The Supreme Court has held that a court can modify arbitral awards in certain circumstances. However, an arbitral award is not intended to be the first step on a ladder of appeals through national courts. Finality and predictability are crucial to commerce and must be respected by the courts, writes Sumant Batra
What was the decision of the Supreme Court on arbitral awards?
In a 4:1 majority ruling, a five-judge Constitution bench led by Chief Justice of India Sanjiv Khanna, and including Justices BR Gavai, Sanjay Kumar, Augustine George Masih, and KV Viswanathan, on April 30, 2025, held that appellate courts have limited powers to modify arbitral awards while exercising jurisdiction under either Section 34 or Section 37 of the Arbitration and Conciliation Act, 1996.
The Supreme Court held that powers to modify arbitral awards can be exercised only under specific circumstances. These, the Court held, are: when the portion of the award found to be invalid can be separated from the valid part, invalidity can be addressed by modification; to correct apparent errors — clerical, computational, or typographical evident on the face of the record; and to modify post-award interest awarded by arbitral tribunal, where appropriate.
Besides, the Supreme Court may exercise its special powers under Article 142 of the Constitution to modify awards, but such powers must be used sparingly and with great caution, in accordance with constitutional limits, the Court held.
Justice KV Viswanathan delivered the dissenting opinion, disagreeing with the majority on certain aspects.
What was the dissenting opinion?
Justice Viswanathan held that the Supreme Court cannot invoke Article 142 of the Constitution to modify arbitral awards. In his opinion, courts have no authority to even modify post-award interest; such matters should at best be referred back to the arbitrator. Judicial interference with arbitral awards is impermissible, reinforcing the principle of minimal court intervention, he wrote in his dissenting judgement.
What led to this decision?
Over the years, different views were expressed in different judgments of the apex court on the question whether an award can be modified by courts. One set of judgments held that courts cannot modify arbitral awards under Sections 34 and 37. Leading in this line is the Project Director, NHAI v. M. Hakeem (2021) case where the apex court ruled that the courts only have the power to set aside an award, and not to modify it, as the limited nature of Section 34 only allows courts to set aside an award on specific grounds. In contrast, some judgements have allowed courts to modify arbitral awards when necessary to serve justice. Eventually, the matter was referred to a larger bench to settle the issue. The key issue before the Constitutional bench was whether Indian courts can read the power to modify awards into the Act or if such power is entirely excluded.
Arguments for and against
The champions of alternate dispute resolution argue that the overarching goal of the Act is to ensure that courts do not interfere unnecessarily in arbitral proceedings. The Indian arbitration law is designed to align with the United Nations Commission on International Trade Law’s (UNCITRAL) Model Law on International Commercial Arbitration, 1985, which aims to limit judicial interference in arbitration; it does not provide for modification of awards. An arbitral award is not intended to be the first step on a ladder of appeals through national courts. Every party dissatisfied with the award would approach the court on the claim of a curable defect. Those in favour argue that courts cannot be powerless in the wake of an invalidity. Remanding the matter back to the arbitrator to cure the defect will cause delay, and may lead to another round of litigation.
Impact on the Indian arbitration market
The month of April has been eventful for arbitration in India. Earlier this month, the Court of Appeal of the Singapore Supreme Court upheld the setting aside of an arbitral award passed by a tribunal led by a former Chief Justice of India after discovering that 47% of its contents — 212 out of 451 paragraphs — were copied verbatim from two prior awards involving the same presiding arbitrator. This turned the spotlight on Indian arbitrators.
A few days back, the Delhi government’s public works department decided to exclude the arbitration clause from its contracts, thus opting for court-based resolution. These have sent mixed signals to the market at a time when the Indian government is determined to promote mediation and arbitration, and wants the GIFT City in Gujarat to become an arbitration hub.
As for the Supreme Court decision, by opting for arbitration, the parties choose, in principle, finality. Finality and predictability are crucial to commerce and must be respected by the courts.
The author is an insolvency lawyer, policy expert & Supreme Court advocate.
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