The Supreme Court Constitution Bench recently held that the powers of Courts to remand arbitral awards back to the Tribunal under S. 34(4) of the Arbitration and Conciliation Act 1996 cannot be seen as a straight-jacket formula.  

The Court observed that an award should be remitted back only if there is a possibility to correct a defect in the award, but if the entire award suffers from substantial injustice and patent illegality, remittance should be avoided. 

The Constitution Bench (by 4:1)held that Appellate Courts have limited powers to modify arbitral awards while exercising powers under either Section 34 or 37 of the Arbitration and Conciliation Act, 1996.

The bench led by CJI Sanjiv Khanna, comprising Justices BR Gavai,Sanjay Kumar, AG Masih and KV Viswanathan delivered the verdict.

The Court held that the power of remand under S. 34(4) of the Act is of restrictive nature for the Courts. While the remand give flexibility to the tribunals to make amends in the award, when it comes to modification powers, such a flexibility is taken away from the tribunals. 

S.34(4) reads : "(4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award."

S. 34(1) provides that the Court can only set aside an award when such an application is made. 

Considering the same, the majority held that a great deal of caution has to be taken by Courts while exercising the powers of modification just as a sculptor works with his/her chisel to shape his art. 

The Court explained : "The power of remand permits the court only to send the award to the tribunal for reconsideration of specific aspects. It is not an open-ended process; rather, it is a limited power, confined to limited circumstances and issues identified by the court." 

"Upon remand, the arbitral tribunal may proceed in a manner warranted by the situation – including recording additional evidence, affording a party an opportunity to present its case if previously denied, or taking any other corrective measures necessary to cure the defect.

In contrast, the exercise of modification powers does not allow for such flexibility. Courts must act with certainty when modifying an award – like a sculptor working with a chisel, needing precision and exactitude. Therefore, the argument that remand powers make modification unnecessary is misconceived. They are distinct powers and are to be exercised differently." 

Analysing that S.34(4) is derived from UNICITRAL Model Law, the Court held that the provision is discretionary in nature. This is understood from the term 'may' mentioned in the provision. Thus the power to remit the matter back to the tribunal is upon the discretion of the Court when it views the possibility of correcting a defect in the award which could prevent the setting aside of the whole award instead. 

 Tribunal's Powers Under S.34 Cannot Be Used To Rewrite Or Set Aside Entire Award : Bench Explains 

While the Court acknowledged that the Tribunal has flexibility in correcting the curable defects, S.34(4) however, cannot be used as a tool by the Tribunal to completely set aside the award or rewrite it. If the Court is of the opinion that the defect in the award is of such a nature that cannot be corrected by the Tribunal, it should not remit the award back to the Tribunal. In a way, the Court culled that the test to decide on remittance is the extent of the defect and legal means available to correct it. 

"It is clear that Section 34(4) does not authorize the arbitral tribunal to rewrite the award on merits or to set it aside. Rather, it serves as a curative mechanism available to the tribunal when permitted by the court. The primary objective is to preserve the award if the identified defect can be cured, thereby avoiding the need to set aside the award. Accordingly, a court may not grant a remand when the defect in the award is inherently irreparable. A key consideration is the proportionality between the harm caused by the defect and the means available to remedy it." 

The Court also expanded on the aspect of proportionality and explained that in cases where there appears to be substantial injustice, patent illegality -such awards cannot be remitted back. Additionally, the Tribunal has to be trusted to make fair decisions while considering a remitted order. 

"While exercising this power, the court must also remain mindful that the arbitral tribunal has already rendered its decision. If the award suffers from serious acts of omission, commission, substantial injustice, or patent illegality, the same may not be remedied through an order of remand. Clearly, there cannot be a lack of confidence in the tribunals' ability to come to a fair and balanced decision when an order of remit is passed." 

The bench hence concluded that the Court should avoid sending a case back to the arbitral tribunal if it would put the tribunal in a difficult position or cause delays, extra costs, or inefficiencies. If remand is ordered, the tribunal has significant, though limited, power to revise the award under Section 34(4), which contrasts with the court's more restricted role under the rest of Section 34.

"Thus, an order of remand should not be passed when such order would place the arbitral tribunal in an invidious or embarrassing position. Additionally, remand may be inappropriate when it does not serve the interests of the parties, particularly in time-sensitive matters or where it would lead to undue costs and inefficiencies. Once an order of remand is granted, the arbitral tribunal has the authority to vary, correct, review, add to, or modify the award. Notably, under Section 34(4), the tribunal's powers, though confined, remain nonetheless substantial. This stands in contrast to the court's narrow role under the rest of Section 34." 

Decision In Kinnari Mullick Case Incorrect : Supreme Court 

The Court referred to the decision in Kinnari Mullick and Another v. Ghanshyam Das Damani which prescribes the conditions under which a court cannot remand the award back to the tribunal. 

These were (1) the court cannot exercise the power of remand suo motu in the absence of a written request by one of the parties and (2) once an application under Section 34(1) has been decided and the award set aside, the court becomes functus officio and cannot thereafter remand the matter to the arbitral tribunal. 

The bench disagreed with the conditions on the following aspects (1) the request to remit may not necessarily be made in writing, and can be in oral form too; (2) the request can be made even after the application to set aside the award under S. 34 is decided. 

"We are unable to accept the view taken in Kinnari Mullick (supra), which insists that an application or request under Section 34(4) must be made by a party in writing. The request may be oral. Nevertheless, there should be a request which is recorded by the court. We are also unable to agree that the request must be exercised before the application under Section 34(1) is decided."

Justice Viswanathan also agreed on this aspect by saying, "in given cases where it considers appropriate and a request is made by a party even orally, the Court may adjourn the proceeding for a period of time in order to give the arbitral Tribunal an opportunity to resume the arbitral proceeding or to take such other action as in the opinion of the arbitral Tribunal will eliminate the grounds for setting aside the award."

 The bench also held that since the appellate jurisdiction of Courts under S. 37 is coterminous and as broad as the jurisdiction under S.34, it cannot be said that the Court does not have the power to remand the award under S.37. 

" The appellate jurisdiction under Section 37 is coterminous with, and as broad as, the jurisdiction of the court deciding objections under Section 34. Hence, the contention that the tribunal becomes functus officio after the award is set aside is misplaced. The Section 37 court still possesses the power of remand stipulated in Section 34(4). Of course, the appellate court, while exercising power under Section 37, should be mindful when the award has been upheld by the Section 34 court. But the Section 37 court still possesses the jurisdiction to remand the matter to the arbitral tribunal."  

The Court also relied upon the decision in Dyna Technologies Private Limited v. Crompton Greaves Limited, where it was held that the issuance of a reasoned award is not a mere formality under the 1996 Act. Here it was laid that a reasoned award requires three aspects - "it must be proper, intelligible, and adequate." 

Considering the same the Court observed : "The purpose behind Section 34(4) is clear: it allows for an award to become enforceable after granting the tribunal an opportunity to cure any defects. This power is exercisable when the arbitral tribunal has failed to give any reasoning or the award exhibits gaps in reasoning and these defects can be cured, thereby preventing unnecessary challenges. The underlying intent is to provide an effective, expeditious forum for addressing curable defects, which Section 34(4) facilitates."  

Reference is also made to the decision in I-Pay Clearing Services Private Limited v. ICICI Bank Limited, where it was clarified that Section 34(4) does not allow a review of the tribunal's previous findings. Thus the Court re-iterated that the scope of S.34(4) does not have to be seen from a straight-jacketed formula and the powers to remit the award back have to be exercised judiciously. 

"The scope of the power under Section 34(4) is not to be restricted to a rigid, straitjacket formula. Rather, it depends on the specific facts and circumstances of each case. Being a discretionary power, it is to be exercised by the Court judiciously, keeping in mind the grounds raised in the application under Section 34(1)." 

"The Court should be prima facie satisfied that the wrong and illegality in the award are curable. While doing so, the Court need not record the final finding on the contentious issue at hand; however, not every request for such relief is warranted. The discretion must be exercised with caution, and only when it is evident that an adjournment will allow the arbitral tribunal to resolve the issues and remove the grounds for setting aside the award. However, Section 34(4) is an enabling provision—it does not compel the tribunal to take corrective action, leaving it free to either amend or refuse to amend the award."   

 Case Details : GAYATRI BALASAMY Versus M/S ISG NOVASOFT TECHNOLOGIES LIMITED| SLP(C) No. 15336-15337/2021

Citation : 2025 LiveLaw (SC) 508

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