November 28, 2021 In Uncategorized

SUPREME COURT DECIDES UPON THE ISSUE OF MODIFICATION OF ARBITRAL AWARD BY AN ARBITRAL TRIBUNAL

A Two Judge Bench of the Hon’ble #SupremeCourt of India comprising of Justices M.R. Shah and B.V. Nagarathna passed a #Judgment dated 22-11-2021 in the case of Gyan Prakash Arya vs Titan Industries Limited {Civil Appeal No.6876 of 2021} and held that an #Arbitrator cannot modify an Arbitral #Award under the Arbitration and Conciliation Act, 1996 (Act) unless there is any arithmetical and/or clerical #error.

In the present case, the Appellant and the Respondent had entered into an Agreement dated 09-07-2003 (Agreement). Subsequently, a dispute arose between the Parties with respect to recovery of pure gold weighing 3648.80 grams (Gold) which was believed to be in the possession of the Appellant. The Respondent invoked the Arbitration Clause contained in the Agreement. A retired District Judge was appointed by the High Court of Karnataka at Bengaluru (High Court) as the sole Arbitrator to adjudicate the dispute between the Parties. An Award dated 04-12-2010 was passed by the Ld. Arbitrator, whereby the Appellant was directed to return to the Claimant/Respondent the Gold within three months from the date of the Award along with interest @ 18% per annum, and value of Gold to be calculated at Rs.740 per gram from 24-07-2004 and up to the date of delivery of the quantity of Gold. Further, it was ordered that in the alternative, the Appellant shall pay to the Claimant/Respondent the market value of Gold along with interest @ 18% per annum within the said period of three months, and value of Gold to be calculated at Rs.740 per gram from 24-07-2004 till the date of payment.

Thereafter, an Application under Section 33 of the Act was filed by the Respondent before the Ld. Arbitrator seeking modification of the Award dated 04-12-2010 by correcting the computational / arithmetical / clerical error in respect of deletion of “at Rs. 740 per gram as claimed in the claim statement” at Page 14 of the Award and deletion of “Rs.740.00 per gram” at Page 17 of the Award and substitute the same by “Rs.20,747/- per 10 grams” at Page 17 of the Award.

The Ld. Arbitrator vide Order dated 14-01-2011 allowed the said Application under Section 33 of the Act and corrected the original Award dated 04-12-2010 as under:

a) the respondent is directed to return to the claimant within three months from today 3,648.80 grams of pure gold along with interest @ 18% per annum calculating the value of gold at Rs.740.00 per gram from 24.07.2004 and up to the date of delivery of that quantity of gold.

b) in the alternative, the respondent shall pay to the claimant within the said period of three months the market value of 3,648.80 grams of pure gold at [Rs.20,747.00 per 10 grams … value substituted] along with interest thereon at 18% per annum from 24.07.2004 and up to the date of payment.

c) the respondent is directed to pay to the claimant within three months from today a sum of Rs.50,000.00 (rupees fifty thousand only) as the probable loss suffered by the claimant due to his failure to keep up to the time schedule in fulfilling his responsibility as a job worker. If he fails to pay that amount within three months, it shall carry interest @ 18% per annum from the date of this award and up to the date of payment.

d) claimant is also entitled to cost which shall include the expenses shared by the claimant along with respondent for arranging the venue for arbitration.

e) advocate’s fee Rs.30,000.00”

Aggrieved by the Arbitral Award dated 04-12-2010 that was further modified by the Order dated 14-01-2011 passed by the Ld. Arbitrator, the Appellant filed an Arbitration Suit (A.S. No. 12/2011) under Section 34 of the Act before the 29th Additional City Civil and Sessions Court. The Court dismissed the said Suit vide Order dated 28-05-2018. Thereafter, an Appeal was filed before the High Court under Section 37 of the Act. However, the High Court dismissed the said Appeal vide Judgment and Order dated 18-03-2021 and confirmed the Judgment and Order passed by the 29th Additional City Civil and Sessions Court dismissing the Arbitration Suit and confirming the Arbitral Award dated 04-12-2010 that was further modified by Order dated 14-01-2011.

Aggrieved and dissatisfied by the Judgment and Order passed by the High Court dated 18-03-2021, thereby allowing the modification of the Award dated 04-12-2010, the Appellant herein preferred an Appeal before the Hon’ble Supreme Court of India.

After taking into consideration, the facts of the case and the arguments advanced by the Parties to the dispute, the Apex Court observed that the Ld. Arbitrator modified the Award dated 04-12-2010 in exercise of powers under Section 33 of the Act and the same is not sustainable.

The Bench observed that an Award can be modified only when there is an arithmetical and/or clerical error and only such errors can be corrected. However, on perusing the facts of the present case, the Bench found that there was no arithmetical and/or clerical error in the original Award passed by the Ld. Arbitrator.

In this regard, the Supreme Court made the following observation:

“What was claimed by the original claimant in the statement of claim was awarded. Therefore, the order passed by the learned arbitrator on an application filed under Section 33 of the 1996 Act and thereafter modifying the original award cannot be sustained. The order passed by the learned arbitrator in the application under Section 33 of the 1996 Act is beyond the scope and ambit of Section 33 of the 1996 Act.”

Thus, the Bench observed that the High Court and the City Civil Court erred in allowing the modification of the Arbitral Award. Hence, the Supreme Court quashed and set aside the Judgment passed by the High Court dated 18-03-2021 and the Order passed by the City Civil Court dated 28-05-2018. As a result, the original Award dated 04-12-2010 was restored.

 

Suchitra Upadhyay

Associate

The Indian Lawyer & Allied Services

Edited by

Sushila Ram Varma

Chief Consultant

The Indian Lawyer & Allied Services

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