Do Court have Powers to Modify Arbitral Awards

The Supreme Court of India Reserves Judgment on Court Powers to Modify Arbitral Awards

The Supreme Court of India has reserved its judgment on a pivotal issue in arbitration law: whether the powers of a court under Section 34 and Section 37 of the Arbitration and Conciliation Act, 1996, include the authority to modify arbitral awards. This question has been a subject of debate due to contradictory judgments in the past. The court’s decision is expected to clarify the scope of judicial intervention in arbitration, aligning with the original intent of the Act to minimize such interference.

Legal Experts Weigh In

Legal experts have expressed significant concerns about the potential for excessive judicial intervention if courts are allowed to modify arbitral awards. Tushar Agarwal, Founder & Managing Partner of C.L.A.P. JURIS – Advocates & Solicitors, emphasized that arbitration’s effectiveness as an alternative dispute resolution (ADR) mechanism could be undermined if modifications become too common. Gauhar Mirza, Partner at Cyril Amarchand Mangaldas, noted that while recent reforms have sought to reduce judicial interference, limited modification powers could help avoid re-arbitration in some cases.

The Journey of Jurisprudence

The Supreme Court’s ruling will test the evolution of arbitration jurisprudence in India. From the judgment in McDermott (which allows re-arbitration) to Associate Builder (which discourages judicial intervention) and M. Hakeem (which bars modification of awards), the legal landscape has seen significant shifts. The recent position of the Delhi High Court in Jaiprakash Associates on “no-rearbitration” also adds to this evolving narrative.

Balancing Act

The Supreme Court’s decision is expected to strike a balance between the need for minimal judicial interference and the desire for fair and efficient arbitration procedures. Some experts argue that limited modification powers could be crucial to ensuring justice, particularly in cases where minor defects do not warrant complete annulment. However, others, like Prachi Dubey, Advocate at the Delhi High Court, argue that the Act’s intent is clear: courts should only validate or set aside awards, not modify them.

The Role of Legislation

The Arbitration and Conciliation Act of 1996 deliberately omitted provisions for court modification of awards, unlike the Arbitration Act of 1940. This legislative choice was intended to preserve the integrity and finality of the arbitral process. Mayur Shetty, Partner at Kochhar & Co., suggests that any power to modify awards should come from the legislature, not the judiciary.

Looking Ahead

The Supreme Court’s ruling is anticipated to be a landmark decision in Indian arbitration law. It could either open the floodgates for increased litigation or set a precedent for balanced judicial intervention. The industry expects the court to allow modifications only under restricted grounds, such as patent illegality, to maintain the arbitration process’s efficiency and finality. The decision will undoubtedly shape the future of arbitration in India, ensuring that it remains an effective and trusted means of dispute resolution.