The Supreme Court examines if courts can modify arbitral awards under Sections 34 and 37 of the Arbitration Act, 1996. Key questions include defining "modification" and permissible parameters. The Act, based on UNCITRAL Model Law, governs arbitration and conciliation, but lacks explicit modification powers, sparking debates on judicial intervention and legislative intent.
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Supreme Court to examine the Arbitration Act 1996.
Supreme Court’s five-judge Constitution Bench to determine whether courts can modify arbitral awards under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996.
The bench emphasized two key questions:
(1) defining "modification" of an arbitral award, and
(2) determining permissible parameters if partial modification is allowed without altering the award’s core.
The Act provides a comprehensive system for resolving disputes outside of traditional courts through arbitration and conciliation mechanisms; it is largely based on the UNCITRAL Model Law on International Commercial Arbitration adopted in 1985 and amended in 2006.
Main features:
A dispute can be referred to arbitration only if there is a valid arbitration agreement between the parties, which can be included as a clause within a contract or a separate agreement.
Parties can mutually agree on the appointment of an arbitrator, or if not, the court can appoint one.
The arbitral tribunal is responsible for conducting the proceedings, hearing evidence, and delivering a final binding award.
The Act explicitly covers international commercial arbitration, where at least one party is from a foreign country.
The Act also provides for conciliation proceedings, where a neutral third party assists the parties in reaching a mutually agreeable settlement.
The Solicitor General argued that the 1996 Act deliberately omitted modification powers, drawing from the UNCITRAL Model Law (1985), which only permits courts to "set aside" awards (Article 34). India adopted this framework directly in Section 34, limiting judicial intervention to setting aside awards, not modifying them .
Most UN member states adopted the Model Law without modification powers, while countries allowing modification (e.g., Singapore) created separate domestic laws .
Section 34(4) allows courts to "remit" an award to the arbitral tribunal for reconsideration (e.g., to fix errors), but this does not equate to modification. Remission reopens the award for tribunal review, whereas modification would involve courts directly altering the award—a power not granted under the Act .
The Solicitor General said that modification powers into Section 34 would require amending the law, which falls outside the judiciary’s role. He mentioned the Vishaka verdict (sexual harassment guidelines) as an exception where the Court acted due to legislative void, unlike here, where the Act explicitly defines judicial powers .
Advocates argued that the power to "partially set aside" an award under Section 34 inherently includes modification. He claimed that severing a flawed part of an award (doctrine of severability) effectively alters the award, thus constituting modification.
They argued that Section 34 was inserted to align with the UNCITRAL Model Law, mainly targeting international arbitration, not domestic cases. They mentioned that India failed to adapt the Model Law for domestic use, leaving courts without modification powers .
They proposed adding words like "and to the extent" or "wholly or partially" to Section 34(2A) to make it workable, arguing the Court has previously amended provisions in eight judgments for clarity.
The bench stressed the need to define "modification" and distinguish it from setting aside or remission. The Chief Justice noted that the term "partially set aside" remains undefined in the Act.
The Court requested references from foreign jurisdictions (e.g., UK, Singapore) that clarify modification parameters, as global standards vary (e.g., Singapore allows modification in domestic arbitration but not international cases).
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