Commercial Court Cannot Substantively Modify Arbitral Award Under Section 33 Of Arbitration Act: SC

The Supreme Court has clarified that the power to correct an award under Section 33 of the Arbitration and Conciliation Act, 1996 is restricted to arithmetical and clerical errors and cannot be used to substantively modify findings, such as converting simple interest into compound interest.

In a judgment delivered by a bench comprising Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe, the Apex Court set aside a Commercial Court's order that had significantly increased a party's liability by altering the nature of interest awarded by an arbitrator. The Court emphasized that such a substitution goes to the root of the arbitrator's assessment and does not constitute a mere typographical correction.

The Court has the following directions:

"(i) The Arbitral mandate validly subsisted at the time when the Arbitral Award was passed.

(ii) The Arbitral Award was dispatched on 27.10.2015, before the email dated 28.10.2015 sent by the Board.

(iii) The Arbitral proceedings were conducted in accordance with the principles of natural justice.

(iv) The Commercial Court in purported exercise of powers under Section 33(i)(a) of the Act erred in substituting the words “compound interest” in place of “simple interest” in the Award dated 27.10.2015 passed by the Arbitrator."

Court's Rationale on Arbitral Mandate and Estoppel

The Court observed that although the arbitrator had unilaterally extended the mandate beyond the initially agreed period, the appellant Board had participated in the proceedings without raising timely objections. Dealing with the issue of subsistence of the mandate, the Court noted that the Board had tacitly agreed to the extensions.

The Court, in its reasoning, observed: "The Board participated in the proceeding before the Arbitrator and had acquiesced with the alleged invalidity and cannot be allowed to turn around after the Award was passed and is estopped from challenging the Award on the ground that the mandate of the Arbitrator had expired."

Limits of Correction Under Section 33 of the Act

Substantive Modification vs. Clerical Correction

The bench relied on State of Arunachal Pradesh v. Damani Construction Co. and Gyan Prakash Arya v. Titan Industries Ltd. to reiterate that Section 33 is not a vehicle for review. The Court found that the arbitrator had consciously awarded simple interest for the pendente lite period, and the Commercial Court's intervention to change it to compound interest which escalated the liability from Rs. 30.38 crores to Rs. 144.93 crores was a jurisdictional error.

The Court, in its reasoning, observed: "The characterisation of the mode of interest whether simple or compound goes to the very of the Arbitrator’s assessment of the equities of the case and reflects a substantive determination on the merits. It is neither a slip of the pen, nor an inadvertent arithmetical mistake, nor a clerical oversight that could be remedied under Section 33(1)(a)."

Background:

The dispute arose from rate contracts awarded between 1998 and 2002 by the Gujarat Water Supply and Sewerage Board to Saryu Plastics Pvt. Ltd. for PVC pipes. Following an audit alleging excess payments, the Board blacklisted the company. In 2012, an arbitrator was appointed. After several extensions, the arbitrator passed an award on October 27, 2015, granting the company Rs. 1.01 Crores with simple interest for the pendente lite period.

The company subsequently moved an application under Section 33 of the Arbitration and Conciliation Act, 1996 seeking to change "simple interest" to "compound interest." While the arbitrator declined, the Commercial Court later modified the award in a review proceeding. The High Court of Gujarat dismissed the Board's appeals against this modification. The Supreme Court, while upholding the validity of the award itself and the conduct of proceedings under principles of natural justice, ultimately ruled that the Commercial Court lacked the jurisdiction to modify the interest type, restoring the original simple interest award.

Case Details:
Case No.: CIVIL APPEAL NOS. 769-770 OF 2026
NeutralCitation: 2026 INSC 552
Case Title: GUJARAT WATER SUPPLY AND SEWERAGE BOARD v. SARYU PLASTICS PVT. LTD.

Source: 2026 CaseBase(SC) 472