Courts can modify arbitral awards: SC

The ruling resolves conflicting precedents.

- Ayesha Arvind

A constitution bench of the Supreme Court on Wednesday ruled by a 4-1 majority that appellate courts can modify arbitral awards "under certain circumstances", ending years of legal uncertainty over judicial powers in arbitration matters.

The five-judge bench, however, emphasised that such modification powers must be exercised with "great caution" and only in limited scenarios.

Arbitration is a private dispute resolution process where parties agree to submit conflicts to an independent third party (arbitrator) instead of going to court, resulting in a binding decision called an award.

The ruling brings clarity to a long-standing ambiguity on whether courts' powers under Section 34 and Section 37 of the Arbitration and Conciliation Act, 1996, extend to modifying arbitral awards. These provisions deal with a court's authority in setting aside arbitral awards and appeals against such orders, respectively.