Introduction
For many years Indian courts adopted a strict view of their powers when reviewing arbitral awards under the Arbitration and Conciliation Act 1996 ("A&C Act"). Conventionally, judges were able to do only two things: set the award aside or remit it to the arbitral tribunal. In the five judge decision of Gayatri Balasamy v. ISG Novasoft Technologies Limited1 ("Balasamy"), the Supreme Court relaxed such framework. Without abandoning the principle of minimal judicial interference, the Court recognised a limited power to modify an award in clearly defined situations. The judgment therefore marks a significant, but measured, evolution in Indian arbitration law.
The Legal Landscape before Balasamy
In order to understand the extent of departure from the existing jurisprudence, it is important to delve into the existing position of law. Notably, the Supreme Court, in McDermott International Inc. v. Burn Standard Company Limited2 andProject Director, NHAI v. M. Hakeem3 which held the field, observed that Section 34 permitted only (i) setting aside the award or (ii) remitting it before the arbitral tribunal for reconsideration. Courts refused to exercise the jurisdiction to alter and/or modify any part of an award, on the basis of the reasoning that such power would undermine party autonomy and convert the supervisory jurisdiction into an appeal on merits.
Section 34(4) contained another limitation: a court could suspend proceedings and remand the matter to the tribunal only on a written request made before the award was annulled. Once the award was set aside, the court became functus officio. This rule, laid down in Kinnari Mullick v. Ghanshyam Das Damani4 placed a strict and narrow procedural gate in the path of parties seeking clarification of the award or its part.
Even an arithmetic error or an inflated interest rate could force parties into the cycle of annulment and remand. Of course, once an order of remand was made, the arbitral tribunal had the authority to vary, correct, review, add to, or modify the award.
Decision in Balasamy
The dispute in Balasamy pertained to clear computational mistakes and an unjustified rate of post-award interest. When the appellant sought modification of award, faced with the restrictive precedents, a Constitutional Bench was constituted to decide whether Section 34 absolutely bars modification.
The Bench held that a court may alter an award, but only in four situations: (1) where the invalid part is severable; (2) where there is a manifest clerical or computational error; (3) where post-award interest requires adjustment for equity; and (4) where the Supreme Court exercises its power under Article 142 of the Constitution to secure complete justice. Importantly, the Court stressed that judges must not reconsider the merits of the dispute.
Departure from Earlier Law
Balasamy softens some established constraints. First, modification of award, previously barred completely, is now allowed in the four situations above. Second, a written request is no longer mandatory for remand under Section 34(4); an oral request may be made even before the Court exercising jurisdiction under Section 34 of the A&C Act. Third, the Court held that the principle that the arbitral tribunal becomes functus officio after the award is set aside is misplaced.
The Court observed that the proviso to Section 34(2)(a)(iv) already lets courts strike down only that part of an award that exceeds the parties' submission. Preserving the remainder is effectively a form of modification, suggesting that the statute itself contemplates a narrow tailoring power.
In fact, the Bench treated severability as the keystone that permits limited modification of an award. It observed that the proviso to Section 34(2)(a)(iv) reflects an implicit legislative invitation to preserve every valid fragment of an otherwise sound award. Relying on the maxim omne majus continet in se minus, the Court reasoned that a Judge who may annul the whole can surely excise the defective limb and let the healthy body stand. It then offered three practical yardsticks for the exercise—independence of the impugned portion, computational integrity of the remainder, and commercial coherence of the result—to guide trial courts in deciding when such surgery is safe.
Severance is forbidden where good and bad findings are so interwoven that removing one would unravel the other, or where the court would be forced into fresh fact finding or quantum calculations, tasks that belong to the tribunal. Addressing enforcement anxieties, the Bench added that a severed award remains an "arbitral award" for New York Convention purposes because Indian law itself authorises partial setting aside. By elevating severability from a proviso-based footnote to a fully-fledged doctrine, this judgment perhaps equips courts to preserve what is sound, excise what is flawed, and keep the arbitral process both efficient and fair.
The Bench also addressed the vexed issue of post-award interest and acknowledged that the Court's newly recognised power of modification extended to this relief. Drawing directly from Section 31(7)(b) of the Act, the Bench observed that an award may sometimes grant an exorbitant rate untethered to commercial reality or conversely remain silent and thereby deny a claimant compensation for the period between the award and actual payment. In either situation, the Court may calibrate the interest component so that it aligns with the statutory benchmark and the equities of the case.
The Court emphasised, however, that such fine-tuning must operate within tight confines: the principal sum and the merits of liability are sacrosanct, and the Court may adjust interest only where the rate is manifestly illegal, confiscatory or plainly inadequate. This will perhaps ensure that the successful party is neither over-rewarded nor left uncompensated, while sparing all concerned the delay and expense of a fresh arbitral proceeding.
Reasons Given by the Court
The Court's reasoning rests on three pillars. Efficiency has been considered as paramount: the Court observed that forcing a remand to rectify minor errors is a wastage of resources and undermines confidence in the alternative dispute resolution process.
Next, the Court relied on the ancillary powers doctrine, placing reliance on Grindlays Bank Limited. v. Central Government Industrial Tribunal5 which recognises that a statutory forum, though limited in jurisdiction, is not denuded of inherent powers essential to prevent injustice and holding that even a limited statutory jurisdiction carries incidental powers needed to give effective relief.
Finally, the Bench cited comparative practice. Many Model Law jurisdictions (for example, the United Kingdom and Singapore) allow limited variation of awards. The Court observed that aligning Indian law with these systems promotes international enforceability and supports India's ambition to become a preferred arbitral seat.
At the same time the Court cautioned that the power must remain narrow; and courts must resist the temptation to revisit facts or evidence.
The Dissenting Opinion
Justice K.V. Viswanathan, while concurring on the need to correct clerical slips, dissented from the majority's broader power to sever or vary an award. Justice Viswanathan opined that Section 34 has only two outcomes: setting aside the award or its remittance and warned that any further relief must flow from Parliament, not judicial invention. Justice Vishwanathan predicted that the majority's test could tempt disappointed parties to label substantive grievances as manifest errors in the award, thereby diluting arbitral finality and risking a conflict with the New York Convention. Although a minority view, the dissent offers lower courts a strict textual roadmap and may encourage future challenges to modifications, pressing Parliament to clarify the statute once and for all.
Practical Implications
The ruling possibly changes strategy for litigants while filing applications under Section 34 of the A&C Act. Counsel may consider incorporating alternative reliefs, such as severance of invalid parts of the award, correction of errors apparent, or recalibration of interest, alongside the usual prayers to set aside the award. It may also be recommended to present clear interest calculations so that the court may adjust and/or compute rates rationally. In case a party may seek remand for clarification; the absence of a written application is no longer fatal.
Conclusion
Balasamy gives courts a new, but tightly limited, power to adjust arbitral awards. The Supreme Court seeks to balance strict legal doctrine with commercial pragmatism, where parties no longer have to return to the arbitral tribunal just to fix a simple calculation error, yet the core independence of arbitration is meant to stay intact.
Justice Viswanathan's dissent, however, raises a caution. He fears that disappointed parties might use this new power to reopen the merits of an award, which could raise a potential conflict with the New York Convention and weaken confidence in India as an arbitration centre. If such tactics become common, the efficiency the majority decision hopes to achieve could be lost.
Parliament may therefore need to step in- either to confirm the limits set by the Court or to put stronger safeguards in place. Until then, much depends on how carefully lower courts apply this new power.
Footnotes
1. [SLP (C) Nos.15336-15337/2021, decision dated April 30, 2025]
2. [Appeal (Civil) 4492 of 1998, decision dated May 12, 2006]
3. [Civil Appeal No. 2756 of 2021, decision dated July 20, 2021]
4. [Civil Appeal No. 5172 OF 2017, decision dated April 20, 2017]
5. [Civil Appeal No. 2355 of 1979, decision dated December 12, 1980]
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