India: Can Arbitral Tribunals Modify Award Under Section 33 Of The Arbitration And Conciliation Act, 1996? - Supreme Court Clarifies.

Introduction

Recently, the Hon'ble Supreme Court of India ("Supreme Court") in the case of "Gyan Prakash Arya v. Titan Industries"¹, ("the Judgment"), considered the issue as to whether the power to allow the correction of an arbitral award, vested with an Arbitral Tribunal under Section 33 of the Arbitration and Conciliation Act, 1996 ("the Act"), would also include the power to modify such an Award. 

Section 33 of the Act of 1996 to the extent that it deals with correction of an arbitral award reads as follows:

This Article encapsulates a brief overview of the Judgment by giving a bird's eye view of the facts involved and thereafter attempts to analyse the rationale behind the decision and its implication on the development of the law.

FACTUAL MATRIX

The dispute before the Hon'ble Supreme Court pertains to an agreement which was executed between Gyan Parkash Arya ("Appellant") and M/s Titan Industries ("Respondent") on 09.07.2003. The dispute was in relation to the recovery of 3648.80 grams of unadulterated gold. On the invocation of the arbitration clause by Respondent, a sole Arbitrator was appointed who passed an Award on 04.12.2010, directing the Appellant to return the unadulterated gold to the Respondent or in alternative pay to the Respondent the market value of 3648.80 grams of gold along with an interest at the rate of 18% per annum, computing the worth of gold at Rs. 740 per gram from 24.07.2004 up to the date of delivery of the amount of gold.

However, after the pronouncement of the Award, Respondent filed an Application under Section 33 of the Act, before the Learned sole Arbitrator, requesting for modification of the Award by correcting a computational/arithmetical/clerical error. The Application was made to substitute the rate of gold i.e., Rs. 740 per gram in the Award to the current market value of gold at Rs. 20,747/- per 10 grams. In pursuance thereof, the Arbitrator while allowing the Application, made certain modifications in the Award and substituted the reliefs earlier granted.

Aggrieved by the decision of the Arbitrator, the Appellant filed an Application under Section 34 of the Act before the City Civil Court which was dismissed. Further, an Appeal under Section 37 of the Act was filed before the Karnataka High Court, which was also dismissed. Aggrieved by the said orders, the Appellant preferred an Appeal before the Supreme Court.

ARGUMENTS OF THE PARTIES

The Appellant contended that the Order passed by the Arbitrator allowing the Application and consequently modifying the original Award was beyond the scope and ambit of the said provision. In exercise of the powers under Section 33, only an arithmetical/clerical error can be corrected in an Arbitral Award. The Appellant further contended that the Respondent in the guise of an Application under Section 33, has come out with an altogether new claim which is not permissible under the law.

Respondent on the other hand contended that the modification of the original Award by the Arbitrator was in the context of an alternative prayer made in the application. In pursuance thereof, even though the original Award is not allowed to be modified, the Respondent shall be entitled to the return of the gold as originally claimed and granted by the Arbitrator.

Reasoning and Decision of the Court

After considering the arguments of the Parties, the Apex Court while noting that the original Award passed by the Arbitrator was in consonance with the claims made by the Claimant/Respondent in its Statement of Claim, held that the modifications made by the Arbitrator in the original Award, pursuant to the application under section 33 cannot be sustained. The Court held that there was no arithmetical/clerical error in the original Award passed by the Arbitrator, therefore the Arbitrator by modifying the Award had exceeded the powers conferred upon it under the said section, which permits modification only to the extent of arithmetical and/or clerical errors.

Thus, the Court observed that the City Civil Court and the Karnataka High Court had committed a grave error by dismissing the Application/Appeal under Sections 34 and 37 of the Act, preferred by the Appellant. In light of the above findings, the Appeal was allowed by the court upholding the Award originally passed by the Arbitrator.

Conclusion

The Apex Court in a very laudable and landmark Judgment has elucidated the restricted scope and ambit of Section 33 of the Act. The Court noted that Section 33 cannot be invoked to modify the Award once passed by the Arbitrator. Section 33 of the Act can only be resorted to make arithmetical or clerical corrections to an Award, unlike Sections 34 and 37 of the Act, which can manifestly change the nature of an Award being passed by the Arbitrator.

Footnote

1 2021 SCC Online SC 1100

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