A much needed clarification

It is widely assumed across India that courts have the powers to amend arbitration awards passed by arbitration tribunals. These arguments and speculations arose in response to the decision of a five-member bench of India’s Supreme Court on 30 April 2025. However, courts at the state level and apex level have been unequivocally stating that the arbitration and conciliation act envisages non-intervention of courts either into arbitration processes or into the arbitration award. Numerous judgments of the apex court have clarified that the court should not substantially modify the arbitrator’s award. Despite this established norm, the Supreme Court had to constitute a five-judges bench under the leadership of the Chief Justice of India to put an end to the argument of the courts’ inherent powers to modify an arbitration award.

A plain reading of opinions, arguments, and speculations reveals that the speculators have either unread or misread the judgement of the Supreme Court of India.

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A closer and clearer reading of the judgement reveals without giving any scope to read between the lines that they are addressing the question – Are Indian courts jurisdictionally empowered to modify an arbitral award? If so, to what extent due to the controversy which arises because the Arbitration and Conciliation Act, 1996, does not expressly empower courts to modify or vary an arbitral award? Section 34 of the 1996 Act only confers upon courts the power to set aside an award.

The bench further identifies, “Section 5 of the 1996 Act limits judicial intervention in an arbitral award to what is authorised by Part I of the Act. Section 34(1) stipulates that ‘recourse’ to a court against an arbitral award may be made only by an application for setting aside the award in accordance with Section 34(2) and 34(3). Section 34(2)(a) enumerates specific grounds on which an award can be set aside. These include the incapacity of a party, invalidity of an arbitration agreement in law, improper notice for appointment of an arbitrator or arbitral proceedings, denying the opportunity to a party to present their case, the award being beyond the scope of submission to arbitration, and the composition of the arbitral tribunal or the arbitral procedure not being by the agreement of the parties in certain circumstances. The proviso to Section 34(2)(a)(iv) of the Arbitration and Conciliation Act, 1996, outlines the concept of ‘severability of awards’.”

The bench further recognises that Section 34(2-A) stipulates that an award may be set aside when it is vitiated by patent illegality appearing on the face of the award. The proviso clarifies that such determination shall not be made solely because there is an erroneous application of law or through re-appreciation of evidence. Section 34(3) provides timelines which need to be adhered to while filing an application under Section 34. Section 34(4) stipulates the court’s power of remanding an award to the arbitral tribunal, while Section 34(6) mandates the expeditious disposal of Section 34 applications, setting a hard outer limit of one year from the date of service of notice on the other party under Section 34(5).

The five-member bench clarifies further that these powers are to set aside the award within the contours of the sections under which an application was brought before the court.

After referring to several of their own judgements and provisions of the Act which is an alternative to the conventional jurisprudence, the five-member bench in the ratio of 4:1 has very clearly and categorically concluded that a court has limited power under Sections 34 and 37 of the 1996 Act to modify the arbitral award. This limited power may be exercised under the following circumstances:

When the award is severable, by severing the “invalid” portion from the “valid” portion of the award;

By correcting any clerical, computational or typographical errors which appear erroneous on the face of the record;

Post award interest may be modified in certain circumstances; and

As per Article 142 of the Constitution, albeit the power must be exercised with great care and caution and within the limits of the constitutional power.

To avoid any confusion and misinterpretation of Article 142 of the Constitution of India, the apex court clarifies, “This power is to be exercised by this court with great care and caution. Article 142 enables the court to do complete justice in any cause or matter pending before it. The exercise of this power has to be in consonance with the fundamental principles and objectives behind the 1996 Act and not in derogation or in suppression thereof.”

It should not be overlooked by advocates fighting in lower courts that the words and clarifications here mean Article 142 is applicable only in cases pending before the apex court.

The circumstances explained by the bench do not warrant any substantial interference by any court, and the arbitration awards passed by the arbitration tribunals are final and binding on the parties, for they would consent to the appointment of an arbitrator on their own.

The conclusions of the court have direct recognition of the spirit behind passing the Arbitration and Conciliation Act 1996 that guarantees speedy disposal of cases outside conventional courts, less cumbersome proceedings, and, more importantly, that the arbitration tribunals are constituted with the consent of the disputing parties themselves.

If courts have powers to modify the awards passed by the arbitration tribunals, there is no need to have separate legislation, lengthen the justice delivery procedure and create additional steps in an already cumbersome justice delivery system.

The writer is former International Senior Adviser, United Nations Development Programme.