SC Refers Questions Of Law On Section 34, 37 Of Arbitration And Conciliation Act To Larger Bench

The Supreme Court of India, on February 20, referred the issue pertaining to modification of the arbitral award under Section 34 and 37 of The Arbitration and Conciliation Act, 1996 to a larger bench. 

The Court was hearing an SLP (Special Leave Petition) which arose from the decisions passed by the Madras High Court under Section 37 of the Arbitration Act, 1996 in the matter of Gayatri Balasamy Vs ISG Novasoft Technologies Ltd. The said decisions of the Madras High Court in an Appeal under Section 37 of the Arbitration Act were specifically discussed and overruled in the judgement passed by this Court in NHAI vs. M. Hakeem and Anr. (2021) 9 SCC 1 and thereafter followed in Larsen Air Conditions and Refrigeration Company v. Union of India and SV Samudram v. State of Karnataka.

During the course of the hearing, it was observed that there are three sets of judgements on the issue of modification of arbitral awards, wherein the Court had modified the award under Article 142 of the Constitution of India; the Court had refused to modify the award; and the Court had modified the award without referring to Article 142 of the Constitution of India.

The Supreme Court under Article 142 can exercise its powers to modify an Award, however, the Court observed that the issue pertaining to modification of Arbitral Awards needs clarification from a larger Bench of this Court, especially for the High Courts and District Courts exercising jurisdiction under Sections 34 and 37 of the Arbitration Act.

Based on the submissions made by the parties, the Court has referred the following questions to be answered by a larger Bench:

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 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, followed in Larsen Air Conditioning and  Refrigeration Company vs. Union of India and SV Samudram vs. State of Karnataka lay down the correct law, as other benches of two Judges (in Vedanta Limited vs. Shenzden Shandong Nuclear Power Construction Company Limited, Oriental  Structural Engineers Pvt. Ltd. vs. State of Kerala and M.P. Power Generation Co. Ltd. vs. Ansaldo Energia Spa) and three Judges (in J.C. Budhraja vs. Chairman, Orissa Mining Corporation Ltd., Tata Hydroelectric Power Supply Co. Ltd. vs. Union of India and Shakti Nath vs. Alpha Tiger Cyprus Investment No.3 Ltd.) of this Court have either modified or accepted modification of the arbitral awards under consideration?

Case Title: Special Leave to Appeal (C) Nos.15336-15337/2021–‘Gayatri Balasamy  vs.  ISG Novasoft Technologies Ltd.’

Counsel for Petitioner: Senior Advocate Arvind Datar, Advocates M.V Mukunda, Hina Shaheen, Mithun Shashank, M.V Swaroop, Hredai Sriram, AOR Nishanth Patil.

Counsel for Respondent: Senior Advocate Siddharth Bhatnagar, along with Mr. Debmalya Banerjee - Partner, Ms. Manmeet Kaur - Partner, Mr. Rohan Sharma, Mr. Gurtejpal Singh, Mr. Chandan Malav, Mr. Abhishek Rana, and Ms. Ananya Khanna, Advocates from Karanjawala & Co., law firm.