In a landmark judgment, a Constitution Bench of the Supreme Court, led by Chief Justice Sanjiv Khanna and comprising Justices BR Gavai, Sanjay Kumar, AG Masih, and KV Viswanathan, ruled that courts have the authority to modify arbitral awards under Section 34 of the Arbitration and Conciliation Act, 1996, to prevent repeat rounds of arbitration and reduce unnecessary delays and expenses.
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While Justice KV Viswanathan dissented, the majority held that limiting courts to only setting aside awards—without allowing modification—would defeat the purpose of arbitration as a swift and efficient dispute resolution method.
“To deny courts the authority to modify an award—particularly when such a denial would impose significant hardships, escalate costs, and lead to unnecessary delays—would defeat the raison d'être of arbitration.”
The Court highlighted that once an award is challenged under Section 34, followed by appeals under Section 37 and possibly a Special Leave Petition under Article 136, forcing parties to go through arbitration again would be more burdensome than traditional litigation.
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The Court clarified that the absence of express modification powers in the Act does not mean such powers are prohibited. The doctrine of severability and the power to partially set aside awards support a limited power to modify.
“The limited and restricted power of severing an award implies a power of the court to vary or modify the award. It will be wrong to argue that silence in the 1996 Act should be read as a complete prohibition.”
Under Section 34(2)(a)(iv), courts can set aside only the part of the award that goes beyond the arbitration scope. This supports the idea that courts can retain valid portions and modify the rest, where legally and practically separable.
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The Court said even though Section 33 empowers arbitrators to correct minor errors, courts can also correct clerical or calculation mistakes under Section 34, especially when they don’t involve a merits-based review.
“A court reviewing an award under Section 34 possesses the authority to rectify computational, clerical, or typographical errors, as well as other manifest errors, provided that such modification does not necessitate a merits-based evaluation.”
Referring to Grindlays Bank Ltd. v. Central Government Industrial Tribunal, the Court reiterated that all courts inherently possess powers to correct procedural errors, which is not the same as reviewing the case on merits.
The Court applied the doctrine of implied powers to justify limited modification under Section 34:
“The doctrine of implied power is to effectuate and advance the object of the legislation, i.e., the 1996 Act, and to avoid the hardship.”
Additionally, the Court cited Section 152 of the Civil Procedure Code, which allows executing courts to correct accidental slips in decrees, as an analogy.
The judgment emphasized that modifications should only be made when there is no doubt or uncertainty. If the error is not obvious, parties should approach the tribunal under Section 33 or seek clarification under Section 34(4).
“If the modification is debatable or a doubt arises regarding its appropriateness... the court will be left unable to proceed, its hands bound by the uncertainty.”
Justice Viswanathan disagreed, stating that granting such powers without legislative backing would amount to judicial legislation. He emphasized that the Arbitration Act already exists, unlike the Vishakha case, where the Court stepped in due to legislative vacuum.
“It would amount to judicial legislation, which we are loathe to do.”
Case Details : GAYATRI BALASAMY Versus M/S ISG NOVASOFT TECHNOLOGIES LIMITED| SLP(C) No. 15336-15337/2021
