The Allahabad High Court has ruled that a District Judge, acting under Section 34 of the Arbitration and Conciliation Act, 1996, lacks the authority to alter an arbitration award. The court emphasized that while specific segments of an award can be separated and annulled, this is permissible only if such separation does not affect the rest of the award.
Justice Shekhar B. Saraf, relying on the Supreme Court's decision in Larsen Air Conditioning and Refrigeration Company Vs. Union of India and others, asserted that diminishing interest amounts to a modification of the original arbitration award, deeming it unlawful and contrary to established Supreme Court principles.
The court nullified the District Judge's order that reduced the interest rate granted by the Arbitrator. It underscored that under Section 34 of the Arbitration and Conciliation Act, 1996, the court lacks the authority to modify an award. The court is empowered under Section 34(2) of the Act to annul portions of the award, but such annulment should not impact the upheld sections of the award.
The case involved a claimant/award holder who approached the High Court contesting the District Judge, Kaushambi's order, which partially allowed the appeal. The Arbitrator's awarded interest rate of 14% was diminished to 6% per annum.
Citing Supreme Court decisions in Project Director v. M. Hakeem, S.V. Samudram v. State of Karnataka & Anr., the appellant's counsel argued that the lower court lacked the authority to modify an award. Conversely, the respondent's counsel defended the District Judge's order, asserting that the interest rate reduction was justified.
The court leaned on Larsen Air Conditioning and Refrigeration Company Vs. Union of India and others, where the Supreme Court overturned a High Court's modification of the interest rate awarded by an arbitrator. The Supreme Court argued that the Arbitration Act, 1940 explicitly permitted award modification, whereas the 1996 Act did not grant such authority to any court. Justice Saraf concurred, holding that under Section 34 of the 1996 Act, the lower court cannot modify an arbitration award. Although severance of parts of the award is permissible, the court must address the severed portion as a whole, ensuring it does not impact the remainder of the award.
In summary, the Allahabad High Court's decision reinforces the statutory limitations on a District Judge's power under Section 34 of the Arbitration and Conciliation Act, 1996. It highlights that while annulment of parts of an award is allowed, modification is impermissible. The court's reliance on Supreme Court precedents, particularly Larsen Air Conditioning and Refrigeration Company, underscores the consistent interpretation of the statutory framework governing arbitration awards.
TAGS: District Judge Severance of Award 1996 Act Limitations Appellant Respondent High Court Order Award Holder
