In a significant ruling on 30th April 2025[1], the Supreme Court of India addressed a pivotal question in arbitration law: Do Indian courts possess the authority to modify arbitral awards under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 (the “Act”)? The Constitution Bench’s decision with a 4[2]:1[3] majority in Gayatri Balasamy v. ISG Novasoft Technologies Ltd[4] provides clarity on this contentious issue, emphasizing the principles of finality and minimal judicial interference in arbitration.
Background of the case
Ms. Gayatri Balasamy was appointed as Vice President (M&A Integration Strategy) at ISG Novasoft Technologies Ltd. on 27th April 2006. Her employment agreement included provisions for training, a potential transfer to the United States, and an arbitration clause for dispute resolution. On 24th July 2006, Ms. Balasamy tendered her resignation, alleging sexual harassment by the company’s CEO, Mr. Krishna Srinivasan. The resignation was not accepted, and over the following year, she received multiple termination letters. Subsequently, Ms. Balasamy filed criminal complaints against the CEO and the Vice President of the Company[5], while ISG Novasoft initiated defamation and extortion proceedings against her.
The Supreme Court referred the dispute to arbitration, resulting in an award of ₹2 crore in favor of Ms. Balasamy. Dissatisfied, she approached the Madras High Court, arguing that the arbitral tribunal had overlooked critical aspects of her claims. A single-judge bench vide Order dated 2nd September 2014 modified the award, granting an additional ₹1.68 crore for the company’s failure to constitute a committee as mandated by the Supreme Court in the Vishaka[6] case to address her sexual harassment allegations.
However, on 8th August 2019, the Division Bench of the Madras High Court revisited and modified the decision rendered by the learned single judge. While concurring with the single judge’s finding that Ms. Balasamy was entitled to additional compensation, the Division Bench took the view that the sum awarded lacked a discernible rationale or computational basis. The Bench observed that the quantum of compensation, i.e., ₹1.6 crore, was disproportionate and unduly burdensome, considering the nature of the claims and evidence on record. Concluding that the award was excessive, the Division Bench significantly curtailed the amount, reducing the additional compensation to ₹50,000. This prompted Ms. Balasamy to file a Special Leave Petition before the Supreme Court.
The matter was initially taken up by a Bench of the Supreme Court on 1st October 2021, comprising then Chief Justice N.V. Ramana along with Justices Surya Kant and Hima Kohli. However, over the following years, the case was listed before several different benches without a final adjudication. It was only in 2024 that the case was assigned to a newly constituted Bench comprising Justices Dipankar Datta, K.V. Viswanathan, and Sandeep Mehta.
On 20th February 2024, this Division Bench observed that the matter raised a substantial and significant question of law: whether a court is empowered to modify an arbitral award under the provisions of Sections 34 and 37 of the Act.
Legal issue
The central question before the Supreme Court was whether Sections 34 and 37 of the Act empower courts to modify arbitral awards[7].
Section 34 of the Act confers upon parties to an arbitral proceeding the statutory right to approach a competent court to seek the setting aside of an arbitral award, but only under specific and limited circumstances. These grounds include, inter alia, situations where a party to the arbitration was under a legal incapacity; where the arbitration agreement is deemed invalid under the applicable law chosen by the parties; or where the applicant was not given proper and timely notice regarding the appointment of an arbitrator or the arbitral proceedings themselves, thereby being unable to present their case. The provision sets a high threshold for judicial interference, reflecting the legislative intent to ensure minimal curial intervention in arbitral awards.
Section 37 of the Act provides for a limited right of appeal against certain orders passed under the Act. It empowers a court, which is otherwise competent to hear appeals from original civil decrees, to entertain appeals arising from specified arbitral orders. In particular, Section 37(1)(c) permits an appeal to be filed against an order either setting aside or refusing to set aside an arbitral award under Section 34. This appellate mechanism serves as a safeguard, ensuring judicial scrutiny over key decisions without undermining the principle of finality that underpins arbitral awards.
The ambiguity lay in whether these provisions implicitly include the power to modify awards.
The Bench observed that the judiciary had, over time, developed two divergent lines of reasoning with respect to the extent of judicial intervention permissible under the Act. It noted that courts had adopted conflicting interpretations across different cases, resulting in an inconsistent and unsettled position on whether arbitral awards could be modified[8], rather than merely set aside or upheld[9].
In light of the conflicting judicial precedents, the Division Bench concluded that the matter raised a fundamental question requiring authoritative resolution. It accordingly referred the issue to a Constitution Bench, noting the necessity for a larger bench to definitively settle the scope of a court’s power to modify arbitral awards under the Act.
Supreme Court’s analysis
The five-judge Constitution Bench, led by Chief Justice Sanjiv Khanna, examined arguments from both sides. Senior Advocate Arvind Datar, representing Ms. Balasamy, contended that the power to partially set aside an award under Section 34 implies the authority to modify it. He argued that modification is a subset of setting aside, essential for delivering complete justice. Conversely, Solicitor General Tushar Mehta, representing the Union government, maintained that the 1996 Act deliberately omits the power to modify awards, unlike its predecessor, the 1940 Act. He emphasized that any expansion of judicial powers should come through legislative amendment, not judicial interpretation.
The Court also considered international practices, noting that jurisdictions like the UK[10], Singapore[11], Australia permits courts to modify arbitral awards under certain circumstances. This comparative analysis highlighted the global trend towards limited judicial intervention to uphold the efficacy of arbitration.
Judgment
The 1st question of law: “Whether the powers of the Court under Sections 34 and 37 of the Arbitration and Conciliation Act 1996 will include the power to modify an arbitral award?”
Delivering the majority opinion, the Chief Justice held that courts are empowered to modify arbitral awards, albeit in narrowly defined and exceptional circumstances. The majority emphasised that such modification should not be routine and must be exercised with judicial restraint. Importantly, the Bench clarified that the Supreme Court, in particular, may invoke its extraordinary discretionary powers under Article 142 of the Constitution to do complete justice between the parties, including modifying the terms of an arbitral award where warranted. Furthermore, the majority acknowledged that courts may, in appropriate cases, alter the rate of post-award interest awarded by an arbitral tribunal, provided such intervention aligns with the principles of fairness and equity.
In his dissenting opinion, Justice Viswanathan firmly disagreed with the majority view, asserting that the Act does not envisage any power for a court, while exercising jurisdiction under Section 34, to modify or revise the contents of an arbitral award. He emphasised that the legislative scheme of the Act limits the court’s role to either setting aside or upholding an award, and that any departure from this structure would undermine the autonomy of the arbitral process. Justice Viswanathan also took the view that the invocation of Article 142 of the Constitution to modify arbitral awards was constitutionally impermissible and inconsistent with the principles underlying arbitration law. Additionally, he maintained that even post-award interest, being part of the substantive award, should not be subject to judicial alteration.
The 2nd question of law: “If the power to modify the award is available, whether such power can be exercised only where the award is severable, and a part thereof can be modified?”
The term “severance” refers to the act of detaching or isolating certain elements from a whole. Within the framework of arbitration, it enables courts to strike down the portions of an arbitral award that are legally flawed, on grounds set out in Section 34 of the Act 1996, while preserving the enforceable and valid components. This principle is specifically acknowledged in the proviso to Section 34(2)(a)(iv), which allows a court to annul an award to the extent that it deals with issues falling outside the scope of the reference or arbitration agreement.
In the Gayatri Balasamy case, the entire Bench, including Justice Viswanathan, who dissented on other issues, was unanimous in affirming that Indian courts are empowered to sever invalid parts of an arbitral award. The judges drew support from the legal doctrine omne majus continet in se minus, which conveys that the ability to do something in full inherently includes the authority to do so in part. Therefore, the power to wholly annul an arbitral award necessarily includes the more limited power to annul it in part.
The majority opinion also explained that this authority is not only implied by the structure of the Act but also clearly reflected in the wording of the aforementioned proviso. However, they stressed that this discretion must be exercised sparingly and only where the impugned portion can be cleanly separated from the rest of the award, both in terms of substance and effect. Justice Viswanathan, in agreement on this point, highlighted that such severance must not disturb or dilute the remaining sections of the award that continue to be legally valid.
While this principle appears straightforward in the context of multi-claim awards, where separate and unrelated claims are individually adjudicated, a more complex challenge emerges when the arbitral tribunal grants a lump-sum award for damages. In such cases, difficulties arise if the court determines that only a portion of the award is substantiated by evidence, raising questions about the severability and enforceability of the remaining amount. Such an exercise would inevitably require an examination of the merits, something that Section 34 of the Act explicitly precludes. However, by framing the issue as one of severability, there is a risk that courts may begin to encroach upon appellate territory under the guise of limited modification. This risks eroding the principle of finality that is central to the arbitral process. Although the majority judgment is driven by a legitimate aim to prevent redundant re-arbitration and enhance procedural efficiency, the broad interpretive leeway it introduces could inadvertently give rise to new litigation over the contours of what constitutes a “limited” intervention.
It is this very concern that underpins the dissenting view, which cautions that permitting modifications under Section 34 undermines the structural integrity of the arbitral framework. Without a firm judicial commitment to exercising this power sparingly and within narrowly defined limits, this ruling could open the floodgates to precisely the kind of judicial interference that the Act was enacted to curtail.
The 3rd question of law: “Whether the power to set aside an award under Section 34 of the Act, being a larger power, will include the power to modify an arbitral award and if so, to what extent?”
The majority took the view that the authority to “partially set aside” an arbitral award effectively amounts to a limited form of modification. In their opinion, the power to sever invalid portions necessarily implies a court’s ability to adjust or vary the terms of the award to the extent required. They concluded that this limited intervention was essential to uphold fairness and efficiency in arbitration. They cautioned that compelling parties to undergo a fresh round of arbitration every time a flaw is found in part of an award would only increase costs, prolong proceedings, and undermine the very objective of the arbitral process. The absence of express language in the Act regarding such powers, they said, should not be interpreted as a legislative ban on modifying awards
Justice Viswanathan, however, strongly disagreed. He made a clear distinction between the concepts of “modification” and “severance,” arguing that the two are not interchangeable. In his view, severance merely involves removing offending portions without altering the substance of what remains, whereas modification requires reshaping or reworking the contents of the award itself. He emphasized that these powers are distinct in nature and rooted in separate legal foundations.
Justice Viswanathan further dismissed the claim that hardship to the parties justified judicial modification of arbitral awards. He cited two key reasons:
- Section 43(4) of the Act allows for proceedings to recommence, which undermines the argument that remitting or setting aside an award results in insurmountable inconvenience.
- By choosing arbitration, parties voluntarily exclude certain judicial remedies, and their rights are strictly governed by the Arbitration Act. As such, allowing courts to modify awards would contradict the contractual structure that the parties themselves agreed upon.
Ultimately, in his dissent, he asserted that courts under the 1996 Act are limited to either setting aside or remitting the award, granting no scope for altering its content.
Correction of apparent errors
The majority concluded that courts hold an implied authority to correct evident mistakes in arbitral awards, such as clerical, typographical, computational[12], or other clear and self-evident errors. While this power is not expressly provided for in the Act, the judges reasoned that it is inherently available to courts as a matter of procedural necessity. They likened this authority to Section 152 of the Code of Civil Procedure, 1908, which permits rectification of inadvertent slips or errors in judicial orders or decrees. However, they cautioned that only errors that are obvious and undisputed on the face of the record can be corrected; this mechanism is not intended to serve as a substitute for appeals or substantive reviews.
The Court’s determination regarding the correction of clerical or computational mistakes reflects a substantive recognition that such rectifications are not limited to trivial or surface-level errors, but may extend to manifest inaccuracies that are clearly apparent on the face of the record and essential to uphold the integrity of the arbitral award.
The term “manifest errors” remains undefined in the statute, leaving its contours broad and imprecise. When interpreted alongside the requirement that such errors be “apparent on the face of the record,” there arises a real possibility that courts may overstep the limited scope of review envisioned under Section 34. This could open the door to reassessing factual findings under the pretext of correcting obvious mistakes. The ambiguity surrounding what qualifies as “manifest” grants courts a wide margin of discretion, potentially blurring the line between permissible judicial scrutiny and impermissible re-evaluation of the merits of the arbitral award.
Justice Viswanathan, though firmly opposed to the broader idea of courts modifying arbitral awards, concurred with the majority on one narrow point: that courts may intervene to correct clearly demonstrable and accidental mistakes in an award.
Adjustment of pendente lite and post-award interest
The majority concluded that judicial intervention to alter interest granted during the arbitration proceedings, commonly referred to as pendente lite interest, is not permissible. Courts may only annul or remit this portion of an award if it is found to be objectionable. In contrast, the majority acknowledged that a narrow power exists for courts to revise post-award interest rates in certain circumstances. Specifically, where the rate imposed by the arbitral tribunal appears unreasonable or disconnected from prevailing economic conditions, courts may intervene. The rationale is that arbitrators are not expected to forecast future financial variables, and correcting the rate could prevent disproportionate outcomes. Post-award interest, governed by Section 31(7)(b) of the Act, accrues from the date of the award until actual payment is made. It is intended to discourage delayed compliance and compensate for deferred payments.
The majority held that courts could either raise or lower this rate where appropriate, seeing this limited authority as a practical necessity, one that avoids the drastic remedy of setting aside the entire award or triggering a new round of arbitration solely due to interest miscalculations.
While recognizing that Section 34 of the Act aligns with the UNCITRAL Model Law, which prohibits modification of awards, the majority emphasized that the treatment of interest under Section 31(7) is a unique feature of Indian arbitration law, not present in the Model Law. This distinct statutory basis justified a different interpretive approach.
Justice Viswanathan dissented, firmly opposing any judicial alteration of interest awarded by an arbitrator. He maintained that neither Section 34 nor the appellate route under Section 37 grants courts the authority to revise interest rates. Where a defect in the interest component is identified, whether due to omission, excess, conflict with the contractual terms, or unreasonableness, he argued that the correct procedure is for the court to remit the matter to the arbitral tribunal under Section 34(4), accompanied by appropriate reasoning.
Justice Viswanathan further noted that the drafters of the 1996 Act consciously departed from the approach under the 1940 Arbitration Act, which expressly permitted modification through Section 15. In his view, the omission of such a power in the 1996 Act was intentional and aligned with international best practices, reinforcing the idea that modification by courts was neither intended nor permissible.
Supreme Court’s modification powers under Article 142
The majority of the Court recognized that Article 142 of the Constitution could potentially serve as a basis for modifying arbitral awards. Historically, courts have invoked this provision to amend awards, particularly when it is essential to achieve “complete justice” and resolve disputes effectively. The majority observed that Article 142 might offer a limited scope for modification to ensure that justice is fully realized, thereby promoting the efficient closure of disputes.
Nonetheless, the majority stressed that any use of Article 142 to modify arbitral awards must be approached with “great caution” and should be strictly confined to narrowly defined circumstances. The Court warned that such powers should not be exercised in a manner that could undermine the core principle of the Arbitration Act, which advocates for minimal judicial intervention in arbitration matters. Thus, modification should never be used to alter the substance of an award.
Justice Viswanathan, however, vehemently opposed the use of Article 142 to alter arbitral decisions. He argued that the Supreme Court should not invoke this constitutional provision to modify awards, as doing so would bypass the statutory limits explicitly set out in the Arbitration Act. In his view, Article 142 cannot override substantive legal principles, and using it in this manner would directly conflict with the framework established by the Arbitration Act.
Enforcement of foreign Arbitral Awards
Opponents of the modification power argued that granting such authority could complicate the enforcement of modified awards in foreign jurisdictions, particularly in light of India’s commitments under the New York Convention.
The majority rejected this argument, deeming it “misconceived.” The Chief Justice noted that allowing for limited modifications under Section 34 does not conflict with the principles of the New York Convention. He explained that the Convention defers to the domestic law of the seat of arbitration to determine whether an award is enforceable. Since Indian law allows for limited modifications, these modifications are incorporated into the domestic legal framework and do not obstruct enforcement under the Convention.
In contrast, Justice Viswanathan disagreed, emphasizing that domestic modifications could indeed affect the enforceability of awards internationally. He cautioned that permitting modifications could create difficulties in enforcement under the New York Convention. He pointed out that the Indian Arbitration Act, aligned with the Model Law, mandates minimal court interference, and modification was not part of that framework. Drawing on examples from jurisdictions like the UK, Singapore, and New Zealand, he noted that these countries explicitly state that court-ordered modifications become part of the arbitral award. In his view, India’s lack of similar legal provisions could jeopardize the enforcement of awards made in India under the Convention.
Modification in statutory arbitration
A central argument put forward by those advocating for the Court’s power to modify arbitral awards was the necessity of such a power in the context of statutory arbitrations, such as those governed by the National Highways Authority Act, 1956. These arbitrations are compulsory in public law matters, particularly in cases like land compensation. The argument was made that, in these circumstances, courts should be able to modify the amount of compensation awarded, given that the arbitration is statutory in nature.
However, both the majority and Justice Viswanathan disagreed with this view. They clarified that Section 34 of the Arbitration Act does not differentiate between statutory and consensual arbitrations and must be applied uniformly across all types of arbitration. The majority also noted that they refrained from expressing an opinion on the validity of the NHAI Act, as there was an ongoing challenge to it before the Court.
One of the key issues referred to the Constitution Bench was the need to resolve conflicting judgments regarding the modification of arbitral awards. A significant case in this regard was Project Director, NHAI v M. Hakeem[13], where the Court addressed the enhancement of an award related to land acquisitions by the NHAI. In Hakeem, the Court had definitively ruled that an award could not be modified under Section 34. Justice Viswanathan, in his dissent, reaffirmed this position, asserting that Hakeem was not decided per incuriam.
Suo motu powers of the Court to remit an Award to the Tribunal
The majority concluded that the court’s authority to remit an award back to the tribunal under Section 34(4) must be initiated by a party’s request, which can be made either in writing or orally[14]. However, the court must formally record this request before remitting the award. They rejected the argument that the ability to remand an award to the tribunal nullifies the court’s power to modify it, stating that the two are distinct and should be exercised separately. The modification power, they emphasized, is a limited one, while the remittance power is broader.
The majority further clarified that the power to remit is discretionary and should be used by the court when it believes that remittance can remedy a specific harm caused by the award. However, if the harm is irreparable or would undermine the interests of justice, the court may choose not to remit the award. They also noted that the tribunal retains substantial powers when an award is remitted, though these powers are more limited compared to the court’s authority to modify under Section 34.
In contrast, Justice Viswanathan viewed the remittance power as a “safety valve,” allowing the tribunal an opportunity to rectify an award before the court fully sets it aside. He argued that the requirement for a written or oral request was merely procedural and did not prevent the court from exercising suo motu powers in appropriate cases to fulfill the Act’s objectives. “The need for an application oral or in writing, is really directory and does not militate against the exercise of Suo Moto powers, in given cases by the Court,” he stated.
Implications
This judgment reinforces the sanctity of arbitral awards and underscores the limited role of courts in arbitration proceedings. Parties must now be more diligent in presenting their cases during arbitration, knowing that courts cannot later modify the outcomes. The decision also signals to the legislature the need to consider whether statutory amendments are necessary to address situations where modification, rather than setting aside, would serve justice.
Conclusion
The Supreme Court’s ruling in Gayatri Balasamy v. ISG Novasoft Technologies Ltd. marks a significant moment in the evolution of India’s arbitration jurisprudence. By acknowledging a limited judicial power to modify arbitral awards, especially to correct clerical, typographical, and severable errors, the majority seeks to balance efficiency and finality in arbitration. However, the judgment also introduces interpretive complexity that risks blurring the line between judicial oversight and intervention. The scope of permissible modifications remains loosely defined, leaving room for inconsistent application and expanded judicial review under the guise of “complete justice” or severability. While the decision is intended to streamline dispute resolution and avoid needless re-arbitration, it also underscores the need for careful judicial restraint. The coming years will determine whether this interpretive shift enhances the credibility of India’s arbitration ecosystem or reopens the gates to the very intervention the 1996 Act aimed to curtail.
Foot Notes…………………………………………………………………………………………………………………………………………..
[1] 2025 INSC 605
[2] Sanjiv Khanna CJI, B.R. Gavai J, P.V. Sanjay Kumar J, A.G. Masih J
[3] K.V. Viswanathan J
[4] SLP (C) Nos.15336-15337/2021
[5] For acts constituting offences under both the Indian Penal Code, 1860, and the Tamil Nadu Prohibition of Harassment of Women Act, 1998
[6] Vishaka and Others Vs. State of Rajasthan and Others,(1997) 6 SCC 241
[7] “1. Whether the powers of the Court under Sections 34 and 37 of the Arbitration and Conciliation Act 1996 will include the power to modify an arbitral award?
- If the power to modify the award is available, whether such power can be exercised only where the award is severable, and a part thereof can be modified?
- Whether the power to set aside an award under Section 34 of the Act, being a larger power, will include the power to modify an arbitral award and if so, to what extent?
- Whether the power to modify an award can be read into the power to set aside an award under Section 34 of the Act?”
[8] In a series of decisions such as Vedanta Limited v. Shenzen Shandong Nuclear Power Construction Company Limited (2018), Oriental Structural Engineers Pvt. Ltd. v. State of Kerala (2011), and Tata Hydro-Electric Power Supply Co. Ltd. v. Union of India (2003), the Supreme Court appeared more amenable to judicial modification of arbitral awards. In these rulings, the Court upheld or permitted altered versions of arbitral awards, suggesting a more flexible approach to the extent of permissible judicial interference under the Act.
[9] In a series of decisions, including McDermott International Inc. v. Burn Standard Co. Ltd. (2006), Project Director, NHAI v. M. Hakeem (2021), and MMTC Ltd. v. Sangyoung Construction Ltd., the Supreme Court consistently emphasized the narrow scope of judicial intervention under Sections 34 and 37 of the Act. These rulings made it clear that while courts may set aside arbitral awards under certain limited circumstances, they are not vested with the authority to alter or modify the substance of the award itself.
[10] Section 67(3) of the UK Arbitration Act, 1996 empowers the court, when dealing with jurisdictional challenges, to confirm, vary, or set aside the arbitral award in whole or in part. Additionally, Section 69 permits an appeal on a point of law, subject to certain conditions, where the court may set aside or remit the award, either in full or in part, for reconsideration by the tribunal. These express statutory provisions provide a clear legislative mandate for judicial intervention in specified circumstances, distinguishing them from regimes, such as that under the Indian Act, that do not confer similar modification powers by default.
[11] Section 49 of the Singapore Arbitration Act, 2001 provides for an appeal against an arbitral award, and the appellate court may:
(a) Confirm the award; or
(b) Vary the award; or
(c) Remit the award in whole or part for reconsideration; or
(d) Set aside the award in whole or in part.
[12] Significantly, arbitral tribunals are already empowered under Section 33 of the Act to rectify clerical, computational, or typographical errors within 30 days of the award or within any extended period mutually agreed upon by the parties. With the Constitution Bench’s interpretation, courts now also possess a limited and narrowly circumscribed power under Section 34 to carry out similar corrections. This development effectively introduces a parallel avenue for minor modifications, thereby extending the scope of judicial oversight, albeit within carefully defined boundaries.
[13] (2021) 9 SCC 1
[14] The Supreme Court also clarified that appellate courts, when exercising jurisdiction under Section 37 of the Arbitration and Conciliation Act, possess analogous powers to remit matters back to the arbitral tribunal during the course of appellate proceedings.
