New Delhi: Arbitration Game Changer!
Arbitral Awards Can Be Altered According to the Stipulations of the 1996 Act
The Supreme Court has rocked the world of arbitration by declaring that it can modify arbitral awards under the Arbitration and Conciliation Act, 1996, under specific conditions!
This bombshell decision is based on the principle that "the more power to salvage, the less power to wreck" - a concept known as "the greater power to set aside includes the lesser authority to modify." This ruling carries colossal implications for both domestic and international commercial disputes.
In a 4:1 majority decision, the bench - led by Chief Justice Sanjiv Khanna - determined that the broad power to nullify arbitral awards also encompasses the authority to tweak parts of it. Only Justices K.V. Viswanathan stood against this decision.
The apex court further clarified that courts could make changes to correct simple errors, fix typos, or modify post-award interest selectively. Additionally, this power could be exercised under Article 142 of the Constitution, though it must be used judiciously.
It's essential to note that though the law does not explicitly give the power to modify arbitral awards, it can be inferred when it's possible to separate valid and invalid parts.
This verdict originated from a reference made by a three-judge bench in the case titled Gayatri Balasamy v. ISG Novasoft Technologies Limited in 2024. The core question the court addressed was whether the powers listed under Sections 34 and 37 of the Act include the power to modify arbitral awards.
The bench decided that although the power to nullify an award can partially nullify it, this isn't always achievable when the valid and invalid sections are interconnected. In simpler terms, if they depend on one another, the award can't be altered in part. The bench acknowledged that modifying and annulling have different consequences, but denying courts the ability to alter awards could be counterproductive due to the lengthy legal battles it may provoke.
Overall, the Supreme Court's ruling marks a remarkable shift in Indian arbitration law. It grants courts the power to modify specific parts of arbitral awards under certain conditions to correct errors, sever invalid parts, and uphold the sanctity of arbitration agreements.
The Supreme Court's decision to modify arbitral awards under certain conditions, as outlined in the Arbitration and Conciliation Act, 1996, has significant implications for both domestic and international commercial disputes within the realm of politics and policy-and-legislation. This ruling, which allows courts to correct simple errors, fix typos, or modify post-award interest selectively, stems from the court's understanding that the power to nullify awards also includes the authority to tweak parts of it. This development in Indian arbitration law, resulting from the Gayatri Balasamy v. ISG Novasoft Technologies Limited case in 2024, underscores the ongoing evolution of general-news policies and legislation.
