Excerpt:

In this blog, the authors critically examine the Supreme Court’s Constitution Bench ruling in Gayatri Balasamy v. ISG Novasoft Technologies Ltd., which authorises limited modification to arbitral awards under Section 34 of the Arbitration Act. The blog, critically analyses the five grounds of permissible intervention, balancing finality with fairness. While the ruling is in line with global norms, it causes apprehension of potential judicial overreach, urging caution to ensure arbitration remains an efficient and autonomous dispute resolution mechanism.

The Delicate Balance Between Finality and Fairness in Arbitration

The legitimacy of arbitration depends on balancing the two competing imperatives, first, the finality of the awards which is essential for efficient dispute resolution and second, the fairness which is required to uphold the substantive justice and due process.^[1] This conflict originates from arbitration’s synthesis as a private adjudicatory mechanism operating within public legal frameworks. Section 5, Arbitration and Conciliation Act, 1996^[2], embraces the global principle of kompetenz-kompetenz, to preserve the arbitral autonomy that prohibits judicial intervention.^[3] As highlighted by the Court in Videocon Industries Ltd v. Union of India (2011)^[4], the courts should avoid infringing on domains of arbitration except in narrowly defined exceptions like public policy violations or procedural irregularities.^[5]

However, if the arbitral awards consist of errors or procedural lapses, the absolute finality risks injustice. The Supreme Court, in a 4:1 majority decision in Gayatri Balasamy v. ISG Novasoft Technologies Ltd^[6]held that the Courts can only make limited or restricted modifications like removing unenforceable terms but cannot visit the case’s merits.^[7] The judgment of the Supreme Court aligns with the UNCITRAL Model Law of reducing the interference of the Judiciary without sacrificing the foundational fairness.^[8]

Internationally, in the United Kingdom, there are similar provisions of balancing these interests by allowing appeals on points of law in exceptional cases under Section 69 of their Arbitration Act.^[9] This dichotomy – wherein finality reduces litigation costs, yet delays and unchecked awards risk undermining the process – mirrors the broader debates in arbitration theory.^[10] Illustratively, the Hines v. Anchor Motor Freight (1976)^[11] precedent depicts how procedural unfairness such as a union’s breach of representation duties can justify the judicial review despite the norms of finality.^[12]

The cautious approach of the Constitutional Bench takes a balanced approach, allowing for corrective steps for technical flaws while protecting the integrity of the arbitral award on substantive merits.^[13]

The Evolution of Section 34: From Sundaram Finance to the 2023 Constitution Bench Ruling

Over the years, Section 34 of the Arbitration and Conciliation Act^[14] has undergone a considerable amount of transformation marked by both legislative intent and a series of landmark judgments. Unlike the repealed 1940 Act, which gave the Courts extensive power to change the arbitral awards, the 1996 Act modelled on the UNCITRAL Model Law limits the judicial interference. Section 34, strictly limited the powers and remedies granted to the court and conferred the power to set aside only arbitral awards and not modify them.^[15] This was upheld by the Supreme Court as well, which emphasized that there should be minimal judicial intervention in arbitration proceedings to preserve the autonomy and the finality of the Arbitration Proceedings.^[16]

The decisive moment came when the Supreme Court in Project Director, NHAI v. M. Hakeem (2021)^[17], held that Section 34 empowered the courts only to set aside the arbitral awards on limited grounds but the courts cannot modify the arbitral awards.^[18] However, under Article 142 of the Constitution of India, the Court acknowledged its power to modify the awards in upholding the interest of justice as seen in cases such as McDermott International Inc. v. Burn Standard Co. Ltd. (2006)^[19] and Oriental Structural Engineers Pvt. Ltd. v. State of Kerala (2021)^[20].

The practical challenges persisted even after the clarity of statutory framework, especially in cases involving technical defects or severable errors. The debate ultimately led to the 2025 decision of the Constitution Bench in Gayatri Balasamy v. ISG Novasoft Technologies Ltd., where the Supreme Court, by a 4:1 majority, reinterpreted Section 34 to recognize that there should be limited intervention of the judiciary such as correction of computational errors or severing invalid components of an arbitral award, while upholding the bar on merit based review.^[21] This decision of the Supreme Court brought coherence to the judgments that were previously conflicting and made explicit that while the minimal judicial interference remains a cornerstone of arbitration jurisprudence, there exists a possibility of judicial correction to ensure efficiency and fairness in arbitration proceedings.^[22]

The Pillars of Permissible Modifications

The Supreme Court, with its ruling in the Gayatri Balasamy v. ISG Novasoft Technologies Ltd., laid down the grounds of permissible modifications of arbitral awards.

The first pillar, i.e., severability addresses the circumstances where invalid components or portions of an award can be isolated without compromising the integrity of the whole. The Court reiterated that this power must be only exercised when there is a clear distinction between the valid and the invalid parts and the two are not interdependent, thereby protecting against the judicial rewriting of substantive merits of the award.^[23]

This approach which has been opted for by the Court prevents redundant re-arbitration and is consistent with the efficiency goals, but it also calls for judicial austerity to avoid overreach.

The second is rectification of clerical, computational or typographical errors, based on the principle that the errors visible on the face of the record should not defeat the ends of justice. The court linked this with Section 152 of CPC and emphasized that the permissible corrections are procedural and not a backdoor for meritbased review. Any deviation into substantive review risks undermining the autonomy and breaching the limited scope of the intervention of the judiciary under Section 34.

The third pillar is related to the extent of modification permissible under Section 34 wherein the Court addressed the phrase “as well as other manifest errors” and clarified its scope. It held that the words cannot be interpreted expansively to allow merit based inferences. The Court rectified it by limiting the powers of modification to “errors which appear erroneous on the face of record”.^[24]  Specifically, it recognized that the silence or ambiguity regarding post-award interest under Section 31(7)(b) in arbitral awards can lead to inequitable outcomes. Thus, courts may intervene to clarify or adjust post-award interest, but only in compelling circumstances, and must avoid altering the substance of the award unless justified by the facts.

The fourth pillar – clarification under Section 34(4) – reinforces that courts may remit matters to the tribunal for curing procedural defects, but cannot use this as a tool to rewrite or modify the award on merits. The majority held that courts cannot modify interest pendente lite i.e. (interest granted during the arbitration proceeding) but it can modify the rate or period of post-award interest under Section 31(7)(b) i.e. (extra money added to the awarded amount if it is not paid on time) granted by an arbitral tribunal and which becomes pertinent when the award is found to exceed the value of claim or contrary to provisions.^[25] This ensures that Section 34(4) remains a corrective, not a creative, jurisdiction.^[26]

Finally, the fifth pillar highlights the importance of invocation of Article 142. The majority held that the Supreme Court may, in exceptional cases, modify awards to do “complete justice” but reiterated that this power must be exercised cautiously and only be exercised based on fundamental consideration of public policy.^[27] The dissent, however, warned that even this limited use of Article 142 risks undermining principles of finality of arbitration. Collectively, these pillars reflect a balancing act: they permit targeted judicial intervention to cure technical or procedural defects, while resolutely prohibiting courts from re-adjudicating the merits, thus preserving both the efficiency and autonomy of the arbitral process.

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^[1] Udechukwu Ojiako, The Finality Principle in Arbitration: A Historical Exploration, 15 J. Legal Aff. & Disp. Resol. in Eng’g & Constr. 04523031 (2023).

^[2] Arbitration and Conciliation Act, No. 26 of 1996, § 5 (India)

^[3] https://lawbhoomi.com/extent-of-judicial-intervention-in-arbitration/

^[4] Videocon Industries Ltd vs Union Of India & Anr 2011 (6) SCC 161.

^[5] Id.

^[6] Gayatri Balasamy v. ISG Novasoft Technologies Ltd , 2025 SCC OnLine SC 986.

^[7] Udechukwu Ojiako, The Finality Principle in Arbitration: A Historical Exploration, 15 J. Legal Aff. & Disp. Resol. in Eng’g & Constr. 04523031 (2023).

^[8]https://jusmundi.com/en/document/publication/en-due-process-in-arbitration-and-how-to-balance-fairness-and-efficiency

^[9] https://kluwerlawonline.com/journalarticle/Journal+of+International+Arbitration/30.5/JOIA2013034

^[10] https://digitalcommons.law.lsu.edu/cgi/viewcontent.cgi?article=1310&context=faculty_scholarship

^[11] Hines v. Anchor Motor Freight, Inc., 424 U.S. 554.

^[12] https://digitalcommons.law.lsu.edu/cgi/viewcontent.cgi?article=1310&context=faculty_scholarship

^[13] Udechukwu Ojiako, The Finality Principle in Arbitration: A Historical Exploration, 15 J. Legal Aff. & Disp. Resol. in Eng’g & Constr. 04523031 (2023).

^[14] Arbitration and Conciliation Act, No. 26 of 1996, § 34 (India).

^[15] https://indiacorplaw.in/2021/10/modification-of-arbitral-awards-and-section-34-an-alternative-perspective.html

^[16] https://www.scconline.com/blog/post/2025/05/02/modification-of-arbitral-awards-supreme-court-section-34/

^[17] Project Director, NHAI v. M. Hakeem , 2021 SCC OnLine SC 473.

^[18] https://www.scconline.com/blog/post/2025/05/02/modification-of-arbitral-awards-supreme-court-section-34/

^[19] Mcdermott International Inc vs Burn Standard Co. Ltd. 2006 (11) SCC 181.

^[20] M/S Oriental Structural Engineers Pvt v. State Of Kerala 2021 SCC OnLine SC 337.

^[21] https://www.scobserver.in/cases/courts-power-to-modify-an-arbitral-award/

^[22] https://www.scconline.com/blog/post/2025/05/02/modification-of-arbitral-awards-supreme-court-section-34/

^[23] https://www.scobserver.in/reports/courts-power-to-modify-an-arbitral-award-judgement-summary/

^[24]https://www.livelaw.in/articles/modification-of-arbitral-awards-supreme-court-judgment-gayatri-balasamy-vs-isg-novasoft-technologies-291339

^[25]https://www.business-standard.com/economy/analysis/court-s-power-to-modify-arbitral-awards-a-cure-worse-than-the-disease-125050500766_1.html

^[26] https://www.scobserver.in/reports/courts-power-to-modify-an-arbitral-award-judgement-summary/

^[27] https://www.scconline.com/blog/post/2025/05/02/modification-of-arbitral-awards-supreme-court-section-34/

The blog post has been written by Sahil Singh & Manassvi Sharrma, who are 3rd Year undergraduate B.A., LL.B (Hons) students at Chanakya National Law University (CNLU), Patna.

LinkedIn Profiles:

Sahil Singh – https://www.linkedin.com/in/sahil-singh18a/

Manassvi Sharrma – https://www.linkedin.com/in/manassvi-sharrma-559660278/?utm_source=share&utm_campaign=share_via&utm_content=profile&utm_medium=ios_app