A 5-judge constitution bench of the Supreme Court of India ("Court") pronounced the judgment in Gayatri Balasamy v. Messrs ISG Novasoft Technologies Limited, 2025 INSC 605 on April 30, 2025. In the said judgment, the Court has considered the question whether there is a power under section 34 of the Arbitration and Conciliation Act, 1996 ("ACA") to modify an arbitral award. In its conclusion, the Court has answered this question in the affirmative and has delineated certain limited circumstances under which the power to modify arbitral awards can be exercised under section 34 of ACA.
Issues before the Court
The Court had framed the following issues for determination:
1. Whether Indian courts are jurisdictionally empowered to modify an arbitral award?
2. If so, under what circumstances can this power be exercised?
Decision of the Court
The above issues have been decided by the Court as follows:
"... the Court has a limited power under Sections 34 and 37 of the 1996 Act to modify the arbitral award. This limited power may be exercised under the following circumstances:
1. when the award is severable, by severing the "invalid" portion from the "valid" portion of the award, as held in Part II of our Analysis.
2. by correcting any clerical computational or typographical errors which appear erroneous on the face of the record, as held in Part IV and V of our Analysis;
3. post award interest may be modified in some circumstances as held in Part IX of our Analysis and/or
4. Article 142 of the Constitution applies, albeit, the power must be exercised with great care and caution and within the limits of the constitutional power as outlined in Part XII of our Analysis"
Power to modify arbitral awards - the basis
The Court has considered that section 34 of ACA does not restrict the range of reliefs that the court can grant, while remaining within the contours of the statute. A different relief can be fashioned as long as it does not violate the guardrails of the power provided under section 34 of ACA.
It was argued before the Court that setting aside, i.e., annulment and modification are different powers. Therefore, section 34 of ACA grants the Court an annulment jurisdiction. Resultantly, the Court's only power is to either annul the award or uphold it. While agreeing that annulment and modification are different powers, the Court held that the power of modification is not ousted from section 34 of ACA.
Further, it was argued before the Court that the doctrine of merger does not apply to court modification of an arbitral award. Simply put, under The Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("New York Convention"), only arbitral awards are recognized and enforceable, not court decrees/ orders that modify those awards. However, the Court refuted this argument, and held that, as per section 48 of ACA which is similarly worded as Article V of the New York Convention, an arbitral award must be binding as per the law of the seat of arbitration. This proceeds on the basis that, for recognition and enforcement, an arbitral award must be "binding on the parties". A modified award would not be binding on the parties without the modification. Resultantly, the award would be read as modified by the judgment/ order under section 34 of ACA.
It weighed heavily with the Court, that to deny the power to modify an arbitral award would mean that parties would be compelled to undergo an extra round of arbitration, to arrive at a decision which would easily be passed by the Court under section 34 of ACA, by modifying an arbitral award. Therefore, denial of the power to modify an arbitral award under section 34 of ACA, would defeat the very raison d'être of arbitration, by imposing significant hardship, escalating cost and leading to unnecessary delays.
Power to sever is power to modify
The Court considered the proviso to section 34(2)(a)(iv) of ACA, and noted that this proviso is clarificatory in nature. The power to sever the invalid portion of an arbitral award, from the valid portion, is inherent to the jurisdiction under section 34 of ACA.
The Court held that the power to sever an arbitral award, is encompassed within the doctrine of omne majus continent in se minus, i.e., the greater power includes the lesser.
Most notably, the Court held that the power to sever an award, implies a power to modify the award. Therefore, application of doctrine of severability to an arbitral award, results in modification thereof.
Power to correct any clerical computational or typographical errors
The Court considered section 33 of ACA whereby an arbitrator is empowered, upon request, to correct and/ or re-interpret the arbitral award, on limited grounds. This includes the correction of computational, clerical or typographical errors, as well as giving interpretation on a specific point or part of the arbitral award.
The Court held that the power to rectify computational, clerical or typographical errors, as well as manifest errors is inherent to courts, even when not explicitly granted by the legislature.
However, the Court laid a caveat to the exercise of such power – under section 34 of ACA, a court must have no uncertainty or doubt when modifying the award. If the modification is debatable or a doubt arises regarding its appropriateness, then this power would not be exercisable. In such circumstances, the recourse would be to remand the arbitral award to the arbitrator under section 34(4) of ACA. This follows the principle of minimal judicial interference and is similar to the approach of "when in doubt, refer" carved out for evaluating prima facie existence of a valid arbitration agreement, under section 11 of ACA.
Power to modify post-award interest
The Court has held that there is a power to modify post-award interest under section 34 of ACA. The Court considered that there is a standard prescribed by the legislature for award of post-award interest. As such the post-award interest can be scrutinised by a court against the standards prescribed. It weighed with the Court that post-award interest is future oriented, and an arbitrator cannot predict future circumstances to determine post-award interest, with impunity. Therefore, it is appropriate for section 34 of ACA to have the authority to intervene and modify the post-award interest, either to increase or decrease the same.
Power to modify under Article 142 of the Constitution of India
The Court has reserved its power to modify arbitral awards in order to do complete justice. The Court has held that the exercise of powers under Article 142 of Constitution of India, to modify an arbitral award, must be guided by the dictum laid down in Shilpa Sailesh v. Varun Sreenivasan, (2023) 14 SCC 231, which is as follows:
"19. Given the aforesaid background and judgments of this Court, the plenary and conscientious power conferred on this Court under Article 142(1) of the Constitution of India, seemingly unhindered, is tempered or bounded by restraint, which must be exercised based on fundamental considerations of general and specific public policy. Fundamental general conditions of public policy refer to the fundamental rights, secularism, federalism, and other basic features of the Constitution of India. Specific public policy should be understood as some express pre-eminent prohibition in any substantive law, and not stipulations and requirements to a particular statutory scheme. It should not contravene a fundamental and non-derogable principle at the core of the statute. Even in the strictest sense, it was never doubted or debated that this Court is empowered under Article 142(1) of the Constitution of India to do "complete justice" without being bound by the relevant provisions of procedure, if it is satisfied that the departure from the said procedure is necessary to do "complete justice" between the parties."
Other notable aspects
With regard to the exercise of power under section 34(4) of ACA, the Court has held that an application under section 34(4) of ACA need not be in writing. Section 34(4) of ACA provides for remand of the arbitral award to the arbitrator for the purpose of taking such action which would eliminate any grounds for setting aside. The Court held that an oral request under section 34(4) of ACA can be entertained. However, the Court recognized that the power under section 34(4) cannot be exercised suo motu.
Additionally, the Court has held that the jurisdiction under section 37 of ACA is coterminous with the jurisdiction under section 34 of ACA. Resultantly, the court under section 37 of ACA can also pass an order under section 34(4) of ACA.
Please find a copy of the judgement, here.
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