March of Arbitration Law 2020-2022 Insights
Covering key topics such as Indian parties with seats outside India, challenges under Section 34, and enforceability of emergency arbitration awards. Various judgements discussed regarding the choice of foreign seats by Indian parties in arbitration agreements.
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MARCH OF ARBITRATION LAW 2020-2022 ANIRUDH KRISHNAN, AK LAW CHAMBERS
List of topics Whether two Indian parties can have a seat outside India? Scope of Section 11 of Arbitration and Conciliation Act, 1996 Scope of challenge under Section 34 Whether a guarantor can be made a party to an arbitration when the guarantee agreement does not contain an arbitration clause No Power to modify the award under Section 34 Limitation period for Section 11 application Arbitration matters under the MSME Development Act, 2006 Emergency Arbitration awards are enforceable in India
Whether two Indian parties can have a seat outside India?
JUDGEMENT AND CITATION PROPOSITION / DESCRIPTION Atlas Export Industries v. Kotak & Dismissed the argument that choosing a foreign Co., (1999) 7 SCC 61, September 1, seat is opposed to public policy under Section 23 1999. read with Section 28 of the Contract Act. TDM Infrastructure Private Limited where both parties have Indian nationalities, then vs. UE Development India Private the arbitration between such parties cannot be said Limited, (2008) 14 SCC 271, to be an international commercial arbitration. 14.05.2008 The intention of the legislature appears to be clear that Indian nationals should not be permitted to derogate from Indian law. This is part of the public policy of the country.
JUDGEMENT AND CITATION PROPOSITION / DESCRIPTION Addhar Mercantile Private Limited Bombay High Court held that two Indian parties v. Shree Jagadamba Agrico Exports cannot choose a foreign seat and foreign law Private Limited, Arbitration governing the arbitration agreement since it is Application No. 197 OF 2014, June inherently opposed to the public policy of India. 12, 2015, Relied upon TDM and held that two Indian parties cannot have seat outside India. Sasan Power Limited v. North Two Indian parties can have a seat outside India America Coal Corporation India and there is no bar under the Arbitration and Private Limited, 2015 SCC OnLine Conciliation Act, 1996. MP high court relied upon MP 7417, September 11, 2015. Atlas and held that two Indian parties can have a seat outside India.
JUDGEMENT AND CITATION PROPOSITION / DESCRIPTION Sasan Power Limited v North The Supreme Court held that since it is a dispute American Coal Corporation between three parties one of which is an American India Private Limited, Civil company including a foreign element, it held that that Appeal No. 8229 of 2016, the governing foreign law is not between two Indian August 24, 2016. companies. GMR Energy Limited v. There is no express prohibition on Indian parties Doosan Power Systems India choosing a foreign seat. Private Limited, CS(COMM) 447/2017, November 14, 2017
JUDGEMENT AND CITATION PROPOSITION / DESCRIPTION PASL Wind Solutions Private The Supreme Court clarified that two Indian parties Limited v. GE Power Conversion can choose a foreign arbitral seat and that parties India Private Limited, Civil Appeal to such foreign seated arbitrations will be able to No. 1647/2021, April 20, 2021. obtain interim relief from the Indian courts. Also referred to party autonomy as the brooding and guiding spirit of arbitration and held that Nothing stands in the way of party autonomy in designating a seat of arbitration outside India even when both parties happen to be Indian nationals . Also dismissed the argument on public policy relying on its earlier decision in Atlas Export.
Scope of Section 11 of Arbitration and Conciliation Act, 1996
JUDGEMENT AND CITATION PROPOSITION / DESCRIPTION SBP & Co. v. Patel Engg. Ltd, Appeal (civil) Chief Justice can decide on his/her own 4168 of 2003, October 26, 2005. jurisdiction. Obiter dicta to suggest that the test of Section 8, 9 and 11 are similar. National Insurance Co. Ltd. vs. Boghara Supreme Court set out three categories- Polyfab Pvt. Ltd, Civil Appeal No. 5733 OF issues mandatorily determinable under 2008, September 18, 2008. Section 11, issues left to the discretion of the Chief Justice and issues that are not determinable under Section 11. No discussion on issues of arbitrability.
JUDGEMENT AND CITATION PROPOSITION / DESCRIPTION Booz Allen and Hamilton Inc. vs. SBI The nature and scope of issues arising for Home Finance Ltd. and Ors, Civil Appeal consideration in an application under No.5440 OF 2002, April 25, 2011. Section 11 of the Act for appointment of arbitrators, are far narrower than those arising in an application under Section 8.
JUDGEMENT AND CITATION PROPOSITION / DESCRIPTION Arasmeta Captive Power Co. Ltd Arbitrability not within the scope of Section 11 v. Lafarge India Pvt Ltd, Civil determination. Appeal No.11003 OF 2013, December 12, 2013. Arbitration and Conciliation Insertion of Section 11(6A), which says that while (Amendment) Act, 2015 appointing the arbitrator under this Section, court shall Confine to the examination of existence of an arbitration agreement It also introduced the prima facie standard under Section 8. However, the word prima facie was not introduced into Section 11 (6A). Also made orders under Section 8, refusing to refer parties to arbitration appealable under Section 37.
JUDGEMENT JUDGEMENT AND CITATION AND CITATION PROPOSITION / DESCRIPTION PROPOSITION / DESCRIPTION Strictly applied Section 11(6A). However, the SC Duro Felguera v. Gangavaram Port read in the prima facie test into Section 11. Limited, Arbitration Petition No.30 OF 2016, October 10, 2017 Number of judgments on similar lines (such as Brightstar Telecommunications India Ltd. v. World Digital Solutions Pvt Ltd, Arb P.662/2017) Three Judge bench of Supreme Court went into issues of whether the dispute was arbitrable or whether it fell within the ambit of an excepted matter. Duro Felguera considered but observations suggesting that (a) it is not binding on the Court as this was a larger bench (b) Duro to be considered in light of the facts of a specific case. United India Insurance Company Limited v. Hyudai Engineering, Civil Appeal No. 8146 OF 2018, August 21, 2018
JUDGEMENT AND CITATION PROPOSITION / DESCRIPTION Rashid Raza v Sadaf Akhtar, Civil The Supreme Court, under a Section 11 Appeal No. 7005 of 2019, September application, went into the arbitrability of fraud 4, 2019. issue. M/s Mayavti Trading Pvt. Ltd. v. Court s power in an Application under Section 11 Pradyuat Deb Burman, Civil Appeal is confined only to the examination of the existence No. 7023 of 2019, September 5, of a valid arbitration agreement and the Court 2019. cannot decide on the arbitrability of a dispute. The Court also upheld the narrow construction of Section 11(6A) as adopted in Duro Felguera.
JUDGEMENT AND CITATION PROPOSITION / DESCRIPTION Vidya Drolia and Ors.v. Durga Recognized the need for consistency in the scope of Trading Corporation, Civil Appeal judicial interference in pre-arbitral stages under No. 2402 OF 2019, December 14, Sections 8 and 11 and held that the prima facie 2020. standard applies equally to section 11. Therefore, the Court held, we can read the mandate of valid arbitration agreement in Section 8 into mandate of Section 11, that is, existence of an arbitration agreement . Pravin Electricals Pvt. Ltd. v. Relying on Vidya Drolia, in order to bring orders Galaxy Infra and Engineering Pvt. under Section 8 and 11 at par, the Supreme Court Ltd., Civil Appeal No. 825 of 2021, recommended that the Parliament needs to re-look March 8, 2021. at Section 11(7), which provides that orders under 11(6) are final, as well as Section 37.
JUDGEMENT AND CITATION PROPOSITION / DESCRIPTION But.. DLF Home Developers Limited v. The Supreme Court expanded the scope of judicial Rajapura Homes Private Limited & inquiry under section 11 of the Arbitration and Anr, Arbitration Petition No. 17 of Conciliation Act, 1996 by holding that Courts are 2020, with DLF Home Developers obligated to apply their mind to the core preliminary Limited v. Begur OMR Homes issues, albeit, within the framework of Section 11(6- Private Limited & Anr., Arbitration A) of the Act. Petition No. 16 of 2020, September It held: even when an arbitration agreement exists, 22, 2021. it would not prevent the Court to decline a prayer for reference if the dispute in question does not correlate to the said agreement
JUDGEMENT AND CITATION PROPOSITION / DESCRIPTION In another decision limiting the scope of judicial interference.. Sanjiv Prakash v. Seema Kukreja The Supreme Court held under the limited scope And Ors, Civil Appeal No. No. 975 OF of interference under Section 11, Courts cannot 2021, April 6, 2021. entertain detailed arguments on whether an agreement which contains an arbitration clause has been novated.
Scope of challenge under Section 34
MARCH OF LAW RELATING TO THE SCOPE OF PUBLIC POLICY PRIOR TO THE 2015 AMENDMENT Renusagar Power Co. Limited v. General Electric Company, 1994 Supp (1) SCC 644 Oil and Natural Gas Corporation Limited v. Saw Pipes Limited, (2003) 5 SCC 705 McDermott International Inc. v. Burn Standard Company Limited and Others, (2006) 11 SCC 181 Centrotrade Minerals & Metals Inc. v. Hindustan Copper Limited, 2006 (2) Arb LR 547 Hindustan Zinc Limited v. Friends Coal Carbonisation, (2006) 4 SCC 445 Delhi Development Authority v. RS Sharma and Company, New Delhi, (2008) 13 SCC 80 Phulchand Exports Limited v. O.O.O. Patriot, (2011) 10 SCC 300
Rashtriya Ispat Nigam Limited v. Dewan Chand Ram Saran, (2012) 5 SCC 306 Shri Lal Mahal Limited v. Progetto Grano Spa, (2014) 2 SCC 433 Report No. 246 of the Law Commission of India titled, Amendments to the Arbitration and Conciliation Act 1996 Oil and Natural Gas Corporation Limited v. Western Geco International Limited, (2014) 9 SCC 263 Associate Builders v. Delhi Development Authority, (2015) 3 SCC 49 Swan Gold Mining Limited v. Hindustan Copper Limited, (2015) 5 SCC 739 Supplementary to Report No. 246 on Amendments to the Arbitration and Conciliation Act 1996, titled Public Policy- Developments post Report No. 246 Arbitration and Conciliation (Amendment) Act, 2015
MARCH OF LAW RELATING TO THE SCOPE OF PUBLIC POLICY POST THE 2015 AMENDMENT ACT ACT- SECTION 34 AND SECTION 48 OF THE ACT Shriram EPC Limited v. Rioglass Solar SA, A.I.R. 2018 S.C. 2549 Ssangyong Engineering and Construction Company Limited v. National Highways Authority of India, (2019) 15 SCC 131 Dyna Technologies Private Limited v. Crompton Greaves Limited, 2019 SCC OnLine SC 1656 Vijay Karia v. Prysmian Cavi E Sistemi SRL and Ors., Civil Appeal No. 1544 of 2020 (Arising out of SLP (Civil) No. 8304 of 2019) and Civil Appeal No. 1545 of 2020 (Arising out of SLP (Civil) No. 8435 of 2019), (Order dated 13.02.2020 SC) Oil India Limited v. South East Asia Marine Engineering and Constructions Limited (Seamec Limited), 2020 SCC OnLine SC 451
Delhi Airport Metro Express The Supreme Court held that the power of Pvt. Ltd. v. Delhi Metro Rail Courts under section 34 does not extend to Corporation Ltd., Civil Appeal substituting their view with that of the No. 5627 of 2021, September tribunal. 9, 2021
JUDGEMENT AND CITATION PROPOSITION / DESCRIPTION Narinder Singh v. Union of India, The Supreme Court held that not taking evidence of Civil Appeal 6734/2021, November a party by depriving them of their right to produce 18, 2021 evidence and cross-examine the witness would result in violation of the principles of natural justice and a lack of full opportunity as envisaged by Section 18 of the Act, thereby, impeding a fair and just decision. Therefore, the award would be set aside under Section 34(2)(a)(iii) as well as clause (ii) to Section 34(2)(b) of the Act.
JUDGEMENT AND CITATION PROPOSITION / DESCRIPTION PSA Sical Terminals Pvt. Ltd v. The Supreme Court held that in case The Board of Trustees of V.O. of a finding which is based on no Chidambranar Port Trust evidence at all or an award that Tuticorin, Civil Appeal Nos.. 3699- 3700 OF 2018, July 28, 2021. ignores vital evidence would be perverse. In such cases, the award is liable to be set aside on the ground of patent illegality.
Meaning ascribed to various colors in the upcoming chart 1. Blue denotes no change pre and post amendment. 2. Red denotes those grounds which are deleted post amendment 3. Green refers to those grounds which have been diluted/narrowed post amendment 4. Orange denotes those grounds that have been moved from one head to another post amendment
SCOPE OF FUNDAMENTAL POLICY OF INDIAN LAW PRE 2015 AMENDMENT ACT FUNDAMENTAL POLICY OF INDIAN LAW CONTRAVENTION OF STATUTE LINKED TO NATIONAL ECONOMIC INTEREST WEDNESBURY PRINCIPLES OF REASONABLENESS DISREGARDING ORDERS OF SUPERIOR COURT PRINCIPLES OF NATURAL JUSTICE JUDICIAL APPROACH CONSIDERATION OF IRRELEVANT MATERIAL AUTHORITY ACTED IN ARBITRARY, WHIMSICAL AND CAPRICIOUS MANNER NO OPPORTUNITY TO PRESENT CASE IGNORANCE OF VITAL EVIDENCE UNFAIR, UNREASONABLE AND NOT OBJECTIVE FINDING BASED ON NO EVIDENCE NON-APPLICATION OF MIND
SCOPE OF FUNDAMENTAL POLICY OF INDIAN LAW POST 2015 AMENDMENT ACT FUNDAMENTAL POLICY OF INDIAN LAW CONTRAVENTION OF STATUTE LINKED WITH NATIONAL ECONOMIC INTEREST; PLUS CONTRAVENTION OF SOME LEGAL PRINCIPLE OR LEGISLATION WHICH IS SO BASIC TO INDIAN LAWTHAT IT IS NOT SUSCEPTIBLE OF BEING COMPROMISED DISREGARDING ORDERS OF A SUPERIOR COURT PRINCIPLES OF NATURAL JUSTICE NO OPPORTUNITY TO PRESENT CASE Example added- Document submitted behind the back of a party
SCOPE OF PATENT ILLEGALITY PRIOR TO THE 2015 AMENDMENT ACT PATENT ILLEGALITY CONTRAVENTION OF SECTION 31(3) OF THE ACT- NO REASONS FOR PASSING THE AWARD CONTRAVENTION OF TERMS OF THE CONTRACT CONTRAVENTION OF SUBSTANTIVE LAW
SCOPE OF PATENT ILLEGALITY POST THE 2015 AMENDMENT ACT PATENT ILLEGALITY CONTRAVENTION OF THE TERMS OF THE CONTRACT IF IT IS NOT A POSSIBLE CONSTRUCTION OR WOULD NOT HAVE BEEN ARRIVED AT BY A REASONABLE OR FAIR- MINDED PERSON CONTRAVENTION OF SECTION 31(3) OF THE ACT- NO REASONS FOR PASSING THE AWARD PERVERSE CONTRAVENTION OF STATUTES LINKED TO PUBLIC POLICY OR PUBLIC INTEREST FINDING BASED ON NO EVIDENCE OR ONE WHICH IGNORES VITAL EVIDENCE DOCUMENT TAKEN AT THE BACK OF THE PARTIES)
ADDITIONAL GROUNDS AVAILABLE PRIOR TO THE 2015 AMENDMENT ACT ADDITIONAL GROUNDS AVAILABLE INTERESTS OF INDIA JUSTICE MORALITY SHOCKS THE CONSCIENCE OF THE COURT
ADDITIONAL GROUNDS AVAILABLE POST THE 2015 AMENDMENT ACT EXPLANATION- ALTHOUGH THE TERMINOLOGY HAS BEEN CHANGED TO MOST BASIC NOTIONS OF JUSTICE AND MORALITY, THE TEST REMAINS THE SAME BOTH PRE AND POST 2015 AMENDMENT ACT MOST BASIC NOTIONS OF JUSTICE AND MORALITY SHOCKS THE CONSCIENCE OF THE COURT NON-CONSIDERATION OF AN ISSUE EXAMPLES WHERE A CLAIM IS MADE FOR RS. 30 LAKHS AND ARBITRATOR HAS AWARDED 45 LAKHS
SUMMARY OF KEY CHANGES BROUGHT ABOUT BY THE 2015 AMENDMENT ACT CONTRAVENTION OF WEDNESBURY PRINCIPLES OF REASONABLENESS AS A VIOLATION OF FUNDAMENTAL POLICY OF INDIAN LAW PRE 2015 AMENDMENT ACT CONTRAVENTION OF WEDNESBURY PRINCIPLES OF REASONABLENESS MAKES THE ARBITRAL AWARD PATENTLY ILLEGAL POST 2015 AMENDMENT ACT 1.
CONTRAVENTION OF SUBSTANTIVE LAW AS A GROUND FOR SETTING ASIDE THE ARBITRAL AWARD HAS BEEN DILUTED 2. CONTRAVENTION OF STATUTE LINKED WITH NATIONAL ECONOMIC INTEREST; PLUS CONTRAVENTION OF SOME LEGAL PRINCIPLE OR LEGISLATION WHICH IS SO BASIC TO INDIAN LAWTHAT IT IS NOT SUSCEPTIBLE OF BEING COMPROMISED CONTRAVENTION OF SUBSTANTIVE LAW LINKED TO PUBLIC POLICY OR PUBLIC INTEREST RENDERS THE AWARD PATENTLY ILLEGAL INTERESTS OF INDIA AVAILABLE AS A GROUND FOR SETTING ASIDE THE ARBITRAL AWARD 3.
Whether a guarantor can be made a party to an arbitration when the guarantee agreement does not contain an arbitration clause.
JUDGEMENT AND CITATION PROPOSITION / DESCRIPTION Sukanya Holdings (P) Ltd v. Jayesh H. Held that causes of action cannot be bifurcated Pandya [(2003) 5 SCC 531]. and arbitration could be restricted only to the parties to the arbitration agreement. Therefore, any person who was not a party to the arbitration agreement could not be brought into an arbitration. Non signatories could not be bound by the arbitration agreement. S.N Prasad. v. Monnet Finance Limited, Civil The Court held that a non signatory guarantor Appeal No. 9224 OF 2010, October 22, 2010 cannot be compelled to join arbitration and rejected the contention that the guarantor s joint and several liability is a valid ground to compel their inclusion. It also held that an award cannot be enforced against a party merely by virtue of their association with the matter or the parties involved.
JUDGEMENT AND CITATION PROPOSITION / DESCRIPTION Chloro Controls India Private Ltd. vs. Severn The Court held that the arbitration fell within the Trent Water Purification Inc. [(2013) 1 SCC ambit of s.45, which was different from s.8, which 641], September 28, 2012 was applicable to domestic arbitrations. The court referred to Sukanya Holdings, but did not over- rule it. Instead, the court held, the expression person claiming through or under appearing in s.45 could be given a liberal interpretation and would mean and take within its ambit multiple and multiparty agreement, though in exceptional cases . Law commission recommendation Refer parties to arbitration unless the court finds that prima facie no valid arbitration agreement exists However, this was not included.
JUDGEMENT AND CITATION PROPOSITION / DESCRIPTION Section 8 - Power to refer parties to arbitration where there is an arbitration agreement (1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance notwithstanding any judgment or decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists. Section 8 ( Old Act v. Amended Act) of the dispute, then, (2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof: PROVIDED that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file such application along with a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court. (3) Notwithstanding that an application has been made under sub- section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.
JUDGEMENT AND CITATION PROPOSITION / DESCRIPTION STCI Finance Limited v. Sukhmani The Delhi High Court held that a guarantee Technologies Pvt. Ltd. and Ors., agreement, although linked to the principal 235(2016)DLT150, November 15, 2016. facility agreement, is an independent contract. Therefore, the guarantor cannot be bound by the arbitration clause contained in the facility agreement. MSTC Ltd. vs. Omega Petro Products Pvt. Since the guarantors are not a party to the Ltd. and Ors. MANU/MH/0166/2018, arbitration agreement signed between the January 16, 2018. creditor and principal debtor, the Bombay High Court refused to refer to arbitration.
JUDGEMENT AND CITATION PROPOSITION / DESCRIPTION Factors such as the relationship of a non- Cheran Properties Limited v. Kasturi and signatory to a party which is a signatory to the Sons Limited and Ors , Civil Appeal No. agreement, the commonality of subject matter 10025-10026 of 2018, April 24, 2018 and the composite nature of the transaction weigh in the balance of whether non signatory is bound by an arbitration agreement. The expression persons claiming under them in Section 35 widens the net of those whom the arbitral award binds.
JUDGEMENT AND CITATION PROPOSITION / DESCRIPTION STCI Finance Ltd. v. Shreyas Kirti Lal The Delhi High Court held that in Doshi & another, CS (COMM) 528 of 2019, situations where the guarantor play a role January 14, 2020 of being more than a guarantor then based on the facts of the case then they can be compelled to be part of the arbitration.
JUDGEMENT AND CITATION PROPOSITION / DESCRIPTION Northern ARC Capital Limited v. Feed Relying on Chloro Chemicals, the Madras Back Infra Private Limited, High Court held despite the guarantee Arb.O.P.(Comm. Div) No.129 of 2021, agreement not containing an arbitration February 2, 2022. clause considering the composite nature This issue is being reconsidered in an SLP of the agreements and the inter-connected before the Supreme Court. nature of liabilities the dispute can be referred to arbitration and the guarantor be a party to it.
Limitation period for Section 11 application
JUDGEMENT AND CITATION PROPOSITION / DESCRIPTION C. Budhraja v. Chairman, Orissa Limitation period for making a claim arising out Mining Corporation Ltd, (2008) 2 SCC a contract cannot be confused with the period of 444, January 18, 2008 limitation for filing a petition under Section 8(2) seeking appointment of an arbitrator. Leaf Biotech v. Municipal The period of limitation for an application under Corporation Nashik, 2010 (6) Mh LJ Section 11 would be governed by Article 137 of 316, September 16, 2010 the Limitation Act, 1963.
Geo Miller & Co. Pvt. Ltd. v. Sections 43(1) & (3) of the Act are in pari materia with Chairman, Rajasthan Vidyut Sections 37(1) & (4) of the Arbitration Act, 1940. The Utpadan Nigam Ltd. AIR 2019 limitation period for reference of a dispute to SC 4244 arbitration is three years from the date on which the cause of action or the claim which is sought to be arbitrated first arises, by virtue of Article 137 of the Schedule to the Limitation Act, 1963.
JUDGEMENT AND CITATION PROPOSITION / DESCRIPTION Bharat Sanchar Nigam Ltd & The period of filing an application under Section 11 Anr v. M/S Nortel Networks would be governed by Article 137 of the Limitation Act, India Pvt Ltd, Civil Appeal No. 1963. In this context, it held: The period of limitation 843-844 OF 2021, March 10, will begin to run from the date when there is failure to 2021 appoint the arbitrator . It also held that Court under Section 11, where the claims are ex facie time barred, and it is manifest that there is no subsisting dispute, the Court may refuse to make the reference
No Power to modify the award under Section 34
SCOPE OF POWER OF THE COURTS TO MODIFY AN ARBITRAL AWARD UNDER SECTION 34 There are conflicting judgments of co-equal benches of the Hon ble Supreme Court. JUDGMENT IN FAVOUR OF MODIFICATION OF AN ARBITRAL AWARD JUDGMENT AGAINST MODIFICATION OF AN ARBITRAL AWARD In Daelim Industrial Company Ltd., 2007 (3) ARBLR 378 (SC), the Court did not disapprove the modification of an Award made by the District Court and High Court. Further, Supreme Court also modified the Award based on its finding Numaligarh Refinery Ltd. v. In McDermott International v. Burn Standard Co. Ltd, (2006) 11 SCC 181, the Court held that the courts merely have a supervisory role under Section 34 and cannot correct errors made by the arbitrator. The Court therefore conclude that under Section 34 of the Act, it can merely quash the arbitral award, leaving it to the parties to initiate a fresh arbitral proceeding. the Hon ble
HIGH COURT JUDGMENTS IN FAVOUR OF THE POWER TO MODIFY AN ARBITRAL AWARD JUDGMENT NAME FINDING OF THE COURT In both cases, the Court found that if there is a patent error in the contractual interpretation, and there is no requirement of further fact finding, then the court can modify the award u/s 34 Axios Navigation Co. Ltd. v. Indian Oil Corporation Limited, 2012 (2) Bom CR 271 Raviuday Construction Co. v. Bhaktiyog Co- operative Housing Society, 2015 SCC Online Bom 3455 Union of India v. Jeevat Construction, 2009 SCC Online Bom 1872 Poysha Oxygen Pvt Ltd. v. Ashwini Suri & Ors, (2009) 3 Arb LR 533 Vivek Jain v. Union of India, 2008 Supp (2) Arb LR 548 Union of India v. Arctic India, 2007 (4) ARBLR 534 (BOM) Union of India v. Modern Laminators Ltd., 2008 SCC Online Del 956 In these cases, the Courts concluded that where the fact finding made by the arbitrator was curable by taking note of the admitted facts or by taking judicial notice of obvious or required facts, then the Court has the power to modify an arbitral award under Section 34 of the Act.
JUDGMENT NAME FINDING OF THE COURT Merely because the word "modify" or "vary" is not indicated in Section 34 of the Act, it will not take away the jurisdiction of the Court exercising under jurisdiction Section 34 of the Act to interfere with the award passed by an arbitrator partially. If such a power is not vested with the Court, it will only lead to multiplicity of proceedings, which is not intended by the legislature while framing Section 34 of the Act. A reasonable interpretation to Section 34 would only lead to an irresistible conclusion that the Court can modify or vary the award of the arbitrator if it is contrary to the material evidence adduced by the parties. Even otherwise, as contemplated under Section 34 (2) (v) (b) (ii) of the Act, when the award passed by the Arbitrator is in conflict with the public policy in our Country, reversal or modification of such award passed by the arbitrator is well within the provisions contained under Section 34 of the Act itself. ISG Novasoft Technologies Limited and Ors. Vs. Gayatri Balasamy and Ors., MANU/TN/4703/2019 (2 judge bench)
JUDGMENT NAME FINDING OF THE COURT The finding of the Court in regards to the power of modification of an arbitral award under Section 34 of the Act is reproduced hereinbelow: Sterlite Technologies Limited and Ors v. Bharat Sanchar O.P.Nos.200 of 2011 and 774 of 2012 Nigam Limited, 41. A conspectus of the Judgments prior to the amending Act 3 of 2016 would indicate that Courts can modify the Award, however, to a very limited extent relating to interest, reduction of damages granted etc, without moving out of the confines of Section 34. With the dicta laid in the recent Judgment in Ssangyong Engineering Vs. National Highways Authority [2019 (8) SCALE 41], where the Hon'ble Supreme Court has held that Under no circumstance can any Court interfere with an arbitral award on the ground that Justice has not been done in the opinion of the Court the power to modify becomes negligible. In fact, in the facts of this case, the court concluded that it did not have the power to modify the arbitral award.
JUDGEMENT AND CITATION PROPOSITION / DESCRIPTION National Highway The Supreme Court conclusively held that the scope under section Authority of India v. 34 does not extend to modifying an award. It held: if one were to M.Hakeem, SLP include the power to modify an award in Section 34, one would be (CIVIL) NO.13020 OF crossing the Lakshman Rekha and doing what, according to the 2020, July 20, 2021. justice of a case, ought to be done . In overruling ISG Novasoft, it held that powers under Section 34 of the Act and Article 142 of the Constitution cannot be conflated. In this regard, it held: the power used was the power to do complete justice between the parties, which is a power relatable to the Constitution vested only in the Supreme Court of India as a final court of last resort under Article 142 of the Constitution of India
