Gayatri Balaswamy And The Scope Of Section 34 - A New Era For Arbitral Award Intervention
Author: LawSphereX
Category: Arbitration & ADR
Published:
Updated:
GAYATRI BALASWAMY AND THE
SCOPE
OF SECTION 34: A NEW ERA FOR ARBITRAL AWARD INTERVENTION?
Ishita Bhatia, Jindal Global Law School
FACTS OF THE CASE The dispute in Gayatri Balasamy v. ISG Novasoft Technologies Ltd. ,1 revolved around the extent to which Indian courts can interfere with arbitral awards under the Arbitration and Conciliation Act, 1996. Gayatri Balasamy and ISG Novasoft Technologies Ltd. were parties to a professional arrangement that eventually soured, prompting one of them to invoke arbitration. The arbitral tribunal passed an award, which was then challenged under Section 34 of the Act. Now, ordinarily, a Section 34 challenge would involve the court either setting aside the award or remanding it to the tribunal for reconsideration. But in this case, things took a more complex turn. The court didn’t just review the award, it went a step further and modified it, making changes to specific components like the amount of compensation and the post-award interest.
This judicial modification triggered a far-reaching legal debate. Traditionally, courts in India have interpreted their powers under Section 34 quite narrowly. As laid down in Project Director, NHAI v. M. Hakeem (2021),2 courts were only seen as having two clear options when faced with an arbitral award: either annul it or send it back to the tribunal for limited corrections under Section 34(4). The notion that a court could alter an award rather than just invalidate or remit it was seen as inconsistent with the Arbitration Act’s text and structure. However, this wasn’t the full picture. In multiple earlier and subsequent decisions such as Vedanta Ltd. v. Shenzhen Shandong Nuclear Power Construction Co. Ltd,3 Tata Hydro- Electric Power Supply Co. Ltd. v. Union of India,4 and Numaligarh Refinery Ltd. v. Daelim
1 Gayatri Balasamy v ISG Novasoft Technologies Ltd 2025 INSC 605.
2 Project Director NHAI v M Hakeem AIR 2021 SC 3471.
3 Vedanta Ltd v Shenzhen Shandong Nuclear Power Construction Co Ltd AIR 2018 SC 4773.
4 Tata Hydro Electric Power Supply Co Ltd v Union of India AIR 2003 SC 1581.
Industrial Co. Ltd,5 courts had, in fact, gone ahead and modified awards, sometimes without even acknowledging the limits imposed by Hakeem. 6 These inconsistencies started piling up, creating confusion about the true scope of judicial review under Indian arbitration law. Faced with this uncertainty and the broader implications it carried for arbitral finality and party autonomy, a three-judge bench of the Supreme Court referred the question to a five-judge Constitution Bench. The aim was clear: to settle once and for all whether courts in India could, in any circumstances, modify an arbitral award and if so, when and how.
ISSUE(S) The core question before the Court was: Do Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, confer upon Indian courts the jurisdiction to modify an arbitral award, or are their powers strictly limited to setting aside the award or remitting it to the arbitral tribunal? This overarching issue was further broken down into the following sub-questions:
1. Does the power to “set aside” an award under Section 34 also include the narrower
power to “modify” it?
2. If modification is permissible, can it be exercised only in cases where the award is
legally severable (i.e., where valid and invalid parts can be separated)?
3. Can courts invoke inherent or equitable powers such as those under Article 142 of the
Constitution to modify arbitral awards despite the statutory silence on such power?
4. Are prior decisions like M. Hakeem correct in holding that courts cannot modify
awards, or have they misinterpreted the legislative framework?
5. Would a limited power of modification interfere with the autonomy and finality of the
arbitral process, especially under the UNCITRAL Model Law framework that India follows?
5 Numaligarh Refinery Ltd v Daelim Industrial Co Ltd 2007 (8) SCC 466
6 Hakeem (n 2).
These questions brought to the forefront a tension between judicial minimalism, a principle underpinning modern arbitration laws and the practical need to correct or clarify awards in a manner that avoids costly and repetitive arbitral proceedings. ARGUMENTS FROM BOTH SIDES ARGUMENTS IN FAVOUR OF RECOGNISING A POWER TO MODIFY ARBITRAL AWARDS-
1. Precedents Already Support Modification
The supporters of a court’s power to modify arbitral awards began by pointing out that Indian courts have, in several past cases, already exercised this power, whether explicitly or implicitly. They referred to decisions like Vedanta Ltd.,7 Tata Hydro-Electric Power Supply,8 and Numaligarh Refinery,9 where the Supreme Court made modifications to awards without necessarily engaging in a detailed debate over whether Section 34 actually permitted it. These modifications, be it changes to interest rates or the severance of problematic clauses, were never struck down or reversed. In their view, this practical trend within Indian jurisprudence clearly showed that Project Director, NHAI v. M. Hakeem took a rigid and arguably inconsistent view of the law and deserved reconsideration.
2. “The Greater Includes the Lesser”
A doctrinal argument that received considerable emphasis relied on the maxim omne majus continet in se minus i.e. if a greater power is granted, it necessarily includes the lesser one. Applying this to the Arbitration Act, they contended that if courts have the authority to set aside an arbitral award entirely, then they must also be allowed to partially set it aside or modify it when the problem is limited to a narrow issue. This would be especially helpful in cases where only a single clause or an interest component is flawed, and there’s no justification to nullify the whole award. This approach, they argued, wasn’t an example of judicial activism but rather a practical, efficient solution.
7 Vedanta (n 3).
8 Tata Hydro-Electric Power Supply (n 4).
9 Numaligarh Refinery (n 5).
3. Comparative and International Practice
Another line of reasoning stemmed from how other Model Law jurisdictions interpret similar provisions. Jurisdictions such as the United Kingdom, Singapore, Kenya, and Australia allow courts to modify arbitral awards in specific circumstances. The advocates of modification noted that these countries have managed to maintain a balance between the finality of arbitration and the need for practical flexibility. Indian courts, they argued, shouldn’t cling to an excessively literal reading of the statute that results in parties having to re-arbitrate minor defects that could have been addressed through simple judicial correction.
4. Section 31(7)(b) Implies Flexibility on Post-Award Interest
Zooming in on a more specific provision, they discussed Section 31(7)(b) of the Act, which provides a default post-award interest rate of 2% above the current rate unless stated otherwise in the award. The argument here was that where the award is either silent or includes an excessive rate, courts must be allowed to intervene, just enough to make sure it’s fair and in line with what Section 31(7)(b) actually requires, without touching the substance of the award.
5. Avoiding Redundant Litigation
Lastly, a strong policy-based argument was raised. A rigid reading of Section 34 would mean that even minor errors like a simple miscalculation or the inclusion of a legally impermissible clause would require setting aside the entire award. This would inevitably lead to costly and time-consuming re-arbitration. In their view, such an outcome goes against the core objectives of arbitration, which are efficiency, cost-effectiveness and finality. A limited modification power, used judiciously, would preserve both time and party autonomy without compromising the legitimacy of the arbitral process. ARGUMENTS AGAINST RECOGNISING A POWER TO MODIFY ARBITRAL AWARDS-
1. Section 34 Does Not Use the Word “Modify”
Those on the opposing side grounded their position firmly in the statutory text. Section 34, they pointed out, only speaks of “setting aside” an award, it does not mention “modification” or “variation.” According to them, this was not a drafting oversight but a deliberate legislative choice, made with full awareness of India’s alignment with the UNCITRAL Model Law. Since that framework also restricts courts to setting aside awards, reading an additional power to modify into Section 34 would be impermissible judicial legislation.
2. Doctrine of Finality in Arbitration
They also raised a more structural concern that allowing courts to modify arbitral awards would go against the very essence of the arbitration process. The idea behind arbitration is that parties choose to step outside the traditional court system and resolve disputes in a final, binding manner. Giving courts the power to tweak awards would essentially transform them into appellate authorities. This would encourage losing parties to approach courts not to challenge awards in full, but to seek small “corrections,” thereby undermining the principle of minimal judicial interference.
3. International Enforcement Issues
A particularly persuasive concern was raised about international enforceability. Under the New York Convention, only arbitral awards, not court-modified versions, are entitled to enforcement abroad. So, if an Indian court alters an award and the successful party seeks to enforce that modified award in a foreign jurisdiction, there’s a real risk that the foreign court might refuse, on the ground that the document is no longer an arbitral award but a court order. This could significantly damage India’s reputation as a pro-arbitration jurisdiction and create confusion in cross-border enforcement.
4. Modification is a Different Power from Setting Aside
They also emphasised that the powers to set aside and to modify are fundamentally distinct. Annulment nullifies an award entirely, whereas modification involves re-writing or revising specific portions of it. These aren’t degrees of the same remedy, and therefore the logic of omne majus continet in se minus should not apply here. Once an award is set aside, it no longer exists so the question of modifying it becomes pointless. According to them, the two powers must be treated as conceptually separate and cannot be blended into one.
6. Tribunal Becomes Functus Officio
Finally, they brought attention to the role of the tribunal itself. Once an arbitral award is passed, the tribunal becomes functus officio i. e. its mandate ends. If courts begin modifying awards, it raises legitimate concerns about the judicial system stepping into the shoes of the arbitrators. Courts are not meant to rewrite arbitral reasoning. Moreover, they argued that the Arbitration Act already provides a built-in mechanism for fixing minor issues. Section 33 allows tribunals to correct errors, and Section 34(4) permits courts to send the matter back to the tribunal for such corrections. This framework, they insisted, is sufficient. Introducing a new power to modify would only upset the careful balance that the Act was designed to maintain. JUDGMENT I.
The Central Holding: Limited Power to Modify Arbitral Awards a five-judge Constitution Bench of the Supreme Court (4:1 majority) held that affirmed that Indian courts do possess a limited power to modify arbitral awards under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996. This marked a subtle but significant departure from the rigid stance earlier taken in Project Director, NHAI v. M. Hakeem (2021), where courts were restricted to either setting aside an award or remanding it to the tribunal. The Court acknowledged that while the legislative intent behind the Act is to minimise judicial interference, the silence in the statute on the word “modify” could not be construed as an absolute bar. Instead, it interpreted the term “recourse” in Section 34 broadly enough to include a narrowly framed power to modify.
This approach, the Court reasoned, better advances the cause of justice by saving parties from the burden of restarting arbitration proceedings for minor or curable defects. II. Recognised Categories Where Modification is Permissible
1. Severability of Awards
The first category identified relates to severability. If the part of the award under challenge is legally and factually separable from the rest, the Court may strike down or modify only that specific portion. This is backed by the proviso to Section 34(2)(a)(iv), which permits courts to invalidate decisions that fall outside the scope of arbitration. However, this is only possible when the parts of the award are not so intertwined that they cannot be detached from one another. If the valid and invalid segments are too closely connected, partial modification or setting aside isn’t feasible.
2. Clerical, Computational, or Typographical Errors
The second category deals with facial or obvious errors such as typos or calculation mistakes that do not require delving into the merits. Here, the Court drew support from Grindlays Bank v. CGIT10 and Section 152 of the Civil Procedure Code, affirming that such minor corrections are within the inherent power of any adjudicatory forum, including one operating under Section
34. Since these are not about second-guessing the arbitrator’s reasoning, they fall outside the
realm of appellate or review jurisdiction.
3. Post-Award Interest
One of the more detailed parts of the judgment revolved around post-award interest under Section 31(7)(b). The Court noted that arbitrators sometimes neglect to award post-award interest or fix excessive or arbitrary rates. Since the Act provides a default rate of 2% above the prevailing rate, the Court felt it was justified in stepping in to revise such amounts when necessary. This could include either raising or lowering the rate, depending on the conduct of the award-debtor post-award. The Court clarified that since post-award interest relates to future events rather than facts on record at the time of arbitration, it calls for a measure of judicial flexibility.
4. Exercise of Article 142 Powers by the Supreme Court
Finally, the Court acknowledged its own constitutional power under Article 142 to do “complete justice” by modifying arbitral awards in exceptional circumstances. That said, it emphasised that this power must be used sparingly and with due care. Citing Shilpa Sailesh v. Varun Sreenivasan,11 the Court reiterated that Article 142 should only be invoked when further litigation would be unduly burdensome and there’s no other recourse. Importantly, such interventions must stay aligned with public policy and the broader statutory goals of the Arbitration Act. III. Clarifications on Related Provisions Remand Under Section 34(4)
10 Grindlays Bank v Central Government Industrial Tribunal AIR 1981 SC 606.
11 Shilpa Sailesh v Varun Sreenivasan 2023 INSC 468.
The Court was careful to differentiate between its power to modify and the option to remand under Section 34(4). If an error is clear and the remedy is straightforward, the Court may choose modification. But when the issue requires further examination or additional factfinding, remand to the arbitral tribunal is the appropriate route. In doing so, the Court also overruled Kinnari Mullick v. Ghanshyam Das Damani,12 which had held that remand under Section 34(4) must be requested in writing and made before the Section 34 application is disposed of. The Bench clarified that even an oral request suffices, and a remand can be ordered at the appellate stage under Section 37. Doctrine of Merger and New York Convention Concerns Addressing fears that modified awards might go against the New York Convention, the Court made it clear that such concerns were unfounded.
It pointed to Section 48(1)(e) of the Arbitration Act, which mirrors Article V of the Convention, to assert that as long as the modification adheres to the law of the seat (in this case, Indian law), the award remains enforceable. The modification doesn’t transform the award into a judicial decree; it merely corrects or refines it in a legally recognised manner. Therefore, the enforceability of such awards internationally remains intact. IV. The Court’s Rejection of Overbroad Interpretations In the final part of its ruling, the Court firmly rejected the notion that statutory arbitrations (such as those conducted under the National Highways Act) should be subject to broader judicial modification powers. It reiterated that the judicial standard for reviewing awards under Section 34 remains the same, regardless of whether the arbitration was statutory or consensual.
Accordingly, demands to increase land compensation just because the dispute arose under a public statute were not entertained. The Court also issued a cautionary note: the power to modify must not be mistaken for a right to conduct a second round of merits-based review. Judges are not meant to re-interpret evidence or substitute their own logic for that of the arbitrators. The whole idea is to allow only narrow, well-defined interventions such as correcting a typo or removing an ultra vires clause, not to undermine the very foundation of arbitral autonomy and finality.
12 Kinnari Mullick v Ghanshyam Das Damani Civil Appeal No 5172 of 2017.
The Dissenting Opinion Justice K. V. Viswanathan agreed that courts should have the power to fix obvious clerical or typographical errors, but he firmly disagreed with the majority’s broader stance on modifying or severing parts of an arbitral award. In his view, Section 34 of the Arbitration Act lays out only two permissible outcomes: either the award is set aside, or it’s sent back to the arbitral tribunal for reconsideration. Any further power to tweak or alter an award, he cautioned, can’t be created by courts; it’s a matter for Parliament to decide. Justice Viswanathan also expressed concern that the majority’s ruling might open the floodgates. Parties unhappy with an award could try to repackage substantive disagreements as 'manifest errors' to sneak in through this narrow exception.
This, he warned, risks eroding the finality of arbitral decisions, a cornerstone of arbitration, and could even raise problems when enforcing modified awards internationally under the New York Convention. Though it’s a minority opinion, the dissent lays out a clear, text-based approach that lower courts might find persuasive. It also puts the spotlight back on the legislature, perhaps nudging it to step in and settle the question through statutory reform.
ANALYSIS
The Gayatri Balasamy judgment opens up a more practical approach to dealing with arbitral awards. For parties and lawyers, it offers welcome relief. Instead of being stuck with the allor-nothing choice of either setting aside an entire award or accepting its flaws, they now have a middle path, courts can step in to fix only those parts of the award that clearly fall within the limited exceptions laid down by the Court. This makes the challenge process more targeted and efficient, especially when the issue is something as simple as a computational slip or an unfair post-award interest rate. From the arbitrator’s point of view, this judgment also raises the bar. There’s now an even stronger incentive to draft awards with greater precision like clearly separating issues, doublechecking figures, and addressing interest clauses thoughtfully.
This proactive approach could prevent unnecessary judicial intervention altogether. But while the judgment does provide a useful safety valve, it also comes with a caution as also highlighted by Justice Viswanathan. The Court has been very clear that its ruling should not be seen as a green light for broad judicial interference. The categories where courts can intervene have been defined narrowly and deliberately. The idea is not to allow courts to second-guess the arbitrator’s reasoning or re-evaluate the merits, but only to correct objective and clearly separable defects. And that’s really the key to this judgment’s long-term impact. Its success will depend on how carefully lower courts implement it. If courts exercise the kind of restraint the Supreme Court envisioned, this ruling could make arbitration in India more efficient and less prone to delays.
But if the boundaries start getting blurred, and courts begin using this as a backdoor to interfere with the substance of awards, it could end up weakening the very autonomy the arbitration process is meant to protect. All in all, Gayatri Balasamy is a thoughtful, balanced judgment. It bridges the gap between strict non-interference and necessary judicial correction. Whether it strengthens India’s proarbitration reputation will now depend on how wisely that balance is maintained in practice.