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Supreme Court Defines Limited Grounds for Modifying Arbitration Awards in Landmark 4-1 Ruling

The majority judgment permits modifications only under specific conditions, emphasizing judicial restraint, while a dissent raises questions about the scope of Article 142.

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The Supreme Court ruling came on a reference to the constitution bench by a three-judge bench on the court’s powers in January this year (HT File Photo)
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Overview

  • The Supreme Court ruled 4-1 that appellate courts can modify arbitral awards under narrowly defined circumstances, balancing arbitration's finality with justice.
  • Permissible grounds for modification include severable awards, clerical or typographical corrections, adjustments to post-award interest in limited cases, and the use of Article 142 for complete justice.
  • The decision stems from a dispute between ISG Novasoft Technologies and a former employee over an employment termination governed by the Arbitration and Conciliation Act, 1996.
  • Justice KV Vishwanathan dissented, arguing that Article 142 should not be used to modify post-award interest and such matters should be referred back to arbitrators.
  • The detailed judgment is awaited, but the ruling clarifies conflicting interpretations of Sections 34 and 37 of the Arbitration Act, setting a precedent for judicial intervention in arbitration.