68 or 69 with respect to an award.

(2) Where the award is varied, the variation has effect as part of

the tribunal’s award.

(3) Where the award is remitted to the tribunal, in whole or in part,

for reconsideration, the tribunal shall make a fresh award in

respect of the matters remitted within three months of the date of

the order for remission or such longer or shorter period as the court

may direct.

(4) Where the award is set aside or declared to be of no effect, in

whole or in part, the court may also order that any provision that

an award is a condition precedent to the bringing of legal

proceedings in respect of a matter to which the arbitration

agreement applies, is of no effect as regards the subject matter of

the award or, as the case may be, the relevant part of the award.”

(Emphasis supplied)

123. It will be noticed that in the United Kingdom and certain other

countries, clear statutory provisions exist stating that where the award

is varied the variation has the effect as part of the Tribunal’s award. It

will be noticed that to give effect to the New York Convention, like the

A&C Act has provisions in Part II, several other countries have also

adopted statutory provisions for recognition and enforcement of

foreign awards. Learned Senior Counsels submit that if the award is

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modified by the Section 34 Court in India, any enforcement brought

abroad will run into complications as objections will be taken that what

is sought to be enforced is not the award but the judgment of the Court.

There is merit in the submission and this is one another reason why

these matters are best left for the legislature to be comprehensively

addressed. Enforcement of foreign judgements and enforcement of

foreign awards are distinct legal concepts and hence, the argument

cannot be characterized as not convincing jurisprudentially or in

principle.

124. Learned Senior Counsel, Mr. Gaurav Pachnanda, pressed the

argument that when a Section 34 Court passes an order there is no

application of the doctrine of merger. This Court in Kunhayammed &

Others Vs. State of Kerala and Another, (2000) 6 SCC 359, has

discussed the doctrine of merger and held that doctrine of merger is not

a doctrine of universal or unlimited application.

125. Considering the holding in this judgment that there is no power

under Section 34 court to modify, in the absence of a statutory

enablement, it is not considered necessary to go into the aspect of the

applicability of the Doctrine of merger.

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IS HAKEEM (SUPRA) PER INCURIAM?

126. In National Insurance Co. Ltd. Vs. Pranay Sethi and Others,

(2017) 16 SCC 680, a Constitution Bench of this Court held as follows:

a decision or judgment can be per incuriam if any provision in a statute,

rule or regulation was not brought to the notice of the court. (Para 28)

It was also held that a decision or judgment can be per incuriam if it is

not possible to reconcile its ratio with that of a previously pronounced

judgement of a co-equal or a larger bench. We find that the judgement

in Hakeem (supra) has rightly interpreted the provisions of A&C Act

and is in no manner conflicting with any ratio of a co-equal or larger

Bench. In the earlier parts of the judgement, we have distinguished the

other judgements referred to in the referral order. Hakeem (supra) itself

distinguished certain other earlier pronouncements. Hakeem (supra)

will now be read in accordance with the ratio laid down in the present

judgment.

127. Reliance was placed on Oil and Natural Gas Corporation Ltd.

vs. Western Geco International Ltd., (2014) 9 SCC 263, to contend

that Hakeem (supra) did not consider the said judgment. It was argued

that power to modify in Section 34 Court was recognised in Western

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Geco (supra). A close reading of Para 40 of Western Geco (Supra),

indicates that though the word ‘modified’ occurs in the judgment, it was

clearly in the context of severability, an aspect Hakeem (supra) was

not concerned with. Hence, it cannot be said that Hakeem (supra) is

per incuriam for not noticing Western Geco (supra). The other

judgments prior to Hakeem (supra) have not discussed the aspect

whether power to modify exists in a Section 34 Court. Hence, we reject

the argument of parties that Hakeem (supra) is per incuriam. Hakeem

(supra) insofar as it held that a Section 34 Court has no power to

modify the award, is not per incuriam.

POWERS UNDER SECTION 33 AND 34 (4) OF THE A&C ACT

– THE ‘SAFETY VALVES’:-

128. As to what errors could be corrected and how it could be done has

been first provided for in Section 33 of the A&C Act. Section 33 deals

with correction and interpretation of award and making of additional

award by the arbitrator. The provision has already been discussed in the

earlier part of this judgment. Section 33(i)(a) deals with correction of

computation error, clerical or typographical error or any other error of

a similar nature occurring in the award. This provision is akin to Section

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15 (b) and (c) of the 1940 Act. Power is also there in the arbitral

Tribunal to Suo Moto correct these errors. Even in the Code of Civil

Procedure, Section 152 provides for a similar power for the Courts.

Section 152 is set out hereinbelow:

“152. Amendment of judgments, decrees or orders.—Clerical or

arithmetical mistakes in judgments, decrees or orders or errors

arising therein from any accidental slip or omission may at any time

be corrected by the Court either of its own motion or on the

application of any of the parties.”

129. Even if any claim is not adjudicated, parties could move to

arbitral Tribunal for the same and an additional award can be made.

130. Now turning to Section 34(4), it reads as follows:-

“34.(4) On receipt of an application under sub-section (1), the Court

may, where it is appropriate and it is so requested by a party, adjourn

the proceedings for a period of time determined by it in order to give

the arbitral tribunal an opportunity to resume the arbitral

proceedings or to take such other action as in the opinion of arbitral

tribunal will eliminate the grounds for setting aside the arbitral

award.”

Section 34(4) occurs in sequence after 34(1), 34(2), 34(2A), 34(3).

After recourse is made under Section 34(1) and the Court has applied

the rigors of 34(1), (2), (2A), the Court would be fairly clear as to

whether any ground has been made out for setting aside the arbitral

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award or not. At this stage, Section 34(4) comes into the picture and

provides that:-

(i) On receipt of an application under sub-section (1), the Court may;

(ii) Where it is appropriate and it is so requested by a party;

(iii) Adjourn the proceedings for a period of time determined by it;

(iv) In order to give the arbitral Tribunal an opportunity;

(v) To resume the arbitral proceedings or to take such other action as in

the opinion of arbitral Tribunal will eliminate the grounds for setting

aside the arbitral award.

131. It must be noticed that all that the Section mentions is a request

being made and there is no prescription that the request should be in

writing. In this regard, the holding in Kinnari Mullick & Anr. vs.

Ghanshyam Das Damani, (2018) 11 SCC 328 to the effect that

discretion available under Section 34(4) to give an opportunity to the

arbitrator can be exercised only upon a written application made in that

behalf by a party is not the correct legal position. To that extent Kinnari

Mullick (supra) does not lay down the correct law.

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132. It cannot be disputed that ordinarily the stage of Section 34(4)

would arise when the Court has put the award through the test of fire

under the prior clauses of Section 34 and entertains the opinion that

there are grounds for setting aside the arbitral award. At this stage, in

given cases where it considers appropriate and a request is made by a

party even orally, the Court may adjourn the proceeding for a period of

time in order to give the arbitral Tribunal an opportunity to resume the

arbitral proceeding or to take such other action as in the opinion of the

arbitral Tribunal will eliminate the grounds for setting aside the award.

The Court shall in the order indicate its reasons for entertaining the

opinion and as to why it considers that there are grounds for setting

aside the arbitral award. Ordinarily, it will be the award holder, who

will be the respondent in the Section 34 application, who will be

interested in sustaining the award. The very fact that he is stoutly

defending the award is a clear indication that he wants the award to be

sustained and grounds, if any, which exist to set aside the award are

eliminated. The grounds may be of different hues.

133. To illustrate, Section 31 which speaks of form and contents of the

arbitral award has the following prescription:- (i) The award shall be

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signed by the members of the Tribunal. (ii) The award shall state the

reasons. (iii) The award shall state the date and place of arbitration. (iv)

The costs of the arbitration to be fixed in accordance with Section

31(A). (v) The award may deal with disputes not contemplated or

falling within the terms of the submissions to arbitration. (vi) The

award may have decision on matters beyond the scope of submissions

of arbitration. In a given case any of the above aspects could be

attracted.

134. The above are only illustrative aspects. This Court in I-Pay

Clearing Services (P) Ltd. v. ICICI Bank Ltd., (2022) 3 SCC 121

quoted the decisions in Dyna Technologies (P) Ltd. v. Crompton

Greaves Ltd., (2019) 20 SCC 1 and Som Datt Builders Ltd. v. State of

Kerala, (2009) 10 SCC 259 and held as follows:-

“34. In the judgment in Dyna Technologies (P) Ltd. v. Crompton

Greaves Ltd. [Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd.,

(2019) 20 SCC 1] , it was a case where there was no inquiry under

Section 34(4) of the Act and in the said case, this Court has held that

the legislative intention behind Section 34(4) of the Act, is to make

the award enforceable, after giving an opportunity to the Tribunal to

undo the curable defects. It was not a case of patent illegality in the

award, but deficiency in the award due to lack of reasoning for a

finding which was already recorded in the award. In the very same

case, it is also clearly held that when there is a complete perversity

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in the reasoning, then the same is a ground to challenge the award

under Section 34(1) of the Act.

35.Som Datt Builders Ltd. v. State of Kerala [Som Datt Builders Ltd.

v. State of Kerala, (2009) 10 SCC 259 : (2009) 4 SCC (Civ) 153] is

also a case where no reasons are given for the finding already

recorded in the award, as such, this Court held that in view of Section

34(4) of the Act, the High Court [State of Kerala v. Somdatt Builders

Ltd. Arbitration Appeal No. 16 of 2005, order dated 3-6-2005 (Ker)]

ought to have given the Arbitral Tribunal an opportunity to give

reasons.”

In para 37 to 43 in I-Pay (supra), this Court held as under:-

“37. In our view, Section 34(4) of the Act can be resorted to record

reasons on the finding already given in the award or to fill up the

gaps in the reasoning of the award. There is a difference between

“finding” and “reasons” as pointed out by the learned Senior Counsel

appearing for the respondent in the judgment in ITO v. Murlidhar

Bhagwan Das [ITO v. Murlidhar Bhagwan Das, AIR 1965 SC 342] .

It is clear from the aforesaid judgment that “finding is a decision on

an issue”. Further, in the judgment in J. Ashoka v. University of

Agricultural Sciences [J. Ashoka v. University of Agricultural

Sciences, (2017) 2 SCC 609 : (2017) 1 SCC (L&S) 517] , this Court

has held that “reasons are the links between the materials on which

certain conclusions are based and the actual conclusions”.

38. In absence of any finding on Point 1, as pleaded by the respondent

and further, it is their case that relevant material produced before the

arbitrator to prove “accord and satisfaction” between the parties, is

not considered, and the same amounts to patent illegality, such

aspects are to be considered by the Court itself. It cannot be said that

it is a case where additional reasons are to be given or gaps in the

reasoning, in absence of a finding on Point 1 viz. “whether the

contract was illegally and abruptly terminated by the respondent?”.

39. Further, Section 34(4) of the Act itself makes it clear that it is

the discretion vested with the Court for remitting the matter to

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Arbitral Tribunal to give an opportunity to resume the

proceedings or not. The words “where it is appropriate” itself

indicate that it is the discretion to be exercised by the Court, to

remit the matter when requested by a party. When application is

filed under Section 34(4) of the Act, the same is to be considered

keeping in mind the grounds raised in the application under Section

34(1) of the Act by the party, who has questioned the award of the

Arbitral Tribunal and the grounds raised in the application filed under

Section 34(4) of the Act and the reply thereto.

40. Merely because an application is filed under Section 34(4) of the

Act by a party, it is not always obligatory on the part of the Court to

remit the matter to Arbitral Tribunal. The discretionary power

conferred under Section 34(4) of the Act, is to be exercised where

there is inadequate reasoning or to fill up the gaps in the reasoning,

in support of the findings which are already recorded in the award.

41. Under the guise of additional reasons and filling up the gaps in

the reasoning, no award can be remitted to the arbitrator, where there

are no findings on the contentious issues in the award. If there are no

findings on the contentious issues in the award or if any findings are

recorded ignoring the material evidence on record, the same are

acceptable grounds for setting aside the award itself. Under the guise

of either additional reasons or filling up the gaps in the reasoning, the

power conferred on the Court cannot be relegated to the arbitrator. In

absence of any finding on contentious issue, no amount of reasons

can cure the defect in the award.

42. A harmonious reading of Sections 31, 34(1), 34(2-A) and 34(4)

of the Arbitration and Conciliation Act, 1996, make it clear that

in appropriate cases, on the request made by a party, Court can

give an opportunity to the arbitrator to resume the arbitral

proceedings for giving reasons or to fill up the gaps in the

reasoning in support of a finding, which is already rendered in

the award. But at the same time, when it prima facie appears that

there is a patent illegality in the award itself, by not recording a

finding on a contentious issue, in such cases, Court may not accede

to the request of a party for giving an opportunity to the Arbitral

Tribunal to resume the arbitral proceedings.

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43. Further, as rightly contended by the learned counsel appearing for

the respondent, that on the plea of “accord and satisfaction” on

further consideration of evidence, which is ignored earlier, even if

the Arbitral Tribunal wants to consciously hold that there was

“accord and satisfaction” between the parties, it cannot do so by

altering the award itself, which he has already passed.”

(Emphasis supplied)

It is clear from the above that the power to remit under Section 34(4)

can be exercised for undoing the curable defects.

AWARD OF INTEREST - USE OF SECTION 34(4) POWER:-

135. Equally, in a given case where the Court feels that interest has not

been awarded or interest beyond the terms of the agreement have been

awarded or excessive interest have been awarded or abysmally low

interest is awarded, the Court under Section 34 cannot modify the

interest. The course of action to be adopted would be to record reasons

in the order and remit the matter to the arbitrator for the arbitral

Tribunal to make the necessary course correction. It is true that if only

on account of interest if awards are to be set aside, the whole exercise

will have to be undertaken again. If the Court in a Section 34

proceeding (which will include the courts in that appellate hierarchy)

is of the opinion that interest aspect needs a relook, the correct course

of action to be adopted is to remit the matter under Section 34(4) for

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the purpose of enabling the arbitrator to take a call. If thereafter again,

when the matter comes back to the Court, the Court feels that the

grounds for setting aside the award are not eliminated, it will have no

choice except to set aside the award.

SUO MOTO EXERCISE OF THE SECTION 34(4) POWER: -

136. Section 34(4) is the safety valve provided in the A&C Act by the

legislature to prevent awards being set aside and to offer a chance to

the arbitral Tribunal to adopt a course correction. In this regard,

considering the purpose for which Section 34(4) was intended, and

since the respondent is defending the award and attempting to sustain

it, if the Court deems it appropriate after arriving at an opinion with

reasons recorded in writing, that there exists ground for setting aside

the arbitral award the Court is even Suo Moto empowered to invoke

powers under Section 34(4) in accordance with the parameters set out

hereinabove. There is nothing in Section 34(4) which detracts from

such an interpretation. There will be on record an application under

Section 34(1) by the applicant to set aside the award and the award

holder invariably is stoutly defending the award and is straining every

nerve to uphold the same. After the court has passed through the

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motions of Section 34(2)(a) (b) and 2 A, it would have arrived at an

opinion as to whether the award is susceptible or whether it is

sustainable. If it arrives at an opinion that the award is vulnerable and

the threat of setting aside is looming large and if within the parameters

laid down in Section 34(4) the grounds for setting aside can be

eliminated - the case is appropriate and time is ripe for exercise of

power under Section 34(4). The need for an application oral or in

writing is really directory and does not militate against the exercise of

Suo Moto powers in given cases by the Court.

COMPUTATION, CLERICAL AND TYPOGRAPHICAL

ERROR OR ANY OTHER ERROR OF SIMILAR NATURE -

ACTUS CURIAE NEMINEM GRAVABIT PRINCIPLE:-

137. Section 33 enables parties to move the Arbitral Tribunal to correct

any computational error, any clerical error or typographical error or any

other errors of similar nature. Section 33(3) enables the arbitral

Tribunal itself to correct any of those errors. No doubt, a time limit of

30 days has been prescribed for the parties to move unless there is a

contract to the contrary. Equally, sub-Section 2 of Section 33 directs

that the correction should be made within 30 days and sub-Section 6 of

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Section 33 states that the arbitral Tribunal may if necessary extend the

period of time within which it shall make a correction.

138. In this regard, it is useful to refer to the recent judgment of this

Court in North Delhi Municipal Corporation v. M/S. S.A. Builders

Ltd., 2024 INSC 988, wherein it was held as under:

“45.1. As per sub-Section (1), within 30 days from the date of receipt

of the arbitral award, a party with notice to the other party, may

request the arbitral tribunal to correct any computation errors, any

clerical or typographical errors or any other errors of a similar nature

occurring in the award. Further, if the parties agree, a party with

notice to the other party, may request the arbitral tribunal to give an

interpretation of a specific point or part of the award. The period of

30 days contemplated under subSection (1) may stand extended to

another period of time if agreed upon by the parties. Therefore,

ordinarily the time limit for correction of errors or for interpretation

of a specific point or part of the award is 30 days from the date of

receipt of the arbitral award. However, the limitation of 30 days can

be waived for another period of time, if agreed upon by the

parties. Question for consideration is what would be the contours of

the expression unless another period of time has been agreed upon

by the parties, as appearing in sub-Section (1) of Section 33.

45.2. Sub-Section (7) of Section 33 clarifies that correction or

interpretation of arbitral award or passing of additional arbitral award

would attract Section 31 of the 1996 Act as discussed supra.

Therefore, the language of sub-Section (1) of Section 33 makes it

abundantly clear that the period of 30 days as provided in Section

33(1) is not an inflexible period. If the parties agree, the said period

can be extended.

45.3. There is no dispute to the proposition of law laid down in

Harshad Chiman Lal Modi (supra), relied upon by the appellant, that

where a court has no jurisdiction over the subject matter of the suit

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by reason of any limitation imposed by the statute, charter or

commission, it cannot take up the cause or matter; an order passed

by the court having no such jurisdiction is a nullity. Question is

whether such a proposition would have any application to the facts

and circumstances of the present case. As we have seen, there was no

embargo on the Arbitral Tribunal to exercise jurisdiction over the

subject matter. The only limitation was that the correction and/or

interpretation of the award should be done within 30 days from

the date of receipt of the arbitral award unless another period of

time has been agreed upon by the parties. Therefore, the

expression unless another period of time has been agreed upon

by the parties assumes critical significance.”

(Emphasis supplied)

139. With regard to computational errors, clerical or typographical

error or any other error of similar nature – (the expression any other

error of similar nature will be read ejusdem generis and will apply to

errors similar to computational errors, clerical or typographical errors),

what should be the course of action if the party has not moved under

Section 33 or having moved the arbitrator has mechanically rejected

the correction?

140. With regard to Section 152 CPC, this Court after holding that

Section 152 is founded on the maxim - actus curiae neminem gravabit

speaking through Dr. Arijit Pasayat J. in U.P. SRTC vs. Imtiaz Hussain,

(2006) 1 SCC 380 lucidly explained the position thus.

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“8. The basis of the provision under Section 152 of the Code is

founded on the maxim “actus curiae neminem gravabit” i.e. an

act of court shall prejudice no man. The maxim “is founded upon

justice and good sense; and affords a safe and certain guide for

the administration of the law”, said Cresswell, J. in Freeman v.

Tranah [12 CB 406 : 138 ER 964] (ER p. 967). An unintentional

mistake of the court which may prejudice the cause of any party

must and alone could be rectified. In Master Construction Co.

(P) Ltd. v. State of Orissa [(1966) 3 SCR 99 : AIR 1966 SC 1047]

it was observed that the arithmetical mistake is a mistake of

calculation, a clerical mistake is a mistake in writing or typing

whereas an error arising out of or occurring from accidental slip

or omission is an error due to careless mistake on the part of the

court liable to be corrected. To illustrate this point it was said that

in a case where the order contains something which is not mentioned

in the decree, it would be a case of unintentional omission or mistake

as the mistake or omission is attributable to the court which may say

something or omit to say something which it did not intend to say or

omit. No new arguments or rearguments on merits can be

entertained to facilitate such rectification of mistakes. The

provision cannot be invoked to modify, alter or add to the terms

of the original order or decree so as to, in effect, pass an effective

judicial order after the judgment in the case.”

(Emphasis supplied)

141. Ordinarily errors of the nature set out above like computational

error, clerical or typographical error or any other error of a similar

nature would not be objected by other party. However, in the unlikely

event of an objection and in a scenario where the arbitrator has not been

moved under Section 33 or having moved the Arbitral Tribunal has

been obstinate in not correcting, a Court in Section 34 to uphold the

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maxim actus curiae neminem gravabit can invoke the power and

correct computational errors, clerical or typographical errors or any

other errors of similar nature without modifying, altering or adding to

the original award. It should not be forgotten that under Section 35

finality is granted to the arbitral awards subject to the provisions in part

I and under Section 36 where the time for making an application to set

aside the arbitral award under Section 34 has expired, then subject to

the provisions of sub-Section 2 such award shall be enforced in

accordance with the provisions of the Code of Civil Procedure in the

same manner as it were a decree of the Court. Hence, a limited

exception alone to the holding in Hakeem (supra) is made.

SEVERABILITY UNDER SECTION 34: -

142. If there was one aspect on which there was a chorus among the

rival factions, it was on the aspect of Section 34 Court having power to

sever that part of the award which fell foul of Section 34 from the good

part.

143. According to P. Ramanatha Aiyar’s Advanced Law Lexicon

(third edition):

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“Sever – ‘to separate; to insist upon a plea distinct from that

of other co-defendants; to disjoin and

severable – ‘capable to being separated’,”

A bare perusal of Section 34 indicates that the power to sever an

award is recognised in Section 34(2)(a)(iv) which reads as

under.

“34(2)(a)(iv). the arbitral award deals with a dispute not

contemplated by or not falling within the terms of the submission

to arbitration, or it contains decisions on matters beyond the scope

of the submission to arbitration:

Provided that, if the decisions on matters submitted to arbitration

can be separated from those not so submitted, only that part of the

arbitral award which contains decisions on matters not submitted

to arbitration may be set aside;”

144. A reading of the above sub-Section reveals that where the arbitral

award deals with disputes not contemplated by or not falling within the

terms of the submission to arbitration or it contains decision on matters

beyond the scope of the submission to arbitration, the award can be set

aside.

145. However, the proviso states that if the decisions on matters

submitted to arbitration can be separated from those not so submitted,

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only that part of the arbitral award which contains decisions on matters

not submitted to arbitration may be set aside.

146. So, severance as a concept is recognised intrinsically in Section

34 itself on the aspect mentioned hereinabove. But the question is when

there are several claims adjudicated and if awards on a few claims fall

foul of Section 34 and if each of the claims which fall foul of Section

34 are capable of separation could the awards on those claims be set

aside? This issue was not discussed in Hakeem (supra). However, the

consistent view of this Court has been that such standalone claims

falling foul of Section 34 can be set aside as long as they are capable of

being severed without affecting the other parts of the award. In other

words, if the claims falling foul of Section 34 are not inseparably

intertwined with the good portion of the award, the award can be

severed.

147. In J.G. Engineers (P) Ltd. vs. Union of India & Anr., (2011) 5

SCC 758, R.V. Raveendran J. speaking for the Court clearly set out the

principle as follows:-

“25. It is now well settled that if an award deals with and decides

several claims separately and distinctly, even if the court finds that

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the award in regard to some items is bad, the court will segregate

the award on items which did not suffer from any infirmity and

uphold the award to that extent. As the award on Items 2, 4, 6, 7,

8 and 9 was upheld by the civil court and as the High Court in

appeal did not find any infirmity in regard to the award on those

claims, the judgment of the High Court setting aside the award in

regard to Claims 2, 4, 6, 7, 8 and 9 of the appellant, cannot be

sustained. The judgment to that extent is liable to be set aside and

the award has to be upheld in regard to Claims 2, 4, 6, 7, 8 and 9.”

148. This Court in Madhya Pradesh Power Generation Company

(supra) had severed the award with regard to the return of amounts

ordered on the Bank guarantees dated 22.02.2000 and 23.02.2000

which pertained towards the amount advanced by the award debtor

therein.

149. During the course of the submissions, the concern expressed by

the several learned counsels were that severability should be carefully

invoked and the exorcised portion of the award should not be

inseparably intertwined with the other portions which are upheld and

ought not to be inter dependent on the good parts of the award. The

further concern expressed was that the Section 34 Court wanting to

sever portions of the award should perform an exercise to see whether

the good part of the award can be separately identified both in terms of

variability and quantum without any co-relation to the bad parts of the

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award. The submission was that if the good parts are intermingled with

the bad parts of the award in a manner that it is impossible to sever the

bad parts, the principle of severability cannot be applied. Mr. Gaurav

Pachnanda, learned Senior Counsel illustrated the submission by

submitting that if a final award is arrived by netting off claims and

counter claims, principles of severability cannot be applied as what is

available in the award was a composite award with a single amount

mentioned therein enforceable by the successful party. There is merit

in this submission and such prerequisites are essential while severing

parts of the award.

150. A Full Bench of the High Court of Judicature at Bombay, in R.S.

Jiwani vs. Ircon International Ltd., 2009 SCC OnLine Bom 2021,

held as under.

“20. The cases would be different where it is not possible or

permissible to sever the award. In other words, where the bad part

of the award was intermingled and interdependent upon the good

parts of the award there it is practically not possible to sever the

award as the illegality may affect the award as a whole. In such

cases, it may not be possible to set aside the award partially.

However, there appears to be no bar in law in applying the doctrine

of severability to the awards which are severable.”

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151. Sanjay Kumar J., (as His Lordship then was) in the High Court of

Judicature at Hyderabad for the State of Telangana in Saptarishi Hotels

Pvt. Ltd. vs. National Institute of Tourism & Hospitality

Management, 2019 SCC OnLine TS 1765, following J.G. Engineers

(supra) held as follows.

“33. In J.G. ENGINEERS PVT. LTD. v. UNION OF INDIA, the

Supreme Court observed that it is now well settled that if an Award

deals with and decides several claims separately and distinctly and

if such Award is found to be bad in regard to some items, the Court

would be entitled to segregate the Award on the items which did

not suffer from any infirmity so that it could be upheld to that

extent.”

152. A learned Single Judge of the Delhi High Court addressing the

issue of severability in National Highways Authority of India vs.

Trichy Thanjavur Expressway Ltd., 2023 SCC OnLine Del 5183, set

out the principle thus.

“38. In our considered opinion, therefore, the answer to the

question which stands posed would have to be rendered on an

interpretation of the phrase “setting aside” as ultimately

adopted and forming part of Section 34. As was noticed

hereinbefore, Section 34(2)(a)(iii) does speak of an award

being set aside in part. We find that the key to understanding

the intent underlying the placement of the Proviso in sub-

clause (iv) of Section 34(2)(a) is in the nature of the grounds

for setting aside which are spoken of in clause (a). As would

be manifest from a reading of the five sub-clauses which are

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positioned in Section 34(2)(a), those constitute grounds which

would strike at the very heart of the arbitral proceedings. The

grounds for setting aside which are set forth in clause (a) strike

at the very foundation of validity of arbitration proceedings.

Sub-Clauses (i) to (v) thus principally constitute grounds

which would render the arbitration proceedings void ab initio.

Although the Section 34(2)(a)(iv) ground for setting aside also

falls in the same genre of a fundamental invalidity, the

Legislature has sought to temper the potential fallout of the

award being set aside in toto on that score. The Proviso to sub-

clause (iv) seeks to address a comprehensibly conceivable

situation where while some parts of the award may have dealt

with non-arbitrable issues or disputes falling outside the scope

of the reference, its other components or parts constitute an

adjudication which could have been validly undertaken by the

AT. The Proviso thus seeks to address such a situation and

redeems as well as rescues the valid parts of an award. This

saves the parties from the spectre of commencing arbitral

proceedings all over and from scratch in respect of all issues

including those which could have validly formed part of the

arbitration.

39. The grounds for setting aside encapsulated in Section

34(2)(b) on the other hand relate to the merits of the challenge

that may be raised in respect of an award and really do not

deal with fundamental invalidity. However, the mere fact that

the Proviso found in sub-clause (iv) of Section 34(2)(a) is not

replicated or reiterated in clause (b) of that provision would

not lead one to conclude that partial setting aside is considered

alien when a court is considering a challenging to an award on

a ground referable to that clause. In fact, the Proviso itself

provides a befitting answer to any interpretation to the

contrary. The Proviso placed in Section 34(2)(a)(iv) is not

only an acknowledgment of partial setting aside not being a

concept foreign to the setting aside power but also of parts of

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the award being legitimately viewed as separate and distinct.

The Proviso itself envisages parts of an award being

severable, capable of segregation and being carved out. The

Proviso is, in fact, the clearest manifestation of both an award

being set aside in part as well as an award comprising of

distinct components and parts.

40. Undoubtedly, an award may comprise a decision rendered

on multiple claims. Each claim though arising out of a

composite contract or transaction may be founded on distinct

facts and flowing from separate identifiable obligations. Just

as claims may come to be preferred resting on a particular

contractual right and corresponding obligation, the decision

which an AT may render on a particular claim could also be

based on a construction of a particular covenant and thus stand

independently without drawing sustenance on a decision

rendered in the context of another. If such claims be separate,

complete and self-contained in themselves, any decision

rendered thereon would hypothetically be able to stand and

survive irrespective of an invalidity which may taint a

decision on others. As long as a claim is not subordinate, in

the sense of being entwined or interdependent upon another, a

decision rendered on the same by the AT would constitute an

award in itself. While awards as conventionally drawn,

arranged and prepared may represent an amalgam of decisions

rendered by the AT on each claim, every part thereof is, in fact,

a manifestation of the decision rendered by it on each claim

that may be laid before it. The award rendered on each such

claim rules on the entitlement of the claimant and the right

asserted in that regard. One could, therefore, validly, subject

of course to the facts of a particular case, be entitled to view

and acknowledge them as binding decisions rendered by the

AT on separate and distinct claims.

41. The Court notes in this regard that Mr. Mukhopadhaya,

Mr. Rajshekhar Rao, learned senior counsels as well as Mr.

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Ashim Sood had urged that while an award as ultimately

rendered may contain findings on numerous claims, the

decision rendered in respect of each such claim is entitled to

be viewed as an award in itself. This, according to learned

counsels, clearly flows from the power of the AT to not just

render a final award but also and in the course of arbitral

proceedings render interim awards in respect of various

claims. It was rightly pointed out by learned counsels that each

such decision on a claim could stand independently and be

final and binding in itself. Those findings or decisions in

relation to various claims that stand placed before the AT may

each constitute an award itself and the operative directions

framed representing the disposition of all such claims. As was

rightly contended by Mr. Mukhopadhaya, the declaration with

respect to entitlement and the award of a money claim

consequent thereto would be liable to be viewed as

independent Arbitral Awards. Mr. Sood had chosen to describe

such a disposition of claims as being an “agglomeration” of

awards. The Court accords its emphatic and wholehearted

acceptance to the aforenoted submissions and comes to the

conclusion that an award is thus liable to be viewed and

understood accordingly. It thus comes to conclude that each

such decision rendered by an AT could be validly viewed as

the decision rendered on a particular claim and thus

constituting an independent award in itself.

42. Once an award is understood as comprising of separate

components, each standing separately and independent of the

other, there appears to be no hurdle in the way of courts

adopting the doctrine of severability and invoking a power to

set aside an award partly. The power so wielded would

continue to remain one confined to “setting aside” as the

provision bids one to do and would thus constitute a valid

exercise of jurisdiction under Section 34 of the Act.

Conclusion:

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G. Undoubtedly, an award may comprise a decision rendered

on multiple claims. Each claim though arising out of a

composite contract or transaction may be founded on distinct

facts and flowing from separate identifiable obligations. Just

as claims may come to be preferred resting on a particular

contractual right and corresponding obligation, the decision

which an AT may render on a particular claim could also be

based on a construction of a particular covenant and thus stand

independently without drawing sustenance on a decision

rendered in the context of another. If such claims be separate,

complete and self-contained in themselves, any decision

rendered thereon would hypothetically be able to stand and

survive irrespective of an invalidity which may taint a

decision on others. As long as a claim is not subordinate, in

the sense of being entwined or interdependent upon another, a

decision rendered on the same by the AT would constitute an

award in itself.

H. While awards as conventionally drawn, arranged and

prepared may represent an amalgam of decisions rendered by

the AT on each claim, every part thereof is, in fact, a

manifestation of the decision rendered by it on each claim that

may be laid before it. The award rendered on each such claim

rules on the entitlement of the claimant and the right asserted

in that regard. One could, therefore, validly, subject of course

to the facts of a particular case, be entitled to view and

acknowledge them as binding decisions rendered by the AT on

separate and distinct claims.

I. Once an award is understood as consisting of separate

components, each standing separately and independent of the

other, there appears to be no hurdle in the way of courts

adopting the doctrine of severability and invoking a power to

set aside an award partly. The power so wielded would

continue to remain one confined to “setting aside” as the

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provision bids one to do and would thus constitute a valid

exercise of jurisdiction under Section 34 of the Act.

L. The power to partially sever an offending part of the

award would ultimately depend on whether the said

decision is independent and distinct and whether an

annulment of that part would not disturb or impact any

other finding or declaration that may have been returned

by the AT. The question of severability would have to be

decided bearing in mind whether the claims are

interconnected or so intertwined that one cannot be

segregated from the other. This for the obvious reason that

if the part which is sought to be set aside is not found to

stand independently, it would be legally impermissible to

partially set aside the award. A partial setting aside should

not lead to a component of the award being rendered

vulnerable or unsustainable. It is only when the award

relates to a claim which is found to stand on its own and

its setting aside would not have a cascading impact that

the Court could consider adopting the aforesaid mode.

M. The Court is thus of the firm opinion that the power to set

aside an award in part would have to abide by the

considerations aforenoted mindful of the imperatives of

walking a line which would not dislodge or disturb another

part of the award. However as long as the part which is

proposed to be annulled is independent and stands unattached

to any other part of the award and it could be validly incised

without affecting the other components of the award, the

recourse to partial setting aside would be valid and justified.

(Emphasis supplied)

153. The views expressed in the judgment, referred to hereinabove, are

correct and the power to set aside will include the power to partially set

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aside and sever the portions of the award which fall foul of Section 34

subject to the riders engrafted hereinabove.

ABANDONMENT OF CLAIMS - COMPROMISE ARRIVED AT

BETWEEN THE PARTIES :

154. Situation may arise where claims for which awards have been

granted may be abandoned or parties may arrive at compromises

contrary to the terms of the award. If the compromise has the effect

only of severing a standalone portion of the award with it being not

inseparably intertwined with any other portion, a Section 34 Court can

give effect to compromise and sever that portion of the award in

accordance with the principles of severability set out hereinabove.

155. Equally, with regard to abandonment or giving up of claims by a

successful party, the same principle will apply. However, if the aspects

are not severable and the abandonment/giving up has the effect of

impinging upon the award and is inseparably intertwined and

permeates the warp and woof of the award, then the option available to

the Section 34 Court is to set aside the award. In case of settlements

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which are not severable, the option will be to dismiss the Section 34

application as not pressed, in view of the settlement arrived at.

156. I have since had the benefit of reading the judgment of the

Hon’ble Chief Justice. In my judgment, I have independently given my

reasons on each of the issues arising herein. The judgment of the

Hon’ble Chief Justice grants power to the Section 34 Court to modify

the post-award interest. I am not able to agree with the said view for

the reasons stated hereinabove. Equally, the judgment of the Hon’ble

Chief Justice permits the exercise of power under Article 142 of the

Constitution of India to modify the award, though it has been stated in

the judgment that the power must be exercised with caution. Here

again, I am not able to agree with the said view for the reasons stated

in my judgment.

CONCLUSION:-

(a) The Courts exercising power under Section 34 and Courts hearing

appeals thereunder have no power to “modify” an award.

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(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)

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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: -

157. In view of the discussion hereinabove, the reference is answered

in the following terms.

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Question No. 1 - As set out in the body of the judgment, while

exercising power under Section 34 of the A&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&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

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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).

158. Appreciation is recorded for the painstaking efforts put in by the

learned Solicitor General and all the Learned Senior

Counsels/Counsels who addressed arguments and to the teams assisting

them.

159. The reference is disposed of in the above terms.

……….........................J.

[K. V. VISWANATHAN ]

New Delhi,

30

th

April, 2025.