In 4:1 ruling, SC says courts have ‘limited power’ to modify arbitral awards

The CJI reading out the conclusions said, “this limited power may be exercised” when the award is severable by separating the invalid portion from the valid portion of the award, to correct any clerical, computational or typographical errors which appear erroneous on the face of the record, to modify post-award interest in some circumstances. The SC may also modify awards by exercising powers under Article 142 of the Constitution, the ruling said, adding, it “must be exercised with great care and caution and within the limits of Constitutional power”.

Section 34 of the Act deals with application for setting aside an arbitral award while Section 37 deals with the circumstances in which an appeal would lie against the order in an arbitral dispute.

Justice Viswanathan held that “courts exercising powers under Section 34 and the courts hearing appeals therefrom under Section 37 have no power to modify an award”.

Justice Viswanathan further said that “power to modify is not a lesser power than the power to set aside as the two operate in separate spheres. The inherent power under Section 151 CPC cannot be used to modify awards, as it is against the express provision of Section 34. Similarly, there is no scope to invoke the doctrine of implied powers to imply the power to modify the award. Article 142 of the Constitution cannot be exercised to modify an award, as it is well settled that Article 142 cannot be used to go by the substantive statutory provisions”.

The five judges were answering a reference made by a three-judge bench in February 2024 on the question whether courts can modify arbitral awards.