Supreme Court’s Limited Powers on Arbitral Awards

May 1, 2025

In a landmark ruling, the Supreme Court of India clarified the extent of judicial powers regarding arbitral awards under the Arbitration and Conciliation Act, 1996. A Constitution Bench, led by Chief Justice Sanjiv Khanna, held that appellate courts possess limited authority to modify arbitral awards. This decision emerged from a reference made in February 2024 concerning the interpretation of Sections 34 and 37 of the Act.

Legal Framework

Section 34 of the Arbitration and Conciliation Act governs the setting aside of arbitral awards. It provides the grounds on which a court can annul an award. Section 37 outlines the appeals process related to orders in arbitral disputes. The court’s ruling clarified that these sections do not inherently grant modification powers.

Key Findings of the Ruling

The Supreme Court’s majority judgment outlined specific conditions under which modifications to arbitral awards can occur. The court affirmed that modifications are permissible if the award is severable. This means that invalid portions can be separated from valid sections. Additionally, clerical, computational, or typographical errors can be corrected. The court also stated that post-award interest might be modified under certain circumstances.

Dissenting Opinion

Justice K.V. Viswanathan dissented from the majority opinion. He argued that the powers under Section 34 do not extend to modifying awards. According to him, such modifications would undermine the essence of arbitration. He maintained that any modifications should be remitted back to the tribunal, as altering awards could create uncertainties, especially in the context of international arbitration.

Implications of the Ruling

The ruling has implications for arbitration in India. It establishes a clearer boundary for judicial intervention in arbitral awards. The limited power to modify awards aims to preserve the integrity of arbitration as a dispute resolution mechanism. However, the dissenting opinion raises concerns about potential inconsistencies in future cases and the enforceability of foreign awards.

Future Considerations

The Supreme Court’s decision invites further discussion on the need for legislative clarity regarding the powers of courts in relation to arbitral awards. The potential for modification of awards remains a contentious issue that may require legislative intervention to address the complexities involved.

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