New Delhi, Apr 30 (PTI) Supreme Court’s Justice K V Viswanathan on Wednesday dissented with the majority verdict of the Supreme Court and held courts have no power to “modify” an arbitral award under the Arbitration and Conciliation Act of 1996.
A five-judge Constitution bench headed by Chief Justice Sanjiv Khanna, by a majority of 4:1, held courts could modify arbitral awards under the 1996 law on arbitration and conciliation under certain circumstances.
The majority verdict, penned by the CJI, held the larger power to set aside an arbitral award under the 1996 Act would also include the authority to modify it if certain conditions were met.
Disagreeing with the majority verdict, Justice Viswanathan, in his 139-page judgement, dealt with all the legal aspects of the issue.
“I have since had the benefit of reading the judgment of the Chief Justice. In my judgment, I have independently given my reasons on each of the issues arising herein. The judgment of the Chief Justice grants power to the Section 34 court to modify the post-award interest,” he said.
The judge, however, held, “I am not able to agree with the said view for the reasons stated…. Equally, the judgment of the Chief Justice permits the exercise of power under Article 142 of the Constitution of India to modify the award, though it has been stated in the judgment that the power must be exercised with caution. Here again, I am not able to agree with the said view for the reasons stated in my judgment.”
The top court was deciding issues relating to arbitration including the key question if the powers of the court under Sections 34 and 37 of the Arbitration and Conciliation Act will include the power to modify an arbitral award.
Section 34 enumerates specific grounds on which an award can be set aside.
On the question whether the power to set aside an award includes the power to partially set it aside, the bench answered in the affirmative.
The minority verdict, on the other hand, held courts exercising power under Section 34 and courts hearing appeals thereunder had no power to modify an award.
It also held the power to modify was not a lesser power to that of the power to set aside, as the two operate in separate spheres and were not of the same genus.
“The inherent power under Section 151 Civil Procedure Code cannot be used to modify awards as it will be contrary to the express power mentioned in Section 34. Similarly, there is no scope for applying the doctrine of implied power to modify awards,” Justice Viswanathan said.
“Article 142 of the Constitution of India will not be exercised by this Court to modify awards passed by arbitrators as it is well settled that the Article 142 power cannot be used to give a go by to the substantive statutory provision,” he added.
Article 142 empowers the Supreme Court to pass any order to render “complete justice” in any case.
The verdict also said the interest awarded also couldn’t be modified in exercise of powers of setting aside and the course of action under the law.
Justice Viswanathan did not agree to the contention that “the power to set aside is a larger power and hence a power to modify is after all a lesser power which should be subsumed in the larger power”.
“At first blush, though the argument seems attractive, a close scrutiny reveals that the argument has really no substance. As explained…, the qualitative nature of an appellate power is different from the power under Section 34,” the minority verdict said.
The two operate in different spheres and are not of the same genus, it added.
“They do not have similar characteristics. It cannot be said just on a first blush understanding that power to set aside is larger and power to modify is smaller or lesser without keeping the context in which Section 34 occurs in the Act and without considering the very ecosystem of the arbitration process,” the judge said.
Justice Viswanthan said it was “crystal clear” that courts exercising powers under Section 34 of the Act to modify arbitral awards struck at the “very core and root of the ethos of the arbitration process”.
“Such an exercise of power will derogate from the core aspects of the Arbitration and Conciliation Act and will breach a pre-eminent prohibition in the said Act,” he said.
The judge added, “If power is reserved for this Court to modify, at the fag end of the litigation, contracting parties will have grave uncertainties as they would not be sure of how the matter will play out when it reaches the apex Court. It will be antithetical to arbitration as an alternative and efficacious mode of dispute resolution.”
On the award of interest and the power to modify it, Justice Viswanthan said courts under Section 34 couldn’t modify the interest.
“The course of action to be adopted would be to record reasons in the order and remit the matter to the arbitrator for the arbitral tribunal to make the necessary course correction…,” he said. (PTI)
Follow our WhatsApp channel
