Section 34 ACA sets forth the standards against which courts are to judge the arbitral award, the final “product” of the arbitral proceedings.  Phraseology borrowed from commentary on Article 34 of Model Law in Howard M Hotlzmann & Joseph E Neuhaus, A Guide to the UNCITRAL Model Law on International Commercial Arbitration, Wolters Kluwer Show More Does Section 34 ACA also include a power to modify the award?
Answering, no, the 2-judge bench in Hakeem noted that the point “stands concluded” by three prior decisions of the Supreme Court. Speaking for the court, Nariman J gave several other reasons as well.
However, exercising power under Article 142 of the Constitution of India,  Article 142 of the Indian Constitution “is conceived to meet situations which cannot be effectively and appropriately tackled by the existing provisions of law.” It states that the Supreme Court may pass such decree or make such order as is necessary for doing complete justice in any cause or matter pending before it. Show More the court upheld the modification of the awards in question.
A. Why did the question of power to modify an award arise?
Several arbitral awards were made under the National Highways Act, 1956   One of the laws enacted by the Indian Parliament to deal with the road network. Show More :
The landowners filed set-aside applications before the District and Sessions Judge, who enhanced the compensation and, thus, modified the awards.  Nariman J gave an illustration of a case where amounts ranging from INR 46.55 to 83.15 per square meter was made. In all cases the amounts were enhanced to INR 645 per square meter. Show More
In appeal, a 2-judge bench upheld the modification. The matters reached the Supreme Court on NHAI’s appeal.
B. The court gave ten reasons as to why Section 34 ACA does not provide the power to modify the award
First, the text itself of Section 34 ACA:
Second, Article 34 of the Model Law:
Third, the Arbitration Act, 1940 had contrasting and broader provisions. The award could be remitted, modified or otherwise set aside.
Fourth, in set-aside proceedings, there is a prohibition against merits-based review (citing authorities).
Fifth, the point (if Section 34 ACA gives the power to modify) “stands concluded” and “settled finally by at least three decisions of this court”:
Sixth, the court noted that some of the judgments of the High Courts “are also instructive” and referred to three of Delhi High Court’s decisions  Cybernetics Network Pvt. Ltd. v. Bisquare Technologies Pvt. Ltd., 2012 SCC OnLine Del 1155; Nussli Switzerland Ltd. v. Organizing Committee Commonwealth Games, 2014 SCC OnLine Del 483; and, Puri Construction P. Ltd. v. Larsen and Toubro Ltd., 2015 SCC OnLine Del 9126. Show More which in turn had referred to several authorities.
Seventh, the court addressed the “sheet anchor” of NHAI’s argument, that is, the judgment of a single judge of the Madras High Court in Gayatri Balaswamy v. ISG Novasoft Technologies Ltd., 2014 SCC OnLine Mad 6568   Decided on 02 September 2014 by V Ramasubramanian J. Show More that was upheld in appeal by a 2-judge bench:
Eighth, even apart from Indian precedent, the arbitral statutes of England, the United States, Canada, Australia and Singapore also lead to the same conclusion. They have express provisions that permit the varying of an award.
Ninth, the argument based on unfair appointment procedure (government servant rubber-stamping the award which cannot then be challenged on merits) was rejected, stating that it could not possibly lead to the conclusion that a challenge on merits must be provided driving a coach and four through Section 34 ACA.
Tenth, he rejected a submission that the doctrine of purposive construction   The submission was made based on a passage in Jaishri Laxmanrao Patil v. Chief Minister, 2021 SCC Online SC 362. Jaishri, in turn, had referred to a seven-Judge Bench judgment on principles of interpretation of Constitution in Abhiram Singh v. CC Commachen, (2017) 2 SCC 629. And in Abhiram, the court had reproduced a passage from Bennion’s Statutory Interpretation, 6th Edn. Nariman J rejected the ‘purposive construction’ argument noting that the case cited dealt with a constitutional provision, and that there was a distinction between constitutional and statutory interpretation. He also referred to his own concurring judgement in Eera v. State (NCT of Delhi), (2017) 15 SCC 133, in which he had used the expression “creative interpretation”. However, he had also said that “creative interpretation” has its limit: “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 “ought.” Show More should be applied. He noted that “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.” However, he added, “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.”
C. Disposition: why was the award’s modification not interfered with?
The court referred to Taherakhatoon v. Salambin Mohammad, (1999) 2 SCC 635 for the proposition that “even after we declare the law and set aside the High Court judgment on law, we need not interfere with the judgment on facts, if the justice of the case does not require interference under Article 136 of the Constitution of India.”
It declined to interfere with the modified award because:
Categories: Application for Setting Aside Arbitral Award | Article 142 Constitution of India | Article 34 Model Law | Finality of Arbitral Awards | M Hakeem | Modification of Arbitral Award | Recourse Against Arbitral Award | Remand of Award | Remission of Award | Section 34 ACA | UNCITRAL Model Law