Gayatri Balasamy v. M/s ISG Novasoft Technologies Ltd.,
2025 SCC OnLine SC 986
Bench: Hon’ble CJI Sanjiv Khanna, B.R. Gavai, Sanjay Kumar, A.G. Masih, K.V. Viswanathan, JJ.)
Facts:
- Multiple decisions had created jurisprudential divergence on whether modification of an arbitral award is permitted under Indian arbitration law.
- Some benches held modification is impermissible, citing Section 34’s limited scope (e.g., Project Director NHAI v. M. Hakeem).
- Others had modified awards citing Article 142, pragmatism, or equity (e.g., Vedanta, Tata Hydro, Oriental Structural Engineers).
Issue:
Whether courts in India have the power under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 to modify an arbitral award, or are limited strictly to setting it aside?
Held:
The Supreme Court recognized a limited jurisdiction to modify arbitral awards under Sections 34 and 37 of the Arbitration Act.
Key Holdings:
- Limited Power of Modification Permitted:
Courts can modify an award:
- When the invalid portion is severable from the valid (Section 34(2)(a)(iv));
- To correct clerical, computational, typographical errors;
- To adjust post-award interest under Section 31(7)(b);
- In exceptional cases under Article 142;
- No General Appellate Power:
- Courts cannot review the merits of the arbitral award.
- The scope of review is narrow and statutorily confined.
- Rejection of the Rigid Interpretation in NHAI vs. M. Hakeem’s:
- The Court clarified that lack of express provision does not equal prohibition.
- Recognized the doctrine of severability and pragmatic judicial intervention.
- Power to Modify in not a Power to Rewrite:
- Modification allowed only where clear, not speculative or merit-based.
Significance:
This landmark Constitution Bench ruling settles the conflict on modification of arbitral awards under Indian law. It balances judicial restraint with practical justice, preventing unnecessary re-arbitration and reinforcing arbitration as a cost-effective, efficient remedy. The judgment aligns Indian arbitration jurisprudence with global practices and gives courts a limited but meaningful role in correcting manifest flaws in awards.
