Apex Court refrains from modifying arbitral award u/s 34 of Arbitration & Conciliation Act

Read judgment: Project Director, NHAI v. M Hakeem

Pankaj Bajpai

New Delhi, July 21, 2021: The Supreme Court has ruled that courts cannot modify an award passed under section 34 of the Arbitration and Conciliation Act, 1996, which deals with application for setting aside an arbitral award. 

A Division Bench of Justice Rohinton Fali Nariman and Justice BR Gavai disposed of a large number of appeals filed under section 37 (appealable orders) of the said Act, laying down as a matter of law that at least in so far as arbitral awards made under the National Highways Act, 1956, Section 34 of the Arbitration Act must be so read as to permit modification of an arbitral award made under NHA so as to enhance compensation awarded by an Arbitrator.

The Supreme Court dismissed the appeals by the Centre since it was brought to light that an arbitral award is given by a government servant appointed by the Central Government. 

The Top Court said that to state that the judicial trend appears to favour an interpretation that would read into Section 34 a power to modify, revise or vary the award “would be to ignore the previous law contained in the 1940 Act; as also to ignore the fact that the 1996 Act was enacted based on the UNCITRAL Model Law on International Commercial Arbitration, 1985”.

Highlighting that the Parliament very clearly intended that no power of modification of an award exists in Section 34 of the Arbitration Act, 1996, the Supreme Court reiterated that it is only for Parliament to amend the aforesaid provision. 

Solicitor General Tushar Mehta, appearing for the National Highways Authority of India (NHAI), contended that the scope of enquiry u/s 34 of the Arbitration and Conciliation Act, 1996 was extremely limited in nature. He argued that the court cannot conduct an adjudicatory exercise to arrive at a different conclusion due to the very nature of the remedy of Section 34 itself. 

The Solicitor General further submitted that Section 34 leaves no room for doubt that there is no power vested by the statute to the supervisory court to alter, vary, interfere or entertain any kind of challenge against an award passed by an arbitrator in accordance with the 1996 Act. 

The Apex Court, however, dismissed the appeals by NHAI observing that the constitutional validity of the National Highways (Amendment) Act, 1997 has not been challenged.