New Delhi, Feb 19 (PTI) The Supreme Court on Wednesday reserved its judgement on the question whether courts could modify arbitral awards under the 1996 law on arbitration and conciliation.
A five-judge Constitution bench comprising Chief Justice Sanjiv Khanna and Justices B R Gavai, Sanjay Kumar, K V Viswanathan and Augustine George Masih heard the submissions in the case, outcome of which could impact domestic and international arbitral awards.
The top court commenced the final hearing on February 13 after the issue was referred to it by a three-judge bench on January 23.
Solicitor general Tushar Mehta aside from senior advocates Arvind Datar, Darius Khambata, Shekhar Napahade, Ritin Rai, Saurabh Kirpal and Gourab Banerji argued in the case.
Lawyers led by Datar argued that the courts, which were empowered under Section 34 of the Arbitration and Conciliation Act, 1996 to set aside the arbitral awards on certain grounds, could also modify it as their powers included the smaller discretion.
Another set of lawyers argued that the term "modify" which was not there in the statute couldn't be read into it to assume the non-existent powers.
Senior advocate Saurabh Kirpal, assisted by law firm M/s Karanjawala & Co., argued against the powers of modification.
He referred to the submission that words like "powers of modification" could be added in the law and secondly, the power of modification could be read into “the power of setting aside an award” of courts.
“The clear words of the statute clearly provide that there is no power to modify. It is not the case that without the powers of modification, the statute is unworkable. The Act has been workable and has worked itself for the last 30 years,” argued Kirpal.
It was well settled that courts do not add words to the statute unless the law is completely “untenable”, he added.
He said the court was not sitting in a “legislative capacity”.
The solicitor general said the 1996 law was a “comprehensive and tailored" code dealing with every eventuality arising out of the arbitration proceedings and “reading something into it for finding a solution to the problem” should not be done.
The law officer said not providing the power to modify the arbitral awards was a “conscious legislative choice”.
Mehta said, “The Act is a complete code. The omission of modification powers in the 1996 Act was a conscious departure, intended to streamline judicial intervention within a limited supervisory paradigm."
Datar, on February 18, argued that the courts empowered to set aside arbitral awards could have the power to modify these decisions.
"Section 34 refers to powers to set aside the award. It is a basic principle that a larger power includes a lesser power. This is based on the maxim…which means the greater contains the lesser,” he said.
The present legal provision created more problems than solving it, added Datar.
The Centre previously said the issue of power to modify arbitral awards should be left to the legislature keeping in mind the evolving arbitration requirements of the nation.
Arbitration is an alternate mode of dispute resolution under the Arbitration and Conciliation Act, 1996 and it minimises the role of courts to interfere with the awards by the tribunals.
While Section 34 of the Act provides for setting aside of an arbitral award on limited grounds such as procedural irregularities, violation of public policy, or lack of jurisdiction, Section 37 governs appeals against orders related to arbitration, including those refusing to set aside an award.
Like Section 34, it also aims to minimise judicial interference while addressing exceptional cases requiring oversight.
"While examining the aforesaid question, the court will also examine the contours and scope of the power of the court … and if the power of modification exists, to what extent the same can be exercised,” the bench had said earlier.
The matter arose from Gayatri Balasamy v. ISG Novasoft Technologies Ltd.
The courts have traditionally interpreted this section narrowly, avoiding a review of the merits of the award to uphold arbitration’s principles of finality and efficiency.
In February 2024, a three-judge bench comprising Justices Dipankar Datta, KV Viswanathan, and Sandeep Mehta framed a few questions and referred the case to the CJI for consideration.
