Article 142 of the Constitution gives the Supreme Court the authority to pass orders necessary to ensure “complete justice” in any matter.
NEW DELHI: Justice KV Viswanathan of the Supreme Court gave a dissenting opinion and firmly stated that courts do not have the power to change or modify arbitral awards under Section 34 or Section 37 of the Arbitration and Conciliation Act, 1996.
He also clarified that the Supreme Court cannot use Article 142 of the Constitution to give itself such a power.
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Article 142 of the Constitution gives the Supreme Court the authority to pass orders necessary to ensure “complete justice” in any matter.
But Justice Viswanathan made it very clear:
“The power under Article 142 cannot be used to ‘supplant’ substantive law…or achieve something indirectly which cannot be achieved directly,”
This view was in direct disagreement with the majority of the five-judge Constitution Bench, which said that the Court may, in rare situations, use Article 142 to modify arbitral awards to do complete justice.
Justice Viswanathan, however, believed that such a step would go against legal precedents and disturb the legal structure laid down in the Arbitration Act.
The Constitution Bench was led by Chief Justice of India (CJI) Sanjiv Khanna and also included Justices BR Gavai, PV Sanjay Kumar, Augustine George Masih, and KV Viswanathan. This important legal question was referred to a five-judge Bench earlier in January after inconsistencies were seen in past Supreme Court decisions.
What Do Sections 34 and 37 Say?
Section 34 of the Arbitration and Conciliation Act allows a person to challenge an arbitral award in court, but only on limited grounds. These include violations of public policy, invalid arbitration agreements, lack of jurisdiction, or when a party was not given proper notice of the arbitration. It does not allow courts to review the merits of the case or change the decision.
Section 37 allows appeals against specific orders such as refusing to enforce awards or interim measures, but again does not give courts the right to rewrite awards.
What Did the Majority Say?
The majority opinion held that courts could modify arbitral awards in a few limited situations:
a) When the award is severable;
b) To fix simple typographical or clerical errors;
c) To correct post-award interest in some cases;
d) In rare and exceptional cases, Article 142 can be used to modify awards for complete justice.
Justice Viswanathan disagreed strongly. In his dissenting judgment, he stated clearly that courts, including the Supreme Court, cannot use Article 142 or any other legal principle to modify arbitral awards.
He said that if courts are allowed to modify awards, it would go against the Arbitration Act’s design. According to him, Section 34 only allows courts to set aside an award—not change it.
He said:
“From the reasons stated in the earlier part of the judgment, it is crystal clear that Courts exercising powers under Section 34, which will include the appellate hierarchy cannot change, vary, or qualify ‘arbitrary awards’ as it strikes at the very core and root of the ethos of the arbitration process. Such an exercise of power will derogate from the core aspects of the A&C Act and will breach a pre-eminent prohibition in the said Act.”
He further explained that modifying an award and setting it aside are two completely different powers:
“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.”
Justice Viswanathan pointed out that Parliament had multiple chances to allow courts to modify awards—during amendments in 2015, 2019, and 2021—but it chose not to.
“Notwithstanding the fact that there have been three occasions for the Parliament to amend the A&C Act…the power to modify has not been incorporated. Hence, for the Court to read the power would be completely untenable.”
He strongly opposed the idea of relying on inherent powers under the Civil Procedure Code (CPC) or implied powers to modify awards:
“Section 34 is couched in clear terms and the parameters for setting aside the award are clearly laid out in mandatory terms…Could inherent powers under CPC be exercised in a manner to be in conflict with the expressly provided powers by the legislature? The answer has to be an emphatic ‘No’.”
He also said that unless the law is changed clearly by Parliament, courts cannot assume the power to modify awards:
“Modification and severance are two different concepts. While modification is not permitted under Section 34, severance of the award falling foul of Section 34 is permissible.”
Justice Viswanathan also disagreed with the majority’s view that post-award interest can be changed under Section 31(7)(b). He said courts do not have this power either and must send such matters back to the arbitrator:
“Interest awarded also cannot be modified in exercise of powers of setting aside and the course of action under Section 34(4) will have to be adopted as discussed in the judgment.”
He stressed that arbitration works because parties willingly choose to follow its rules instead of going to regular courts.
That choice should be respected:
“Party autonomy enables parties to dispense with technical formalities and procedures of National Court proceedings, contractually. They agree to abide by the terms of the statute regulating arbitration which they perceive as advantageous. Having done so, they cannot be allowed to cry afoul, when it does not suit their needs and clamor for certain procedures which are legislatively not sanctioned in the arbitration process and are available in the normal machinery of the Courts.”
Justice Viswanathan also warned that if Indian courts start modifying arbitral awards, it could create problems when enforcing those awards abroad under the New York Convention. He referred to other countries like the UK, Singapore, New Zealand, and Kenya, which have clear legal provisions for modifying awards—something India does not.
“Mr. Gourab Banerji, learned Senior Counsel and Mr. Gaurav Pachnanda, learned Senior Counsel drew the attention of this Court to certain specific statutory provisions obtaining in the UK, Singapore, New Zealand and Kenya. This was to drive home the point that not only were there express provisions to modify awards in those statutes by the Court hearing the setting aside application, there are also express provisions recognising that the award will hitherto be read in the modified form.”
He added:
“Learned Senior Counsels submit that if the award is modified by the Section 34 Court in India, any enforcement brought abroad will run into complications as objections will be taken that what is sought to be enforced is not the award but the judgment of the Court. There is merit in the submission and this is one another reason why these matters are best left for the legislature to be comprehensively addressed.”
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