Section 33 Cannot Be Used to Rewrite Interest

The Supreme Court considered whether a Commercial Court, while acting under Section 33(1)(a) of the Arbitration and Conciliation Act, 1996, could substitute the words “compound interest” for “simple interest” in an arbitral award. The Court answered that question in the negative.

The dispute arose from rate contracts for supply of PVC pipes between Gujarat Water Supply and Sewerage Board and Saryu Plastics Pvt. Ltd. The parties later entered into an arbitration agreement and appointed a sole arbitrator. The arbitral proceedings were prolonged, with repeated extensions of time and delays on the part of the Board in filing its reply and attending hearings.

One of the issues before the Supreme Court was whether the arbitral mandate had expired before the award was passed. The Court held that the mandate validly subsisted when the award was made. It also held that the award had been dispatched on 27.10.2015 before the Board’s email dated 28.10.2015.

On the merits of the correction made by the Commercial Court, the Supreme Court held that Section 33(1)(a) permits only correction of computational, clerical or similar errors. It does not authorise a court to alter the substance of the award. Substituting “compound interest” for “simple interest” was not a correction, but a review of the award. The Court said the Commercial Court had manifestly exceeded its jurisdiction.

The Court also recorded that the arbitral proceedings were conducted in accordance with the principles of natural justice. It therefore set aside the impugned judgment and decree dated 11.11.2022, as corrected on 16.12.2022, and the order dated 25.09.2018 passed by the Commercial Court.

The result was that the company’s entitlement to simple interest at 21.675% for the pendente lite period stood restored.

Practical takeaway: Section 33 cannot be used to rewrite the substance of an arbitral award under the guise of correction.