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Issues: (i) whether a court exercising jurisdiction under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 can modify an arbitral award or is confined to upholding or setting it aside; (ii) whether the reduction of the contractual interest awarded by the arbitrator was justified.
Issue (i): whether a court exercising jurisdiction under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 can modify an arbitral award or is confined to upholding or setting it aside.
Analysis: The statutory scheme permits only limited judicial interference with arbitral awards. A court dealing with a challenge under Section 34 may either reject the challenge and uphold the award or set aside the award on recognised grounds. It has no jurisdiction to reappreciate evidence and substitute its own view on the merits, still less to rewrite the award by reducing it to a different figure. Interference on the ground of public policy or patent illegality is confined to cases where the award suffers from a defect going to the root of the matter. A plausible view taken by the arbitrator cannot be displaced by a court merely because another view is possible.
Conclusion: The modification of the award by the court below was impermissible and could not be sustained.
Issue (ii): whether the reduction of the contractual interest awarded by the arbitrator was justified.
Analysis: The dispute arose out of a commercial contract and the arbitrator had granted interest on the awarded sums. The courts below reduced the rate without any adequate legal basis. The entitlement to interest on money awards is recognised by Section 31(7) of the Arbitration and Conciliation Act, 1996, and the reduction made in the present case was not supported by the record or by the constraints applicable to review of arbitral awards. To do complete justice between the parties, the Court exercised its constitutional power while restoring the award.
Conclusion: The curtailment of interest was unjustified, and the award of interest was restored, with the rate adjusted to 9% per annum.
Final Conclusion: The challenge to the arbitral award succeeded because the courts below exceeded the permissible limits of review under the arbitration law. The award was restored, and the appeal was allowed.
Ratio Decidendi: In proceedings under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, a court cannot modify an arbitral award and may interfere only within the narrowly defined statutory grounds, including public policy and patent illegality.
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