The Supreme Court of India in Gayatri Balasamy v. ISG Novasoft Technologies Limited 2025 INSC 605, by a majority has held that a Court does have the power to modify an arbitral award under Section 34 of the Arbitration and Conciliation Act 1996, and that the Supreme Court can use plenary powers under Article 142 of the Constitution to modify an arbitral award. In a strong dissenting judgement, Justice Viswanathan proposes that if a gap exists in the Arbitration and Conciliation Act 1996 as regards modification of awards, such gap ought to be filled by the legislature.
What was the Tension?
Section 34 of the Arbitration and Conciliation Act 1996 (“A&C Act”) does not expressly give a Court the power to modify an arbitral award. While the Supreme Court had previously observed that a Court acting under Section 34 of the A&C Act cannot correct errors in an award, there was a legal debate because, in certain cases, the Supreme Court had allowed modifications (modifying an interest rate or period of interest set in an award). Given the jurisprudential tension, the fundamental question on whether a Court has a power to modify an award was referred to a Constitution Bench of five Justices to conclude the point.
The Majority Decision
The Judgement held that Section 34 of the A&C Act does include the power to modify an award – albeit to a limited extent; and that the Supreme Court can use Article 142 of the Constitution of India to modify an award. In short, it was held:
- A Court has limited power to modify an arbitral award.
- Where an award is severable, a Court can sever the “invalid” part from the “valid” part.
- A Court may correct any “clerical, computational or typographical errors which appear erroneous on the face of the record”.
- A Court has the power to modify post-award interest in limited circumstances.
- Article 142 of the Constitution can be used to effect “complete justice” (although such power is to be exercised with “great care and caution”).
The Dissent
Justice Viswanathan agreed with the Majority that Section 34 provides the Court with a power to sever an award provided it is well-defined that an award is severable; and that a Court has the power to correct any clerical errors – which he noted is derived from Section 152 of the Code of Civil Procedure 1908. However, Justice Viswanathan disagreed that a Court has a power to modify an arbitral award under Section 34 of the A&C Act or Article 142 of the Constitution.
Clarity?
Does the Judgement give clarity? There is residual concern that the Judgement (still) creates uncertainty. The following are ‘uncertainties’ which may arise because of the Judgement:
How is the power to modify under Section 34 of the A&C Act exercised?
While the Judgement has clarified that the power to modify an arbitral award is “limited” and that a Court cannot exercise appellate powers in the manner that it would under the Code of Civil Procedure, it did not go further and explain what sort of modifications may be made. [1] The Supreme Court said there is a ‘line in the sand’ that may not be crossed – but did not elaborate on precisely where the line ought to be drawn. The risk is obvious in that Courts may have differing views on where the line is to be placed.
How is the Supreme Court’s power under Article 142 of the Constitution exercised?
The Judgement cautions that “the power [under Article 142]should not be exercised where the effect of the order passed by the court would be to rewrite the award or modify the award on merits”, but it does not specify the way the power may be used. The Judgement merely states that “the power can be exercised where it is required and necessary to bring the litigation or dispute to an end”. [our emphasis] Perhaps this was deliberate. We say this because what may be required to “bring the litigation or dispute to an end” will naturally differ from case to case.
Problems with the enforcement of awards outside of India?
Where an award is modified by a Court and there is no corresponding statutory provision which makes such modification a part of the award, it may give rise to difficulties in enforcing the award in foreign jurisdictions. Debates around whether what is sought to be enforced is an arbitral award or a judgement of an Indian Court cannot be ruled out. Precision is needed to avoid further costs and delays.
Has Section 34(4) been rendered redundant?
Is the power, in practical terms, to remit an award under Section 34 (4) of A&C Act now redundant? If not – when is it to be exercised? Section 34(4) sets out that a Court may adjourn set-aside proceedings and remit the matter to allow the tribunal to ‘fix’ the award. Now, where a Court can now modify an award itself, it is hazy when a power to remit an award to the arbitral tribunal ought to be exercised.
Wrap-Up
The Judgement is an excellent read and provides a comprehensive review of statutory court intervention from around the world. Modification of arbitral awards is naturally nuanced and requires a case-by-case review. Whilst many lawyers sought ‘closure’ and certainty on this topic, our thinking is that the Supreme Court was naturally not able to codify or create a set of rules. That is the beauty of the common law, and whilst some will say this creates uncertainty as to when an award may be modified, others will take the Supreme Court’s ‘messaging’ and work hard to make sure that the arbitration procedure and the award gives little or no room for modification(s).
[1] The Judgement gives two limited examples: (i) a power to correct clerical errors, and (ii) a power to modify post-award interest. The majority’s position that post-award interest can be modified is questioned. The Judgement says, “as there is a standard prescribed by the legislature, the post-award interest awarded can be scrutinized by courts against the standards prescribed.” This suggests that because a statute provides a rate for interest, a ruling on that point can be subject to review by a court under Section 34 of the A&C Act. The practical consequence that follows is that an aggrieved party may challenge post-award interest on the basis that the arbitrator had no reasons to depart from the 2% benchmark in Section 31(7)(b) of A&C Act.
