District Judge Cannot Modify Arbitral Award, Only Sever Parts Or Set Aside Entirely Under Section 34: Allahabad HC
The Allahabad High Court held that under Section 34 of the Arbitration and Conciliation Act, 1996, the District Judge does not have the power to modify an arbitral award. Instead, the court's authority is limited to severing parts of the award and setting them aside entirely if such severance does not impact the remaining upheld award.
The order in question had partly allowed an appeal and reduced the rate of interest awarded by an arbitrator from 14% to 6% per annum.
A Bench of Justice Shekhar B. Saraf held, “It is trite law, settled by a catena of Supreme Court judgements that the Court does not have the power under Section 34 of Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act") to modify an award. The Court under Section 34(2) of the Act has the power to sever parts of the award and set aside the same in toto, if the severance does not impact the remaining award that is upheld under Section 34 of the Act.”
Advocate Vinod Sinha appeared for the Appellants. He argued that the district judge’s court does not have the power to modify an arbitral award, citing relevant judgments.
After considering the arguments and examining the relevant judgments, the Court concluded that the court does not have the power under Section 34 of the Arbitration and Conciliation Act, 1996, to modify an arbitral award.
The Court further noted that the reduction of the interest rate in the impugned order constituted a modification of the original award, which is deemed illegal and against established legal principles.
The Court added, “In the present case, I find that the rate of interest that was awarded to be paid on the principle sum was 14% per annum from 25.3.2000 till the payment was made. In the impugned order this rate of interest has been reduced to 6% without providing any cogent reasons for the same. Reduction of interest is nothing but a modification of the original arbitration award, and accordingly, the same is illegal and against the principles established by the Supreme Court.”
Therefore, the Court quashed and sets aside the impugned judgment and order, allowing the appeal.
Cause Title: Sushil Kumar Mishra v. State of U.P.& Anr., [2024:AHC:9904]
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