IN THE HIGH COURT OF JUDICATURE AT DELHI

ORDINARY ORIGINAL CIVIL JURISDICTION

O.M.P. (COMM) 95/ 2023

NATIONAL HIGHWAYS AUTHORITY OF INDIA)………… Petitioner

V/s.

TRICHY TANJAVUR EXPRESSWAY ) …………… Respondent

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IN THE HIGH COURT OF JUDICATURE AT DELHI

ORDINARY ORIGINAL CIVIL JURISDICTION

O.M.P. (COMM) 106/ 2023

TRICHY TANJAVUR EXPRESSWAY )………… Petitioner

V/s.

NATIONAL HIGHWAYS AUTHORITY OF INDIA) …………… Respondent

WRITTEN SUBMISSIONS OF SANJIT SHENOY, ADVOCATE, BOMBAY HIGH COURT

(O.S.) AS AMICUS ON PROVISIONS OF SECTION 34 (2) & (4) :
IT IS RESPECTFULLY SUBMITTED AS FOLLOWS :

1) An arbitration award can be challenged as envisaged under the provisions of

Section 34 (2) & 34 (4) of the ACA 1996. The power of a court for setting aside an
arbitral award are restricted and has been postulated under the provisions of S. 34
(2) (a) & (b) and if it is established in any S. 34 petition that the impugned Award
attracts any of the provisions of S. 34 (2) (a) (i) – (iv) & (b) then the Court can set
 2

aside the award. However, under S. 34 (4) postulates that, on receipt of an

application under sub-section (1), the Court may, where it is appropriate and it is so
requested by a party, adjourn the proceedings for a period of time determined by it
in order to give the arbitral tribunal an opportunity to resume the arbitral
proceedings or to take such other action as in the opinion of arbitral tribunal will
eliminate the grounds for setting aside the arbitral award.

2) The Supreme Court in Hakeem rightly observed that it is only for Parliament to
amend Section 34(4), and bring it in line with other legislations the world over. In
NHAI v. M. Hakeem [(2021) 9 SCC 1] the Supreme Court held that courts had no
power to modify an arbitral award. The Court rightly observed that the Arbitration
and Conciliation Act, 1996 (“ACA”) does not confer courts with the power to modify
arbitral awards, and doing so will be crossing “the Lakshman Rekha”. The Court in
Hakeem’s judgement has dealt with powers of the court under Section 34 (2) to set
aside an award and under Section 34 (4) to remand the matter. The relevant paras
pertaining to setting aside, modification and remitting the award back, are
reproduced hereinbelow for easy reference of your Lordship.
(i) Para 14 :- What is important to note is that, far from Section 34 being in
the nature of an appellate provision, it provides only for setting aside
awards on very limited grounds, such grounds being contained in sub-
sections (2) and (3) of Section 34. Secondly, as the marginal note of
Section 34 indicates, “recourse” to a court against an arbitral award may
be made only by an application for setting aside such award in
accordance with sub-sections (2) and (3). “Recourse” is defined by P
Ramanatha Aiyar’s Advanced Law Lexicon (3rd edition) as the
enforcement or method of enforcing a right. By way of contrast, under
Sections 15 and 16 of the Arbitration Act, 1940, the court is given the
power to modify or correct an award in the circumstances mentioned in
Section 15, apart from a power to remit the award under Section 16, right
 3

is itself truncated, enforcement of such truncated right can also be only

limited in nature. What is clear from a reading of the said provisions is
that, given the limited grounds of challenge under sub-sections (2) and (3),
an application can only be made to set aside an award. This becomes even
clearer when we see sub- section (4) under which, on receipt of an
application under sub- section (1) of Section 34, the court may adjourn the
Section 34 proceedings and give the arbitral tribunal an opportunity to
resume the arbitral proceedings or take such action as will eliminate the
grounds for setting aside the arbitral award. Here again, it is important
to note that it is the opinion of the arbitral tribunal which counts in order
to eliminate the grounds for setting aside the award, which may be
indicated by the court hearing the Section 34 application”
(ii) Para 15 :- “It is important to remember that Section 34 is modelled on the
UNCITRAL Model Law on International Commercial Arbitration, 1985,
under which no power to modify an award is given to a court hearing a
challenge to an award.
(iii) Para 17 :- The statutory scheme under Section 34 of the Arbitration Act,
1996 is in keeping with the UNCITRAL Model Law and the legislative
policy of minimal judicial interference in arbitral awards.
(iv) Para 18 :- By way of contrast, under Sections 15 and 16 of the Arbitration
Act, 1940, the court is given the power to modify or correct an award in
the circumstances mentioned in Section 15, apart from a power to remit
the award under Section 16.
(v) Para 20 :- Thus, under the scheme of the old Act, an award may be
remitted, modified or otherwise set aside given the grounds contained in
Section 30 of the 1940 Act, which are broader than the grounds contained
in Section 34 of the 1996 Act.
(vi) Para 21 :- It is settled law that a Section 34 proceeding does not contain
any challenge on the merits of the award. This has been decided in MMTC
 4

Ltd. v. Vedanta Ltd., (2019) 4 SCC 163, at 167 as follows: - 14. As far as
interference with an order made under Section 34, as per Section 37, is
concerned, it cannot be disputed that such interference under Section 37
cannot travel beyond the restrictions laid down under Section 34. In other
words, the court cannot undertake an independent assessment of the
merits of the award, and must only ascertain that the exercise of power by
the court under Section 34 has not exceeded the scope of the provision.
Thus, it is evident that in case an arbitral award has been confirmed by
the court under Section 34 and by the court in an appeal under Section 37,
this Court must be extremely cautious and slow to disturb such concurrent
findings.
(vii) Para 36 :- At this juncture it must be noted that the legislative intention of
providing Section 34(4) in the Arbitration Act was to make the award
enforceable, after giving an opportunity to the Tribunal to undo the
curable defects. This provision cannot be brushed aside and the High
Court could not have proceeded further to determine the issue on merits.
(viii) Para 37 :- In case of absence of reasoning the utility has been provided
under Section 34(4) of the Arbitration Act to cure such defects. When there
is complete perversity in the reasoning then only it can be challenged
under the provisions of Section 34 of the Arbitration Act. The power vested
under Section 34(4) of the Arbitration Act to cure defects can be utilised in
cases where the arbitral award does not provide any reasoning or if the
award has some gap in the reasoning or otherwise and that can be cured
so as to avoid a challenge based on the aforesaid curable defects under
Section 34 of the Arbitration Act. However, in this case such remand to the
Tribunal would not be beneficial as this case has taken more than 25 years
for its adjudication. It is in this state of affairs that we lament that the
purpose of arbitration as an effective and expeditious forum itself stands
effaced.
 5

(ix) para 41 :- “A look at the Arbitration Acts of England, the United States,
Canada, Australia and Singapore also lead to the same conclusion. In each
of those legislative measures, there are express provisions which permit
the varying of an award, unlike Section 34 of the present Act. In para 51,
the learned Single Judge then refers to recourse to a court against an
arbitral award, and argues that a statute cannot be interpreted in such
manner as to make the remedy worse than the disease. As has been
pointed out by us, the “disease” can only be cured in very limited
circumstances thus limiting the remedy as well. Also, to assimilate the
Section 34 jurisdiction with the revisional jurisdiction under Section 115 of
the Code of Civil Procedure, 1908 [the “CPC”], is again fallacious. Section
115 of the CPC expressly sets out the three grounds on which a revision
may be entertained and then states that the High Court may make ‘such
order as it thinks fit’. These latter words are missing in Section 34, given
the legislative scheme of the Arbitration Act, 1996. For all the aforesaid
reasons, with great respect to the learned Single Judge, it is not correct in
law and therefore stands overruled.”
(x) para 46 :- “Quite obviously if one were to include the power to modify an
award in Section 34, one would be crossing the Lakshman Rekha and
doing what, according to the justice of a case, ought to be done. In
interpreting a statutory provision, a Judge must put himself in the shoes of
Parliament and then ask whether Parliament intended this result.
Parliament very clearly intended that no power of modification of an
award exists in Section 34 of the Arbitration Act, 1996. 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
(xi) It was recognized by the court that there are judgements of the Supreme
Court where the courts have modified awards, but explains these decisions
 6

as taken by the Supreme Court under its extraordinary jurisdiction under

Article 142 of the Constitution of India, even whilst some of the judgements
do not explicitly refer to Article 142.

3) A similar issue arose in the matter of NHAI v. P. Nagaraju alias Cheluvaiah [SC-
11/07/2022], where a coordinate bench of the Supreme Court set aside an arbitral
award on the ground the award suffered from “patent illegality” and that the “only
course open” was to set aside the award. The Court, however, concurrently
remanded the matter to the same arbitral tribunal “to reconsider” certain aspects
under Section 34(4) of the ACA. However, this would be contrary to S. 34 (4) as an
Award cannot be set aside under Section 34 while simultaneously remanding the
matter to the tribunal under Section 34(4). A bare perusal of the latter will indicate
that an exercise of power under Section 34(4) is to uphold an award, and not set it
aside – this is clearly discernable from the expression “eliminate the grounds for
setting aside the award” appearing in Section 34(4). This position also stands settled
by a three-judge bench in the matter of Kinnari Mullick v. Ghanshyam Das Damani
[SC 20/04/2017.] which has been referred to and relied upon by the Supreme Court
in Hakeem’s case.

4) In Kinnari Mullick case (supra), the award was set aside by the Single Judge under
S. 34(4) even though No “formal written application” was filed by the party in
question, either before the Single Judge or the Division Bench, under Section 34(4)
of the ACA. The Supreme Court held that under Section 34(4) the court’s discretion
was “ limited” and could be “exercised only upon a written application made in that
behalf by a party to the arbitration proceedings”, and that the court “cannot exercise
this limited power of deferring the proceedings before it suo moto”. Failure by a
party to seek deferral of the court proceedings to set aside the award would
disqualify the party from moving an application under Section 34(4). The Court
further held that upon the disposal of the main proceedings under Section 34, the
 7

arbitral tribunal becomes functus officio, and further observed, “…the limited
remedy available under Section 34(4) is required to be invoked by the party to the
arbitral proceedings before the award is set aside by the Court”.

5) In the peculiar facts of P Nagaraju as well, no application under Section 34(4) of the
ACA was filed before the Court. There is not clarity as to how the Supreme Court
relied on Section 34(4) while simultaneously setting aside the award which is
contrary to what is postulated under Section 34 (4).

6) The Judgement of P. Nagaraju fails to consider the binding precedent of a three-

judge bench in Kinnari Mullick, making the f0rmer judgement per incuriam. The
Court instead relies on Dyna Technologies Pvt. Ltd. v. Crompton Greaves Ltd. [2019
SCC OnLine SC 1656].

7) The judgement of Dyna Technologies does not make a reference to Kinnari Mullick,
the Court’s observations on Section 34(4) are more or less in line with the former
judgement. In fact, the Court in Dyna Technologies observed that “… when the High
Court concluded that there was no reasoned award, then the award ceased to exist
and the Arbitral Tribunal was functus officio under Section 34 of the Arbitration Act
….”. This view appears to be diametric to what the Supreme Court held in the P.
Nagaraju matter. Whereas, the Supreme Court in Dyna Technologies did intend
for its observations to be the ratio on Section 34(4). The Court in Dyna Technologies
case did not rely on Kinnari Mullick, which undoubtedly is the authority on Section
34(4) of the ACA.

8) In the matter of Vedanta Limited v. Shenzhen Shandong Nuclear Power-SC-

11/10/2018, the Supreme Court modified the interest granted by the arbitral
tribunal. The Supreme Court made no mention of Article 142. More importantly, the
Court in Vedanta appears to have granted sanction to other courts to modify award
qua interest, and in this regard observed – “Courts may reduce the interest rate
 8

awarded awarded by an Arbitral Tribunal where such interest rate does not reflect
the prevailing economic conditions or where it is not found reasonable, or promotes
the interests of justice”. This observation by the Supreme Court is in contra-
distinction to the position later taken by the coordinate bench in Hakeem
judgement, however, the Hakeem judgement makes no reference to Vedanta
judgement.

9) The well settled proposition is that the “… Supreme Court in the exercise of its
jurisdiction may pass such decree or make such order as is necessary for doing
complete justice in any cause or matter pending before it…..”, however, the
Constitution Bench of the Supreme Court in the matter of Premchand Garg v. Excise
Commission has held that such an order cannot be “inconsistent with the
substantive provisions of the relevant statutory laws”

10) Furthermore, in 2007, the Supreme Court in the matter of Bharat Sewa
Sansthan v. U.P. Electricity Corporation Limited, held, that the Supreme Court will
not “ordinarily” bypass the provisions of the Arbitration and Conciliation Act, 1996
while exercising power under Article 142. In this particular matter, the Court
declined to exercise its powers under Article 142 for “payment of arrears towards
water and sewerage tax and payment of interest at the rate of 12% p.a. on the
arrears of rent in terms of the agreement”, and held that while undoubtedly Article
142 is meant to do complete justice between the litigating parties, the” power is
conceived to meet the situations which cannot be effectively and appropriately
tackled by the existing provisions of law”.

11) Seen in this context, it would be important to consider that the Supreme Court in
Vedanta reduced the interest, even though the Court found no infirmity with the
award, on the ground that interest was in the nature of “compensation” and hence
“excessive”.
 9

12) The Supreme Court in Hakeem remarked 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 Court cites the example of arbitration legislation in England, the United States,
Canada, Australia and Singapore, where there are express provisions which permit
the varying of an award. In this context, it may be apropos to mention that even in
countries like the United Kingdom where the courts have the power to modify and
vary the award, those powers are backed with adequate guardrails to limit judicial
intervention, and courts themselves maintain “a close control to discourage
speculative applications”

13) The Supreme Court, in the context of Section 34(4), appears to limit the powers of
the Court to remand matters, only to awards with “curable defects” [Kinnari
Mullick & Dyna Technologies]. However, the plain language of Section 34(4), unlike
Section 33, appears to impose no such fetters. Per contra, a bare perusal of the
language of Section 34(4) appears to grant wide powers to the Court - to adjourn
proceedings “for a time period determined” by the court, to direct the arbitral
tribunal “to resume the arbitral proceedings” or “to take such other action as in the
opinion of the arbitral tribunal, will eliminate the grounds for setting aside the
arbitral award”

14) Apart from a few judgements [Kinnari Mullick, Dyna Technologies and I-Pay
Cleaning Services Pvt. Ltd. v. ICICI Bank Ltd., which provide some insight into the
scope of Section 34(4), there is no clear guideline as to which awards will fall within
the mischief of Section 34(4). Even so, it might be worth considering whether there
is an actual difference between “curing defects” and “modification”, or whether it is
merely a matter of semantics. Certainly, it is no one’s case that the courts should
have the power to modify arbitral awards in their entirety. Seen in that context,
 10

would it not be correct to say that the ACA does indeed make a provision for
modification/variation of an award (by whatever name called)?

15) In cases where relief of modification/variation is not sought, and only an

application to set aside is filed, the court is only vested with the power to set aside
the award. Thereafter, the only option for the parties is “to begin the arbitration
again if it is desired” [McDermott International Inc. v. Burn Standard Co. Ltd.] For
any detractors that believe the parties would have to undertake a cumbersome
second arbitration, do consider that such an instance would be no different if
parties had filed a suit, and were before a court in a “first appeal”. Besides, the
“second” arbitration would only be a re-hearing on arguments, since parties would
be bound by their pleadings and evidence.

16)In the current context, parties have been diffident to file applications under Section
34(4). Petitioners are typically keen to challenge the entire award, in the hope of the
award being set aside in its entirety so as to avoid any liability that was foisted
upon them. The Respondents, on the other hand, are generally reluctant to file a
Section 34(4) application for the fear of admitting even a partial error with the
award. So, while the prayer is to seek setting aside, the hope is modification.

17) It’s a noteworthy fact that debates and controversies in context of modification of
awards is not restricted to India alone. In England, under the English Arbitration
Act, 1996, courts have the power to vary the award if the challenge is made on a
substantive ground or when an appeal is filed on the question of law. In Australia,
the courts can only set-aside an award under the provisions of similarly worded
section 34 of the International Arbitration Act, 1974. However, section 34-A was
later added to that legislation under which an appeal can be preferred, through
which modification can be effected. Even in the USA, section 11 of the United States
Federal Arbitration Act, 1925 lays down that a court is empowered to make an
order modifying or correcting the award under three conditions: (a) evident
 11

material mistake; (2) arbitration award on an issue not submitted for dispute; and
(c) award is imperfect as to matter of form not affecting the merits. It’s also
noteworthy that in Singapore, the courts not only can modify the award under an
independent provision but can modify and set-aside the award in the same
proceeding by way of a combination of section 51(2), 48 and 49 of the Singapore
Arbitration Act, 2001. Hence, it is clear that various jurisdictions either already had
provisions or incorporated new ones through amendments to allow modification of
awards.

18) Through its various judgements, the Supreme Court has made it amply clear
that modification of awards cannot be carried out under section 34 (2) of the 1996
Act. However, the Supreme Court has been allowing modification of awards under
Article 142 of the Constitution of India in furtherance of its power to do complete
justice. While delivering the NHAI judgement, the Supreme Court relied on various
landmark cases like McDermott International Inc. v. Burn Standard Co. Ltd and
Hindustan Zinc Ltd. v. Friends Coal Carbonisation, and reiterated its stance on
section 34, but allowed modification under Article 142. This clearly highlights that
the issue is not with modification, but only with respect to exercising such powers
under section 34 (2).

19) In Gayatri Balaswamy v. ISG Novasoft Technologies Ltd., where the Madras High
Court had allowed modification of award under section 34, the Supreme Court held
that such an interpretation of section 34 is erroneous; nonetheless, it allowed
modification under Article 142 of the Constitution. In another judgement, Oriental
Structural Engineers Pvt. Ltd. v. State of Kerala -SC-22/04/2021, the Supreme Court
modified the arbitral award by citing “justice and equity” as the ground for making
modifications. Hence, it can be clearly observed that the Court has not taken a
backseat in modifying the awards, but has merely held that section 34 signifies the
principle of minimal judicial intervention. The Supreme Court is of the opinion that
 12

if, in the interest of justice, modification is necessary, it shall do so under powers

vested on it under Article 142. This amply indicates that the Courts under Section 34
cannot modify an award in the absence of any specific provisions empowering the
courts under the provisions of Section 34.

20) Conclusion : - (i) Firstly, while the Supreme Court has rightly observed that
it is not possible to modify awards under section 34 of the 1996 Act, the Court has
time and again upheld the modification of award under the garb of doing ‘complete
justice’ in accordance with Article 142 of the Constitution. This indicates that the
Court is of the opinion that modification is not contrary to the overall procedure but
is not permitted under section 34 (2) or (4). Additionally, this clearly reflects an
approach of the Court that does incorporate the idea of limited modification. In
NHAI, the Supreme Court observed that the present judgment does not bar the
exercise of its extraordinary powers under Article 142 of the Constitution in order to
achieve complete justice between parties. It is apparent that while the primary
objective of arbitration is ‘minimum judicial interference’, there are questions of
practical considerations that co-exists.

(ii) Secondly, from the perspective of comparative analysis of provisions for setting
aside and modifying the awards across jurisdictions, it is apparent that various
countries have amended their statutes to incorporate modifying power. While
adopting the Model Law, the Indian legislature must have also taken ideas from the
statutes of other jurisdictions which empower their courts to modify an award.
Countries like Australia, which share a similarly worded section for setting aside
the award, formulated additional provision that specifically allows for
modification, hence reflecting the importance of the same.

(iii) Thirdly, an order that remits the parties back for de novo proceedings before
the arbitration tribunal might run contrary to the very foundation of preferring
alternative dispute resolution over litigation and defeat the time bound alternate
 13

dispute resolution mechanism envisaged under the ACA. Therefore, to allow such a
modification, either, the 1996 Act must be amended to incorporate this specific
proviso as a new section to the ACA (albeit with limited powers) or a proviso should
be added to the existing section 34 with limited modification power as to obviate
circumvention of the statute. However, as the present position stands, there is no
power vested with the courts under Section 34 to modify an award and as regards
setting aside of an award, the same is postulated under S. 34 (2). Section 34 (4) on
the other hand envisages only resuming the proceedings before the arbitrator but
only upon an application made by a party under sub section (1) of S. 34 and the
court cannot suo motu remit the to the arbitrator for resumptions of the proceedings
in the absence of a formal application by the party that has filed the original
application under S. 34 (1). Moreover, the award cannot be concurrently set aside
and then remitted back to the Arbitrator for resuming the proceedings since that
would be contrary to the wordings of 34 (4) :- “in order to give the arbitral tribunal
an opportunity to resume the arbitral proceedings or to take such other action as in
the opinion of arbitral tribunal will eliminate the grounds for setting aside the
arbitral award”

Dated this 1st day of May, 2023

SANJIT SHENOY
S. SHENOY & ASSOCIATES,
ADVOCATES, BOMBAY HIGH COURT
Bar Council enrollment no : Mah/264/1993
Bombay High Court Original Side enrollment No : 4417
Bombay High Court Code No : I-18951
Cell : 9970271089
Email : [email protected].