Latest news with #ISGNovasoftTechnologiesLimited
&w=3840&q=100)
Business Standard
05-05-2025
- Business
- Business Standard
Court's power to modify arbitral awards: A cure worse than the disease
Arbitration users worry over poor-quality awards and prolonged litigation; some propose allowing courts to modify awards, but this raises concerns over finality and judicial overreach Dheeraj Nair Anjali Anchayil For some time now, arbitration users in India have voiced grave concerns over the poor quality of adjudication and awards. Parties often go through elaborate arbitration proceedings only to receive a poorly written award which invites lengthy litigation in courts. They run the risk of the award being set to naught at any stage of this litigation process. In this context, some have proposed a solution in the form of permitting modification of awards by courts. Last week, a five-judge Bench of the Supreme Court of India gave a definitive view on this issue through its decision in Gayatri Balaswamy v. ISG Novasoft Technologies Limited. A 4:1 majority of the Supreme Court, led by Chief Justice of India Sanjiv Khanna, held that courts can modify arbitral awards in limited circumstances. This power can be exercised where the award can be severed into valid and invalid portions; or to correct clerical, typographical or computational errors on the face of the record; or to modify post-award interest. In addition, the Supreme Court can modify awards in exercise of its powers under Article 142 of the Constitution of India to do complete justice. The plain language of Section 34 of the Arbitration and Conciliation Act, 1996, permits courts to only confirm an arbitral award or set it aside. However, this is far from ideal, since where an arbitral award is set aside, parties are back to square one and must restart arbitration proceedings. While parties may seek a remand back to the arbitral tribunal, this remedy cannot be used to correct substantive errors in the arbitral award. The judgment recognises this problem and attempts to provide a solution to parties instead of sending them back to restart arbitration proceedings. Yet, the ambiguous language of the judgment leaves room for clever manoeuvring and thereby inflicts a cure worse than the disease it seeks to remedy. What does the judgment mean for arbitration users? The judgment permits courts to modify an arbitral award by severing invalid portions of the award from the rest of the award. However, it is unclear whether what is being permitted here is merely setting aside the invalid portions — as opposed to any other modification. This lack of clarity in the judgment may allow clever litigants to seek substantive modifications of the invalid portions of an award, which would certainly complicate and prolong court proceedings. Courts may also interpret the judgment as permitting modifications of this nature and may not restrict themselves to simply pruning away the invalid portions of an award. While the Supreme Court has cautioned the courts against a merits-based review of arbitral awards, any modification of an award would invariably involve some assessment of the merits. In such cases, there are no specific guardrails on the power to modify arbitral awards. The judgment also permits courts to modify an arbitral award to rectify computational, clerical or typographical errors and 'other manifest errors'. While the former is uncontroversial, there is little clarity on what is captured under 'other manifest errors'. This may provide a backdoor entry for parties to seek substantive modifications to awards in the garb of correcting such errors. Further, by providing for modification of post-award interest, the Supreme Court has inadvertently created a perverse incentive for parties to prolong court litigation over arbitral awards in the hope of securing a reduction in post-award interest. In India, due to court delays, post-award interest can often exceed the value of the claims themselves. Lastly, by expressly providing for the exercise of power under Article 142 to modify arbitral awards, the Supreme Court has opened the door for every party dissatisfied with an arbitral award to try their luck before it. This will create incredible uncertainty over the fate of arbitral awards in India. In this context, one may recall how the Supreme Court's exercise of its extraordinary curative jurisdiction to set aside the arbitral award in favour of Delhi Airport Metro Express Private Limited became the subject of criticism from many quarters. If awards are easily susceptible to modification, then it will erode the finality of arbitration and thereby undermine confidence in arbitration as a dispute resolution mechanism. It is worth remembering that in a robust arbitration system, the role of courts is to facilitate and support arbitration and not interfere with the decision-making capacity of arbitral tribunals. In any case, a broad power to modify arbitral awards ought to be based on explicit legislative provisions. Thus, unless the Supreme Court quickly provides necessary clarity, it seems inevitable that the judgment will lead to increased judicial intervention in arbitral awards — which Indian courts have been attempting to consciously avoid. Impact on ease of doing business While most businesses in India are all too familiar with the unpredictability of court litigation in India, this judgment will add a layer of further complications and concerns. It may become the proverbial straw that finally breaks the camel's back. Indian parties may now actively choose to have their arbitrations in other jurisdictions to avoid the complications created by this judgment. If so, at a time when India is competing with other well-established jurisdictions such as Singapore or the United Kingdom to have disputes arbitrated in India, this judgment may push parties in the other direction. Dheeraj Nair and Anjali Anchayil are partners at JSA Advocates & Solicitors. Dheeraj is co-chair of JSA's disputes practice.
Hindustan Times
30-04-2025
- Business
- Hindustan Times
Courts can modify arbitral awards but must exercise ‘great caution': Supreme Court
NEW DELHI: A five-judge constitution bench of the Supreme Court on Wednesday ruled by a 4-1 majority that appellate courts can modify arbitral awards 'under certain circumstances', ending uncertainty over the extent of the court's power in interfering with the awards under the Arbitration and Conciliation Act, 1996. The bench, however, underlined that such power was limited and must be exercised with 'great caution'. A detailed judgement is awaited. Chief Justice of India Sanjiv Khanna and justices BR Gavai, Sanjay Kumar and AG Masih held that such limited power to modify arbitral awards could be exercised in circumstances where the award is severable, for correcting typographical or clerical errors, for correcting or modifying post award interest in certain circumstances, and that the Supreme Court can exercise its powers under Article 142 of the Constitution to modify awards to do 'complete justice to a case.' Justice KV Vishwanathan dissented from the majority on certain aspects including the appellate court's power to modify post award interest. Justice Vishwanathan held that the Supreme Court could not use Article 142 to modify interest post award and that the issue should be referred back to the arbitrator. The ruling came on a reference to the constitution bench by a three-judge bench on the court's powers in January this year while dealing with petitions under sections 34 and 37 of the Act. The two provisions in the 1996 Act deal with the court's authority in setting aside the arbitral awards and appeals against such orders respectively. One set of rulings previously indicated that the power of the courts was limited to setting aside the arbitral awards, strictly in terms of the specific grounds enshrined under the provision. In a second set of judgments, the top court did not only set aside the arbitral award but also modified them. After a three-day hearing, the constitution bench reserved the judgment on February 19. The issue arose out of a dispute between ISG Novasoft Technologies Limited, a company engaged in the business of dealing with products relating to Information technology, and its former employee over termination of an employment agreement. The employment agreement was made subject to the provisions of the 1996 Act. The matter was initially heard by a three-judge bench comprising justices Dipankar Datta, KV Viswanathan and Sandeep Mehta. At the time, senior counsel Arvind Datar, appeared for the former employee and senior advocate Siddharth Bhatnagar, along with a team of associates from Karanjawala & Co appeared for ISG Novasoft. During arguments before the constitution bench, solicitor general Tushar Mehta for the Union government argued that the law only permitted courts to wholly or partially set aside an award and did not grant them the power to modify it. Mehta also urged the bench to refrain from reading such a power into the law, emphasising that the issue should be left to the 'wisdom of the legislature'. Senior Advocate Arvind Datar, who appeared for the former employee, argued in support of the courts' power to modify arbitral awards and reasoned that the power to partially set aside an award was essentially the power to modify it. Datar argued that Section 34 of the Arbitration Act was intended to accommodate international arbitration and was not meant for instances of domestic arbitration. Datar suggested at the time that adding a few words to Section 34 would make it workable by giving courts the power to modify. Senior advocate Saurabh Kirpal, however, opposed Datar's submissions and argued the addition or subtraction of words under a statute was a legislative exercise, not a judicial one. Kirpal argued that allowing modification would not necessarily expedite the arbitration process.
