Courts Have Limited Powers to Modify Arbitral Awards: Supreme Court

Key Judgment: Gayatri Balasamy v. ISG Novasoft Technologies Ltd.

1. The Supreme Court clarified that courts can modify arbitral awards under limited and specific circumstances.
2. This power arises under Section 34 or 37 of the Arbitration and Conciliation Act, 1996.

When Can Courts Modify Arbitral Awards?

1. Severability of Award: Courts may modify the award if the invalid portion can be separated from the valid one without affecting the whole.
2. Legal Doctrine Invoked: The court cited "omne majus continet in se minus" – the principle that the greater power to set aside an award includes the lesser power to modify it in part.
3. Clerical or Typographical Corrections: Errors involving computation, clerical mistakes, or typos may be corrected.
4. Interest-Related Modifications: Post-award interest may be altered in certain conditions to align with justice.
5. Article 142 of the Constitution: The court may use its powers under Article 142 to do complete justice, but only when consistent with the spirit of the 1996 Act.

Arbitration in India

1. Definition: Arbitration is part of Alternative Dispute Resolution (ADR) mechanisms, where disputes are resolved outside courts through a mutually agreed private adjudication process.
2. Other ADR Modes: Includes conciliation and mediation alongside arbitration.
3. Why It Matters: Arbitration is considered less adversarial, faster, and more flexible than traditional litigation.
4. Legal Basis: Governed by the Arbitration and Conciliation Act, 1996, based on the UNCITRAL Model Law (1985).

Key Legal Provisions in the 1996 Act

1. Section 34(1): Allows recourse to a court only for setting aside an arbitral award, not for modifying it entirely.
2. Section 37: Specifies appealable orders including those related to interim measures and setting aside awards.

Positive Aspects of the Judgment

1. Equity Through Article 142: Enables courts to ensure fairness in commercial disputes without compromising legal principles.
2. Avoids Re-Arbitration: Saves time and cost by modifying only the problematic portion, rather than starting arbitration afresh.

Concerns and Challenges

1. Risk to India’s Arbitration Hub Aspirations: Expanded judicial powers may prompt businesses to prefer international arbitration venues, undermining India’s intent to become a global arbitration centre.

No Distinction in Law: The 1996 Act does not differentiate between domestic and international arbitration, raising concerns for global investors

 

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