The Lawboratory

Appellate Courts cannot alter Arbitrator’s award under Section 34: Supreme Court

Supreme Court

On 20th July 2021, the Supreme Court’s division bench comprising of Justices R.F. Nariman and B.R. Gavai observed in the case titled “Project Director, National Highways vs. M. Hakeem”, that the Court cannot alter an arbitrator’s award under Section 34 of the Arbitration and Conciliation Act, 1996.

The bench expressed that while interpreting a legal provision, the Judge doing so must put himself in the place of Parliament and then question whether the Parliament envisioned this outcome or not. Further, with respect to this provision, Parliament has clearly envisioned that no power of alteration of an Arbitrator’s award exists u/s 34 of the Act. Furthermore, the bench noted that the power to alter an award under Section 34 would be crossing the “Lakshman Rekha” i.e., a rule which should not be broken.

Moreover, the Apex Court stated that the judicial trend seems to favor an elucidation, that would read into Section 34 as an authority to alter, revision or vary the award would be ignoring the preceding law confined in the 1940 Act and also to disregard the fact that the Arbitration and Conciliation Act,1996 was passed based on the UNCITRAL Model Law on International Commercial Arbitration, 1985.

The Court remarked that Section 34 is an appellate provision and the grounds for setting aside an arbitrator’s award are very limited. Moreover, Section 16 of the Arbitration Act,1940 empowers the Courts to alter or correct an award under the circumstances stipulated in Section 15. The bench observed that through various judgments it has been elucidated that Section 34 does not confer any authority over the Court to modify the award.

The Supreme Court was hearing an appeal filed by NHAI against the judgment of Madras High Court’s Division Bench. The main issue before the High Court in the impugned judgment was whether the power of the Court to set aside an arbitrator’s award under Section 34 of the Arbitration Act includes the power to modify the award as well. The High Court observed that arbitral awards made under Section 34 of the Arbitration Act must be read to authorize alteration of an arbitral award made under the National Highways Act,1956 in order to improve compensation awarded by an Arbitrator.

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