A five-judge Constitution Bench of the Supreme Court of India issued a landmark ruling in the case of Gayatri Balasamy vs M/s ISG Novasoft Technologies Limited[1], resolving a long-debated issue as to whether courts can modify arbitral awards. In a 4:1 majority, the Apex Court recognized an implied power to modify an arbitral award under Section 34 of the Arbitration & Conciliation Act (“Arbitration Act”). However, it clarified that this power of modification is limited and can be exercised in specific situations: when the award is severable, to fix clerical, typographical, or any other manifest errors, to adjust post-award interest in certain cases, and by the Supreme Court while exercising its special powers under Article 142 of the Constitution which has to be used cautiously. This decision marks a pivotal development in India’s arbitration law framework.

This article outlines the legislative background and events leading to the Constitution Bench's review of courts’ power to modify arbitral awards. While encapsulating the key points of the judgment, it presents the authors’ view that, while the ruling is a positive development, some ambiguity still persists over this excessive judicial involvement, which may impact public confidence in the country’s arbitration framework, especially since the scope for modification is not properly delineated and remains subject to inconsistent judicial interpretation.

History of modification of award: A judicial enigma:

The judicial history of courts modifying arbitral awards dates back to the Supreme Court’s ruling in McDermott International Inc. v. Burn Standard Co. Ltd[2], wherein it was held that under Section 34 of the Arbitration Act, courts can only set aside an award, necessitating a fresh arbitration process. However, since this judgment did not directly tackle the issue of modification, the Supreme Court later provided clear guidance in National Highway Authority of India v. M. Hakeem[3], explicitly ruling that courts cannot modify arbitral awards under Section 34. Further, the Delhi High Court in NHAI v. Trichy Thanjavoor Expressway Limited[4], clarified that partially setting aside an award does not equate to modifying it. Applying the doctrine of severability, the Delhi High Court held that when an award addresses distinct claims separately, a Section 34 court can strike down only the offending parts, allowing the rest to remain enforceable without restarting arbitration.

Modification of award for "complete justice":

Despite the lack of a statutory mechanism providing for modification and numerous judicial precedents prohibiting the modification of arbitral awards, courts have, on limited occasions, made exceptions to ensure ‘complete justice’. One of the earliest instances was Tata Hydro-Electric Power Supply Co. Ltd. v. Union of India[5], where the Supreme Court upheld the award but modified the interest period. In Krishna Bhagya Jala Nigam Ltd. v. Harischandra Reddy[6], the Supreme Court reduced the interest rate and suggested a compensation reduction, which the award-holder accepted. Similarly, in S.V. Samudram v. State of Karnataka[7], despite acknowledging the lack of power under Sections 34 and 37 to alter awards, the Supreme Court used its extraordinary powers under Article 142 to reduce the interest rate. Most recently, in S. Jayalakshmi v. Special District Revenue Officer[8], although the Supreme Court confirmed that courts cannot modify awards under Section 34, it invoked Article 142 to uphold previously granted compensation, ensuring fairness and consistency with similarly placed landowners from the M. Hakeem case.

A review of the above cases indicates that, despite the apparent clarity brought by the M. Hakeem judgment (Supra), considerable judicial inconsistency persisted, warranting an authoritative pronouncement from a larger bench of the Supreme Court to settle this vexed issue. Given the urgency and significant impact on the arbitration regime in the country, a three-judge bench of the Supreme Court referred all the relevant questions pertaining to modification of award to a larger bench. Thereafter, CJI Sanjeev Khanna directed the constitution of a Constitution Bench to address the said issues.

Gayatri Balasamy vs ISG Novasoft – The majority judgment:

The majority judgment, penned by Chief Justice Sanjeev Khanna, observed that Section 34 of the Arbitration Act entails an implied or inherent power of modification of an award, although in limited circumstances. Some of the key findings of the judgment are discussed hereinbelow:

  • Affirming partial setting aside of award: The majority judgment upheld the partial annulment of an arbitral award, providing that the offending part of the award is severable from the rest of the award. Citing the Delhi High Court's ruling in NHAI v. Trichy Thanjavoor Expressway Ltd.(Supra), the Supreme Court applied the principle of omne majus continet in se minus (“the greater power includes the lesser”), affirming that the authority to set aside an award under Section 34 also includes the authority to do so partially. However, the Supreme Court emphasized that partial annulment is only permissible when the invalid and valid sections are clearly distinct and not interdependent.

  • Limited power of modification can be traced in Section 34: The Supreme Court acknowledged that while minimal judicial interference is a core principle of arbitration, domestic courts still play a crucial role in ensuring swift and just dispute resolution. While highlighting delays in final disposal of Section 34 and 37 petitions, the Apex Court noted that without the power to modify awards, courts would be forced to set them aside in their entirety, leading to costly, prolonged re-arbitration, causing unnecessary hardships to the parties, which undermines the purpose of the Arbitration Act. The Court invoked the doctrine of implied powers and ‘reinterpreted’ section 34 to include a limited power to modify awards, stating that even if the same is not explicitly granted by the legislature, the courts can read into a limited modification power under the wide power of setting aside the award under Section 34 to advance legislative intent and reduce party hardship.

  • Limited grounds of modification: The Supreme Court clarified that the power to modify an arbitral award is narrowly confined and must not involve re-evaluating the merits of the dispute. The courts may exercise this power only to correct clear and obvious errors, such as computational, typographical, clerical, or other manifest errors that are apparent on the face of the award. Notably, arbitral tribunals also hold similar authority under Section 33 of the Arbitration Act, allowing them to make such corrections within 30 days of the award or within a mutually agreed timeframe. Therefore, now alongside Section 33, Section 34 also grants courts a limited scope to make such modifications.

  • Modification of award or remitting the award to the arbitrator under Section 34(4): Drawing the line: Under Section 34(4) of the Arbitration Act, courts may remit an award back to the arbitrator to correct curable defects upon request. As the power of modification now stands recognized under Section 34, a key issue arises: when should a court exercise this power directly, and when should it remand the award back to the arbitrator? The Supreme Court clarified that if the modification is straightforward and the error is apparent on the face of the record, the court may itself make the correction. However, if the issue is complex or debatable, the court should remit the award under Section 34(4). Notably, the Supreme Court also confirmed that appellate courts under Section 37 have similar remand powers, which can be exercised during appeal proceedings. The Apex Court further noted that the exercise of powers by a court under Section 34(4) can also be exercised on an oral request and need not be only based on a written application.

  • Post-award interest can be modified by the courts: The Supreme Court held that courts have the authority to modify the post-award interest granted under Section 31(7)(b) of the Arbitration Act, which sets a default rate of 2% above the prevailing interest rate if the award is silent on the matter. The Court reasoned that post-award interest is future-oriented and may not always be accurately determined by the arbitrator, justifying judicial correction at a later stage. However, it was clarified that interest awarded for the period during the arbitration proceedings (pendente lite interest) cannot be altered by the courts.

  • Power of Supreme Court to modify awards under Article 142: The Apex Court recognized and affirmed the inherent power of the Supreme Court under Article 142 of the Constitution (as exercised in various cases earlier) to modify the arbitral awards to secure the ends of justice and bring the dispute to an end. As a caveat, the Court also observed that this inherent power must be invoked with utmost care and caution and must not result in rewriting the award or modifying the award on its merits.

Dissenting opinion of Justice K.V. Vishwanathan:

In his dissenting opinion, Justice K.V. Vishwanathan disagreed with the majority, asserting that Section 34 of the Arbitration Act does not grant courts the power to modify arbitral awards, and such a power cannot be implied in contradiction to the legislature’s intent. Further, he opined that courts also lack the authority to change the rate of interest. Justice Vishwanathan also emphasized that the Supreme Court cannot use its powers under Article 142 to modify an award, as inherent power cannot be invoked contrary to statutory limitations of Section 34. However, he acknowledged that courts may correct computational, clerical, or typographical errors, provided these do not result in substantive changes to the award.

Analysis and conclusion

This Constitution Bench judgment carries pivotal ramifications for the growth and evolution of arbitral jurisprudence in India. In this much-anticipated decision, the majority opinion attempts to settle the long-standing and complex issue by recognizing the power to modify an award under Section 34 of the Arbitration Act. However, it cannot be overlooked that affirming such a power may result in undermining the principles of minimal judicial intervention and finality of awards, which are the cornerstones of the Arbitration Act.

Justice Vishwanathan, in his dissenting opinion, observed that the term modify means to “change, vary, qualify, or reduce,” and such a meaning cannot be read into the limited power of setting aside an award under Section 34, especially when the legislature has not expressly conferred this power. He highlighted that unlike the 1940 Arbitration Act, which explicitly permitted modification, the current 1996 Act consciously omits such a provision, even after multiple amendments. Further, in other arbitration-friendly jurisdictions, modification is only permissible when an express statutory power is conferred for the same, such as in the United Kingdom (under Section 67 of the English Arbitration Act, 1996) and in Singapore (under Section 47 of the Singapore Arbitration Act, 2001)

The majority judgment emphasized the hardship to the parties if the power of modification is not recognized. However, Justice Vishwanathan correctly noted that under the Arbitration Act, the only recourse available to a court is to set aside the award and initiate fresh arbitration under Section 43. The majority relied on the doctrine of implied powers to justify modification, but Justice Vishwanathan pointed out that this doctrine should only be applied when it is necessary to enforce the statute’s final powers. Since Section 34 of the Arbitration Act is based on minimal judicial intervention and only allows setting aside an award (on extremely limited grounds), granting courts an implied power to modify awards would undermine the statute's intended objective of finality of the awards.

Pertinently, the majority opined that the power of modification can be used to rectify any computational, typographical, clerical, or other manifest errors apparent on the face of the award. However, the term ‘manifest error apparent on the face of the record’ is vague and subject to judicial interpretation, which may result in inconsistent decisions and unnecessary judicial interference. As the majority has also permitted the Supreme Court to modify an award by exercising its inherent power under Article 142, there exists a serious apprehension that allowing such modification by a Section 34 court, a Section 37 court, or the Supreme Court at a belated stage could seriously undermine the finality of the arbitral process.

Justice Vishwanathan rightly emphasized that arbitration is a special and distinct dispute resolution mechanism and allowing courts to modify awards at the final stage of litigation introduces significant uncertainty, which is antithetical to the spirit of the Arbitration Act. By granting courts this power, the Supreme Court has risked amplifying judicial intervention, potentially disrupting the scheme of the Arbitration Act. This could deter domestic and international stakeholders from choosing India as a preferred arbitration venue. With the judiciary’s role significantly expanded and the government opting to avoid dispute resolution via arbitration, there are serious concerns about the long-term credibility and resilience of India’s arbitration ecosystem.

[1] Special Leave Petition (Civil) No. 15336-15337/2021

[2] (2006) 11 SCC 181

[3] (2021) 9 SCC 1

[4] 2023 SCC OnLine Del 5183

[5] (2003) 4 SCC 172

[6] (2007) 2 SCC 720

[7] (2024) 3 SCC 623

[8] Civil Appeal No. 192 of 2025

Authors:

Abhinav Sharma, Partner

Ayush Srivastava, Senior Associate

Mayank Bansal, Associate

Disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.