Supreme Court Ruling: Scope to Modify Arbitral Awards under Section 34 & 37
Context:
In the case of Gayatri Balasamy v. ISG Novasoft Technologies Ltd, the Supreme Court clarified the legal scope for modifying arbitral awards under the Arbitration and Conciliation Act, 1996.
Relevance:
GS-02 (Indian Polity)
Key Takeaways from the Judgment
- Partial Modification Permitted: Courts can modify or set aside parts of an arbitral award if the award is severable—i.e., invalid sections can be separated from valid ones.
- Doctrine Cited: The SC invoked the principle of “omne majus continet in se minus” (the greater includes the lesser), implying that the power to fully set aside an award includes the power to partially do so.
- Error Correction Allowed: Courts can rectify clerical, typographical, or computational errors in the arbitral award.
- Post-Award Interest Modification: The Court may also revise post-award interest under certain circumstances.
- Article 142 Invoked: The SC noted that such powers may also be exercised under Article 142 of the Constitution (complete justice), as long as it aligns with the basic structure and principles of the 1996 Act.
Background: Arbitration in India
- Definition: Arbitration is a method of Alternative Dispute Resolution (ADR) where parties mutually agree to settle disputes outside court through a neutral third party.
- Advantages: It is less adversarial, faster, and more flexible than traditional litigation.
- Legal Framework:
- Governed by the Arbitration and Conciliation Act, 1996.
- Based on the UNCITRAL Model Law, 1985 for international commercial arbitration.
- Section 34: Allows for setting aside an arbitral award by court.
- Section 37: Lists situations where appeals can be made against arbitral orders.
Prelims Practice Question:
Q. With reference to the Supreme Court judgement in Gayatri Balasamy v. ISG Novasoft Technologies Ltd., consider the following statements:
- The Court held that arbitral awards can be modified or set aside partially if the award is severable.
- The judgement invoked Article 142 of the Constitution to ensure complete justice in arbitration matters.
- Courts cannot modify post-award interest under any circumstances.
Which of the statements given above is/are correct?
A. 1 and 2 only
B. 2 and 3 only
C. 1 and 3 only
D. 1, 2 and 3
Answer: A. 1 and 2 only
Explanation:
- Statement 1 is correct: The Court allowed partial modification of arbitral awards if severable.
- Statement 2 is correct: the SC invoked Article 142 for ensuring complete justice.
- Statement 3 is incorrect: The Court can modify post-award interest in some circumstances.
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