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The Project Director, National Highways V M Hakeem & Anr (2021) Sc: S.34 Of Arbitration Act Gives No Power To Modify Arbitral Reward

minakshi bindhani ,
  27 July 2021       Share Bookmark

Court :
The Supreme Court of India,New Delhi
Brief :
In this case, the Court considered appeals filed by the NHAI against the judgment held by the Madras High Court,which stated that arbitral awards in so far made under National Highways Act,1956 must be read as to permit modification of an arbitral award under Section 34 of Arbitration Act,andto enhance compensation awarded by a learned Arbitrator.
Citation :
REFERENCE: LL 2021 SC 311


DATE OF JUDGEMENT:
July 20th, 2021

BENCH:
Justice Rohinton Fali Nariman and Justice B.R.Gavai

PARTIES:
The Project Director, National Highways. Authority of India…….(Appellant)
M. Hakeem & ANR. (Respondent)

SUBJECT

The Supreme Court held that Section 34 of the Arbitration and Conciliation Act,1996 gives no power to modify an award and the appellate court has the power to only set aside or remand.

FACTS

  • In this case, the Court considered appeals filed by the NHAI against the judgment held by the Madras High Court,which stated that arbitral awards in so far made under National Highways Act,1956 must be read as to permit modification of an arbitral award under Section 34 of Arbitration Act,andto enhance compensation awarded by a learned Arbitrator.
  • The facts in all these appeals, the awards passed under the National Highways Act,1956 was abysmally low amounts granted by the competent authority.So under Section 34 of the Act, the petitions were filed before the District and Session Court to enhance the award amount, and the same was modified. In the appeal filed, modifications were upheld by the Division Bench, with being a remand order to fix compensation for certain trees and crops.

IMPORTANTPROVISIONS

ARBITRATION AND CONCILIATION ACT,1956:

  • Section 34: Application for setting aside the arbitral award. —

(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-Section (2) and Sub-Section (3).

(2) An arbitral award may be set aside by the Court only if—

(a)The party making the application furnishes proof that—

(i) A party was under some incapacity, or
(ii) The arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties unless such agreement was inconflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance this Part; or

(b) the Court finds that—

(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is inconflict with the public policy of India.

Explanation. —Without prejudice to the generality of sub-clause (ii) it is hereby declared, for the avoidance of any doubt, that an award is inconflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81.

(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under Section 33, from the date on which that request had been disposed of by the arbitral tribunal: Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.

(4) On receipt of an application under Sub-Section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period determined by it to allow the arbitral tribunal to resume the arbitral proceedings or to take such other action as in the opinion of the arbitral tribunal will eliminate the grounds for setting aside the arbitral award.

  • Section 15:

Termination of mandate and substitution of the arbitrator.

  • Section 16:

Competence of arbitral tribunal to rule on its jurisdiction.

ISSUES

  • Whether the power under Section34 of the Arbitration Act 1996 to “set aside” an award of an arbitrator would include the power to modify such an award?

ANALYSIS OF THE JUDGEMENT

  • “If one were to include the power to modify an award, one would be crossing the Laksman Rekha”. The Court, interpreting a statutory provision, said that the judge must put himself in the shoes of Parliament then ask whether the Parliament intended this result.
  • No power of modification of an award exists in Section 34.It is only for the Parliament to amend the aforesaid provision in the light of the experience of the courts in the working Arbitration Act.
  • The Bench was observed only for setting aside awards on very limited grounds, being contained in sub-Sections (2) and (3). Where the right is itself truncated, enforcement of such truncated right can also be only limited in nature. What we understand given the limited grounds of challenge, an application can only be made to set aside an award.
  • The said Section is modeled on the UNCITRAL Model Law on International Commercial Arbitration,1985, under which no power has been given to modify an award.
  • The Court has given the power to modify or to correct an award in this circumstance, apart from the power to remit the award. But under the Section, there is no power to modify or correct.

CONCLUSION

The Court held that,given the fact that in several similar cases, the NHAI had allowed similarly situated persons to receive compensation at a much higher rate than awarded, it declined to exercise its jurisdiction under Article 136 in favor of the appellants, based on the facts of the present cases. It was also held that most of the awards in these cases were made 7-10 years ago, and it would not, at this distance in time, be fair to send back these cases for a de novo start before the very arbitrator or some other arbitrator not consensually appointed, but appointed by the Central Government. The appeals were, therefore, dismissed on facts with no order as to costs.

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