LI Network
Published on: January 6, 2024 at 12:00 IST
The Supreme Court recently reinforced the principle that attempts to modify arbitral awards under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, are impermissible.
In a case where the Court addressed a plea challenging the modification of an arbitral award, it reiterated that any endeavor to alter an award during petitions under Sections 34 and 37 of the Act is not allowed.
The case involved Mr. S.V. Samudram (the Appellant) entering a construction contract with the Karnataka State Public Works Department. Disputes arose due to alleged delays in completing the work, leading to arbitration. The arbitrator awarded a sum of Rs.14,68,239 to the Appellant.
The Respondent challenged the arbitral award under Section 34 of the Act, leading to the award being modified by the Civil Judge, reducing the amount to Rs.3,71,564 with interest at 9%. The Appellant then approached the High Court under Section 37(1) challenging this modification, which was dismissed.
The Supreme Court emphasized that Courts have no jurisdiction to modify arbitral awards under Section 34. It reiterated that the arbitral tribunal’s decision is binding, unless set aside on specific grounds outlined in the Act.
Regarding the modification, the Court stated that interference with an arbitral award is restricted to the grounds specified under Section 34, emphasizing the need to consider the substance of the findings rather than a literal interpretation.
The Court also highlighted the limited scope of interference under Sections 34 and 37, citing legislative intent and prior judgments to assert that courts cannot undertake an independent assessment of the award’s merits.
Consequently, the Supreme Court set aside the judgment passed by the lower courts and restored the original arbitral award, directing the State of Karnataka to promptly pay the awarded amount to the Appellant.
