By Sheetal Tiwari
Advocate | Arbitrator | Mediator

Introduction

In a landmark judgment delivered on 30th April 2025, the Constitution Bench of the Hon’ble Supreme Court of India in Gayatri Balasamy v. ISG Novasoft Technologies Ltd. addressed a long-standing ambiguity in Indian arbitration law:

Can courts modify an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996?

By a 4:1 majority, the Court ruled that while courts generally do not have the power to review the merits of an arbitral award, limited modification is permissible—but strictly within narrowly defined parameters.

This ruling not only resolves a judicial conflict but also attempts to balance two important pillars of arbitration: party autonomy and judicial oversight.

Background: The Need for Clarification

Section 34 of the Arbitration and Conciliation Act, 1996, allows parties to apply for the setting aside of an arbitral award on limited procedural and jurisdictional grounds. However, the provision does not mention modification.

While Section 33 empowers the arbitral tribunal to correct clerical, typographical, or computational errors, this must be done within 30 days of the award. Once that period lapses, and the tribunal becomes functus officio, the parties are left with only one recourse, i.e., Section 34.

This gave rise to a legal vacuum. Should a court be forced to set aside the entire award for a minor and obvious error, simply because modification is not expressly allowed?

The lack of clarity led to conflicting judicial opinions. Some High Courts and benches of the Supreme Court took the view that limited modifications were permissible, while others, notably in the M. Hakeem case, held that Section 34 permits only setting aside, not alteration.

The Gayatri Balasamy ruling finally settles the debate.

What the Supreme Court Held: Key Takeaways

The majority judgment, delivered by Justice Sanjiv Khanna (for himself and three other judges), held:

Limited Modification Permitted in Specific Cases

Courts can modify arbitral awards only in the following circumstances:

• Severable Awards: Where the offending part of the award is clearly separable from the rest and does not affect the core reasoning.
• Clerical or Arithmetical Errors: If the error is apparent on the face of the record and involves no re-evaluation of facts or evidence.
• Post-Award Interest: Courts may modify interest rates if they are unjust, arbitrary, or if the award is silent on the issue.
• Under Article 142 of the Constitution: The Supreme Court alone may exercise this power to do complete justice, though sparingly.

The Court clarified that this does not amount to rewriting the award but serves as a practical correction in the interest of justice.

The Dissenting View: Justice K.V. Viswanathan

Justice K.V. Viswanathan offered a well-reasoned dissent. He cautioned that:

• Section 34 does not confer any power to modify the award, and courts should not read into the law what is not written.
• Modifying an award could undermine party autonomy—a core principle of arbitration.
• It may also complicate the enforcement of foreign awards under the New York Convention, creating uncertainty in cross-border arbitration.

He strongly opposed the use of Article 142 to alter arbitral awards, arguing that such an approach, however well-intentioned, blurs the boundary between adjudication and legislation.

Why This Judgment Matters

This Constitution Bench ruling brings much-needed clarity and consistency to arbitration jurisprudence. Here’s why it is significant:

• Avoids Judicial Overreach

The Court respects the finality of arbitral awards and does not permit reassessment of merits. This ensures that arbitration remains an efficient alternative to litigation.

Prevents Procedural Rigidity

By allowing minor and severable corrections, the judgment avoids the waste of judicial and arbitral time that a full remand or rehearing would entail.

Ensures Fairness

Parties are no longer left remediless for evident typographical or computational errors when the tribunal is no longer empowered to act under Section 33.

Bridges a Legislative Gap

While the statute is silent on modification, the judgment bridges this gap through a principled and cautious interpretation, ensuring that courts can deliver substantive justice without disrupting the arbitration process.

Understanding the Balancing Act

The judgment attempts to strike a delicate balance:

"Respect party autonomy while avoiding procedural rigidity."

This means:

• Arbitration’s essence—minimal court interference—is preserved.
• But courts are not powerless when a technical or minor issue unfairly harms a party.
• The judiciary acts not as an appellate forum, but as a guardian of fairness, when narrow corrections are needed.

Conclusion

The Gayatri Balasamy judgment is a pragmatic and necessary evolution in Indian arbitration law. It affirms that courts are not meant to reopen awards on merit but also need not remain helpless when faced with clear and correctable injustice.

In doing so, the Supreme Court has restored predictability in arbitration practice while upholding the principles of finality, autonomy, and fairness—core to the success of the arbitration system.

For practitioners and stakeholders in the arbitration community, this decision marks a pivotal moment in how courts interact with arbitral awards—one that reinforces the importance of a practical, balanced, and justice-oriented approach.