The Delhi High Court ruled on Monday that under Section 34 of the 1996 Arbitration and Conciliation Act, courts may set aside a portion of an arbitral award if that portion is susceptible of being severable or validly severed from the remainder. Trichy Thanjavur Motorway Ltd vs.
Justice Yashwant Varma observed that the 1996 Act’s proviso to Section 34(2)(a)(iv) already acknowledged that arbitral awards may sometimes be severable. Such accolades may be partially revoked (or partially maintained).
As a result, he ruled that a partial annulment of arbitral awards is not limited to the scenarios outlined in Section 34(2)(a), but can be applied to all scenarios outlined in Section 34.
“Section 34(2)(a)(iv) cannot be interpreted as indicating that a partial setting aside power is available to be invoked only in circumstances that may fall within the scope of that clause…”We are firmly of the opinion that the term “setting aside” as used in Section 34 includes the authority to annul a portion of an award, provided that it is severable and does not affect or overshadow other components,” the ruling stated.
The Court concluded that the fact that the proviso under Section 34(2)(a)(iv) was not repeated in clause (b) of Section 34(2) does not lead to the “inevitable conclusion that a partial setting aside is considered alien” in other circumstances under Section 34 of the 1996 Act.
The Court stated, “Once an award is understood to consist of separate components, each standing separately and independently of the other, there appears to be no impediment to courts adopting the doctrine of severability and invoking a power to set aside an award in part.”
However, it cautioned,
“A partial set-aside should not render a portion of the award susceptible or untenable. Only when the award relates to a claim that stands on its own and its setting aside would not have a domino effect could the court contemplate adopting the aforementioned mode.”
Justice Varma also noted that partially setting aside an arbitral award is distinct from “modifying” or changing the terms of an award.
The current Arbitration Act prohibits the substitution of the Court’s opinion for that of the arbitral tribunal when modifying an award. In its decision in NHAI v. M Hakim, the Supreme Court also clarified that tribunals cannot modify arbitral awards.