S.V. SAMUDRAM vs.

STATE OF KARNATAKA & ANR1

CASE TYPE CIVIL APPEAL/8067/2019

CITATION [2024] 1 S.C.R. 281; 2024 INSC 17; 2024 LiveLaw (SC) 14

CORUM ABHAY S. OKA AND SANJAY KAROL2, JJ.

DATE OF JANUARY 4, 2024

FACTS OF THE CASE

Mr. S.V. Samudram (Appellant) has entered into a contract from the Karnataka State Public
Works Department (Respondent) on January 29, 1990 to construct the office and residence of
the Chief Conservator of Forests at Sirsi for an amount of Rs. 14.86 Lakhs with a stipulation
that that the possession of the construction site would be handed over to the
Claimant-Appellant on March 8, 1990 and the work allotted was to be completed on or before
May 6, 1992 i.e. 18 months from the date of the agreement excluding the monsoon season.

However, it was claimed by the Claimant-Appellant that the work allotted could not be
completed on time by the him, because the PWD department responsible did not clear his
bills, repeatedly at every stage and also due to delays caused by change of site and in delivery
of material for such construction.

In order to settle the claims, the parties resorted to the arbitration proceedings, and the
claimant-appellant filed his claim before the learned Arbitrator totalling to Rs.18,06,439/-
along with an interest payable thereupon @18% per annum. Among the 11 claims filed by the
claimant-appellant, only 9 claims were awarded by the learned arbitral tribunal totalling to
Rs. 14,68,239/- with interest payable @18%.

Assailing the order of the arbitrator, the respondent preferred a petition under Section 34 of
the Act. The Ld. Civil Judge while deciding the Section 34 petition modified the award
passed by the tribunal and reduced the amount of claim to Rs. 3,71, 564 with interest @9%
interest, and also provided the reasoning to that effect.

Thereafter, against the Section 34 Petition order, the claimant-appellant preferred a Section
37(1) petition before the High Court of Karnataka, which has confirmed the modification of

1
S.V. Samudram v. State of Karnataka and Anr.
https://www.livelaw.in/supreme-court/supreme-court-judgment-arbitral-awards-modification-arbitration-and-con
ciliation-act-245921
2
Author of the Judgement
the arbitral award as has been done by the learned Civil Judge, dismissing the application on
part of the Claimant-Appellant.

ISSUES INVOLVED IN THE CASE

Whether arbitral award may be modified under Section 34/37 of the Arbitration and
Conciliation Act, 1996.

ANALYSIS

1. Arbitral awards cannot be modified under Section 34

The apex Court has observed that the position as to whether an arbitral award can be
modified in the proceedings initiated under Sections 34/ 37 of the Arbitration and
Conciliation Act, 1996 is no longer res integra. The Court reiterated the findings of it passed
in National Highways Authority of India vs. M. Hakeem and Anr.3, categorically held that
any Court under Section 34 would have no jurisdiction to modify the arbitral award, which at
best, given the same to be in conflict with the grounds specified under Section 34 would be
wholly unsustainable in law.4

Moreover, the Court also observed that “the Arbitrator's view, generally, is considered to be
binding upon the parties unless it is set aside on certain specified grounds.”5 The Court also
noted the importance of primacy granted to an arbitral tribunal to adjudicate the disputes
agreed to be resolved by the parties through arbitration.

While placing reliance on three judge Bench Judgment of the Supreme Court in Dyna
Technologies Private Ltd. vs. Crompton Greaves Ltd.6 the Court reiterated the need for the
Court to look at the substance of the findings, rather than its form, stood reiterated and the
need for adopting an approach of reading the award in a fair and just manner, and not in what
is termed as “an unduly literal way”. Thus, no interference by way of modifying the award
can be made while adjudicating Section 34 petition.

2. There shall be no violation of Public Policy

In the instant case, the only provision under which the award could have been assailed was
for it to have been in conflict with the public policy of India. The Court took reference to its
own judgment, Indian Oil Corporation Ltd. vs. Shree Ganesh Petroleum7 to summarize that
an award could be said to be against the public policy of India in, inter alia, the following
circumstances:

3
(2021) 9 SCC 1.
4
Supra (S.V. Samudram) Para 14.
5
Supra (S.V. Samudram) Para 17.
6
[2019] 15 SCR 295: (2019) 20 SCC 1.
7
(2022) 4 SCC 463.
 a.​ When an award is, on its face, in patent violation of a statutory provision
b.​ When the arbitrator/Arbitral Tribunal has failed to adopt a judicial approach in
deciding the dispute.
c.​ When an award is in violation of the principles of natural justice. When an award is
unreasonable or perverse.
d.​ When an award is patently illegal, which would include an award in patent
contravention of any substantive law of India or in patent breach of the Act, 1996.
e.​ When an award is contrary to the interest of India, or against justice or morality, in the
sense that it shocks the conscience of the Court.

However, the Court declined to accept that there's a violation of public policy of India by
observing that:

“the reasons recorded by the learned Civil Judge for modifying the arbitral award, as
reflected from a perusal thereof, have been recorded in an earlier section of the judgment.
None of those reasons even so much as allude to the award being contrary to the public
policy of India, which would enable the court to look into the merits of the award.”8

3. Modification of Award under Section 37 Petition

The Court, while considering the order of the High Court upholding such modification, under
the jurisdiction of Section 37 of the Act, 1996, took a reference to one of its own Judgments
in MMTC Ltd. vs. Vedanta Ltd.9 where the observation conveyed in is meaningful i.e.,

“14. As far as interference with an order made under Section 34, as per Section 37, is
concerned, it cannot be disputed that such interference under Section 37 cannot travel
beyond the restrictions laid down under Section 34. In other words, the court cannot
undertake an independent assessment of the merits of the award and must only ascertain that
the exercise of power by the court under Section 34 has not exceeded the scope of the
provision. Thus, it is evident that in case an arbitral award has been confirmed by the court
under Section 34 and by the court in an appeal under Section 37, this Court must be
extremely cautious and slow to disturb such concurrent findings.”10

Moreover, the court took reference of a Judgment delivered in Larsen Air Conditioning and
Refrigeration Company vs. Union of India and Ors.11 by holding that “the circumscribed
nature of the exercise of power under Sections 34 and 37 i.e., interference with an arbitral
award, is clearly demonstrated by legislative intent. The Arbitration Act of 1940 had a
provision (Section 15) which allowed for a court to interfere in awards, however, under the

8
Supra (S.V. Samudram) Para 29.
9
[2019] 3 SCR 1023: (2019) 4 SCC 163
10
Ibid.
11
[2023] 11 SCR 86: 2023 SCC OnLine 982
current legislation, that provision has been omitted.”12 Thus, the Court held that “the learned
Single Judge, similar to the learned Civil Judge under Section 34, appears to have not
concerned themselves with the contours of Section 37 of the Act, 1996.”13

CONCLUSION

The Court has ultimately allowed the appeal of the claimant-appellant by setting aside the
impugned judgment passed by the Ld. Single Judge of High Court and Ld. Civil Judge, and
consequently restored the award dated 18th Feb. 2003 passed by the Ld. Arbitrator, with a
direction to the State of Karnataka to expeditiously pay the amount to the claimant-appellant.

VERY VERY IMPORTANT (JUDGEMENT OVERRULED)

However, this view has been overruled by a larger Bench of 5 judges of the Supreme Court in
the case of Gayatri Balasmay vs. M/s ISG Novasoft Technologies Ltd.14 also recorded by
LiveLaw dated 04.05.2025.

The apex Court held that the Court has a limited power under Sections 34 and 37 of the
Arbitration and Conciliation Act, 1996 to modify the arbitral award. This limited power may
be exercised under the following circumstances:

1.​ when the award is severable, by severing the “invalid” portion from the “valid”
portion of the award
(Part II of the Judgement Analysis)

2.​ by correcting any clerical, computational or typographical errors which appear

3.​ post award interest may be modified in some circumstances

4.​ Article 142 of the Constitution applies, albeit, the power must be exercised with great
care and caution and within the limits of the constitutional power
(Part XII of the Judgement Analysis)

12
Supra (S.V. Samudram) Para 38.
13
Supra (S.V. Samudram) Para 39.
14
2025 INSC 605, 2025 LiveLaw (SC) 508,
https://www.livelaw.in/top-stories/if-courts-can-only-set-aside-awards-cant-modify-them-parties-will-be-forced-
to-undergo-fresh-round-of-arbitration-supreme-court-291109