Abstract
This article addresses the long-standing debate under Indian arbitration law over the finality of arbitral awards and the need for limited judicial intervention to correct obvious flaws. Focusing on the text and architecture of Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, it identifies the legislative silence over any power to correct awards, as well as the historically restricted remedial channels available, namely, tribunal-triggered corrections under Section 33 and clarification remissions under Section 34(4).
A review of leading case law, McDermott International v. Burn Standard, and Project Director, NHAI v. Hakeem, reveals an entrenched “all-or-nothing” doctrine that excluded courts from amending awards, even where prima facie clerical, computational, or separable invalid parts were obvious. In a landmark development, the Supreme Court’s Constitution Bench judgment in Gayatri Balasamy v. ISG Novasoft Technologies Ltd. establishes for the first time an implied power to enable limited judicial amendment under Section 34.
Introduction
The Supreme Court’s recent Constitution Bench decision in Gayatri Balasamy v. ISG Novasoft Technologies Ltd[1] resolves a long-standing controversy over the extent of judicial interference under Sections 34 and 37 of the A&C Act[2]. In a 4:1 majority, the Court held that while Section 34 does not generally empower courts to modify awards, an implied limited power of correction exists in narrowly defined circumstances.[3].
The majority recognised that courts may adjust manifest errors or sever invalid parts of an award, fix clerical or typographical mistakes, and correct post-award interest under Section 31(7)[4], and that the Supreme Court can use its Article 142[5] power to “do complete justice” in rare cases. Justice K.V. Viswanathan’s dissenting opinion vigorously objected that Section 34 permits only setting aside awards, stressing arbitration’s finality and the risk of international enforcement difficulties.[6]. This article examines the legislative scheme and prior jurisprudence, analyses the majority and dissent in Gayatri Balasamy, and assesses the practical impact on arbitration practice and possible reforms.
Statutory Framework
The 1996 Act provides a tightly confined scheme for judicial review of awards. Section 34(1) permits a party to apply to set aside an arbitral award on specific grounds; it states that “recourse to a Court may be made only by an application for setting aside such award by sub-section (2) and sub-section (3)”. Sub-section (2) lists narrow invalidating grounds (e.g. incapacity, invalid agreement, lack of notice, exceeding scope) and public policy violations. Notably absent is any express power to vary or correct an award’s substantive outcome[7].
Section 34(4) allows the court, before setting aside an award, to adjourn proceedings or remand the award to the tribunal so that the tribunal may eliminate the defects identified. Thus, Section 34(4) expressly contemplates remand and correction by the tribunal, but stops short of authorising the court itself to rewrite an award. Section 37 provides for a limited appeal against a Section 34 order. It allows an appeal, with leave of court, against orders setting aside or refusing to set aside an award, and confers on the appellate court “coterminous” jurisdiction may confirm, set aside, vary (modify), or remit the award. In effect, the scope of an appeal under Section 37 is coextensive with the Section 34 review.
By contrast, Section 33 [8]explicitly empowers the tribunal to make certain post-award adjustments: it may correct “computational, clerical or typographical errors” or interpret its award, and can make an additional award on omitted claims. But Section 33 grants the tribunal those limited correction powers, which are to be exercised promptly after the award. In sum, the Act’s text confines courts to setting aside awards on enumerated defects; it nowhere expressly gives courts authority to modify an award’s quantum or substance, apart from remand and error correction by the tribunal.
Pre-Gayatri Case Law
Indian precedent has long underscored the finality of arbitral awards and the narrow scope of Section 34 review. In McDermott International Inc. v. Burn Standard Co. Ltd.[9], the Court explained that the 1996 Act “limits the supervisory role of the court to specific grounds under Section 34”. It held that the court under Section 34 “does not act as an appellate authority for factual findings, evidence, or questions of law dealt with by the arbitral tribunal”.
The court cannot review merits or correct mistakes of law or fact; its role is “confined to setting aside the award,” leaving parties to fresh arbitration if necessary.[10]. In Project Director, NHAI v. M. Hakeem[11], a two-judge bench reiterated that Section 34 permits setting aside awards only on the limited grounds in sub-sections (2) and (3). It emphasised that Section 34(4) only facilitates remand, “the award can either be set aside or remanded to the arbitral tribunal,” with Section 34(4) giving the court power to adjourn and allow the tribunal to cure the defects.
Significantly, Hakeem noted that Section 34 is modelled on the UNCITRAL Model Law, which does not allow court-crafted modifications, and held that Indian courts have no general power to “modify” awards[12].
Several two-judge decisions upheld interest modifications in statutory-arbitration cases. For example, Vedanta Ltd. v. Shenzhen Shandong Nuclear Power Construction Co. Ltd[13] held that applying a uniform interest rate across different currencies was unjustified.
The Court left the INR interest at 9% but modified the Euro component to LIBOR+3%, and struck down a 15% penal interest, without invoking Article 142. In Oriental Structural Engineers Pvt. Ltd. v. State of Kerala[14], the Court upheld an award but intervened to change the interest rate from 12% to 8%, applying established principles of fairness. In all these cases, however, courts characterised the adjustments as either severing an invalid part or using extraordinary powers, and they carefully limited intervention to avoid merits review.
In sum, pre-Gayatri jurisprudence recognised that Section 34 confers no broad appellatepower, but generated a “judicial enigma” as to whether limited corrections might be inherently permissible. This inconsistent landscape, sometimes summarised as courts having “ancillary or incidental” powers to do justice, made a Constitution Bench clarification inevitable.[15].
Gayatri Balasamy – Factual & Procedural Background
Gayatri Balasamy was employed by ISG Novasoft Technologies Ltd. as Vice-President and resigned in mid-2006, alleging sexual harassment. Criminal complaints ensued on both sides. The Supreme Court referred the dispute to arbitration, and an arbitral tribunal ultimately awarded Balasamy ₹2 crore in compensation. Aggrieved that certain claims had been ignored, Balasamy challenged the award under Section 34 in the Madras High Court.
On 2 September 2014, a single‑judge of the Madras HC did not set aside the award but modified it, adding ₹1.6 crore to the original award. A Division Bench in 2019 agreed that some enhancement was warranted but found ₹1.6 crore “excessive and onerous,” reducing the additional sum to ₹50 lakh. Balasamy then filed a Special Leave Petition in the Supreme Court, raising the pivotal question whether Indian courts may modify arbitral awards under Sections 34 and 37. Given conflicting precedents, the matter was referred to a 5‑judge Bench for adjudication.
Gayatri Balasamy – Majority Judgment
Chief Justice Khanna’s majority opinion reaffirmed that the Act’s scheme forecloses appellate review but recognised very limited powers of correction incident to Section 34. Emphasising Section 5 and the specific grounds in Section 34(2)‑(3), the Court underscored that “judicial interference in arbitral proceedings is permissible only in the circumstances explicitly provided”.
Section 34 “primarily contemplates the setting aside of awards”; however, the majority reasoned that the inherent authority to sever invalid portions implies a confined power to modify the award to preserve valid parts. In practical terms, this means a Section 34 court may strike out or alter only that part of an award which is “clearly separable” from the rest. If the invalid portion is hopelessly intertwined with the valid part, the entire award must stand or fall; partial modification is impermissible in that case. In effect, severability under Section 34(2)(a)(iv) allows the court to “set aside only the invalid portion” of an award, upholding the remainder. The majority held that to deny even this limited authority would “frustrate the objectives of the Arbitration Act” and force needless re-arbitration.
Apart from severance, the majority identified other limited categories of permissible modification. First, courts may rectify manifest errors, such as computational or clerical mistakes that do not involve a merits-based evaluation. Although Section 33 empowers the tribunal to correct such errors, the court similarly “possesses the authority to rectify computational, clerical, or typographical errors” in an application under Section 34, provided the “essence of the award” remains unchanged.
This implicit power, akin to inherent or “ex debito justitiae” powers recognised in Grindlays Bank Ltd. v. CGI[16]T, was deemed necessary to do justice. Secondly, the Court clarified that it can adjust post-award interest under Section 31(7)(b) of the Act. The Court reasoned that because Section 31(7)(b) permits tribunals to award interest at a higher rate unless otherwise agreed, courts may intervene to “reduce or increase” the interest if warranted by circumstances, such as delay in enforcement.
The majority was careful to draw firm limits. It held that other substantive modifications are forbidden. A Section 34 court cannot re-open fact findings or legal reasoning of the tribunal, or alter the quantum awarded beyond severing invalid parts. The distinction was summarised as follows: courts may set aside or remit an award, and the arbitrator may correct it, but “courts do not have the power to modify the substance of an award,” except for trivial errors. In practical terms, any variation beyond mere rectifications was ruled out[17].
In addition, the Court confirmed that remand under Section 34(4) is discretionary and must be used with caution. Courts may refuse to remand if it would cause undue delay or cost, but when a defect is remediable by the tribunal, remand is the appropriate remedy rather than judicial rewriting. Finally, the majority reaffirmed the Supreme Court’s Article 142 power. Citing Sangyoung v. NHAI[18], the Court held that Article 142 can end protracted litigation, but cautioned that it “cannot be used to rewrite or modify arbitral awards on merits”. Any exercise of Article 142 must be with restraint, for “complete justice” only, and in line with the Act’s objectives.[19].
Gayatri Balasamy – Dissenting Opinion
Justice K.V. Viswanathan dissented on the central issue. He agreed that Section 34 does not allow appellate re-adjudication, but viewed even the limited modifications as impermissible. Viswanathan J. emphasised that “modification and severance are two different concepts” and that Section 34’s option to sever an offending portion does not authorise courts to rewrite or substitute any part of the award. In his view, reading a general power to modify into the statute would undermine arbitration’s finality and violate India’s international obligations under the New York Convention[20].
He relied on NHAI v. Hakeem as controlling law. Justice Viswanathan pointed out that the majority in Hakeem “categorically held that modification of arbitral awards lies outside the jurisdiction of Section 34 courts”. Only “minor computational or typographical mistakes” were excepted, even in Hakeem, he noted. Since the Arbitration Act does not expressly empower modifications, he argued the Court should not engraft new powers; the existing regime already provides remedies by remand or fresh arbitration. In his view, permitting any non-technical alteration would create uncertainties and dilute party autonomy. The dissent would confine Section 34 strictly to setting aside, preserving the competing doctrines of finality and minimal intervention.
Implications and Analysis
Gayatri Balasamy’s decision is a landmark ruling in the backdrop of India’s traditionally stern judicial review of arbitral awards, though within some constraints. The majority’s approval of limited amendments, removal of invalid portions, rectification of patent errors, and modification of interest rates is a hesitant step towards pragmatic adjudication.
As one commentator has aptly stated, the Court “affirmed that a court under Section 34 has the power to modify an award, but only to the extent of correcting minor errors and modifying post-award interest.” In holding that modification of awards is a viable remedy under Section 34, the Court has perforce brought an end to the erstwhile existing contradiction in judicial interpretations that had kept litigants and the judiciary in a state of confusion[21].
These holdings have significant practical consequences. Positively, they can allow the resolution of disputes. Permitting courts to sever only the defective part of an award and confirm the rest can save parties the necessity of rearbitrating already justly decided matters. Likewise, curing obvious clerical errors or modifying an oppressive rate of interest saves litigants unnecessary cost and delay.
By affirming these inherent powers, the Court has furnished “guardrails” which avoid “unnecessary delays” and preserve arbitration’s very promise of efficient justice. The majority itself observed that requiring strictly “fresh arbitration proceedings” each time would be contrary to the promise of efficiency, particularly in urgent cases.
But the ruling has issues of uncertainty and consistency. The permissible changes are blended with inexact standards, e.g., the award must be “clearly separable,” or the mistake cannot distort the essence of the award. Critics warn that words like “furthering the ends of justice” and “errors not apparent on the face” are necessarily vague and could substitute one type of uncertainty for another.
What is “indisputably severable” or “manifest error” will vary from judge to judge, leading to inconsistent results. One commentator notes that there is no clearly defined criterion for “hardship” or “unnecessary delay,” and the parties and courts must grapple with vagueness.
In addition, there is no clearly defined rule on when a court should opt for remand back to the tribunal over the exercise of its modification power, something the majority did not rule on definitively. Practically, some judges will lean towards preservation of arbitration, while others will be more prone to amend awards; until precedents are set, this situation may generate additional litigation.
Concerns persist regarding the enforcement of cross-border awards. The dissenting judgment cautioned against potential conflict with the New York Convention; the majority judgment, however, was of the view that no principled inconsistency exists, based on the reasoning that an award can be binding even if a court considers it modified. Foreign enforcement courts, nonetheless, could remain apprehensive about changes made locally.
The absence of express legislative provisions regarding modifications leaves India’s law different from that of nations such as the United Kingdom or Singapore, where limited modification is expressly allowed. Even the ruling’s supporters concede that “some ambiguity remains” regarding these powers and that the effect of the ruling on enforcement in other jurisdictions remains to be tested.
In this discussion, Gayatri Balasamy seeks to reconcile the concepts of finality and efficiency, guarantees finality through the application of a thin gate, but simultaneously enables courts to dispense “complete justice” in exceptional cases. Notably, it maintains that Section 34 is a remedy for setting aside awards, rather than a means of appeal.
As one commentator has noted, the ruling “reaffirmed the principle of minimal interference, upholding the finality and integrity of arbitral awards, while allowing limited corrections in specific situations.” But the newly created exceptions can lead to an over-reliance on Section 34 in contentious cases and create a “greater than necessary” role for the judiciary. Thus, the ruling leaves as many practical questions as it resolves, portending an imminent era of refinement of doctrine.
Recommendations
The Gayatri Balasamy judgment is a landmark clarification that Indian courts are not at liberty to modify arbitral awards under Section 34, but can make penultimate modifications in line with the fundamental spirit of the Act. In policy terms, it tips the balance ever so marginally in favour of preventing injustice without opening the floodgates of appeals. To guarantee the integrity without bringing about uncertainty, some practical and legislative suggestions can be imposed.
The legislature may consider the express amendment of the Act to legalise the approved changes or to exempt them outright. A provision in statute, like Section 34A in several legal systems, could prescribe acceptable corrections, eliminating ambiguity. Clarifying terms such as “severable portion” or “manifest error” in statutes or regulations would help harmonise judicial practices. If changes are viewed as fundamentally beneficial, Parliament could expressively approve some non-contentious changes, as in Singapore or the United Kingdom, or include safeguarding steps per the views consolidated by the New York Convention.
There also needs to be consistent criteria for courts and arbitrators. Bench notes and directions can be issued by the Supreme Court or the Bar Council to distinguish between permissible corrections and de facto appeals. Judges, for instance, could place a heavy burden of proof to establish that an award is “severable” and insist on the arbitral award itself to state separability.
Application of standardised tests in the event of errors that “do not alter the substance of the award” would preclude subjective findings. The Court’s precept of “complete justice” and minimal intervention should be a rule that lower courts and tribunals adhere to, to defer to remand or new arbitration in situations of doubt.
Conclusion
Overall, Gayatri Balasamy strikes a realistic balance, it maintains the finality of arbitration but carves out precise exceptions to avoid patent injustice. By its distinction between setting aside, severance, and clerical correction, the Court has removed uncertainty and brought Indian practice closer to the international benchmark of minimal intervention..To ensure the decision’s full benefit, however, stakeholders need to urge legislative clarification and uniform judicial application. Conspicuous rules, either in the form of amendments or soundly reasoned precedent, will make the power to modify an authentic exception, rather than a new basis of appeals, and thus maintain the efficiency and trustworthiness of India’s arbitration regime.
[1] Gayatri Balasamy v M/s ISG Novasoft Technologies Ltd [2025] INSC 605
[2] Arbitration and Conciliation Act 1996, ss 34, 37.
[3] Vrinda Patodia and Arnav Joshi, ‘Modifying Arbitral Awards: Supreme Court Resolves Conflict in Section 34 Powers’ (Obhan & Associates, 7 May 2025) https://www.lexology.com/library/detail.aspx?g=6e5020c4-43b3-4c92-999b-84ea371b5c87 accessed 27 May 2025
[4]Arbitration and Conciliation Act 1996, s 31(7).
[5] Constitution of India, art 142.
[6] Abhinav Sharma, Ayush Srivastava, and Mayank Bansal, ‘Supreme Court on Modification of Arbitral Awards: A Landmark Ruling with Loose Ends’ (Chambers and Partners, 2 May 2025)
https://chambers.com/articles/supreme-court-on-modification-of-arbitral-awards-a-landmark-ruling-with-loose-ends accessed 27 May 2025.
[7] Gayatri Balasamy v M/s ISG Novasoft Technologies Ltd [2025] INSC 605 https://api.sci.gov.in/supremecourt/2021/20788/20788_2021_1_1501_61506_Judgement_30-Apr-2025.pdf accessed 27 May 2025.
[8] Arbitration and Conciliation Act 1996, s 33.
[9] McDermott International Inc v Burn Standard Co Ltd (2006) 11 SCC 181
[10] Vijayendra Pratap Singh, Abhijnan Jha, and Ankitesh Ojha, ‘India’s Tryst with Modifying Awards – Pragmatic Recognition or a Catastrophe’ (Global Arbitration Review, 15 May 2025) https://globalarbitrationreview.com/review/the-asia-pacific-arbitration-review/2026/article/indias-tryst-modifying-awards-pragmatic-recognition-or-catastrophe accessed 27 May 2025
[11] Project Director, NHAI v M Hakeem (2021) 9 SCC 1
[12] The Project Director National Highways v M Hakeem (2021)’ (Drishti Judiciary, 14 May 2025) https://www.drishtijudiciary.com/landmark-judgement/alternative-dispute-resolution/the-project-director-national-highways-v-m-hakeem-2021 accessed 27 May 2025.
[13] Vedanta Ltd v Shenzhen Shandong Nuclear Power Construction Co Ltd (2019) 11 SCC 465
[14] Oriental Structural Engineers Pvt Ltd v State of Kerala (2021) 6 SCC 150
[15] Shri Venkatesh and Manu Tiwari, ‘The Indecision in Modification of Awards under Section 34 and 37 of the Arbitration and Conciliation Act’ (SKV Law Offices, 25 April 2025) https://skvlawoffices.com/the-indecision-in-modification-of-awards-under-section-34-and-37-of-the-arbitration-and-conciliation-act/ accessed 27 May 2025.
[16] Grindlays Bank Ltd v Central Government Industrial Tribunal and Others (1980) 1981 AIR 606
[17] Aditya Vikram Jalan and Durga Priya Manda, ‘Modification of Arbitral Awards: A Practitioner’s Perspective’ (Supreme Court Observer, 13 May 2025) https://www.scobserver.in/journal/modification-of-arbitral-awards-a-practitioners-perspective/ accessed 27 May 2025.
[18] Ssangyong Engineering & Construction Co Ltd v National Highways Authority of India (2019) 15 SCC 131
[19] Author Unknown, ‘Analysing the Power of Courts to Modify Arbitral Awards as Set Out in Gayatri Balaswamy v M/s ISG‘ (2025) International Journal of Legal and Law Research https://www.ijllr.com/post/analysing-the-power-of-courts-to-modify-arbitral-awards-as-set-out-in-gayatri-balaswamy-vs-m-s-isg accessed 27 May 2025
[20] Convention on the Recognition and Enforcement of Foreign Arbitral Awards (adopted 10 June 1958, entered into force 7 June 1959) 330 UNTS 3 (New York Convention)
[21] Zoeb Cutlerywala, ‘Supreme Court’s Five-Judge Verdict on Modification of Arbitral Awards: A Welcome Evolution or Judicial Overreach?’ (2 May 2025) Mondaq https://www.mondaq.com/india/arbitration-dispute-resolution/1619514/supreme-courts-five-judge-verdict-on-modification-of-arbitral-awards-a-welcome-evolution-or-judicial-overreach accessed 27 May 2025
Author: Narendra Kumar is a student at NLIU, Bhopal.
