Supreme Court Refers Issue On Modifying Arbitral Awards To Five-Judge Constitution Bench

Supreme Court Refers Issue on Modifying Arbitral Awards to Five-Judge Constitution Bench

The Supreme Court has referred a crucial legal issue to a five-judge Constitution bench regarding whether courts can modify arbitral awards under the Arbitration and Conciliation Act, 1996. A bench consisting of Chief Justice Sanjiv Khanna and Justices Sanjay Kumar and KV Viswanathan, highlighted the need for clarity on the contentious issue of whether courts have the authority to modify arbitral awards under Sections 34 and 37 of the 1996 Act.

The matter arose from the case of Gayatri Balasamy v. ISG Novasoft Technologies Ltd. Section 34 of the Act permits setting aside an arbitral award on limited grounds, such as procedural irregularities, violation of public policy, or lack of jurisdiction.

Acknowledging the complexity of the issue and its broader implications for arbitration jurisprudence, the Chief Justice referred the case to a five-judge Constitution bench after considering submissions on behalf of the respondents. It was suggested that referring the question to a five-judge bench would be appropriate to bring clarity to the issue, particularly since the matter was previously referred to the Chief Justice by a three-judge bench.

In February 2024, a three-judge bench, comprising Justices Dipankar Datta, KV Viswanathan, and Sandeep Mehta, had framed several questions and referred the matter to the Chief Justice for consideration. One of the key questions posed was, "Does the power to set aside an arbitral award under Section 34 include the authority to modify it?" Another question raised was, "If modification is permitted, what is its extent and under what circumstances?"

Arbitration, as an alternative mode of dispute resolution under the 1996 law, generally minimizes the role of courts in interfering with tribunal awards.