A two-judge Bench of Justice MR Shah and Justice BV Nagarathna has held that the original Arbitral Award can only be modified under Section 33 of Arbitration Act if there exists any arithmetical or clerical error.
Senior Advocate Mr. Sukumar Pattjoshi appeared for the Appellant while Senior Advocate Mr. Sajan Poovayya appeared for the Respondent during the proceedings before the Court.
An appeal was preferred assailing the judgment of the Karnataka High Court which had dismissed the appeal of the Appellant under Section 37 of the Arbitration Act and upheld the judgment of the City Civil Court dismissing the Arbitration suit under Section 34 thereby confirming the Arbitral Award further modifying the award under Section 33.
In this case, a dispute between the parties arose and was referred to Arbitration. The dispute was related to the recovery of pure gold weighing 3648.80 grams which was in the possession of the Appellant. The Respondent filed a claim petition before the Arbitrator.
The Arbitrator passed an award and directed the Appellant to return to the Respondent-Claimant 3648.80 grams of pure gold along with interest @ 18% p.a. calculating the value of gold at Rs.740 per gram. The Arbitrator also passed an award that the Appellant shall pay to the claimant/Respondent the market value of 3648.80 grams of pure gold with interest at 18% p.a. calculating the value of the gold at Rs. 740 per gram.
This was followed by the Respondent filing an application under Section 33 for modification of award by correcting computational/arithmetical/clerical error by deleting "at Rs. 740 per gram as claimed in the claim statement" at and to delete "Rs.740.00 per gram," and substitute the same by "Rs.20,747/- per 10 grams." The application was allowed.
Aggrieved, the Appellant filed an arbitration suit before the City Civil Court under Section 34 which was dismissed. Also, the appeal under Section 37 was dismissed by the High Court.
It was contended by the Appellant before the Supreme Court under Section 33 of the Arbitration Act, only an arithmetical/clerical error could be corrected. However, the Respondent-Claimant came out altogether with a new claim which was not permissible under Section 33.
While the Respondent argued that what was granted by the Arbitrator was in the context of alternative prayer, even if the original award stood as it is, the Respondent would be entitled to gold which was the first and primary relief claimed and granted by the Arbitrator.
The Apex Court after hearing the contentions of the parties at length, observed, "Only in a case of arithmetical and/or clerical error, the award can be modified and such errors only can be corrected. In the present case, it cannot be said that there was any arithmetical and/or clerical error in the original award passed by the learned arbitrator."
"What was claimed by the original claimant in the statement of claim was awarded. Therefore, the order passed by the learned arbitrator on an application filed under Section 33of the 1996 Act and thereafter modifying the original award cannot be sustained. The order passed by the learned arbitrator in the application under Section 33 of the 1996 Act is beyond the scope and ambit of Section 33 of the 1996 Act," the Bench opined.
Further, the Court added that both the High Court and City Civil Court committed a grave error in dismissing the Arbitration Suit/Appeal under Sections 34 and 37 of the 1996 Act.
Additionally, the Court asserted, "The modified award passed by the learned arbitrator allowing the application under Section 33 of the 1996 Act cannot be sustained and the same deserves to be quashed and set aside."
In the light of these observations, the Court set aside and quashed the impugned order of the High Court passed under Section 37 and restored the original award passed by the Arbitrator dated 04.12.2020 and allowed the appeal.