Court acting under Section 34 of the Arbitration Act has no power to modify an award: Supreme Court clears the law

The SC on July 20, 2021 {THE PROJECT DIRECTOR, NATIONAL HIGHWAYS NO.45 E AND 220 NATIONAL HIGHWAYS AUTHORITY OF INDIA vs. M. HAKEEM & ANR} held that orders that are passed under Article 142 of the Constitution do not constitute the ratio decidendi of a judgment. It was further held that, given the limited judicial interference on extremely limited grounds not dealing with the merits of an award, the ‘limited remedy’ under Section 34 is co-terminus with the ‘limited right’, namely, either to set aside an award or remand the matter under the circumstances mentioned in Section 34 of the Arbitration Act, 1996. 

It was also held by the Bench, comprising of Justice R. F. Nariman and Justice B.R. Gavai that there can be no doubt that given the law laid down by the Court, Section 34 of the Arbitration Act, 1996 cannot be held to include within it a power to modify an award. 

The SC further to differentiate the rules of interpretation qua Constitution quoted the famous statement of Chief Justice Marshall in M'Culloch v. State of Maryland, 17 US 316 (1819) that “it is a constitution we are expounding” – and the Constitution is a living document governing the lives of millions of people, which is required to be interpreted in a flexible evolutionary manner to provide for the demands and compulsions of changing times and needs. 

The question falling for consideration in present case before the SC was whether the power of a court under Section 34 of the Arbitration and Conciliation Act, 1996 [“Arbitration Act”] to “set aside” an award of an arbitrator would include the power to modify such an award.

The court held that in interpreting a statutory provision, a Judge must put himself in the shoes of Parliament and then ask whether Parliament intended this result. It was held that Parliament very clearly intended that no power of modification of an award exists in Section 34 of the Arbitration Act, 1996. It was held that it is only for Parliament to amend the aforesaid provision in the light of the experience of the courts in the working of the Arbitration Act, 1996, and bring it in line with other legislations the world over.

The SC further observed that injunctions against highway projects have now become impossible to obtain in view of Section 20A of the Specific Relief Act, which has been introduced w.e.f. 01.10.2018.

It was earlier held by the Supreme Court of India in Taherakhatoon v. Salambin Mohammad, (1999) 2 SCC 635 (at para 20), even after it declares the law and set aside the High Court judgment on law, it does not interfere with the judgment on facts, if the justice of the case does not require interference under Article 136 of the Constitution of India.

The SC further held that in present factual matrix, given the fact that in several similar cases, the NHAI has allowed similarly situated persons to receive compensation at a much higher rate than awarded, it declines to exercise its jurisdiction under Article 136 in favour of the appellants on the facts of the present cases. It was also held by the SC that given the fact that most of the awards in these cases were made 7-10 years ago, 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 by the SC with no order as to costs.