Arbitration In IndiaCourts Cannot modify or amend an Arbitral Award

The Supreme Court in S V Samudran vs State of Karnataka & Anr. [Civil Appeal No. 8067 of 2019 decided on 04.01.2024] held that scope of judicial intervention is very limited under Section 34 and 37 of the A&C Act. Further, courts cannot modify or amend any Arbitral Awards.

FACTS

Mr. S V Samudran, (hereinafter “the Appellant”), executed a contract with Karnataka State Public Works Department (hereinafter “the Respondent”) for construction of the office and residence of the Chief Conservator of Forest at Sirsi for Rs.14.86 Lakhs on 29.01.1990 (hereinafter referred to as the “Contract”).

According, to the Contract, the Appellant would be handed over the possession of premises on 08.03.1990  and was supposed to complete the work by  08.05.1990.

The work could not be completed because of constant delays and change of site and delivery material and non-clearance of bills on the part of the Respondent. Hence, the parties opted for Arbitration proceedings for resolution of disputes arising out of the Contract.

The Arbitrators passed an Arbitral Award which allowed the claims of the Appellant (hereinafter referred to as the “Impugned Award”). The Respondent challenged the Impugned Award under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “A&C Act”), which was modified by the Ld. Civil Judge decreasing the amount at which the interest was to be paid by the Respondent  vide Civil Misc No.08/2003 dated 22.04.2010 (hereinafter referred to as the “Original Order”).

The Karnataka High Court confirmed the Original Order and passed an order under Section 37 of the A&C Act vide MFA No.24507 of 2010 dated 07.02.2017 (hereinafter referred to as the “Impugned Order”).

Hence, being  aggrieved by the Original Order and Impugned Order, the Appellant has preferred the present appeal.

ISSUE BEFORE THE SUPREME COURT

Whether the Arbitral Award can be modified under Section 34 of the A&C Act and Section 37 of the A&C Act ?

CONTENTIONS OF THE PARTIES

The Appellant relied upon National Highways Authority of India v. M. Hakeen and Another [(2021) 9 SCC 1] and contended that any court under Section 34 of the A&C Act does not have jurisdiction to modify the arbitral award, which at best, given the same to be in conflict with the grounds specified under Section 34 would be wholly unsustainable in law.

The Appellant also relied upon Dakshin Haryana Bijli Vitran Nigam Limited v. Navigant Technologies Private Limited [(2021) 7 SCC 657] and Larsen Air Conditioning and Refrigeration Company v. Union of India & Others [2023 SCC On Line 982] and argued that courts cannot modify or amend Arbitral Awards but can only quash and set aside, leaving the parties for re-initiation of the Arbitral proceedings.

The Respondent relied upon  MMTC Ltd. v. Vedanta Ltd [(2019) 4 SCC 163] and contended that provisions of Sections 34 and 37 of the A&C Act accorded power for amendment and modification of the Arbitral Award.

DECISION AND FINDINGS

The Supreme Court considered the Impugned Award, Original Order and Impugned Order. It relied upon Associate Builders v. DDA [(2015) 3 SCC 49] and observed that the scope of judicial intervention under Section 34 and 37 of the A&C Act is very limited while dealing with an Arbitral Award.

The Supreme Court relied upon Indian Oil Corpn. Ltd. v. Shree Ganesh Petroleum [(2022) 4 SCC 463] and held that neither Ld. Civil Judge nor Karnataka High Court had jurisdiction to amend or modify the Impugned  Award.

The Supreme Court quashed and set aside the Original Order as well as the Impugned Order and restored the Impugned Award.

AMLEGALS REMARKS

The Supreme Court has upheld the legislative intent of minimal judicial intervention of the A&C Act. The Court has rightly upheld that courts do not have jurisdiction to alter or modify an Arbitral Award. It underscores the imperative to uphold the integrity of the arbitral process and underscores the limited scope for judicial intervention. The judiciary is reminded of the necessity to adhere to the parameters delineated within the provisions of the A&C Act and operate within the confines of the jurisdiction prescribed by law. This ruling exemplifies the judiciary’s exercise of self-restraint in acknowledging and respecting the delineated boundaries of its authority.

-Team AMLEGALS, assisted by Mr. Utsav Sheth (Intern)

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