The Supreme Court has ruled that in certain cases, it can exercise its constitutional powers under Article 142 to modify arbitral awards, provided it does not interfere with the merits of the award or rewrite its core.
Chief Justice Sanjiv Khanna, writing the majority opinion, emphasized that the Court’s power under Article 142 must be used sparingly and only when necessary to end prolonged litigation. The Constitution Bench also included Justices BR Gavai, Sanjay Kumar, AG Masih, and Justice KV Viswanathan, who delivered a strong dissent.
“The power can be exercised where it is required and necessary to bring the litigation or dispute to an end. Not only would this end protracted litigation, but it would also save parties' money and time.” — Supreme Court Majority Opinion
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The case, Gayatri Balasamy v. M/S ISG Novasoft Technologies Ltd, dealt with whether courts under Section 34 of the Arbitration and Conciliation Act, 1996, have the authority to modify arbitral awards, a power not explicitly granted in the Act.
The majority ruled that while the Act does not directly allow for such modification, the Court can partially set aside awards, especially in severable portions, and modify clerical or computational errors, including post-award interest.
“This limited power may be exercised under the following circumstances: when the award is severable, clerical errors exist, post-award interest needs adjustment, or under Article 142 in exceptional cases.” — Supreme Court Bench
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The Court clarified that judicial intervention must always stay within the confines of the 1996 Arbitration Act and should not encroach upon the merits of arbitral decisions.
However, Justice KV Viswanathan dissented, asserting that such modifications contradict the structure of the Arbitration Act and would be a serious blow to the finality and autonomy of arbitration.
“Article 142, even with the width of its amplitude, cannot be used to build a new edifice where none existed earlier... It cannot supplant substantive law.” — Justice KV Viswanathan
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Justice Viswanathan referred to earlier judgments, including Supreme Court Bar Association v. Union of India, and noted that courts modifying arbitral awards risks undermining confidence in arbitration as an efficient dispute resolution method.
He warned that allowing the Supreme Court to change awards in the final stage of litigation could introduce grave uncertainty for parties and contradict the spirit of arbitration.
“Such an exercise of power will derogate from the core aspects of the Arbitration and Conciliation Act and breach a pre-eminent prohibition in the said Act.” — Justice KV Viswanathan
