The Supreme Court of India, in a Constitution Bench judgment delivered on 30 April 2025, finally brought clarity to a long-pending and deeply contested question in Indian arbitration law: Can courts modify arbitral awards under the Arbitration and Conciliation Act, 1996, or are they confined only to setting them aside?
Background of the Dispute
The controversy arose from a series of civil appeals, led by Gayatri Balasamy, challenging judgments passed under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996. The appeals stemmed from conflicting Supreme Court precedents on whether Indian courts possess the jurisdiction to modify or vary arbitral awards, especially when parts of an award are legally flawed but severable.
Earlier decisions such as Project Director, NHAI v. M. Hakeem had taken a restrictive view, holding that courts could only set aside awards and not alter them. However, several other benches, both of two and three judges, had, in practice, modified arbitral awards, particularly with respect to interest, severable claims, or computational errors. This divergence led to legal uncertainty and inconsistent application of arbitration law.
Reference to a Larger Bench
Recognising the seriousness of the issue, a three-judge Bench, by an order dated 20 February 2024, referred the matter to the Chief Justice of India. Subsequently, a five-judge Constitution Bench, headed by Chief Justice Sanjiv Khanna, was constituted to authoritatively decide the issue.
The Court framed multiple questions of law, including whether the power to set aside an award implicitly includes the power to modify it, and whether such power can be exercised only when the award is severable.
Arguments Before the Court
Counsel for Appellant argued that denying courts the power to modify awards would force parties into fresh rounds of arbitration, defeating the very purpose of arbitration as a speedy and cost-effective dispute resolution mechanism. They relied on the principle that the greater power includes the lesser, contending that if courts can annul awards, they should also be able to correct them in limited circumstances.
On the other hand, Counsel for the Respondent warned that allowing modification would convert courts into appellate forums, undermining arbitral autonomy and potentially conflicting with the UNCITRAL Model Law and the New York Convention governing enforcement of arbitral awards.
Supreme Court’s Analysis
After an extensive examination of statutory provisions, Indian and foreign jurisprudence, and arbitration principles, the Constitution Bench adopted a balanced approach.
The Court held that while Section 34 does not expressly confer modification powers, it cannot be interpreted as an absolute bar. A rigid interpretation, the Bench noted, would lead to injustice, delay, and unnecessary re-arbitration.
Importantly, the Court clarified that modification is not an appellate review and must remain tightly controlled. The power can be exercised only where the court has certainty, and where modification does not require reappreciation of evidence or reconsideration of merits.
Final Verdict
The Supreme Court conclusively ruled 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 power may be exercised only in the following situations:
- Where the award is severable, allowing invalid portions to be removed while preserving the valid parts
- To correct clerical, typographical, or computational errors apparent on the face of the record
- To modify post-award interest in justified circumstances
- In rare cases, by invoking Article 142 of the Constitution to do complete justice
At the same time, the Court firmly cautioned that courts cannot rewrite arbitral awards or sit in appeal over arbitral findings.
Significance of the Ruling
This landmark judgment reconciles years of judicial inconsistency and strikes a pragmatic balance between minimal judicial intervention and substantive justice. By recognising a narrowly tailored modification power, the Supreme Court has strengthened India’s arbitration framework while ensuring that procedural rigidity does not defeat fairness.
The decision is expected to reduce prolonged litigation, limit unnecessary re-arbitrations, and provide much-needed certainty to arbitration practitioners and commercial parties alike.
The Parties and Their Legal Teams
- Appellant: Ms. Gayatri Balasamy
Counsel for Appellant: Senior Advocate Arvind Datar, Advocate M.V. Mukunda, Advocate Hina Shaheen, Advocate Mithun Shashank, Advocate Hredai Sriram, Advocates-on-Record Nishanth Patil and K. Parameshwar.
- Respondent: M/s ISG Novasoft Technologies Limited
Counsel for Respondent: Senior Advocate Siddharth Bhatnagar, Advocate Debmalya Banerjee, Advocate Manmeet Kaur, Advocate Rohan Sharma, Advocate Gurtej Pal Singh, Advocate Abhishek Rana, Advocate Ananya Khanna, Advocate Aditya Sidhra, and Advocates-on-Record from Karanjawala & Co.
Judgment Date: 30 April 2025
Bench: CJI Sanjiv Khanna, J. B.R. Gavai, J. Sanjay Kumar, J. Augustine George Masih
Case Title: Gayatri Balasamy v. ISG Novasoft Technologies Limited
