Supreme Court Judgment on Section 33 of the Arbitration Act

Case name: Gyan Prakash Arya v. M/s. Titan Industries Limited (LL 2021 SC 669)

Overview

The Supreme Court recently observed that an arbitrator cannot modify the award on an application given under section 33 of the Arbitration and Conciliation Act, 1996. The Supreme Court also clarified that arbitral awards can only be modified on grounds of arithmetic and clerical errors. The court emphasized that only such errors can be rectified and nothing else. The judgment was given by a division bench of Justices MR Shah and BV Nagaranthna. 

Facts

The arbitral award was given on 4th December 2010. The appellant had challenged the award in XXIX Additional City Civil & Sessions Court initially where the appeal was dismissed. The High Court also dismissed the appeal. Now, the appellant has challenged the award in the Supreme Court under the civil appellate jurisdiction. 

The appellant and respondent had entered into an agreement on 9th July 2003. A dispute arose relating to the recovery of pure gold weighing 3648.80 grams. It was in the possession of the appellant at that time. The respondent invoked the arbitration clause under the agreement to resolve the dispute. A sole arbitrator was appointed to adjudicate the matter between the parties. The respondent asked for several reliefs to be granted to him.

The arbitrator passed an award on 4th December 2010. The award was made in favor of the respondent. It directed that the appellant should return the gold weighing 3648.80 grams to the respondent and the interest rate would be 18% per annum calculating the value of gold at Rs.740 per gram from 24th July 2004 and up to the date of delivery of the quantity of gold. The appellant was directed to do the same within three months from the date of declaring the award. 

Under section 33 of the Arbitration Act, the respondent filed an application to modify the award. The arbitrator allowed the application and modified the award henceforth. 

Arguments on behalf of the Appellants:

The appellant submitted that allowing the respondent’s application to modify the award and further modifying the award is beyond the scope of the arbitrator’s jurisdiction. It was also submitted that there was no clerical error in the initial award so there is no logical explanation as to why the award was modified. The initial award was given on the merits of the case and as per the original demands of the respondent. Further, the respondent filed an application seeking a new demand which is not permissible under section 33 of the Arbitration Act. Only arithmetical and clerical errors can be corrected under the section and no new claim can be bought. Lastly, it was submitted that both the City Civil Court and the High Court have materially erred in upholding the arbitral award by allowing the application to be modified under section 33 of the Arbitration Act. 

Arguments on behalf of the Respondents:

The respondent submitted that the arbitrator had modified the award concerning the alternate relief claimed by the respondent. The respondent’s counsel was unable to defend the arbitrator’s action to allow the application and modify the award. It was submitted that even if the original award was to be considered the appellant still have to return the gold weighing 3648.80 grams. Returning the gold was the main and primary relief granted by the arbitrator. 

SC Judgment:

The Supreme Court stated that the original award given by the arbitrator was according to the original claim of the respondent. The arbitrator’s decision to allow the respondent’s application to modify the award cannot be sustained under section 33 of the Arbitration Act. The Supreme Court stated that only arithmetical errors can be modified under the aforementioned section. the award passed by the arbitrator and allowing the respondent’s application under section 33 of the Arbitration Act is beyond the section’s scope and ambit. The modified award given by the arbitrator has been quashed and set aside by the court. In addition, the City Civil Court as well as the High Court have committed a grave error in dismissing the arbitration appeal under sections 34 and 37 of the Arbitration Act. The original award passed by the arbitrator on 4th December 2012 has been restored by the court.

Author:

Mili Rawat
Dehradun
B.A.LLB(Hons.) from National Law Institute University, Bhopal.