Madras High Court's Landmark Ruling Clarifies Jurisdiction on Arbitral Award Modifications

Remand Orders by Division Bench Reconsidered Amid Conflicting Precedents and Supreme Court References

In a pivotal judgment, the Madras High Court, presided by Justice N. Anand Venkatesh, navigated a complex legal landscape surrounding the modification of arbitral awards under the Arbitration and Conciliation Act, 1996. The ruling addressed the jurisdictional powers of courts under Sections 34 and 37 of the Act, particularly in light of the conflicting precedents set by the Supreme Court's decision in NHAI v. M. Hakeem (2021) and its reconsideration in Gayatri Balasamy v. ISG Novasoft Technologies Ltd. (2025).

The court was confronted with multiple petitions remanded by a Division Bench without addressing the merits, leaving the Section 34 court in a legal conundrum. The petitions, originally challenging arbitral awards, had been remanded for a de-novo hearing despite the Division Bench not vacating the findings on merits. This raised a crucial question: whether a Section 34 court could implement a remand order when the appellate court under Section 37 had not addressed the merits or set aside the findings.

Justice Venkatesh highlighted the jurisdictional limitations imposed by the Supreme Court in the Hakeem case, which initially restricted courts from modifying arbitral awards under Section 34. However, the subsequent Supreme Court ruling in Gayatri Balasamy clarified that modifications were permissible under limited circumstances, such as severing invalid portions or correcting clerical errors.

The judgment underscored the procedural challenges faced by the courts due to the Division Bench's remand orders, which did not engage with the merits of the cases. This resulted in a legal impasse, as the Section 34 court could not conduct a de-novo hearing without reversing the findings on merits.

The court emphasized the need for clarity in the appellate process, citing the Supreme Court's guidelines in cases such as Bombay Slum Redevelopment Corpn. (P) Ltd. v. Samir Narain Bhojwani, which restrict remand orders to exceptional circumstances. It further noted that the Division Bench's remand orders did not satisfy these criteria, thus complicating the implementation of a de-novo hearing.

In light of these complexities, Justice Venkatesh suggested that the parties consider seeking a review of the Division Bench's remand orders, allowing for a reassessment in line with the latest Supreme Court precedents. The judgment marks a significant development in arbitration law, highlighting the evolving judicial stance on the modification of arbitral awards and the procedural intricacies of appellate jurisdiction.

Bottom Line:

Arbitration and Conciliation Act, 1996 - Jurisdiction of Section 34 and Section 37 Courts regarding modification of an arbitral award clarified in light of precedents and recent judgments.

Statutory provision(s): Arbitration and Conciliation Act, 1996 - Sections 34 and 37; Civil Procedure Code, 1908 - Order XLI Rule 23-A

Electronics Corporation of Tamil Nadu Limited v. ICMC Corporation Limited, (Madras) : Law Finder Doc Id # 2809948