In a recent case, the Hon’ble Supreme Court of India held that an arbitrator allowing an application to modify the original award in exercise of powers under Section 33 of the Arbitration and Conciliation Act, 1996 (“the Act”) is not sustainable if there is no arithmetical and/or clerical error in the award.

The Appellant in Civil Appeal No. 6876 of 2021 had entered into an agreement with the Respondent dated 09.07.2003. Subsequently, a dispute arose between the parties relating to recovery of pure gold weighing 3648.80 grams said to have been in the possession of the Appellant. The respondent invoked the arbitration clause contained in the agreement and the Karnataka High Court appointed a retired District Judge as the sole arbitrator to adjudicate the dispute between the parties.

The arbitrator passed an award dated 04.12.2010 directing the Appellant to return to the Respondent within three months from the date of the award, 3648.80 grams of pure gold along with interest @ 18% per annum calculating the value of gold at Rs.740 per gram from 24.07.2004 and up to the date of delivery of the quantity of gold. The learned arbitrator also passed an award that in the alternative, the Appellant shall pay to the Respondent within the said period of three months, the market value of 3648.80 grams of pure gold along with interest @ 18% per annum calculating the value of the gold at Rs. 740 per gram from 24.07.2004 till the date of payment.

Thereafter, the Respondent filed an application under Section 33 of the Act for modification of the award dated 04.12.2010 by correcting computational/arithmetical/clerical error by deleting “at Rs. 740 per gram as claimed in the claim statement” at page 14 and further substituting “Rs.740/- per gram” at page 17 with "Rs. 20,747/- per 10 grams". The arbitrator allowed the said application vide order dated 14.01.2011. Being aggrieved, the Appellant herein filed an arbitration suit under Section 34 of the Act before the City Civil Court which came to be dismissed and thereafter filed an appeal under Section 37 of the Act before the Karnataka High Court which was also dismissed vide the present impugned judgment and order.

The Hon’ble Division Bench observed that the original award passed by the arbitrator was as per the original claim made by the Respondent and as per the statement of claim. There was even a specific finding by the arbitrator on the alternative relief of payment of value as on the date of the award. The Bench went on to hold that only in a case of arithmetical and/or clerical error, the award can be modified under Section 33 of the Act 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 arbitrator. What was claimed by the Respondent in the statement of claim was awarded. Therefore, the order passed by the arbitrator on an application filed under Section 33 of the Act and thereafter modifying the original award cannot be sustained. Thus, the Hon’ble Supreme Court quashed and set aside the modified award passed by the arbitrator.

By - Lakshmi Raman