Abstract
In a recent judgement of Gayatri Balasamy v. ISG Novasoft Technologies Ltd[1]theapex court has clearly decided regarding a longstanding question as whether court has the power to modify the arbitral award under Arbitration and conciliation act 1996.The court held that the court has limited power to modify the case when certain conditions are met .
Also while exercising the power under Article 142 the court can modify the decision of the arbitral Award , The New York convention and the UNCITRAL model has also been discussed which works on the principal that if domestic laws are there which allows for modification of the arbitral award then it is alright.The difference between modification and remand hs been explained.
Factual Background
Gayatri Balasamy (“Appellant”), an employee of ISG Novasoft Technologies Ltd., lodged a criminal complaint against senior executives of the firm for sexual harassment offenses, which resulted in defamation and extortion claims from the company. When the issue arrived at the Supreme Court, it was sent to arbitration, where the Arbitral Tribunal granted the Appellant ?2 crores.
Discontented, she aimed to overturn the award pursuant to Section 34 of the Arbitration and Conciliation Act 1996 (“1996 Act”) in the Madras High Court. The High Court altered the award, providing an extra ?1.6 crores. Nevertheless, a Division Bench on appeal pursuant to Section 37 of the 1996 Act lowered this supplementary award to 50,000, considering the original compensation to be excessive. The Appellant subsequently lodged an appeal with the Supreme Court.
Interpretation of the Statute
A restricted authority for alteration exists within the interpretation of Section 34 of the Arbitration and Conciliation Act 1996.
Most concluded that the 1996 Act’s purpose was to speed up dispute resolution via a faster, more affordable alternative to litigation. It determined that restricting courts from modifying would result in unreasonable results, create difficulties, elevate costs, and result in delays, since Section 34 and 37 appeals can take years. The majority argued that if courts could merely annul awards, parties would face an additional arbitration round to confirm a decision already simply made by the court CJ. Khanna). Consequently, the majority determined that the authority of judicial review under Section 34 and the annulment of an arbitral award inherently encompasses a restricted ability to alter the arbitral award
Justice Viswanathan further held that setting aside an award does not lead to an absurd outcome, as the 1996 Act allows for recommencement of proceedings, including arbitration, upon setting aside an award under Section 43(4). He reasoned that parties entering arbitration consciously agree to step out of the normal judicial process, and a Section 34 court, unless expressly authorized, cannot modify or vary an award .
Power of modification is different from remand
The majority found that under Section 34(4) of the 1996 Act, courts are empowered to remit issues back to the arbitral tribunal for specific determinations). Upon remand, the tribunal can vary, correct, review, add, or modify the award. However, the majority held that Section 34(4) does not authorize the tribunal to rewrite or set aside the award on merits; rather, it acts as a curative mechanism available when permitted by the court The majority held that computational, clerical, and typographical errors not requiring a merits evaluation can be modified by the Court in a Section 34 application
The Supreme Court discarded the view in Kinnari Mullick v. Ghanshyam Das Damani[2] (2018) 11 SCC 328 (SC)which required only a written application for remand under /Section 34(4), holding that under Section 37 of the 1996 Act, the Court still possesses jurisdiction to remand the matter suo motu
Justice Viswanathan found that Section 33 allows the Arbitral Tribunal to correct computational, clerical, or similar errors and make additional awards for unadjudicated claims . He held that the power to adjourn the proceedings and remit the matter to the Arbitral Tribunal under Section 34(4) can be exercised for undoing the curable defects He found that this power is to cure defects like inadequate reasoning or filling gaps in existing findings, but not for supplying findings on contentious issues absent from the original award .
He held that a limited exception based on the actus curiae neminem gravabit principle allows the court under Section 34 to correct obvious computational, clerical, or typographical errors without modifying the original award’s terms even if the arbitrator has not exercised its power under Section 33 .
Modification does not render the amended award unenforceable under the New York Convention
The majority held that interpreting Section 34 to include a limited power to modify awards will not affect the enforcement of foreign awards under international commercial arbitration (¶66 CJ. Khanna). The majority reasoned that Article V of the New York Convention and Section 46 of the 1996 Act, similarly worded, recognize the supremacy of the domestic law of the country where the award is made for enforcement purposes. However, Justice Viswanathan held that modifying New York Convention awards in India would complicate foreign enforcement due to the lack of statutory provisions (unlike UK/Singapore) that treat a modified award as part of the Tribunal’s award. He pointed out that this issue warrants legislative intervention
Court can modify post award interest but not pendente lite
The majority held that the Court cannot modify pendente lite interest granted during arbitration ( Where the interest awarded contradicts the contractual position, the court, when examining objections under Section 34, can either set aside the interest rate or remand the matter to the arbitral tribunal under Section 34(4) The majority observed that post-award interest under Section 37(1)(b) is an additional compensation for unpaid arbitral awards after due time In cases where this post-award interest appears unjustified, given the unpredictability of the future unknown to the arbitrator, it is necessary for the Court to have the authority to modify it for the dissipation of justice
Justice Vishwanthan in his dissenting opinion held that a court cannot modify interest, including post-award interest, and the proper course is to remit the matter to the arbitrator for correction under Section 34(4) He also held that the Court may suo motu exercise this Section 34(4) power if it finds grounds to set aside the award, as its purpose is to allow the tribunal to cure defects and make the award enforceable
Supreme Court’s power to do complete justice under Article 142 of the Constitution
The majority held that the Supreme Court’s power under Article 142 of the Constitution must be exercised in consonance with the fundamental principles and objectives of the 1996 Act.). The majority reasoned that this power can be used in arbitration proceedings to end protracted litigation and save parties’ time and money. However, it should not be used to rewrite or modify the award on merits).
Analysis
The Constitution Bench of the Supreme Court in Gayatri Balasamy v. ISG Novasoft Technologies Ltd. has established a significant interpretation of Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 (“1996 Act”), resolving a protracted debate in Indian arbitration law. The main question before the Court was whether Indian courts, when exercising authority under Sections 34 and 37, have the ability to modify or alter arbitral awards, a matter on which prior rulings had displayed significant disagreement.
The issue stemmed from differing viewpoints expressed by two- and three-judge panels in previous rulings like M. Hakeem and Vedanta Ltd., in which courts had either denied or permitted alterations to awards. The 1996 Act, in contrast to the previous Arbitration Act of 1940, does not specifically provide courts the authority to modify arbitral awards. Rather, Section 34 allows for the annulment of awards solely on specific, legally established grounds. Nonetheless, previous rulings occasionally strayed from this stringent interpretation, referencing Article 142 of the Constitution or employing a pragmatic method to adjust interest rates or eliminate invalid sections of awards.
In Gayatri Balasamy, the Court stated that although courts lack broad appellate authority regarding arbitral awards, a restricted authority for modification can be interpreted from the framework of Section 34 under certain conditions. These consist of (i) scenarios in which the award can be divided and only a portion is invalid, (ii) occurrences of clerical, typographical, or calculation mistakes evident in the record, (iii) cases needing correction or modification of post-award interest according to Section 31(7)(b), and (iv) when the Supreme Court uses its constitutional power under Article 142 to achieve full justice.
The ruling meticulously distinguishes between acceptable judicial intervention and the necessity to honor arbitral independence. The Court acknowledged the principle of severability in Section 34(2)(a)(iv), affirming that courts may nullify solely the objectionable section of an award when it is legally and practically distinct. Furthermore, the ruling acknowledges the potential for courts to rectify obvious mistakes without reevaluating evidence, thereby protecting against unwarranted re-arbitration, which would undermine the goal of efficient and timely dispute resolution via arbitration.
A major aspect of the ruling is its elucidation of the merger doctrine and the global enforceability of revised awards. The Court correctly determined that these minor changes would not violate the New York Convention, since the critical factor for enforcement is whether the award, modified in accordance with domestic law, is conclusive and enforceable in the country of origin. The ruling also counters the strict perspective in Kinnari Mullick by permitting both oral and written applications for remand under Section 34(4), and by confirming that appellate courts can also exercise these remand powers under Section 37.
From both policy and practical perspectives, this ruling enhances India’s arbitration system by adding pragmatism while maintaining party autonomy. It acknowledges that judicial restraint does not equal judicial ineffectiveness and that appropriate limited intervention can enhance finality and efficiency. Nonetheless, the Court warned that this authority must not result in courts functioning as hidden appellate bodies.
To sum up, Gayatri Balasamy represents a well-reasoned and equitable decision that reconciles opposing precedents and offers clear direction regarding the extent of judicial authority in arbitration issues. It strengthens legal clarity, maintains arbitral independence, and guarantees that procedural restrictions do not hinder substantive justice. This ruling is expected to impact both local arbitration practices and India’s standing as a jurisdiction favorable to arbitration
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[1] Gayatri Balasamy v. ISG Novasoft Technologies Ltd., 2015 SCC OnLine Mad 7327 (India).
[2]Kinnari Mullick v. Ghanshyam Das Damani, (2018) 11 SCC 328 (SC) (India).
[3] https://www.sci.gov.in
Author Name- Shreya Shree, Vivekananda Institute of Professional Studies, GGSIPU, New Delhi
