New Delhi, Feb 18 (PTI) The courts empowered to set aside arbitral awards under the 1996 law on arbitration and conciliation, could have the power to modify these decisions, a petitioner argued in the Supreme Court on Tuesday.
A five-judge Constitution bench comprising Chief Justice Sanjiv Khanna and Justices B R Gavai, Sanjay Kumar, K V Viswanathan and Augustine George Masih is hearing whether courts could modify arbitral awards under the provisions of a 1996 law.
Senior advocate Arvind Datar, appearing for one of the petitioners Gayatri Balasamy, referred to Section 34 of the Arbitration and Conciliation ACT and said if courts were having a larger power to set aside the arbitral awards then it was established in various judgements that the smaller authority, such as the power to modify the awards, was automatically there.
“Section 34 refers to powers to set aside the award. It is a basic principle that a larger power includes a lesser power. This is based on the maxim…which means the greater contains the lesser,” said Datar, who is assisted by law firm M/s Karanjawala & Co.
He referred to judgements and said, “A bench of nine-judges has also held that greater power contains lesser power.” Datar went on to argue, “It is not necessary to fully set aside the award. The court can either partially set aside the award or modify it. It is submitted that the modification can be to the extent to which the award is in conflict with public policy under Section 34(2)(b) or to the extent it is vitiated by patent illegality under Section 34 (2A).” He said the present legal provision created more problems than solving it.
“The rigidity has caused problems. Either the legislature or the judiciary’s fault…the power to set aside an award, includes power to partially set aside the award,” he added.
Aside from Datar, senior advocates including Darius Khambata, Shekhar Napahade and Ritin Rai argued in the day-long proceedings which would continue on February 19.
Napahade concurred with Datar and said courts should have the power to modify arbitral awards.
The bench commenced the hearing on February 13 with the arguments of solicitor general Tushar Mehta for the Centre.
The Centre said the issue of power to modify arbitral awards should be left to the legislature keeping in mind the evolving arbitration requirements of the nation.
A three-judge bench headed by the CJI on January 23 referred the contentious issue to a larger bench.
Arbitration is an alternate mode of dispute resolution under the Arbitration and Conciliation Act, 1996 and it minimises the role of courts to interfere with the awards by the tribunals.
Section 34 of the Act provides for setting aside of an arbitral award on limited grounds such as procedural irregularities, violation of public policy, or lack of jurisdiction.
Section 37 governs appeals against orders related to arbitration, including those refusing to set aside an award.
Like Section 34, it also aims to minimise judicial interference while addressing exceptional cases requiring oversight.
“This court will first hear arguments of the counsel seeking reconsideration of the ratio expressed in the Project Director, NHAI v. M Hakeem, that is, the court has the power to modify an award under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996,” the top court said.
It said it would then hear the counsel who support the view that the court did not have the power to modify an award under Sections 34 and 37.
“While examining the aforesaid question, the court will also examine the contours and scope of the power of the court … and if the power of modification exists, to what extent the same can be exercised,” the bench ordered.
The bench stressed on the need for clarity on the issue.
The matter arose from Gayatri Balasamy v. ISG Novasoft Technologies Ltd.
The courts have traditionally interpreted this section narrowly, avoiding a review of the merits of the award to uphold arbitration’s principles of finality and efficiency.
In February 2024, a three-judge bench comprising Justices Dipankar Datta, KV Viswanathan, and Sandeep Mehta framed a few questions and referred the case to the CJI for consideration. PTI SJK AMK
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