On April 30, 2025, the Supreme Court of India delivered a landmark judgment in Gayatri Balasamy v. ISG Novasoft Technologies Ltd., which finally resolved a long-standing ambiguity in Indian arbitration law: whether courts possess the power to modify arbitral awards under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996. In a reasoned and well-structured decision, the Constitution Bench led by Chief Justice Sanjiv Khanna held that Indian courts do indeed have a limited power to modify arbitral awards—subject to specific safeguards.
This decision, in my view, is not only welcome but overdue. For years, our arbitration jurisprudence has swung between two extremes—strict non-intervention on one side, and vague, equity-based intervention on the other. The Supreme Court's ruling brings a much-needed balance, rooting its position in legal pragmatism and statutory interpretation while still staying true to the pro-arbitration spirit of the 1996 Act.
The Crux of the Decision
The central question before the Court was deceptively simple: Do Indian courts, while hearing challenges under Sections 34 or 37, have the jurisdiction to modify an arbitral award? Historically, courts were thought to only have the power to "set aside" an award, not to "modify" it. But the practical implications of this limitation were significant. In many cases, parties had to return to the arbitral tribunal for re-arbitration over minor errors, even when those could have been resolved judicially.
Recognizing this, the Supreme Court held that courts do have limited powers to modify arbitral awards in the following scenarios:
- Severability: When invalid and valid portions of the award are separable, courts may sever the invalid parts and uphold the rest.
- Clerical/Typographical Errors: Courts may correct errors that are manifest on the face of the record.
- Post-Award Interest: Courts can vary interest rates post-award if circumstances justify such change.
- Complete Justice under Article 142: The Supreme Court retains the power to modify awards to do "complete justice" in appropriate cases.
Why This Decision Was Necessary Sooner
It is unfortunate that it took over two decades for such clarity to emerge. Section 34 of the Arbitration Act has long been treated as sacrosanct, interpreted narrowly to preserve arbitral autonomy. While this approach was theoretically sound, it was blind to ground realities. Parties were often dragged into multiple rounds of litigation and re-arbitration over technical defects, minor computation errors, or excessive interest awards—defeating the whole purpose of arbitration as a time-bound, cost-effective alternative to litigation.
The judgment in Project Director, NHAI v. M. Hakeem (2021) had taken a strict textualist stance, stating that courts could only set aside and not modify an award. But this ignored earlier decisions like Vedanta v. Shenzhen and Numaligarh Refinery v. Daelim, where courts had, in effect, modified awards—particularly with regard to interest. The contradiction between theory and practice was glaring, and it took the Court until 2025 to address it comprehensively.
This delay came at the expense of efficiency and trust in the arbitral process. Had this clarification come earlier, parties could have avoided multiple re-arbitrations and prolonged litigation.
Support for the Supreme Court's Balanced Approach
One of the most commendable aspects of the judgment is its attempt to strike a balance between respecting arbitral autonomy and delivering substantive justice. The Court did not open the floodgates to wholesale modifications, nor did it blindly defer to the arbitral tribunal. Instead, it created a structured, limited pathway for judicial modification—only when it is unavoidable and strictly within the framework of the 1996 Act.
The Court’s emphasis on the principle of severability is a masterstroke. This allows courts to strike out legally flawed segments of an award while preserving the rest, thereby respecting the tribunal's work and avoiding re-arbitration. Likewise, correcting clerical errors or adjusting interest rates is not a review of merits, but a necessary function to avoid injustice.
Importantly, the Court distinguished between its power of judicial review and appellate jurisdiction. It reaffirmed that courts under Section 34 are not appellate bodies, and cannot re-evaluate the merits of the award. But it also rightly noted that the power to "set aside" must, in logic and principle, include the lesser power to "set aside in part" or to "correct" errors that are clear and unambiguous.
A Pragmatic View on Post-Award Interest
The Court’s approach to post-award interest is particularly worthy of praise. Section 31(7)(b) of the Arbitration Act provides a default rule—if the tribunal does not specify an interest rate post-award, a 2% premium over the prevailing rate applies. However, tribunals cannot predict post-award conduct or delays. Giving courts the ability to adjust this rate ensures fairness and discourages opportunistic litigation or payment delays.
Again, this isn’t judicial overreach—it is a measured response to practical difficulties. The Court emphasized that any such adjustment must be based on compelling reasons, ensuring judicial discretion is not abused.
Distinguishing Modification from Rewriting the Award
Critics may argue that this judgment introduces a slippery slope—once courts start modifying awards, what prevents them from acting as appellate authorities?
The Supreme Court addressed this concern head-on. It clarified that modification should never involve a merits-based evaluation. Courts cannot and should not re-assess evidence or re-interpret the contract. Their role is to correct what is obvious, undeniable, and unjust—nothing more.
Moreover, the Court drew a clear line between its power to modify under Sections 34 and 37 and the Supreme Court's own extraordinary powers under Article 142. It wisely noted that Article 142 should be used sparingly and never to override statutory policy or rewrite awards on merits.
Impact on India’s Arbitration Ecosystem
This judgment is poised to have a profound impact on India’s arbitration landscape. First, it aligns Indian law more closely with international standards. While the UNCITRAL Model Law does not explicitly allow modification, many Model Law jurisdictions—including Singapore and the UK—have evolved their laws to allow courts some scope of intervention to do justice. India has now joined that league, without deviating from the core tenets of party autonomy and finality.
Second, this decision will save time and cost. Instead of starting fresh arbitration for minor errors, parties can now seek limited corrections through courts. This will boost confidence in the arbitration system and reduce case load on arbitral institutions.
Third, it provides better clarity for both lawyers and litigants. Courts now have structured guidance on when and how they can intervene, which will lead to more predictable outcomes.
Conclusion
The Supreme Court’s ruling in Gayatri Balasamy marks a turning point in Indian arbitration law. It affirms a long-felt need: that courts, within limits, must have the power to correct an award to prevent injustice. By embracing a structured and limited doctrine of modification, the Court has honored both the spirit and the letter of the 1996 Act.
But the timing also compels reflection. This is a decision that should have come much earlier. In waiting over two decades to confront a visible doctrinal inconsistency, the judiciary allowed confusion and inefficiency to persist. Nevertheless, better late than never.
This judgment offers a blueprint for balanced arbitration jurisprudence—one that is faithful to the law, grounded in practical realities, and driven by the ultimate aim of justice. It deserves not just our approval, but our applause.