The Karnataka High Court has clarified that a District Judge does not have the authority to enhance the amount awarded by an arbitrator while deciding a petition under Section 34 of the Arbitration and Conciliation Act, 1996. This significant ruling was delivered by Justice Hanchate Sanjeevkumar in the case titled The Union of India and Another vs. Sri Kothari Subbaraju (MFA No. 6525 of 2016), decided on March 12, 2025.
The matter arose from a contractual dispute between the appellant and the respondent, which was referred to arbitration. The arbitrator delivered an award in favor of the respondent, allowing their claims. However, the respondent later approached the District Court under Section 34 of the Arbitration Act, challenging parts of the arbitral award.
The District Judge, while deciding A.S. No. 39/2008, modified the award by enhancing the amounts under claim numbers 3, 4, and 5. This effectively altered the original decision made by the arbitrator.
The Union of India, aggrieved by this modification, filed an appeal under Section 37 of the Arbitration Act. The appellant argued that the District Judge overstepped the jurisdiction provided under Section 34, which strictly limits the court to either uphold or set aside an arbitral award based on specific legal grounds. The power to change the award, especially to increase or reduce the awarded amount, was never granted under the said section.
The court under Section 34 does not act as an appellate authority. It only checks if the award falls within any of the limited grounds for interference,the appellant's counsel submitted, relying on the Supreme Court’s decision in S.V. Samudram v. State of Karnataka.
Justice Hanchate Sanjeevkumar agreed with the argument and emphasized that the District Court had wrongly treated the petition as an appeal. The judge highlighted that courts cannot revise or rewrite an arbitral award as per their opinion. They can only interfere if the award violates any of the limited grounds set out under Section 34 of the Act.
"If an award is found to conflict with the grounds mentioned in Section 34, it may be set aside but not modified. Any attempt to change the award would amount to crossing the 'Lakshman Rekha'," the High Court stated, quoting the Supreme Court’s direction in S.V. Samudram.
Read Also:- X Corp Challenges Sahyog Portal: Karnataka High Court Hears Arguments on IT Act Provisions
The High Court concluded that the District Judge had no legal right to alter the award passed by the arbitrator. Accordingly, the High Court allowed the appeal and set aside the District Court’s order that had enhanced the claims.
This judgment serves as a reminder of the limited role courts have in arbitration matters and reaffirms the principle that arbitral awards should not be interfered with unless they clearly violate the grounds specified in the law.
