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by Admin
14 December 2025 5:24 PM
“The Power to Modify and Power to Set Aside Are Not of the Same Genus”— a five-judge Constitution Bench of the Supreme Court of India delivered a significant and authoritative ruling in the case titled In Re: Interplay Between Section 34 and Power of Modification of Arbitral Awards. This landmark judgment settles the long-standing question of whether courts can modify arbitral awards under Section 34 of the Arbitration and Conciliation Act, 1996 ("A&C Act").
The Supreme Court categorically held that courts exercising jurisdiction under Section 34 or even in appellate forums do not possess the power to "modify" an arbitral award, thereby reiterating the central tenet of minimal court interference in the arbitral process. The Court further clarified that “modification” and “severance” are conceptually and legally distinct. While courts can “sever” parts of an award falling foul of the law, they cannot enter into the merits of the dispute to change the award itself.
Conflicting Precedents Prompt Constitutional Clarification
The reference to the Constitution Bench arose from inconsistencies in judicial decisions over whether a Section 34 Court could partially modify or correct an arbitral award, especially in matters involving interest or excessive damages. While the Supreme Court’s decision in Project Director, NHAI v. M. Hakeem, (2021) 9 SCC 1, had previously ruled that courts lack such power, some earlier judgments, and various High Courts had exercised or endorsed a form of modification.
The Constitution Bench was called upon to resolve this doctrinal conflict and lay down the correct interpretation of the statutory framework governing arbitral award review under Indian law.
At the heart of the dispute was whether the power to "set aside" an award under Section 34 also includes the lesser power to "modify" it, and if not, whether such power can be read into the statute by implication, inherent jurisdiction, or constitutional authority under Article 142.
Justice K.V. Viswanathan, delivering a separate but concurring opinion, framed the central concern:
“The power to modify is not a lesser power to that of the power to set aside, as the two operate in separate spheres and are not of the same genus.”
The Court delved into the textual, contextual, and historical reading of Section 34, and emphasized that the Arbitration and Conciliation Act, 1996, modeled on the UNCITRAL Model Law, was deliberately designed to provide limited recourse against arbitral awards, with no appellate review on merits.
Details of the Judgment: Legislative Intent and Limits of Judicial Review
Plain Meaning Rule and Absence of Legislative Mandate
The Court highlighted the plain meaning of Section 34, which allows a court to “set aside” an award “only if” specific statutory grounds are met. It was stressed:
“It is a strong thing to read into an Act of Parliament words which are not there, and in the absence of clear necessity it is a wrong thing to do.”
Rejecting calls to "iron out the creases" in the legislation, the Court said that modifying an award amounts to rewriting it, not interpreting it:
“What is sought to be done is virtual mutilation of the fabric and not just the ironing out of the creases.”
Section 34 Court Cannot Act as an Appellate Court
The judgment made it emphatically clear that a Section 34 Court does not act as an appellate forum, and cannot reassess facts or substitute its own views for that of the arbitrator. The Bench cited Dyna Technologies Pvt. Ltd. v. Crompton Greaves Ltd. (2019) 20 SCC 1:
“Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction… If the courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated.”
Rejection of Inherent Powers and Doctrine of Implied Powers
Arguments that courts can exercise inherent powers under Section 151 of the Civil Procedure Code (CPC) or apply the doctrine of implied powers were flatly rejected. The Court reasoned:
“Inherent powers are not to be exercised when their exercise may be in conflict with what has been expressly provided… such a course would amount to rewriting the statute.”
Citing Manohar Lal Chopra v. Rai Bahadur Hiralal, (1961) SCC OnLine SC 17, the Court reiterated that where the statute prescribes a specific remedy and procedure, inherent powers cannot override it.
Article 142 of the Constitution Cannot Be Used to Modify Arbitral Awards
The Constitution Bench further held that even the Supreme Court, when hearing appeals under Section 34, cannot invoke Article 142 to modify awards.
Quoting the seminal judgment in Supreme Court Bar Association v. Union of India, (1998) 4 SCC 409, it was held:
“Article 142, even with the width of its amplitude, cannot be used to build a new edifice where none existed earlier, by ignoring express statutory provisions.”
Section 34(4) as a ‘Safety Valve’: Remittal, Not Modification
The Court clarified that Section 34(4) of the A&C Act acts as a “safety valve” allowing courts to remit the award back to the arbitrator for limited correction—such as inadequate reasoning or incorrect computation—but not for modifying the substance of the award.
“Section 34(4) provides an opportunity to adopt course correction… If the Court deems it appropriate, it may even suo motu invoke this provision after recording its reasons.”
Furthermore, the Court held that even an oral request under Section 34(4) suffices and overruled the contrary view taken in Kinnari Mullick v. Ghanshyam Das Damani, (2018) 11 SCC 328.
Limited Exception: Minor Corrections Permissible Based on Actus Curiae Neminem Gravabit
While firmly barring modification, the Court carved out one limited exception:
“Clerical, computational or typographical errors—errors of a similar nature—may be corrected by the court in order to prevent an act of the court from prejudicing a party.”
This principle is derived from the legal maxim actus curiae neminem gravabit, and such correction, the Court emphasized, does not amount to modification.
Severability of Arbitral Awards Permissible
The judgment affirmed that while modification is impermissible, severance of invalid portions of an award is allowed, provided the parts are distinct, standalone, and not interdependent.
Quoting from J.G. Engineers Pvt. Ltd. v. Union of India, (2011) 5 SCC 758:
“If an award deals with several claims separately and distinctly… the court will segregate the award on items which did not suffer from any infirmity.”
However, the Court cautioned that if the impugned part of the award is intertwined with other components, severability cannot be applied.
Hakeem (2021) Not Per Incuriam
The Court definitively ruled that the 2021 decision in Project Director, NHAI v. Hakeem is not per incuriam, and in fact, lays down the correct law.
“Hakeem (supra) will now be read in accordance with the ratio laid down in the present judgment.”
Attempts to challenge Hakeem by citing Western Geco International Ltd. (2014) were rejected as Western Geco was based on severability, not modification.
Conclusion: Legislative Amendment, Not Judicial Activism, Is the Way Forward
The Court took note of the T.K. Viswanathan Committee which had recommended legislative incorporation of modification powers in rare cases. But the Court observed that Parliament has not adopted these suggestions, and hence:
“It would amount to judicial legislation for courts to read in a power that the legislature has consciously excluded.”
Answers to the Reference: A Judicially Categorical Position
Courts do not have the power to modify an arbitral award under Section 34.
While modification is not permitted, severance of offending parts is permissible if separable.
Power to set aside does not subsume a power to modify. They are qualitatively distinct.
Hakeem (2021) lays down the correct law, subject to one limited exception: correction of clerical/computational errors under the principle of actus curiae neminem gravabit.
Date of Decision: April 30, 2025
