Can Courts Modify Arbitral Awards Under Section 34?
The extent of the Court's power in interfering with arbitral awards under Section 34 of the Arbitration and Conciliation Act 1996 ("the Act") is still in the realm of uncertainty. The bare reading of Section 34 of the Act ("Section 34") indicates that the power of the Courts is limited to setting aside the arbitral awards, strictly in terms of the specific grounds enshrined therein. However, there are several judgments wherein the Courts have not only set aside but also modified arbitral awards while dealing with petitions filed under Section 34. This article discusses whether Courts can modify arbitral awards while dealing with petitions under Section 34 and highlights certain relevant judgments given by various Courts regarding this issue. Certain Relevant Judgments Highlighting This Issue  The judgment passed in Dyna Technologies Pvt. Ltd. v. Crompton Greaves Ltd. ("Dyna Technologies") is the classic example wherein the Supreme Court modified an arbitral award. In the Dyna Technologies case, the Madras High Court set aside the tribunal's award relating to Claim No. 2, whereby the arbitral tribunal awarded Rs. 27,78,125/- along with interest @ 18% p.a. till the date of payment, in favor of the Appellant. While deciding the appeal against the judgment of the Madras High Court, the Supreme Court observed that the arbitral award is unintelligible and thus, cannot be sustained. However, based on the observation that 'litigation has been protracted for more than 25 years, without any end for the parties', the Supreme Court modified the tribunal's award relating to Claim No. 2 and directed the Respondents to pay Rs. 30,00,000/- along with interest @ 12% p.a. from the date of the judgment till the date of payment to the Appellant. In another recent judgment passed in Oriental Structural Engineers Pvt. Ltd. v. State of Kerala ("Oriental"), the Supreme Court modified the interest on delayed payment awarded in the arbitral award to the Appellant from 12% p.a. to 8% p.a. by merely citing 'justice and equity' as the ground for making such modification. Similarly, in V4 Infrastructure Pvt. Ltd. v. Jindal Biochem Pvt. Ltd. ("Jindal Biochem"), even the Division Bench of the Delhi High Court modified the interest on delayed payment awarded by the arbitral tribunal from 18% p.a. to 9% p.a. while observing that the interest granted in the award was irrational as it was much higher than the prevailing banking rate of interest on the date when the Court passed the judgment. In another recent judgment passed in M/s J.K. Fenner (India) Ltd. v. M/s Neyveli Lignite Corporation ("J.K Fenner"), the Maras High Court granted an alternative relief which was prayed for in arbitration but was denied in the arbitral award by not only awarding interest @ 9% p.a. from the date when the amount became due till the date of the award but also granting interest @ 18% p.a. from the date of the award till the date of payment in favor of the Petitioner. These judgments depict a trend wherein the Courts have recognized their power to modify arbitral awards while dealing with petitions under Section 34, even though in none of the judgments mentioned above have the Courts stated the basis of such power. On the contrary, there are number of judgments wherein the Courts have taken a view which is diametrically opposite to the position stated hereinabove. In McDermott International Inc. v. Burn Standard Co. Ltd. ("McDermott"), the Supreme Court held that Courts cannot correct the errors of the arbitrators and can only quash arbitral awards under Section 34 of the Act. From the observation described above, it appears that the Court's power under Section 34 is only limited to setting aside arbitral awards and does not include the power to modify arbitral awards. Furthermore, in Angel Broking Ltd. v. Sharda Kapur ("Angel Broking"), the Delhi High Court directly dealt with the issue of whether Section 34 authorizes the Courts to modify arbitral awards or grant additional or alternative reliefs which were prayed for in the arbitration proceedings but were denied by the arbitral tribunal. While answering the aforesaid issue, the Delhi High Court observed that Section 34 does not provide the Courts with the power to modify, vary or remit the arbitral award. It was thus held that the Courts have no authority to modify the arbitral award or to grant additional/alternative reliefs, which the arbitral tribunal did not grant. While arriving at the said conclusions, the High Court relied upon the Supreme Court's judgment in McDermott as well as the earlier judgment passed by a Division Bench of the Delhi High Court in Puri Construction Ltd. and Ors. v. Larsen and Turbo Ltd. ("Puri Construction"). Analysis  From the judgments mentioned above, it is clear that the question regarding the Court's power of modifying awards while dealing with petitions filed under Section 34 is res integra. In order to appreciate this issue, it is essential to consider the following factors:  Firstly, Section 34 of the Act confers the Courts with the limited power of setting aside arbitral awards as per the specific grounds enshrined therein. The Act contains no provision that allows the Courts to either modify the arbitral awards or grant additional/alternative reliefs that the arbitral tribunal did not grant. The observations of the Supreme Court in McDermott are also relevant in this regard, wherein the Court observed that the provisions of the Act provide the Courts with only a supervisory role at the minimum level in the process of reviewing the arbitral award. Furthermore, it is relevant to state that the expediency in resolving the dispute and the finality of the arbitral award offered through the arbitration proceedings serve as the basis for the parties to refer any dispute to arbitration. For this purpose, the scheme of the Act provides for the minimal intervention of the Courts during the arbitration proceedings as well as in the process of setting aside the arbitral awards. In view of the above, it is clear that the Court's practice of modification and alteration of the arbitral award while dealing with petitions under Section 34 is beyond the scheme of the Act and contrary to the very purpose of conducting arbitration proceedings. Secondly, the Act provides only two mechanisms for making changes in the arbitral award passed by the arbitral tribunal. The first being provided under Section 33, whereby the arbitral tribunal is empowered to make clerical and technical corrections in the arbitral award that it deems fit after receiving the request for the same from the parties to the proceedings. The second mechanism is under Section 34(4), whereby the Courts can adjourn the proceedings for setting aside arbitral awards and provide an opportunity to the arbitral tribunal to take appropriate actions to eliminate the grounds for setting aside such arbitral awards. In Dyna Technologies, the Supreme Court observed that the utility provided under Section 34(4) must be invoked by the Courts to eliminate any curable defect in the arbitral awards by remanding the matter to the arbitral tribunal in terms of the said provision. Thus, even during the pendency of the proceedings under Section 34, the defects in the arbitral award can only be cured by the arbitral tribunal. In view of the above, it is clear that that power to make changes in the arbitral award only resides with the arbitral tribunal, and the Courts cannot make any such changes in the arbitral award under any circumstance whatsoever. Thirdly, in Dyna Technologies and Oriental, the modification in arbitral awards by the Supreme Court, at best, can be assumed to have been done by exercising its extraordinary powers under Article 142 of the Constitution of India. The said provision empowers the Supreme Court to pass any decree or order for doing complete justice in the matters pending before it. In State of Punjab v. Rafiq Masih ("Rafiq Masih"), the Supreme Court observed that Article 142 is a justice-oriented provision that empowers the Supreme Court to give preference to equity over law, and therefore, the directions issued under Article 142 do not constitute a binding precedent on other Courts. However, the judgments such as Dyna Technologies and Oriental do not expressly state that the Supreme Court has modified the arbitral awards under Article 142, and thus the said judgments hold no precedential value. As a result, even the other Courts are modifying arbitral awards while dealing with petitions filed under Section 34, which is contrary to the scheme of the Act. Therefore, in order to provide better guidance, the Supreme Court, while amending arbitral awards in future judgments, should expressly state that the said exercise is being done under Article 142. Concluding Remarks  In the light of the above, it appears that the law laid down in the judgments passed by the Delhi High Court in Angel Broking and Puri Construction is the accurate position regarding this issue. The Courts should recognize that while opting to resolve disputes through arbitration, the parties consciously choose to exclude the Court's jurisdiction. Thus, the exercise of modifying or altering the arbitral award by the Courts not only goes against the scheme of the Act but also defeats the objective of the arbitration process. Therefore, after the dispute between the parties is resolved through arbitration, the Courts should recognize that their role is limited to setting aside arbitral awards based on the specific grounds enshrined under Section 34 and should refrain from making any modifications in the arbitral awards. In the author's view, a bench of the Supreme Court of appropriate strength must settle this issue in order to prevent the modification of arbitral awards by the Courts in the proceedings initiated under Section 34 of the Act. The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.