Modifying Or Altering Arbitral Award Defeats Objective Of Arbitration Process As Court's Power U/s. 34 Of Act Is Limited- Delhi HC

The Delhi High Court observed that in cases where the dispute had been resolved through arbitration, the Court's role was limited only to setting aside arbitral awards based on the specific grounds enshrined under Section 34 of the Arbitration and Conciliation Act, 1996 (Act).

The Bench of Justice Chandra Dhari Singh observed that “The Courts should recognize that while opting to resolve disputes through arbitration, the parties consciously choose to exclude the Court's jurisdiction. Thus, the exercise of modifying or altering the arbitral award by the Courts not only goes against the Scheme of the Act, but also defeats the objective of the arbitration process.”

Advocate Abhishek Gola appeared for the petitioner and Advocate Amitesh C. Mishra appeared for the respondent.

In this case, the petitioner was a general insurance company and the respondent was a company which provided Information Technology (“IT”) solutions, hardware, software, as well as ancillary solutions across the country. An agreement was executed between them for the procurement, implementation, customisation, deployment, maintenance, training and support qua an Enterprise Content Management (EMC) solution.

It was the case of the petitioner that, some portion of work was not completed within the stipulated period and holding the respondent solely responsible for the entire delay, imposed penalty and deducted Liquidated Damages at the rate of 10% of the entire project value i.e. Rs. 1,59,85,753/-.

The respondent objected the deduction of liquidated damages. Both the parties tried to settle the dispute amicably but could not resolve the matter. Thereafter, the dispute was referred to the Arbitral tribunal. Aggrieved by the order of Arbitral Tribunal, the petitioner had approached the Delhi High Court under Section 34 of the Act.

The issue to be dealt with was- whether the petition to modify the arbitral award under Section 34 of the Act was maintainable or not?

The Court observed that section 34 of the Act provided that the Courts had no power to modify the arbitral award, their power was limited to setting aside the arbitral awards, which was aligned with the primary objective which the legislative sought to meet i.e. 'minimal judicial interference'.

“It is settled law that the 1996 Act makes provision for the supervisory role of Courts, for the review of an arbitral award only to ensure fairness. Intervention of the Court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. The Court cannot correct the errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again, if it is desired.” the Court further observed.

The Court further said that an award could be set aside it was-

"I. Contrary to the fundamental policy of Indian law.

II. Contrary to the interest of India i.e. it affects India’s relations with other countries.

III. Contrary to principles of justice and/or morality

IV. Suffers from Patent illegality."

Therefore, the Court observed that the impugned award did not fall under the category which warranted interference under Section 34 of the Act and, accordingly, the petition was dismissed.

Cause Title- The Oriental Insurance Co. Ltd. V.HCL Infosystems Limited (Neutral Citation NO. 2023/DHC/001487)

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