The arbitration landscape in India is evolving, and a five-judge Constitution Bench of the Hon’ble Supreme Court of India has delivered a significant judgment in Gayatri Balasamy v. M/s ISG Novasoft Technologies Ltd., upholding the courts’ power to modify arbitral awards under limited circumstances. The Hon’ble Court in this case examined the scope of judicial intervention with respect to the modification of arbitral awards under sections 34 and 37 of the Arbitration and Conciliation Act, 1996.
The case was initially heard by a three-judge Bench of the Hon’ble Supreme Court, which referred the matter to a Constitution Bench to resolve conflicting precedents and provide clarity on the issue. The Constitution Bench held that courts have the power to modify arbitral awards; however, this is permitted only in specific circumstances, such as when the award is severable, allowing the invalid portion to be separated, or to correct clerical, typographical, or computational errors evident on the face of the award. The Hon’ble Court also held that the courts may modify arbitral awards to adjust post-arbitral award interest where it appears disproportionate. The Hon’ble Court also held that, in appropriate cases, it is within its powers under Article 142 to modify arbitral awards where such modification is necessary to ensure complete justice.
The Constitutional Bench comprised former Hon’ble CJI Sanjiv Khanna, Hon’ble CJI B.R. Gavai, Hon’ble Justice Sanjay Kumar, Hon’ble Justice A.G. Masih, and Hon’ble Justice K.V. Viswanathan. The judgment was passed with a 4:1 majority, with Hon’ble Justice K.V. Viswanathan delivering the dissenting opinion. He was of the view that courts lack the authority to modify arbitral awards in the absence of any statutory provision.
The Hon’ble Court also distinguished between the concepts of setting aside and modification of an arbitral award, noting their distinct consequences. The Hon’ble Court held that the power to modify an arbitral award is within its ambit, provided that the invalid portion is separable from the valid one. In this respect, the Hon’ble Court also went on to interpret Section 34 of the Arbitration and Conciliation Act, 1996 and observed that, the provision is silent on modification of the Arbitral Award. However, at the same time, the Hon’ble Court also observed that the said provision does not explicitly bar courts from modifying arbitral awards. The Hon’ble Court also observed that the absence of modification powers could result in undue delays and force parties to initiate fresh arbitration proceedings. Similarly, while dealing with the issue of post-award interest, the Hon’ble Court was of the view that such modifying powers would help reduce further litigation.
https://api.sci.gov.in/supremecourt/2021/20788/20788_2021_1_1501_61506_Judgement_30-Apr-2025.pdf