Supreme Court on Limited Power to Modify Arbitral Awards – Gayatri Balasamy Case (2025)

Case Citation:

Gayatri Balasamy v. M/s ISG Novasoft Technologies Ltd. & Ors.,
2025 INSC 605
(Arising out of S.L.P. (C) Nos. 15336–15337 of 2021)
Bench: Sanjiv Khanna, CJI; B.R. Gavai, J.; Sanjay Kumar, J.; Augustine George Masih, J.

Facts of the Case:

The case originated from conflicting judicial opinions on whether Indian courts have the jurisdiction to modify arbitral awards under the Arbitration and Conciliation Act, 1996.
While Section 34 of the Act provides that courts may “set aside” an arbitral award on limited grounds, several earlier Supreme Court decisions had, in practice, modified awards, especially regarding interest rates or partial awards.
Due to this inconsistency, a five-judge Constitution Bench was constituted to determine the extent of court powers under Sections 34 and 37 of the Act.

Main Provisions Involved:

• Section 34, Arbitration and Conciliation Act, 1996 – Application for setting aside arbitral award.
• Section 37 – Appeal provisions.
• Section 31(7) – Interest on arbitral awards.
• Article 142, Constitution of India – Power of Supreme Court to do complete justice.
• Section 5 – Limited judicial intervention in arbitration.

Issues Involved:

1. Can courts under Sections 34 and 37 modify an arbitral award?
2. If yes, to what extent?
3. Does setting aside an award inherently include the lesser power to modify it?
4. Do such powers violate the UNCITRAL Model Law framework?

Key Principles Laid Down by the Supreme Court:

The five-judge bench held that courts possess a limited power to modify arbitral awards.
The Court clarified four key circumstances where modification is permissible:

1. When the award is severable:
   • Courts can separate valid and invalid parts and set aside only the defective portion.
2. Clerical or computational errors:
   • Courts can correct clear mistakes on the face of the record (like calculation or typographical errors).
3. Post-award interest:
   • Courts can alter the rate of post-award interest if it is contrary to law or unjust, aligning with Section 31(7).
4. Under Article 142 of the Constitution:
   • The Supreme Court can exercise its extraordinary power to modify awards to achieve complete justice, though sparingly.

However, the Court rejected expansive modification powers, emphasizing that:

• Courts cannot rewrite or re-evaluate merits of an arbitral award.
• Modifications should not turn the Section 34 process into an appellate review.
• Only errors that are apparent and severable may be corrected.

Observations and Reasoning:

• The Bench highlighted that Section 34 does not explicitly grant the power to modify awards but also does not prohibit limited modifications.
• The judgment harmonizes equity and legislative intent, ensuring efficiency without overstepping judicial limits.
• The Court underscored that endless litigation through repeated arbitrations defeats the very purpose of arbitration as a speedy, cost-effective mechanism.
• The decision balances judicial restraint and substantive justice — ensuring that courts intervene only when necessary to prevent injustice.

Impact of the Judgment:

• This ruling brings uniformity and clarity to arbitration jurisprudence in India.
• It effectively overrules portions of Project Director, NHAI v. M. Hakeem (2021), which had held that courts cannot modify awards.
• The decision enhances judicial efficiency, avoiding redundant re-arbitrations over minor errors.
• It reinforces India’s pro-arbitration stance, while maintaining fairness and procedural integrity.

Conclusion:

The Supreme Court in Gayatri Balasamy v. ISG Novasoft Technologies Ltd. has struck a fine balance between judicial restraint and the need for practical justice.
By recognizing limited modification powers under Sections 34 and 37, the Court has ensured that minor legal or clerical errors do not necessitate setting aside entire awards — a significant step toward streamlining India’s arbitration framework.

Short Summary

In Gayatri Balasamy v. ISG Novasoft Technologies Ltd., 2025 INSC 605, the Supreme Court of India held that under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, courts have limited powers to modify arbitral awards — such as correcting clerical mistakes, adjusting post-award interest, and severing invalid portions.
This landmark judgment clarifies judicial powers, promoting efficiency, equity, and finality in arbitration proceedings.