Blog

Introduction

Arbitration in India has grown as a preferred method for resolving disputes, especially in commercial and infrastructure matters. The Arbitration and Conciliation Act, 1996 governs arbitration proceedings in India and aims to reduce judicial interference. One key provision, Section 34, allows courts to set aside arbitral awards under limited circumstances. However, an important question lingered for years—can courts modify an arbitral award under this section?

On April 30, 2025, a five-judge Constitution Bench of the Supreme Court, headed by Chief Justice Sanjiv Khanna, finally addressed this critical issue. In a 4:1 majority, the Court held that modification of arbitral awards is permissible in limited circumstances, but not equivalent to appellate review. This ruling attempts to strike a balance between the need for judicial oversight and the core principle of minimal court interference in arbitration.

Background: What Is Section 34 of the Arbitration Act?

Section 34 of the Arbitration and Conciliation Act, 1996 allows a party to apply to set aside an arbitral award under specific grounds such as:

1. The arbitration agreement was invalid.

2. The party was not given proper notice.

3. The award goes beyond the scope of the arbitration.

4. The award is in conflict with public policy.

But the law does not mention whether a court can modify or alter the award instead of setting it aside. This created confusion among courts and litigants, with conflicting decisions over the years.

The Constitution Bench’s Verdict: Overview

The Constitution Bench addressed whether courts have the power to modify arbitral awards under Section 34. Here's what they ruled:

• Majority View (4 Judges - CJI Sanjiv Khanna, Justices B.R. Gavai, P.V. Sanjay Kumar, A.G. Masih):

  1. Modification is allowed in limited cases.

  2. Courts can modify post-award interest.

  3. Supreme Court can invoke Article 142 of the Constitution for modification.

  4. Rectification of clerical or computation errors is permitted.

• Dissenting View (Justice K.V. Viswanathan):

  1. No power of modification under Section 34.

  2. Only powers allowed are setting aside or remitting the award.

  3. Article 142 cannot be used to modify arbitral awards.

  4. Post-award interest cannot be altered by courts.

Severance of Award Under Section 34: All Judges Agree

The term "severance" means splitting an invalid portion of an award from the valid portion. This allows courts to partially set aside the invalid part while retaining the valid parts.

All five judges, including Justice Viswanathan, agreed that:

1. Courts have the power to sever parts of an award.

2. This is explicitly provided under Section 34(2)(a)(iv).

3. It helps maintain valid portions without starting a new arbitration.

4. Severance is allowed only when the parts are legally and practically separable.

Power to Modify vs. Power to Partially Set Aside

This was the key point of divergence between the majority and the dissenting judge.

What the Majority Held:

1. The ability to sever parts of an award implies a limited power to modify.

2. This avoids the hardship of setting aside the entire award and forcing parties to re-arbitrate.

3. Section 34’s silence on modification doesn't mean absolute prohibition.

They emphasized:

"Denying courts the authority to modify an award would defeat the purpose of arbitration by increasing costs and delays."

What Justice Viswanathan Said:

1. Severance and modification are not the same.

2. Severance means to remove, while modification means to change.

3. Courts can only remit or set aside awards under Section 34—not modify them.

4. Cited Section 43(4) to support the view that hardships due to setting aside are part of the arbitration system.

Rectifying Clerical and Typographical Errors

The majority clarified that courts have the power to correct manifest errors like:

1. Clerical mistakes.

2. Arithmetic or calculation errors.

3. Typing or obvious factual mistakes.

They said this power is similar to Section 152 of the Civil Procedure Code, which allows correction of accidental errors in judgments.

However, this does not mean the court can review or alter the award’s merits.

Justice Viswanathan's View:

1. Agreed that courts can rectify errors, but this is a narrow exception.

2. Rejected the idea of a broader modification power.

Interest on Awards: Different Types, Different Rules

There are two types of interest in arbitral awards:

1. Pendente Lite Interest – During the arbitration.

2. Post-Award Interest – After the award is announced.

Majority’s View:

1. Courts cannot modify pendente lite interest.

2. Courts can modify post-award interest in limited cases, especially if:

   1. The arbitrator's rate is unjust.

   2. Market shifts make the rate unreasonable.

   3. It helps avoid setting aside the whole award.

They emphasized that Section 31(7)(b) of the Arbitration Act allows post-award interest and that courts can tweak it when needed.

Justice Viswanathan's Dissent:

1. Firmly rejected the court’s ability to change any interest amount.

2. Stated that even if the interest rate is flawed, the proper remedy is to remit the matter under Section 34(4).

3. Argued that India follows the UNCITRAL Model Law, which bars such modifications.

Use of Article 142 of the Constitution

Article 142 allows the Supreme Court to pass any order necessary to ensure complete justice.

Majority Opinion:

1. Article 142 can be used to modify awards in rare cases.

2. Should be exercised with great caution.

3. Cannot be used to review the merits of an award.

Justice Viswanathan’s Objection:

1. Strongly opposed using Article 142 to modify arbitral awards.

2. Said it would violate the Arbitration Act.

3. Article 142 cannot override the express limitations in the law.

Enforcement of Foreign Awards: A Divided View

A concern was raised that modifying arbitral awards could affect their enforceability in foreign countries, especially under the New York Convention.

Majority's Response:

1. The concern is unfounded.

2. The Convention respects the domestic law of the seat of arbitration.

3. Since Indian law now permits limited modification, it's valid under the Convention.

Justice Viswanathan’s Warning:

1. Disagreed strongly.

2. Said modifications could threaten enforcement of Indian awards abroad.

3. Unlike the UK or Singapore, India lacks provisions recognizing court-modified awards.

Statutory Arbitration: Special Case?

Statutory arbitrations, like those under the National Highways Act, are not by mutual consent but compulsory under law.

Some argued that courts should be allowed to modify awards (e.g., compensation in land acquisition cases) in these cases.

Verdict from Both Majority and Dissent:

1. Section 34 does not differentiate between statutory and consensual arbitration.

2. Uniform standards apply.

3. No special modification power for statutory arbitrations.

Revisiting the NHAI v. M. Hakeem Case

In 2021, the Supreme Court ruled in Project Director, NHAI v. M. Hakeem that courts cannot modify arbitral awards under Section 34.

Current Judgment:

1. Majority view indirectly departs from Hakeem, without expressly overruling it.

2. Justice Viswanathan upheld Hakeem, calling it a correct and binding precedent.

Suo Moto Remand by Courts

Can courts on their own send an award back to the tribunal for correction?

Majority Opinion:

1. Courts can remit an award under Section 34(4), but only if a party requests it.

2. The request can be oral or written.

3. This power is separate from the power to modify.

Justice Viswanathan's Take:

1. Courts can suo moto remit the matter without a request.

2. Called it a “safety valve” in the arbitration process.

Key Takeaways for Legal Practitioners and Businesses

Conclusion

This landmark judgment has clarified a long-debated issue in arbitration law. While the Supreme Court has now allowed limited modification of arbitral awards, it has simultaneously placed important checks and balances to avoid misuse of this power.

For legal professionals, this decision provides new tools to address genuine errors in arbitral awards without restarting arbitration. For businesses, it ensures faster dispute resolution and less cost escalation.

However, the dissenting opinion also acts as a cautionary note, reminding courts and litigants to respect the limited role of judiciary in arbitration matters.

As the Indian arbitration ecosystem matures, this ruling could pave the way for further clarity and confidence in the arbitration process—both domestically and internationally.

Introduction

The independence of the judiciary is a cornerstone of any democratic nation. It ensures that justice is delivered fairly, without any influence from the executive or legislature. In India, the judiciary holds a unique and powerful position, acting as the guardian of the Constitution and the protector of fundamental rights. This independence is not just a legal concept but a practical necessity for upholding the rule of law and maintaining citizens’ trust in the justice system.

The Concept of Judicial Independence

Judicial independence means that the judiciary must be free from any external influence, particularly from the executive and legislative branches of the government. It should have the liberty to interpret and apply laws impartially.

In the Indian context, this independence is essential to:

1. Ensure fair justice to all citizens.

2. Safeguard fundamental rights against any misuse of power.

3. Maintain checks and balances in governance.

Without an independent judiciary, the rights enshrined in the Constitution would merely be symbolic.

Constitutional Framework for Judicial Independence

India’s Constitution contains several provisions that collectively build the foundation for an independent judiciary. Let’s explore them one by one.

Separation of Powers

Article 50 of the Indian Constitution explicitly advises the state to separate the judiciary from the executive in public services. This ensures that judges are not under the administrative control of the executive.

This division of power among the three wings—Legislature, Executive, and Judiciary—prevents concentration of power and keeps the government in check.

Appointment and Tenure of Judges

The appointment and tenure of judges are crucial in maintaining judicial independence.

The Collegium System

India follows the Collegium System for appointments to the higher judiciary. The system emerged from three landmark cases known as the Three Judges Cases:

• First Judges Case (1981): Gave primacy to the executive.

• Second Judges Case (1993): Shifted power to the judiciary through the Collegium.

• Third Judges Case (1998): Expanded the Collegium to include four senior-most judges.

This Collegium, led by the Chief Justice of India, makes recommendations for appointments and transfers in the higher judiciary.

Tenure and Security

1. Supreme Court Judges retire at 65, High Court Judges at 62.

2. Judges cannot be removed except through impeachment by Parliament, making arbitrary removal impossible.

This job security protects judges from political retaliation or coercion.

Judicial Review

Judicial Review empowers the courts to scrutinize the constitutionality of laws passed by the legislature and actions by the executive.

1. Article 13 invalidates any law that violates fundamental rights.

2. Kesavananda Bharati v. State of Kerala (1973): Introduced the Basic Structure Doctrine, protecting core elements of the Constitution from amendment.

This power keeps the Parliament and Executive accountable to constitutional principles.

Immunity and Privileges

To maintain their independence:

1. Judges enjoy legal immunity for decisions made in their official capacity.

2. They cannot be prosecuted for judicial acts under Article 121 and 211, except by impeachment.

This helps judges function without fear of reprisal from disgruntled parties.

Financial Independence

A financially independent judiciary cannot be manipulated through budgetary controls.

1. Judges’ salaries and allowances are charged from the Consolidated Fund of India, meaning they are not subject to vote in Parliament.

2. The judiciary controls its administrative expenses, ensuring autonomy in decision-making.

Judicial Independence in Landmark Cases

The Indian judiciary has often demonstrated its independence through bold verdicts. Let’s explore some landmark examples:

Indira Gandhi v. Raj Narain (1975)

The Allahabad High Court invalidated then-Prime Minister Indira Gandhi’s election, showing that no one is above the law. This judgment was a strong statement of judicial independence.

Kesavananda Bharati Case (1973)

The Supreme Court ruled that Parliament cannot alter the “basic structure” of the Constitution, including judicial independence, even through constitutional amendments.

Supreme Court Advocates-on-Record Association v. Union of India (2015)

The court struck down the National Judicial Appointments Commission (NJAC), which gave the executive a say in judicial appointments. The judgment restored full control to the Collegium system, reaffirming that appointment of judges must remain independent of political influence.

Challenges to Judicial Independence in India

Despite the strong framework, judicial independence in India is not without its share of hurdles.

Political Pressure

High-profile and politically sensitive cases often bring pressure from ruling governments.

Examples include:

1. Postponed hearings in cases involving powerful politicians.

2. Delay in judicial appointments due to executive withholding approvals.

Though not always explicit, such interference can erode trust in the judiciary.

Judicial Corruption

A few isolated incidents of judicial corruption have emerged, affecting the judiciary’s image and questioning its integrity.

For example:

1. Bribery allegations against retired judges.

2. Lack of a transparent mechanism to discipline judges.

Lack of Transparency in Judicial Appointments

The Collegium System, though independent, has been criticized for being opaque and arbitrary.

1. No published criteria for selection.

2. No detailed reasoning for accepting or rejecting names.

3. The process remains closed to public scrutiny, inviting suspicion.

Many experts and citizens alike have called for a more transparent system, possibly with Parliamentary oversight.

Inadequate Security for Judges

Several judges face threats when handling controversial cases, such as:

1. Encounters involving politicians or gangsters.

2. High-profile corruption or terrorism cases.

The murders of Judge Loya and other judicial officers sparked national concern about judges’ safety.

Providing better protection is essential to allow them to function without fear.

Role of Media and Public Perception

The media plays a vital role in both strengthening and undermining judicial independence.

Positive Role:

1. Highlights judicial delays and lack of access to justice.

2. Spreads awareness about landmark rulings and rights.

Negative Role:

1. Media trials can influence public perception and sometimes judges themselves.

2. Continuous pressure and judgment in the "court of public opinion" may interfere with fair trials.

Hence, while media freedom is vital, responsible reporting is equally important to preserve judicial independence.

Judiciary as a Guardian of Democracy

India’s judiciary not only interprets laws but also acts as a bulwark against authoritarianism.

Some examples include:

• Golak Nath v. State of Punjab (1967): Limited Parliament’s power to amend Fundamental Rights.

• Maneka Gandhi v. Union of India (1978): Expanded the interpretation of Article 21 (Right to Life).

• Navtej Singh Johar v. Union of India (2018): Decriminalized homosexuality under Section 377 IPC, advancing individual liberty.

Each of these judgments proved how an independent judiciary can shape India’s social and democratic evolution.

International Recognition of Indian Judiciary

India’s judiciary has been recognized globally for its progressive judgments and activism.

1. The Public Interest Litigation (PIL) mechanism is viewed as a global model for ensuring justice to marginalized communities.

2. India’s courts are also looked upon for balancing rapid economic development with environmental sustainability (e.g., banning firecrackers, pollution checks).

This global respect has been built on the foundation of judicial independence and constitutional integrity.

Suggested Reforms for Strengthening Judicial Independence

To preserve and enhance the independence of the judiciary, the following reforms may be considered:

Judicial Accountability and Ethics Code

1. An enforceable code of conduct for judges.

2. Transparent disciplinary mechanisms for erring judges.

Judicial Appointments Commission with Safeguards

1. A new version of NJAC that maintains independence while ensuring transparency.

2. Balanced representation from judiciary, executive, and civil society.

Better Infrastructure and Budget Allocation

1. Courtrooms and staff are often overburdened.

2. A well-funded judiciary is necessary for quicker justice delivery and reducing pendency.

Digital Reforms

1. Use of AI and digitization to ensure timely delivery of justice.

2. Transparency in case listings and reasons for adjournments.

Conclusion

The independence of the judiciary is more than just a constitutional requirement—it is a lifeline of democracy in India. It ensures that the rule of law prevails, fundamental rights are protected, and justice is delivered without fear or favor.

India’s judiciary has, time and again, demonstrated its strength by standing up to political pressures, defending constitutional values, and ensuring that the voices of citizens are heard. However, to keep this independence intact, constant vigilance, thoughtful reforms, and public support are essential.

A democracy is only as strong as its institutions, and the judiciary stands as the last line of defense against injustice. Safeguarding its independence is, therefore, a duty of the state, the legal community, and every citizen.

The judiciary plays a pivotal role in any democratic nation, ensuring the proper interpretation and implementation of laws while upholding constitutional ideals. In India, with a rich and diverse tapestry of cultures, religions, and languages, the judiciary's role becomes even more significant. This blog aims to delve into the functioning of the Indian judiciary and assess how effectively it has served the constitutional ideals laid down by the framers.

Understanding the Indian Judiciary

Structure of the Judiciary

The Indian judiciary comprises the Supreme Court, high courts, and subordinate courts. The Supreme Court is the apex body, responsible for interpreting the constitution and ensuring its supremacy. High courts exist at the state level, overseeing the judiciary within their respective jurisdictions. Subordinate courts include district courts, sessions courts, and various specialized tribunals.

Independence of the Judiciary

One of the cornerstones of a functional judiciary is its independence. In India, the Constitution provides various safeguards to ensure the independence of the judiciary. Judges are appointed through a rigorous process, and their removal is subject to strict procedures to prevent undue interference from the executive or legislative branches.

Judiciary and Constitutional Ideals

Fundamental rights are the bedrock of the Indian Constitution, guaranteeing citizens' freedoms and liberties. The judiciary acts as the guardian of these rights, ensuring their enforcement and protecting individuals from any infringement by the state or other entities. Landmark judgments such as Kesavananda Bharati v. State of Kerala and Maneka Gandhi v. Union of India have expanded the scope of fundamental rights, reinforcing their significance in the Indian legal framework.

Judicial Review

The power of judicial review enables the judiciary to scrutinize the actions of the executive and legislative branches to ensure their conformity with the Constitution. Through this mechanism, the judiciary acts as a check on the government's exercise of power, preventing any arbitrary or unconstitutional actions. Several landmark cases, including Golaknath v. State of Punjab and S.R. Bommai v. Union of India, have established the judiciary's authority to review legislative and executive actions, thereby safeguarding the constitutional balance of power.

Protection of Minority Rights

India's diversity is reflected in its commitment to protecting minority rights. The judiciary plays a crucial role in safeguarding the rights of religious, linguistic, and cultural minorities against any discrimination or marginalization. Cases such as Mohd. Hanif Qureshi v. State of Bihar and T.M.A. Pai Foundation v. State of Karnataka have underscored the importance of minority rights in the Indian constitutional framework, emphasizing equality and inclusivity.

Social Justice and Welfare

Beyond protecting individual rights, the Indian judiciary has also championed social justice and welfare measures to promote equality and inclusivity. Through public interest litigation (PIL) and other mechanisms, the judiciary has intervened in matters relating to environmental protection, healthcare, education, and labor rights, ensuring that constitutional ideals translate into tangible benefits for all sections of society. Notable cases like Vishaka v. State of Rajasthan and Olga Tellis v. Bombay Municipal Corporation have set precedents for the judiciary's proactive role in advancing social justice.

Challenges and Criticisms

Despite its significant contributions, the Indian judiciary faces several challenges and criticisms that affect its ability to fully realize constitutional ideals:

1. Backlog of Cases: The judiciary grapples with a massive backlog of cases, leading to delays in the delivery of justice and undermining public confidence in the legal system.

2. Access to Justice: Despite efforts to promote legal aid and facilitate access to justice, marginalized communities often face barriers in availing legal remedies, exacerbating inequalities within the legal system.

3. Judicial Activism vs. Restraint: Debates persist regarding the appropriate role of the judiciary, with some critics arguing that judicial activism encroaches upon the domain of the executive and legislative branches, potentially undermining the principle of separation of powers.

4. Transparency and Accountability: Ensuring transparency and accountability within the judiciary remains a challenge, with concerns raised regarding judicial appointments, ethical conduct, and disciplinary mechanisms.

Conclusion

The Indian judiciary plays a vital role in upholding constitutional ideals, safeguarding fundamental rights, promoting social justice, and ensuring the rule of law. Despite facing challenges, it has made significant contributions to India's democratic fabric through its commitment to judicial independence, constitutional principles, and public welfare. Moving forward, addressing the judiciary's challenges and fostering greater accountability and transparency will be essential to furthering its effectiveness in serving the constitutional ideals enshrined in the Indian Constitution.

FAQs

1. What is the role of the Indian judiciary in upholding constitutional ideals?

The Indian judiciary serves as the guardian of the Constitution, ensuring that laws and actions by the government adhere to constitutional principles, including protecting fundamental rights, promoting social justice, and maintaining the rule of law.

2. How does the judiciary protect fundamental rights in India?

The judiciary safeguards fundamental rights through judicial review, ensuring that laws and government actions do not infringe upon the freedoms and liberties guaranteed to citizens by the Constitution.

3. What is the significance of judicial review in the Indian legal system?

Judicial review allows the judiciary to examine the constitutionality of laws and government actions, acting as a check on the executive and legislative branches to prevent any arbitrary or unconstitutional exercise of power.

4. Can you provide examples of landmark cases that have shaped the judiciary's role in India?

Cases such as Kesavananda Bharati v. State of Kerala, Maneka Gandhi v. Union of India, and S.R. Bommai v. Union of India have played pivotal roles in defining and expanding the judiciary's authority and responsibilities within the Indian constitutional framework.

5. How does the judiciary address issues related to minority rights in India?

The judiciary protects minority rights by ensuring equality and non-discrimination, as enshrined in the Constitution.