M/s Arvind Associates vs Union Of India

Manoj Kumar Tiwari, J

This is an Appeal under Section 37 of Arbitration and Conciliation Act, 1996 against the judgment & order dated 30.04.2008 passed by learned

District Judge, Dehradun in Arbitration Case No. 63 of 2003, whereby the award given by the Arbitrator has been modified. Operative portion of the

said judgment is reproduced below:-

“I considered the argument. The arbitrator in a detailed judgment has attributed the entire delay to Union of India. Therefore, their claim to the

extent of Rs. 5.00 lacs was declined. I do not find any illegality, irregularity or misconduct on the part of the arbitrator while awarding a sum of Rs.

2,38,228/- to the contractor and disallowing the claim of Union of India and allowing the claim of the contractor. The position of law has already been

clarified above. I do not find anything on record to infer any malafide on the part of arbitrator. The arbitrator has given a detailed and reasoned award.

In nutshell, the objections U/s 34 of the Act filed by the petitioner deserves to be dismissed with a modification discussed in the body of judgment.

Order

For the reasons stated above, the objections of Union of India are dismissed with the following modification:-

A sum of Rs. 3.00 lacs awarded against claim No. 1 Part (iv) (Para 34.1.0) is set aside.

A sum of Rs. 2,65,000/- is also set aside which is awarded against Claim No. 1 Part (ii) (Para 34.2.2)

Pendentelite interest @ 12% and further interest @ 15% awarded in Paras 34.19.4, Para 34.19.5 and Para 34.19.6 and Para 34.19.7 of the award,

are reduced to 9% and 12% respectively.

The parties shall bear their own cost.â€​

Learned counsel appearing for the appellant submits that, in exercise of power under Section 34 of Arbitration and Conciliation Act, 1996, learned

District Judge could not have modified the award, as given by the Arbitrator.

This Court finds substance in the submission made on behalf of the appellant. Section 34(2) of the Act enables the Court to set aside the award on

certain grounds, which are enumerated in the said sub-section and the power to vary award is not available under the said Section. Hon’ble

Supreme Court in the case of Project Director, National Highways Authority of India v. M. Hakeem and another, reported in 2021 SCC Online SC

473 has dealt with this aspect of the matter and held that, while exercising power under Section 34 of the Act, the District Judge can interfere with the

award on limited ground and the right available to the Court concerned is also limited, namely, to set aside the award or remand the matter under the

circumstances mentioned in Section 34 of the Act. Para nos. 38 to 47 of the said judgment are reproduced below:-

“38. Col. Balasubramanian also referred to three other judgments to buttress the very same submission, namely, Numaligarh Refinery Ltd. v.

Daelim Industrial Co. Ltd., (2007) 8 SCC 466; DDA v. R.S. Sharma and Co., (2008) 13 SCC 80 and Royal Education Society v. LIS (India)

Construction Co. (P) Ltd., (2009) 2 SCC 261. Each of these judgments also does not carry the matter further in that, orders that are passed under

Article 142 of the Constitution do not constitute the ratio decidendi of a judgment. Admittedly, there was no discussion on whether, as a matter of

law, a power to vary an award can be found in Section 34 of the Arbitration, 1996.

As has been pointed out by us hereinabove, McDermott (supra) has been followed by this Court in Kinnari Mullick (supra). Also, in Dakshin

Haryana Bijli Vitran Nigam Ltd. v. Navigant Technologies Pvt. Ltd., 2021 SCC OnLine SC 157, a recent judgment of this Court also followed

McDermott (supra) stating that there is no power to modify an arbitral award under Section 34 as follows:â€

(f) In law, where the Court sets aside the award passed by the majority members of the tribunal, the underlying disputes would require to be decided

afresh in an appropriate proceeding.

Under Section 34 of the Arbitration Act, the Court may either dismiss the objections filed, and uphold the award, or set aside the award if the grounds

contained in sub-sections (2) and (2A) are made out. There is no power to modify an arbitral award.

It can therefore be said that this question has now been settled finally by at least 3 decisions of this Court. Even otherwise, to state that the judicial

trend appears to favour an interpretation that would read into Section 34 a power to modify, revise or vary the award would be to ignore the previous

law contained in the 1940 Act; as also to ignore the fact that the 1996 Act was enacted based on the UNCITRAL Model Law on International

Commercial Arbitration, 1985 which, as has been pointed out in Redfern and Hunter on International Arbitration, makes it clear that, given the

limited judicial interference on extremely limited grounds not dealing with the merits of an award, the ‘limited remedy’ under Section 34 is co-

terminus with the ‘limited right’, namely, either to set aside an award or remand the matter under the circumstances mentioned in Section 34 of

the Arbitration Act, 1996.

A look at the Arbitration Acts of England, the United States, Canada, Australia and Singapore also lead to the same conclusion. In each of those

legislative measures, there are express provisions which permit the varying of an award, unlike Section 34 of the present Act. In para 51, the learned

Single Judge then refers to recourse to a court against an arbitral award, and argues that a statute cannot be interpreted in such manner as to make

the remedy worse than the disease. As has been pointed out by us, the “disease†can only be cured in very limited circumstances thus limiting the

remedy as well. Also, to assimilate the Section 34 jurisdiction with the revisional jurisdiction under Section 115 of the Code of Civil Procedure, 1908

[the “CPCâ€], is again fallacious. Section 115 of the CPC expressly sets out the three grounds on which a revision may be entertained and then

states that the High Court may make ‘such order as it thinks fit’. These latter words are missing in Section 34, given the legislative scheme of

the Arbitration Act, 1996. For all the aforesaid reasons, with great respect to the learned Single Judge, it is not correct in law and therefore stands

overruled.

Coming to the submission in support of the impugned judgment that the fact that the Central Government appoints an arbitrator and the arbitration

would therefore not be consensual, resulting in a government servant rubber stamping an award which then cannot be challenged on its merits, cannot

possibly lead to the conclusion that, therefore, a challenge on merits must be provided driving a coach and four through Section 34 of the Arbitration

Act, 1996. The impugned judgment is also incorrect on this score.

Col. Balasubramanian, however referred to a passage in Jaishri Laxmanrao Patil v. Chief Minister, 2021 SCC OnLine SC 362 (at paras 412 to

415). He argued that ‘purposive construction’ referred to by Bennion in his classic on Statutory Interpretation must be applied by us on the

facts of this case as in legislations dealing with land acquisition, a pragmatic view is required to be taken and the law must be interpreted purposefully

and realistically so that the benefit reaches the masses. We may only add that the judgment cited by Col. Balasubramanian is a judgment dealing with

a constitutional provision - Article 342A of the Constitution. We must never forget the famous statement of Chief Justice Marshall in M'Culloch v.

State of Maryland, 17 US 316 (1819) (1819) that “it is a constitution we are expounding†- and the Constitution is a living document governing

the lives of millions of people, which is required to be interpreted in a flexible evolutionary manner to provide for the demands and compulsions of

changing times and needs.

The distinction between constitutional and statutory interpretation was felicitously put by Justice Aharon Barak, President of the Supreme Court of

Israel thus:

“The task of expounding a Constitution is crucially different from that of construing a statute. A statute defines present rights and obligations. It is

easily enacted and as easily repealed. A Constitution, by contrast, is drafted with an eye to the future. Its function is to provide a continuing

framework for the legitimate exercise of governmental power and, when joined by a Bill or Charter of Rights, for the unremitting protection of

individual rights and liberties. Once enacted, its provisions cannot easily be repealed or amended. It must, therefore, be capable of growth and

development over time to meet new social, political and historical realities often unimagined by its framers. The judiciary is the guardian of the

Constitution and must, in interpreting its provisions, bear these considerations in mind.â€​

This quote has been cited in Rameshwar Prasad (VI) v. Union of India, (2006) 2 SCC 1 (at pages 91, 92).

“Purposive construction†of statutes, relevant in the present context, is referred to in a recent concurring judgment by Nariman, J. in Eera v.

State (NCT of Delhi), (2017) 15 SCC 133, as the theory of “creative interpretationâ€. However, even “creative interpretation†has its limits,

which have been laid down in the aforesaid judgment as follows:â€

A reading of the Act as a whole in the light of the Statement of Objects and Reasons thus makes it clear that the intention of the legislator was to

focus on children, as commonly understood i.e. persons who are physically under the age of 18 years. The golden rule in determining whether the

judiciary has crossed the Lakshman Rekha in the guise of interpreting a statute is really whether a Judge has only ironed out the creases that he

found in a statute in the light of its object, or whether he has altered the material of which the Act is woven. In short, the difference is the well-known

philosophical difference between “is†and “oughtâ€. Does the Judge put himself in the place of the legislator and ask himself whether the

legislator intended a certain result, or does he state that this must have been the intent of the legislator and infuse what he thinks should have been

done had he been the legislator. If the latter, it is clear that the Judge then would add something more than what there is in the statute by way of a

supposed intention of the legislator and would go beyond creative interpretation of legislation to legislating itself. It is at this point that the Judge

crosses the Lakshman Rekha and becomes a legislator, stating what the law ought to be instead of what the law is.

Quite obviously if one were to include the power to modify an award in Section 34, one would be crossing the Lakshman Rekha and doing what,

according to the justice of a case, ought to be done. In interpreting a statutory provision, a Judge must put himself in the shoes of Parliament and then

ask whether Parliament intended this result. Parliament very clearly intended that no power of modification of an award exists in Section 34 of the

Arbitration Act, 1996. It is only for Parliament to amend the aforesaid provision in the light of the experience of the courts in the working of the

Arbitration Act, 1996, and bring it in line with other legislations the world over.â€​

In view of the aforesaid legal position, this Court has no hesitation in holding that modification of the award, as made by learned District Judge, is

without any authority of law.

In such view of the matter, the Appeal from Order is allowed and the impugned judgment & order dated 30.04.2008 rendered by learned District

Judge, Dehradun in Arbitration Case No.63 of 2003 is set aside.