Introduction
In a landmark judgment delivered on April 30, 2025, a five-judge Constitution Bench of the Supreme Court of India in Gayatri Balasamy v. M/s ISG Novasoft Technologies Limited (Civil Appeal arising out of SLP (C) Nos. 15336-15337 of 2021) has conclusively addressed the contentious issue of whether courts have the power to modify arbitral awards while exercising jurisdiction under Section 34 of the Arbitration and Conciliation Act, 1996 (“A&C Act”).
The judgment, authored by Chief Justice Sanjiv Khanna with a separate opinion by Justice K.V. Viswanathan, provides much-needed clarity on the scope and extent of judicial intervention in arbitral awards. This blog post analyzes the key aspects of this significant judgment and its implications for arbitration practice in India.
Background and Reference Questions
The debate centered around the interpretation of Section 34 of the A&C Act and the correctness of the Supreme Court’s previous decision in Project Director, NHAI v. M. Hakeem (2021), which held that courts cannot modify arbitral awards while exercising powers under Section 34.
The Constitution Bench was constituted to answer five questions:
- Whether courts have the power to modify arbitral awards under Sections 34 and 37 of the A&C Act
- If such power exists, whether it can only be exercised where the award is severable
- Whether the power to set aside includes the power to modify
- Whether modification powers can be read into Section 34
- Whether the judgment in Project Director, NHAI v. M. Hakeem laid down the correct law, particularly in light of other judgments that had either modified or accepted modifications to arbitral awards
The Court’s Findings
The judgment of the Constitution Bench, though not unanimous in every aspect, provides significant clarity on the extent of judicial intervention permissible under Section 34.
Limited Power to Modify
Chief Justice Sanjiv Khanna, writing for the majority, held that courts do have a limited power to modify arbitral awards under certain specific circumstances:
- Severance of Invalid Portions: When the award is severable, courts can sever the “invalid” portion from the “valid” portion.
- Clerical and Computational Errors: Courts can correct clerical, computational, or typographical errors that appear erroneous on the face of the record.
- Post-Award Interest: In some circumstances, courts may modify post-award interest.
- Exercise of Article 142 Powers: The Supreme Court may exercise its powers under Article 142 of the Constitution to modify awards, albeit with great care and caution.
Justice Viswanathan’s Partially Dissenting View
Justice K.V. Viswanathan, while agreeing with most aspects of the majority opinion, expressed disagreement on two points:
- He did not agree that courts can modify post-award interest and held that the correct course of action would be to remit the matter to the arbitrator under Section 34(4).
- He was of the view that even the Supreme Court should not exercise its powers under Article 142 to modify arbitral awards as it would contravene a fundamental principle of the A&C Act.
Key Principles Established
1. Distinction Between Modification and Severance
The Court emphasized the conceptual distinction between “modification” and “severance.” While modification involves changing, varying, or qualifying an award, severance means separating or disjoining parts of an award. The Court unanimously recognized the power to sever subject to the condition that the severed part is standalone and not inseparably intertwined with other parts of the award.
2. Limited Judicial Intervention
The judgment reinforces the principle of limited judicial intervention in arbitration matters, which is a cornerstone of the A&C Act. Section 5 of the Act expressly limits judicial intervention to what is authorized by Part I of the Act.
3. Safety Valves in the A&C Act
The Court identified certain “safety valves” in the A&C Act:
- Section 33: Allows parties to request the arbitral tribunal to correct computational, clerical, or typographical errors, or to give an interpretation of specific points.
- Section 34(4): Enables courts to remit matters to the arbitral tribunal to eliminate grounds for setting aside the award.
4. Suo Moto Exercise of Section 34(4) Power
The Court clarified that the power under Section 34(4) can be exercised by courts suo moto, even without a written application from a party, contrary to the holding in Kinnari Mullick v. Ghanshyam Das Damani (2018).
5. Actus Curiae Neminem Gravabit Principle
Invoking the maxim “actus curiae neminem gravabit” (an act of court shall prejudice no one), the Court held that computational, clerical, or typographical errors could be corrected by the Section 34 court without being considered a modification of the award.
Implications for Arbitration Practice
1. Finality of Arbitral Awards
The judgment reinforces the finality of arbitral awards by limiting the court’s power to modify them. This aligns with the core objective of the A&C Act to minimize judicial intervention in the arbitral process.
2. Practical Approach to Minor Errors
By allowing courts to correct minor errors, the judgment adopts a practical approach that prevents unnecessary setting aside of awards for technical issues that could be easily rectified.
3. Clarity on Severability
The judgment provides clear guidance on when and how parts of an award can be severed. This will help courts determine when partial setting aside is permissible without affecting the entire award.
4. Emphasis on Section 34(4) as a Remedial Measure
The judgment highlights the importance of Section 34(4) as a remedial measure to give arbitral tribunals an opportunity to correct defects rather than setting aside awards entirely.
5. International Commercial Arbitration
The judgment addresses concerns about enforceability of modified awards under the New York Convention, noting that without specific legislative provisions (unlike in jurisdictions like the UK and Singapore), modification of awards could create enforcement issues internationally.
Conclusion
The Supreme Court’s judgment in Gayatri Balasamy provides a balanced and nuanced approach to the question of judicial intervention in arbitral awards. While respecting the principle of minimal judicial interference, it creates limited, well-defined exceptions where courts can intervene to correct obvious errors or sever invalid portions of awards.
This judgment will likely contribute to making India a more arbitration-friendly jurisdiction by providing clarity on the scope of judicial review while maintaining the integrity and finality of the arbitral process. It also underscores the need for careful drafting of arbitration agreements and awards, as parties now have clear guidance on what aspects of an award might be susceptible to judicial intervention under Section 34.
For practitioners and parties engaged in arbitration, the judgment emphasizes the importance of promptly utilizing the mechanisms available under Section 33 for correction of errors and omissions in awards, rather than relying on the courts to modify awards at the challenge stage.
Disclaimer: This blog post is for informational purposes only and should not be construed as legal advice. The views expressed herein are based on our understanding of the law and the judgment as of the date of publication. Readers should consult with a qualified attorney for advice specific to their circumstances. Nothing in this post creates an attorney-client relationship between AUGUST ATTORNEYS LLP and the reader.