This article has been written by Bhavya Verma, pursuing a Diploma Course in Advanced Contract Drafting, Negotiation, and Dispute resolution from LawSikho. This article has been edited by Prashant Baviskar (Associate, Lawsikho), Ruchika Mohapatra (Associate, Lawsikho), and Indrasish Majumder (Intern at Lawsikho).
This article has been published by Shoronya Banerjee.
Table of Contents
Introduction
The case of Gyan Prakash Arya v. M/s Titan Industries Limited, mainly revolves around the issue of the extent of the power of the arbitrator under Section 33 of the Arbitration and Conciliation Act, 1996. Section 33 of the Act empowers the arbitrator to correct or interpret an award. The arbitral tribunal can correct any computation, clerical, typographical, or any other error of a similar kind. A party within thirty (30) days of the receipt of the award (unless otherwise agreed by the parties) after sending a notice to the other party may request an arbitral tribunal to correct the award and the tribunal may correct the award within thirty (30) days which can be later extended by the tribunal.
The tribunal may correct the award and remove the imperfections only if it does not affect the main decision. Where in the case there is a clerical mistake or an error from an omission or an accidental slip, the same can be rectified either by the tribunal or with the intervention of the court. The arbitrator cannot modify the award to allow a claim made by a party. Even if there are no grounds as stipulated under Section 33, the court may modify an award as per the parties’ compromise.
Facts of the case
Gyan Prakash Arya (appellant) and M/s Titan Industries Limited (respondent) entered into an agreement dated 09.07.2003. The respondent invoked the arbitration clause when a dispute arose between the parties relating to the recovery of pure gold weighing 3648.80 grams in possession of the appellant. The respondent filed a claim petition before the learned arbitrator seeking the following reliefs: –
- To direct respondent (Mr. Gyan Prakash Arya) to deliver pure gold weighing 3648.80 grams or in alternative pay a sum of Rs. 27,00,112.00 towards the cost of pure gold calculated at the rate of Rs. 740 per gram.
- To pay a sum of Rs. 11,74,545.00 towards the interest amount due on the said amount of Rs. 27,00,112.00 from June 2003 till the date of filing the claim and further interest at 18% per annum during the pendency of the proceedings.
- To pay a sum of Rs. 26,50,338.00 towards the loss which has been caused to the claimant on account of the defaults committed.
- Award costs of the proceedings and such other and further reliefs which are just in the interest of justice and equity.
The arbitrator passed an award directing the appellant to return within three (3) months from the date of award the pure gold along with interest @ 18% per annum from 24.07.2004. In the alternative, the appellant shall pay the respondent within three (3) months the market value of the pure gold with interest @ 18% per annum calculating the value of the gold at Rs. 740 per gram from 24.07.2004 till the date of payment.
Subsequent to this, the respondent filed an application under Section 33 of the Act to modify the award by correcting computational/arithmetical/clerical error by deleting “at Rs. 740 per gram” and substituting the same by “Rs.240,727/- per 10 grams”. The said application was allowed by the learned arbitrator and corrected the award.
Being aggrieved, the appellant under Section 34 of the Act filed a suit before the City Civil Court which was further dismissed. Appellant filed an appeal under Section 37 of the Act before the High Court which was also dismissed. The Appellant preferred an appeal feeling aggrieved and dissatisfied by the order passed by the High Court of Karnataka at Bengaluru. The High Court dismissed the appeal and confirmed the order passed by the XXIXth Additional City Civil and Sessions Court. The XXIXth Additional and City Civil and Sessions Court dismissed the arbitration suit under Section 34 of the Act and confirmed the Arbitral Award dated 04.12.2010.
Feeling dissatisfied, the appellant further approached the Supreme Court.
Issues involved
- Whether the appeal made by the appellant is maintainable or not?
- Whether the judgment and order passed by the City Civil Court and the High Court are liable to be quashed and set aside or not?
- Whether the modified award passed by the learned arbitrator is liable to be set aside and quashed or not?
Arguments on behalf of appellant
Shri Sukumar Pattjoshi, learned Senior Advocate representing the appellant contended that the order passed by the learned arbitrator allowing the application under Section 33 and subsequently modifying the original award is beyond the scope and ambit of the jurisdiction of the learned arbitrator under the said provision. He further contended that there was no arithmetical and/or clerical error in the original award passed by the learned arbitrator and the award was passed as per the original claims made by the respondent/claimant and even the discussion by the learned arbitrator was on the claim as made by the original respondent/claimant after the discussion on merits and on appreciation of the evidence on record. Under Section 33 of the Act only arithmetical and/or clerical error can be corrected whereas in the instant case the respondent/claimant came all together with a new claim which is not permissible under the said provision and therefore the City Civil Court and the High Court have erred in upholding the order passed by the learned arbitrator.
Arguments on behalf of respondent
Shri Sajan Poovayya, learned Senior Advocate appearing on behalf of the respondent contended that what has been modified by the learned arbitrator on an application filed under Section 33 of the is in the context of the alternative prayer and the relief being granted by the learned arbitrator. Even if the original award stands as it is, the respondent shall be entitled to the return of the gold which was the first and primary relief claimed and granted by the learned arbitrator.
Judgment
The judgment was passed by J. Mr. Shah and J B.V Nagarathna. The Hon’ble Court observed that the original award passed by the learned arbitrator was as per the original claim made by the respondent and there was a specific finding by the learned arbitrator on the alternative relief of the payment of the value as, “No doubt, the market value of gold has increased to a great extent as on today but in the absence of any reliable proof in this behalf I find that as claimed in the claim statement it is just and reasonable to allow interest on the market value of the balance gold in question at Rs. 740 per gram as claimed in the claim statement and also interest on this amount at 18% per annum from the date of the claim statement and up to the satisfaction of the reliefs to be granted under this award issue Nos. 3 and 3a are answered accordingly.”
Since the original award was passed as per the original claim made by the respondent, therefore, subsequently allowing the application under Section 33 of the Act to modify the Award in the exercise of the powers of the said provisions is not sustainable. Only in the cases of arithmetical and/or clerical error, the award can be modified and in the instant case, there was no such error. Thus, the award passed by the learned arbitrator in the application under Section 33 of the Act is beyond the scope and ambit of the said provision and both the City Civil Court and the High Court have committed a grave error in dismissing the arbitration suit/appeal under Sections 34 and 37 of the Act respectively.
The appeal made by the appellant was allowed and the impugned judgment and order passed by the High Court in an appeal under Section 37 of the Act and the City Civil Court in arbitration suit under Section 34 of the Act and the order passed by the learned arbitrator dated 14.01.2011 modifying the original award were thereby quashed and set aside. Consequently, the original award passed by the learned arbitrator dated 04.12.2010 stood restored.
Judgment analysis
The appellant aggrieved by the decisions of the Arbitral Tribunal and the lower courts preferred an appeal to the Apex Court. The respondent made an application under Section 33 of the Act requesting to change the amount of the claim awarded by the tribunal stating it to be an error as per the said provisions. The tribunal accepted the application, modifying the award. The appellant approached the City Civil Court and the High Court wherein his appeal was dismissed.
The Apex Court read the award in light of Section 33 of the Act and very rightly quashed the modified award and the orders passed by the lower courts. The judgment pronounced by the Apex Court is in conformity with section 33 of the Act and the Court provided the appropriate relief to the aggrieved party as the provision allows modification of the award in the case of arithmetical and/or clerical error.
Before this judgment, Section 33 of the Act could have been easily misused by the parties to harass the other. The Hon’ble Court in the instant case rightly limited the scope of misuse and abuse of the said provision. The said judgment will hold a landmark value in future cases of modification of the awards.
Conclusion
An arbitral award is final and binding upon both parties, Section 33 is incorporated in case there is a human error made in the award. Section 33 enables the Arbitration Tribunal to modify the award in case of any arithmetical and/or clerical error. It safeguards the interests of the parties and prevents arbitral tribunal from making mistakes. No party should be harmed due to the error in the award made by the arbitrator.
The said provision should not be irrationally used by a party just to modify the amount of the claim or modify the award just to gain a benefit out of it. In the instant case, allowing the application by the tribunal and thereafter modifying the award is a travesty of justice.
References
- CIVIL APPEAL NO.6876 OF 2021.
- Bjorn-Jensen & Co v. Lysafght (Australia) Ltd, (1979) 1 Llyod’s Rep 494.
- Hindustan Vidyat Products Ltd. v. M.P. Housing Board, (1999) 3 SCC 536
- Munshi Ram v. Banwari Lal, AIR 1962 SC 903.
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