To Modify an Arbitral Award Under Section 34 Is to Cross the Lakshman Rekha: Karnataka HC Reiterates Supreme Court’s Warning on Judicial Overreach in Arbitration

Court Cannot Sit in Appeal Over an Arbitral Award — Powers Under Section 34 Are Strictly Supervisory, Not Substitutive - Karnataka High Court decisively ruled that modification of an arbitral award by a court under Section 34 of the Arbitration and Conciliation Act, 1996, is impermissible in law. Justice Hanchate Sanjeevkumar held that the District Judge had acted beyond his jurisdiction by altering the arbitral award passed by a tribunal — a move the High Court termed as legally unsustainable.

Citing the binding precedent of the Supreme Court in NHAI v. M. Hakeem (2021) and S.V. Samudram v. State of Karnataka, the Court observed: “Any attempt to modify an award under Section 34 would amount to crossing the Lakshman Rekha.”

The Union of India, through South Western Railway, had entered into a contractual relationship with respondent Kothari Subbaraju, a railway contractor. Disputes having arisen, the matter was referred to arbitration. The Arbitral Tribunal passed an award, granting several claims in favour of the contractor.

Aggrieved, the contractor filed A.S. No. 39/2008 before the XXXIII Additional City Civil and Sessions Judge, Bengaluru, under Section 34 of the Act, seeking to challenge and vary the award. The District Court partly allowed the challenge and went a step further — modifying claim Nos. 3, 4, and 5 of the award by enhancing the awarded amounts.

This modification was challenged by the Union of India before the High Court by way of the present appeal.

“Court Cannot Modify or Enhance Award in Section 34 Proceedings — It Can Only Set Aside on Limited Grounds”
The High Court made it clear that: “The District Judge is not sitting as the Appellate Authority on the award passed by the arbitral tribunal… There is no power vested with the Court to modify or alter the arbitral award as if could be done in the appeal.”

Justice Sanjeevkumar extensively quoted from M. Hakeem and S.V. Samudram, noting that even when an award appears flawed, courts must not substitute or reshape it: “Intervention by court is envisaged only in cases like fraud, bias, or violation of natural justice. The court cannot correct errors of the arbitrators. It can only quash the award, leaving parties free to re-initiate arbitration, if desired.”

The Court cited McDermott International v. Burn Standard (2006) 11 SCC 181: “The 1996 Act provides for minimal court intervention… Parties consciously opt for arbitration, excluding court jurisdiction in favor of finality and expediency.”

It also reaffirmed the recent principle laid down in Larsen Air Conditioning v. Union of India (2023), reiterating that Section 34 proceedings are not adjudicatory appeals, but rather narrow, supervisory reviews.

Allowing the appeal, the High Court ruled: “The Court of District Judge while considering the arbitration suit under Section 34 has treated it as an appeal — this is not permissible as per law.”

Accordingly, the order passed by the District Court on 31.03.2016 was set aside, and the arbitration suit filed by the contractor was dismissed.

This judgment strengthens the jurisprudence that Section 34 is not a backdoor for courts to rewrite arbitral awards. Any attempt to do so would violate the legislative scheme of minimal court interference and compromise the autonomy of the arbitral process.

The Karnataka High Court has thus reaffirmed a fundamental principle: “Arbitration thrives on finality. Judicial tinkering must stop at the threshold of Section 34.”

Date of Decision: 12 March 2025