To begin with the article, I want to first highlight that arbitration in India has grown manyfold due to legislative intent and much needed amendments coupled with various judicial pronouncements of the Supreme Court (SC) and High Courts (HC) for the betterment of making India an international hub for arbitration which gives confidence to the international business community to resolve the disputes via arbitration in India only with the exemplification of least judicial intervention in matters related to arbitration but the effort goes in vain when Karnataka High court upheld the judgment of the city civil court, Bangalore where the court permitted modification of an arbitral award under section 33 of the Arbitration & conciliation act, 1996 (Arbitration act) and surprisingly the Hon’ble Karnataka HC upheld the judgment when the matter reached the apex court with utter dissatisfaction the SC held that the modification of an arbitral award is not permitted under section 33 of the Arbitration Act and the arbitrator doesn’t have any power specifically related to this matter in Gyan Arya v. Titan industries Ltd. So I’ll mention the conundrum still prevalent among arbitrators and subordinate courts and how the supreme court of India ironed out this conundrum and cleared the mist concerning correction and modification of an arbitral award under sections 33 & 34 of the Arbitration act of 1996 on different occasions to avoid conflicting rulings and bring forth the clarified position for a win-win situation in Indian arbitration jurisprudence so far regarding this.
According to section 33 of the arbitration act, a party with notice to other parties to a dispute may request arbitral tribunal for any clerical and an arithmetical error within 30 days after receipt of the award, and also if mutually agreed they may seek an interpretation on a specific point of an award like I said about the procedural aspect about correction, modification, and interpretation about arbitral award it begins after the tribunal passed the award within 30 days or pre-decided by the respective parties on several days also the party, with notice to the other party, may request the arbitral tribunal to correct any additional errors, any ecclesiastical or typographical errors or any other errors of a similar nature occurring in the award as there are certain limitations regarding the interplay of modification and a corrected added award as section 34 appeal provisions also emanates into the show with the application of section 33 and clarification of SC in this regard recently.
Modification of an Arbitral Award
So modification of an Arbitration award sounds very similar to the correction, interpretation of an arbitral award but the reality is the legislative and legal means are way different in terms of implications as well as implementation especially when subjected to judicial scrutiny as the technicalities such as claim volume change or adding up of an additional claim or removing or similar changes of same nature and there is a Lakshman Rekha for arbitrators conduct between section 33 & 34 and time after again judicial pronouncements cleared the fog around this like just a couple of days ago the apex court reiterated that modification of arbitral award permitted only up to mathematical and calculations errors or mistakes of similar nature not beyond that if subjected to section 33 in an appeal came from Karnataka high court related to gold quantity.
Pertinent to mention the power of the court is in real dilemma dealing with an application to set aside the arbitral award under section 34 of the arbitration act of 1996 especially when it got mixed with modification of awards from district courts particularly in claimed quantity, volume, and other important stuff which are not supposed to be modified either under section 34 or section 33 of the arbitration act i.e., Correction & modification, so on similar footing we can expect section 33 must have absolute restrictions attached to the same.
The plain reading of Section 34 of the Act (“Section 34”) stipulates that the power of the Courts is limited to setting aside the arbitral awards, strictly in terms of the specific grounds enshrined therein. However, there are several judgments wherein the Courts have not only set aside but also modified arbitral awards while dealing with petitions filed under Section 34 which makes it understandable that section 33 corrections are different than modification, noticeable modification of an arbitral award vest with judiciary under certain circumstances after passing of the award the power of modification and adding up will shrink to a greater extent so whether Courts can modify arbitral awards while dealing with petitions under Section 34 and highlights certain relevant judgments given by various Courts regarding this issue for better understanding of modification of an arbitral award under sec 34 & interplay with sec 33, consequently, a dilemma occurs because of these windy clouds on concerning issues related to Indian arbitration jurisprudence although apex court regularly ironing out such conundrums to make our country an arbitration-friendly jurisdiction globally also satisfying the legislative intent of the legislation.
Crossing the Lakshman Rekha of Modification in Garb of Correction of an Arbitral Award
Due to the lack of a settled position of law and jurisprudence in this regard quite often inconsistent variations occur among different fora’s and court of law between correction under section 33 of the act which shall be used only for arithmetical and clerical errors in the award with notice to other party and section 34 which deals with appeal provisions to set aside arbitral award undergrounds enumerated in this section especially public policy like in garb of correction of a clerical error in an award the arbitrator went on to change claimed quantity & assets under section 33 of the act and similarly under section 34 of the act courts decides the merit of the award then made few modifications under 34 which itself is not permissible and finally the supreme court of India in 2021 pronounced two path-breaking judgments NHAI V. M.HAKEEM and GYAN ARYA V. TITAN INDUSTRIES LTD. related to ironing out the conundrum of correction and modification of award which surely clear some mist onwards on the concerned issue and do justice to the legislative intent of the act for least judicial intervention.
Tracing some background history in this regard the arbitration act of 1940 under section 15 & 16 provided powers for modification of award despite setting aside to Indian courts later got amended as this was against the basic spirit of arbitration and least judicial intervention and this amendment based on UNCITRAL model law for International Commercial Arbitration isolates the judicial appellate process from the practice of arbitration and neither does empower courts to modify award unless the law of land provided for the same, setting aside an award under section 34 of the act is restricted with few specific conditions as per the needs of international commercial disputes resolution scenario but modification part left undealt under this head, therefore it shows that parliament doesn’t want to provide any modification power of an arbitral award to safeguard autonomy and precious time of courts in a burdened judicial system but time and again the judicial precedents exhibited conflicting and non-uniform views which led to the crossing of correction and modification Lakshman Rekha in the Indian landscape.
Conflicting Judicial Precedents
In the past different courts endorsed inconsistent and differing approaches to modify and correction of awards to a greater extent until the NHAI v. M. HAKEEM judgment came on July 20, 2021, where SC held that the court cannot modify an award under section 34 as there are limited grounds to set aside an award and an doesn’t act as an appellate method also SC declined to modify the payment of compensation awarded under NHAI act despite it is extremely low for the land acquisition this provides much-needed clarity on this aspect before this the precedents created an unwanted conundrum in this regard.
In McDermott International v. Burn Standard Co. Ltd. Hon’ble SC held that courts cannot modify an arbitral award as it only has supervisory power to ensure fairness in arbitration, jurisdiction issue must be raised before the arbitral tribunal rather than the court so the court said we cannot modify the award we can only set aside it under section 34 although SC put up an interesting perspective to re arbitrate if the parties wanted so to cater the mistakes did by parties and tribunal in the past, slightly thinking it opened up a small room for a possible dilemma regarding modification issue as lastly, Apex court went on to modify the award under Article 142 in the garb of doing complete justice also it is better not to forget it cleared the mist to some extent in 2006.
In another landmark judgment Hindustan Zinc Ltd. V. Friends Coal Carbonisation delivered by the supreme court of India in 2006 after reiterating its stance in McDermott they unexpectedly upheld the modification of an award in a plea of section 34 to set aside the award by the trial court which is a dent in itself to the principle of least judicial intervention and an add on to the non-uniform position in this regard.
In a regressive step for the Indian arbitration landscape and a dent to bit improved image of the judiciary after they delivered a few pro arbitrations centric judgments during that period, it was a step back as in ONGC Ltd. V. Western Geco International Ltd. Court proceeded with modification of subject matter of an arbitral award under section 34 they had the option to set aside the award but to baffle public policy doctrine they modified the subject matter of award which violated section 5 arbitration act, 1996 doctrine of least judicial intervention in arbitration space, Hon’ble SC mentioned that if the tribunal inferred “wrong facts during proceedings then the award can be modified or cast away” which was fair to a certain extent but modification is certainly not the best choice regarding this.
In Vedanta Ltd. v. Shenzhen Shandong nuclear power construction Co. Ltd. supreme court of India in 2018 enumerated the parameters to award interest in international commercial arbitrations due to lack of consensus in awarding interest as well as the inconsistent approach of tribunals in doing so consequently the court made few modifications on account of interest part in the concerned international commercial arbitration respecting parameters and guidelines provided by Justice Indu Malhotra back then but modification and correction stigma continued which must not be the ideal practice, to be honest.
In Kinnari Mullick v. Ghanshyam Das Damani supreme court pronounced a very important judgment which said that after setting aside an arbitration award under section 34(4) courts are not empowered to transfer the parties before the arbitration tribunal especially Suo moto also added that restricted discretion is vested with courts if only written application made for the same by the parties, majorly it denied the power of modifications exercised by courts in various instances.
Similarly, in Radha Chemicals v. Union of India 2018, Hon’ble SC reiterated the same instance as mentioned in kinnari Mullick by the hon’ble court held that courts are not vested with the power to remand back the matter to the arbitration tribunal once the award is dispatched by the tribunal on the face of a petition under section 34 of the arbitration act such judgments cleared the instance of least judicial intervention and helped towards ironing out the conundrum in a limited manner.
In Gayatri Balaswamy v. ISG Nova soft technologies Ltd., Madras HC again took an ambiguous non-linear position when it comes to modification of award, the court said that under section 34 of the arbitration act modification power is inherent when the concerned matter reached SC, it found the observation of madras HC flawed and mistaken still in the garb of heaviest sword article 142 court allowed the modification to a greater extent.
Supreme Court of India Ironed Out the Conundrum
So, as I mentioned the dilemma and inconsistent approach of high courts and the supreme court on different occasions related to this conundrum of modification, correction, and the intricacies involved in section 34 of the act, to settle the dust and mist around the issue in 2021 SC pronounced 2 important judgments which according to me will iron out these confusing stances and shall provide a constant and uniform approach in India to make India an arbitration-friendly jurisdiction in a real sense although the courts can modify the award under article 142 of Indian constitution in the garb of doing complete jurisdiction these two precedents will benefit the arbitration jurisprudence of India.
1st is Project director, NHAI v. M. Hakeem where the supreme court held that courts do not have any power to modify the arbitral award under section 34 of the Arbitration act, 19996 and as section 34 of the act is based on UNCITRAL model law on international commercial arbitration, 1985 under which no modification power was provided under section 34 courts can set aside the award completely or in part but modification is not the ideal way to proceed , court also discussed power to adjourn the proceedings under section 34(4) so the arbitration tribunal can treat the defects in a fair and just manner as tribunal can eliminate grounds for setting aside the award this judgment welcomed largely by the practitioners of arbitrations and the commentators in the same subject or practice area as this cleared the space which was earlier complicated by different high courts hopefully the relevant course, judicial orders, and relevant amendments to the post-award mechanism become more synthesized and effective onwards.
2nd one is in Gyan Prakash Arya V. titan industries Ltd. This is one of the most important and recent cases decided on the issue of the conundrum of modifications and corrections under section 33 of the act as the learned arbitrator modified the award in name of correction and interpretation under section 33 so the aggrieved appellant after facing a setback under section 34 for setting aside this award on account of modification which is not permitted under section 33 consequently, went to the Karnataka high court against this under section 37 of the act but surprisingly the high court upheld the judgment of Bangalore city civil court rendering the modification of award under section 33 as Valid and sustaining with no option left the appellant knocked on the door of the apex court where the bench decided with utter dissatisfaction from both subordinate courts that no modification of an award is permitted under section 33 of the act until and unless there is an arithmetical or clerical error in the award and constitutional courts shouldn’t interfere with the basic spirit of arbitration legislation of least judicial intervention and to contribute for improving India’s image as a preferred seat for International Arbitration around the world and eradicating such sorry affairs of the state in Indian Arbitration Landscape.