Can Arbitral Awards Be Modified In Setting-Aside Proceedings? – A Brief On Supreme Court’s Re-Interpretation Of Section 34 Of Arbitration Act

In India’s evolving arbitration framework, Section 34 of the Arbitration and Conciliation Act, 1996 has long been viewed as a narrow channel—one that permits only the setting aside of arbitral awards, not their modification or correction. However, a recent Supreme Court judgment has recalibrated that understanding, hinting at a more pragmatic approach to judicial oversight.

📘 The Legal Landscape Before

Traditionally, courts have interpreted Section 34 strictly. The belief was clear: a court can either uphold the arbitral award or strike it down—but cannot alter its contents. This position aimed to preserve the sanctity of arbitration by minimizing court interference.

But this approach, while principled, often led to rigid outcomes—especially when an award had only minor defects. In such cases, full annulment seemed disproportionate.

🏛️ What the Supreme Court Now Says

In a recent decision, the Supreme Court acknowledged this dilemma and indicated that courts should not be powerless when only a portion of the award is flawed. The Court suggested that limited modification—without delving into reappreciation of facts—might be permissible when it serves justice and avoids unnecessary re-arbitration.

This doesn’t open the floodgates to judicial rewriting of awards—but it softens the boundary between “set aside” and “modify.”

⚖️ Why This Matters

This shift matters because:

• Commercial disputes often involve complex claims, some of which may be legally sound while others may not.

• A complete annulment means starting over, which undermines efficiency—one of arbitration’s main advantages.

• Modification, if carefully allowed, balances fairness and finality.

🛑 Still, Not a Free Pass

It’s important to emphasize: the court did not discard the McDermott precedent altogether. Any intervention must:

• Be minimal

• Address a clear legal defect

• Avoid any factual reassessment

In essence, the judiciary is not becoming a substitute arbitrator.

✅ Conclusion

The Supreme Court’s reinterpretation of Section 34 reflects a mature, context-driven evolution of arbitration law in India. While preserving arbitral autonomy, it allows room for the courts to correct injustice without overstepping. This development could make India’s arbitration regime more commercially viable and globally aligned, offering fairer, faster outcomes when applied with judicial discipline.