Syllabus :GS2/Governance
In News
- The Supreme Court of India, in a majority 4:1 judgment, ruled that courts have the limited power to modify arbitral awards under Section 34 of the Arbitration and Conciliation Act, 1996.
Background
- This decision responds to a legal question referred by a three-judge bench in February 2024, seeking clarity on whether courts can modify arbitral awards.
Arbitration
- It is an alternate mode of dispute resolution under the 1996 law and it minimises the role of courts to interfere with the awards by the tribunals.
Major Highlights of the Judgement
- Courts can modify awards to remove invalid portions or correct typographical, computational, or clerical errors.
- Courts can also adjust the interest post-award if necessary.
- Judicial intervention under Section 34 of the Arbitration and Conciliation Act, 1996 is confined to limited grounds, such as public policy or fraud.
- Courts cannot correct factual errors, reconsider costs, or review the merits of the award.
- Article 142 Powers: The Supreme Court can use its inherent powers under Article 142 to ensure complete justice in cases involving arbitral awards.
- However, this power must be exercised cautiously and in line with the principles of the 1996 Arbitration Act.
| Do you know? – Section 34 of the Arbitration and Conciliation Act allows a court to set aside an arbitral award on specific grounds such as violation of public policy, fundamental legal principles, fraud, corruption, or moral injustice. 1. Section 37 deals with the circumstances in which an appeal would lie against the order in an arbitral dispute – However, the Supreme Court, in its majority judgment, noted that it had occasionally modified arbitral awards in the past to avoid prolonged litigation and ensure justice, even though such modification is not explicitly provided under Section 34. |
Dissent
- Justice Viswanathan’s Argued that arbitral awards cannot be modified unless specifically permitted by the statute.
- Section 34 only allows for the setting aside of awards, not modifying them.
- The dissent mirrored the Centre’s view, which emphasized that the power to modify should be statutorily conferred.
- Lawyers argued that allowing courts to modify arbitral awards could replace them with court decrees, which could have international implications.
- Modifying arbitral awards could lead to issues with enforcing them under international conventions.
Source :TH
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