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Arbitrator Cannot Modify Award On An Application Under Section 33 Arbitration Act: SC

 

Without mincing any words, the Apex Court has as recently as on November 22, 2021 in an extremely learned, laudable, landmark and latest judgment titled Gyan Prakash Arya vs M/s Titan Industries Limited in Civil Appeal No. 6876 of 2021 in exercise of its civil appellate jurisdiction observed that an arbitrator cannot modify an arbitration award on an application filed under Section 33 of the Arbitration and Conciliation Act. It deserves mentioning here that the Bench of Apex Court comprising of Justice MR Shah and Justice BV Nagarathna very elegantly, eloquently and effectively said that, “Only in a case of arithmetical and/or clerical error, the award can be modified and such errors only can be corrected. All the courts must always adhere to what has been laid down by the Apex Court in this notable judgment!

To start with, this brief, brilliant, bold and balanced judgment authored by Justice MR Shah for a Bench of Apex Court comprising of himself and Justice BV Nagarathna sets the ball rolling by first and foremost observing in para 1 that, “Feeling aggrieved and dissatisfied with the impugned judgment and order dated 18.03.2021 passed by the High Court of Karnataka at Bengaluru in M.F.A. No.7098 of 2018 (AA), by which the High Court has dismissed the said appeal preferred by the appellant herein under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the ’1996 Act’) and has confirmed the judgment and order passed by the XXIXth Additional City Civil & Sessions Court dismissing arbitration suit (A.S. No. 12/2011) under Section 34 of the 1996 Act and  confirming the Arbitral Award dated 04.12.2010, further modified vide order dated 14.01.2011, the original appellant has preferred the present appeal.”

To put things in perspective, the Bench then puts forth in para 2 that, “That the appellant and the respondent herein had entered into an agreement dated 9.7.2003. A dispute arose between the parties relating to recovery of pure gold weighing 3648.80 grams said to have been in the possession of the appellant herein. The respondent invoked the arbitration clause contained in the agreement dated 9.7.2003. The High Court appointed a retired District Judge as the sole arbitrator to adjudicate the dispute between the parties. The respondent filed a claim petition before the learned arbitrator seeking the following reliefs:

“a) to direct the respondent to deliver pure gold weighing 3648.80 grams to the claimant or in the alternative direct the respondent to pay the claimant a sum of Rs.27,00,112.00 towards the cost of pure gold weighing 3648.80 grams (calculated at the rate of Rs.740 per gram);

b) to direct the respondent to pay to the claimant a sum of Rs.11,74,545.00 towards the interest amount due on the said amount of Rs.27,00,112.00 (value of pure gold weighing 3648.80 grams) from June 2003 till date of filing of this claim and further interest on the said amounts at 18% per annum during the pendency of these proceedings and until realization of the same;

c) to direct the respondent to pay to the claimant a sum of Rs.26,50,338.00 towards the loss which has been caused to the claimant on account of the defaults committed by the respondent; and

d) award costs of the proceedings and such other and further reliefs which are just in the interest of justice and equity.””

As we see, the Bench then points out in para 3 that, “The learned arbitrator passed an award dated 04.12.2010 directing the appellant herein to return to the claimant/respondent within three months from the date of the award 3648.80 grams of pure gold along with interest @ 18% per annum calculating the value of gold at Rs.740 per gram from 24.07.2004 and up to the date of delivery of the quantity of gold. The learned arbitrator also passed an award that in the alternative, the appellant shall pay to the claimant/respondent within the said period of three months, the market value of 3648.80 grams of pure gold along with interest @ 18% per annum calculating the value of the gold at Rs. 740 per gram from 24.07.2004 till the date of payment.”

As it turned out, the Bench then enunciates in para 4 that, “Subsequently, the respondent filed an application under Section 33 of the 1996 Act and requested to modify the award dated 04.12.2010 by correcting computational/arithmetical/clerical error by deleting “at Rs. 740 per gram as claimed in the claim statement” at page 14, second para, line 20 and to delete “Rs.740.00 per gram” at page 17, para 15(b), line 3, and substitute the same by “Rs.20,747/- per 10 grams” at page 17, para 15(b), line 3.”

Furthermore, the Bench then mentions in para 5 that, “The learned arbitrator allowed the said application under Section 33 of the 1996 Act vide order dated 14.01.2011 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”.”

As anticipated, the Bench then reveals in para 6 that, “Being aggrieved, the appellant herein filed an arbitration suit under Section 34 of the 1996 Act before the City Civil Court. The said Court dismissed the said suit under Section 34 of the 1996 Act. Further, appeal under Section 37 of the 1996 Act has been dismissed by the High Court, by the impugned judgment and order.”

As a corollary, the Bench then discloses in para 7 that, “Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the High Court and the City Civil Court and the order passed by the learned arbitrator allowing the application under Section 33 of the 1996 Act and modifying the award dated 04.12.2010 as above, the original appellant – respondent before the arbitrator has preferred the present appeal.”

Most significantly and also most remarkably, what forms the cornerstone of this learned judgment is then laid bare in para 12 wherein it is held that, “The original award was passed considering the claim made by the claimant as per its original claim and as per the statement of the claim made and therefore subsequently allowing the application under Section 33 of the 1996 Act to modify the original award in exercise of powers under Section 33 of the 1996 Act is not sustainable. Only in a case of arithmetical and/or clerical error, the award can be modified and such errors only can be corrected. In the present case, it cannot be said that there was any arithmetical and/or clerical error in the original award passed by the learned arbitrator. 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. Therefore, both, the City Civil Court as well as the High Court have committed a grave error in dismissing the arbitration suit/appeal under Sections 34 and 37 of the 1996 Act respectively. The modified award passed by the learned arbitrator allowing the application under Section 33 of the 1996 Act cannot be sustained and the same deserves to be quashed and set aside.”

Finally, the Bench then holds in para 13 that, “In view of the above and for the reasons stated above, the present appeal is allowed. The impugned judgment and orders passed by the High Court in an appeal under Section 37 of the 1996 Act and City Civil Court in arbitration suit under Section 34 of the 1996 Act and the order passed by the learned arbitrator dated 14.1.2011 modifying the original award dated 04.12.2010 are hereby quashed and set aside. Consequently, the original award passed by the learned arbitrator dated 04.12.2010 stands restored. However, in the facts and circumstances of the case, there shall be no order as to costs.”

In summary, the Apex Court in this noteworthy judgment makes it absolutely clear that an arbitrator cannot modify an award on an application under Section 33 of Arbitration Act. All the courts must strictly adhere to what has been laid down by the Apex Court in this notable case. No denying!

Sanjeev Sirohi

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