The Supreme Court, in a landmark 4:1 verdict by a Constitution Bench, has ruled that courts can modify arbitral awards in limited circumstances under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996. The decision came while addressing key legal issues referred by a three-judge bench in Gayatri Balasamy vs. ISG Novasoft Technologies Ltd.
"Courts may only intervene in awards to the extent permitted under law and not go beyond the statutory limits,"
held Chief Justice Sanjiv Khanna, delivering the majority opinion. The court emphasized that such powers are strictly limited and not to be used for a merits-based review.
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The judgment clarified that modification is permitted only when:
- The invalid portion of the award can be clearly separated from the valid part.
- There are clerical, computation, or typographical errors.
- Post-award interest needs adjustment in justified cases.
- Article 142 of the Constitution can be cautiously invoked, within legal limits.
The Bench included CJI Sanjiv Khanna, Justices BR Gavai, Sanjay Kumar, AG Masih, and KV Viswanathan. The ruling was reserved earlier this year after a three-day hearing.
However, Justice KV Viswanathan dissented strongly.
"Section 34 does not grant courts the power to modify awards—it only allows setting aside," he stated. Justice Viswanathan warned that allowing such modifications would conflict with the core principle of arbitration.
“The power to modify is not lesser than the power to set aside—they operate in distinct domains. Article 142 cannot be invoked to bypass statutory limitations,”
— Justice KV Viswanathan
He also disagreed with the majority view that post-award interest could be changed by courts and argued that such changes should be sent back to the arbitral tribunal to avoid complications, especially in foreign awards.
The case arose from conflicting judgments on whether courts can modify awards under the Arbitration Act. Some benches had held such powers do not exist, while others had allowed modifications. To resolve this, the question was referred to a larger bench.
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Key legal questions examined included:
- Can courts modify an arbitral award under Sections 34 and 37?
- Is modification permissible only when the award is severable?
- Does the power to set aside include the power to modify?
- Can courts partially set aside or only fully do so?
- Do prior decisions like M. Hakeem and SV Samudram correctly interpret the law?
The Solicitor General, Tushar Mehta, representing the Union of India, argued that the law permits only setting aside, not modifying an award. He explained that under S.34(4), courts may allow the tribunal to correct flaws, but not step in to change the award themselves.
"Modification and setting aside are fundamentally different concepts and only the legislature—not courts—can extend such powers,"
— Solicitor General Tushar Mehta
Senior Advocate Arvind Datar, for the petitioner, argued that courts should have the power to modify grossly flawed awards to ensure justice. He said India’s adoption of Article 34 from UNCITRAL was not entirely suited to domestic arbitration and that countries like the UK and Singapore adapted the model more appropriately.
The petitioners suggested that partial setting aside of awards should include the ability to modify certain parts. They emphasized the importance of courts having inherent powers to correct obvious errors and unjust outcomes.
This case, titled Gayatri Balasamy vs. ISG Novasoft Technologies Ltd. SLP(C) No. 15336-15337/2021 , now clarifies a critical point of arbitration law and balances judicial oversight with the autonomy of the arbitral process.
Appearance Of The Parties -
Petitioners : Mr. Arvind Datar, Sr. Advocate along with Nishanth Patil, Advocate appeared for the Petitioner in the lead matter i.e. Gayatri Balawamy v. ISG Novasoft (SLP (C) No. 15336-15337 of 2021)
Respondents : Mr. Saurabh Kirpal, Sr. Advocate along with Ms. Manmeet Kaur, Partner, Mr. Debmalya Banerjee, Partner, Rohan Sharma, Principal Associate, Gurtejpal Singh, Senior Associate, Jai Dogra, Liza Vohra, Advocates, appeared on behalf of the Respondent in the lead matter i.e. Gayatri Balawamy v. ISG Novasoft (SLP (C) No. 15336-15337 of 2021).
Mr. Tushar Mehta, Solicitor General of India, Archana Pathak Dave, ASG along with Nikilesh Ramachandran, Aastha Singh, Kaustubh Prakash and Surjendu Sankar Das, Advocates, appeared on behalf of Union of India.
Intervenors : Mr. Gourab Banerji, Sr. Advocate appeared along with Arunava Mukharjee, Advocate on behalf of UNCITRAL; Mr. Shekhar Naphade, Sr. Advocate appeared along with Shashibhushan P. Adgaonkar, Advocate on record; Mr. Prashanto Chandra Sen, Sr. Advocate; Mr. Sumeet Pushkarna, Sr. Advocate appeared along with Mr. Gaurav Varma on behalf of Telecommunications Consultants India Ltd; Ritin Rai, Sr. Adv, Sr. Advocate appeared along with Prakash Ranjan Nayak, Advocate; Darius Khambata, Sr. Advocate appeared along with E.C. Agarwala, Advocate.
