Source: Allahabad High Court

Why in News?

The bench of Justices Manoj Kumar Gupta and Vikram D. Chauhan observed that it is well within the power of the court to segregate, sever, and set aside part of the award and uphold the remaining part.

• The Allahabad High Court gave this observation in the matter of Hindustan Steelworks Construction Limited (HSCL) v. New Okhla Industrial Development Authority (NOIDA).

What is the Background of HSCL v. NOIDA?

• HSCL, (appellant) a government undertaking entered into an agreement with NOIDA (respondent) for the construction of two flyovers with clover leaves and allied work at Rs. 106.10 crores.
• A report from IIT Delhi found that the cost of a project was made to seem higher by about Rs. 60 crores, the organization in charge of the project, HSCL, was told to stop all the work.
• After talking back and forth many times, HSCL decided not to ask for compensation for the money they lost and the increased costs while the work was stopped.
  • However, after the completion of the work, HSCL changed their stance and demanded compensation for both the time when the work was stopped and the time before and after they started working again.
  • They made a Supplementary MoU where HSCL agreed to forego its claim towards damages and price escalation during the period contract remained suspended.
  • HSCL went for arbitration where the arbitrator held in the favor of HSCL.
• NOIDA went to commercial court under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act). They said the damages that HSCL claimed for the project being paused for 928 days should not be considered.
• The validity of Supplementary MoU was upheld. The plea of coercion, duress, undue influence and unequal bargaining power by HSCL was rejected.
  • The appellant then contended in the present appeal that questions related to coercion and duress were beyond the power of the commercial court under Section 34 of A&C Act.

What were the Court’s Observations?

• While allowing the application of doctrine of severability on arbitral award the court stated the following restrictions:
  • While exercising the power, the court cannot modify the conclusive findings of arbitral tribunal and,
  • The remaining part is capable of surviving on its own.
• The court further stated that, “it is now well- settled that if an award deals with and decides several claims separately and distinctly, even if the court finds that the award in regard to some items is bad, the court will segregate the award on items which did not suffer from any infirmity and uphold the award to that extent”.

What is the Doctrine of Severability?

• This doctrine, often referred to as the "separability" doctrine, provides a mechanism for courts to determine whether a particular provision of a law or constitution can be severed from the rest of the document without rendering the entire document unconstitutional or void.
• The Doctrine of Severability embodies the idea that an invalid or unconstitutional provision should not taint an otherwise valid law or constitution, thus serving as a safeguard against judicial overreach and ensuring that the legal system continues to function effectively.
• It is derived from Article 13 of the Constitution of India, 1950.

What are the Landmark Cases of Doctrine of Severability?

• Marbury v. Madison (1803):
  • While not directly related to severability, Marbury v. Madison established the principle of judicial review, which is the foundation for courts' authority to determine the constitutionality of laws.
  • This case laid the groundwork for future decisions on severability.
• A.K. Gopalan v. State of Madras (1950):
  • The Supreme Court held Section 14 of the Prevention Detention Act, 1950 void while stating that the whole statute cannot be struck down.
• R. M. D. Chamarbaugwala v. Union of India (1957):
  • In this case, the SC held that if a part of a statute is found to be unconstitutional, that part can be separated or severed from the rest of the statute, provided that the remaining portion can still stand on its own and function independently.
  • This principle allows the court to strike down only the offending or unconstitutional provisions of a law while keeping the valid portions intact, rather than declaring the entire law invalid.