Author: Priyanshu Pareek
College: JECRC UNIVERSITY
Abstract
Finality is to arbitration what oxygen is to fire remove it, and the process extinguishes itself. For decades, Indian courts had maintained a studied restraint in interfering with arbitral awards, recognising that parties choose arbitration precisely to escape the protracted uncertainty of litigation. On 30 April 2025, a five-judge Constitution Bench of the Supreme Court of India, by a 4:1 majority, fundamentally altered this equilibrium. In Gayatri Balasamy v. M/S ISG Novasoft Technologies Limited (2025 INSC 605), the Court held that Section 34 of the Arbitration and Conciliation Act, 1996, implicitly grants courts a limited power to modify arbitral awards a power the statute nowhere expressly confers. The judgment resolves a decade-long conflict between contradictory High Court decisions. It simultaneously creates a fresh wave of uncertainty about the finality of Indian awards, their enforceability in foreign jurisdictions under the New York Convention, and the institutional credibility of India as an international arbitration seat. This article examines the facts, holding, and four-pronged modification framework of Gayatri Balasamy, critically analyses the majority and dissenting opinions, traces the comparative arbitration law framework in the UK, Singapore, and USA, and argues that while the majority’s pragmatic intent is understandable, the coherent solution demanded legislative amendment not judicial implication.
To the Point
Gayatri Balasamy was appointed Vice President (M&A Integration Strategy) at ISG Novasoft Technologies Limited on 27 April 2006. Within months, she resigned, alleging sexual harassment by the company’s CEO. The resignation did not take effect. Three letters of termination followed. She lodged criminal complaints; the company filed counter-complaints for defamation and extortion. When both parties eventually reached the Supreme Court, the Court referred them to arbitration. The arbitral tribunal, on 8 August 2019, awarded Balasamy compensation of Rs. 2 crore. Dissatisfied that certain claims were overlooked, she approached the Madras High Court under Section 34 of the Arbitration and Conciliation Act, 1996. The Single Judge enhanced the award by Rs. 1.6 crore. The Division Bench, finding the enhancement excessive, drastically reduced the additional amount to Rs. 50,000. Balasamy moved the Supreme Court.
What began as an employment dispute became the vehicle for resolving one of Indian arbitration law’s most contested questions: does the power to set aside an award under Section 34 implicitly include the power to modify it? The question mattered because two irreconcilable lines of authority had developed. One, led by NHAI v. M. Hakeem (2021), held that Section 34 permits only setting aside not modification and that courts must either confirm or annul an award. The other, led by earlier decisions of several High Courts, held that modification was inherent in the court’s curial power. A three-judge bench, finding the conflict irresolvable without authoritative guidance, referred the matter to a Constitution Bench on 20 February 2024. The answer arrived on 30 April 2025 and it has divided the arbitration world.
Use of Legal Jargon
The Arbitration and Conciliation Act, 1996 (hereinafter ‘the Act’) was enacted to give effect to the UNCITRAL Model Law on International Commercial Arbitration, 1985, and to align Indian arbitration practice with international standards. Section 34 of the Act governs ‘recourse against an arbitral award’ the mechanism through which a party may challenge an award before a court. The grounds for challenge are exhaustively enumerated: invalidity of the arbitration agreement under Section 34(2)(a)(i); violation of due process under Section 34(2)(a)(ii); the award falling outside the scope of the arbitration agreement under Section 34(2)(a)(iv); the composition of the tribunal violating the parties’ agreement under Section 34(2)(a)(v); the subject matter being non-arbitrable under Section 34(2)(b)(i); and the award conflicting with the public policy of India under Section 34(2)(b)(ii). For domestic awards only, Section 34(2A) permits challenge on the ground of patent illegality appearing on the face of the award.
Critically, Section 34 does not use the word ‘modify.’ It empowers courts to ‘set aside’ awards. Section 34(4) permits courts to ‘adjourn’ proceedings and remand the matter to the arbitral tribunal for resumption of proceedings or taking any action to eliminate the grounds for setting aside a remand power that the dissenting Justice Viswanathan argued made judicial modification unnecessary and impermissible. Section 37 governs appellate proceedings against Section 34 orders, and was held by the majority to carry the same limited modification power as Section 34. The principle of kompetenz-kompetenz the arbitral tribunal’s authority to determine its own jurisdiction and the doctrine of minimal judicial intervention, both foundational to the Act, are directly implicated by the majority’s recognition of a modification power that the legislature had not expressly granted.
The majority invoked three doctrines to justify its holding. First, the Latin maxim omne majus continet in se minus the greater power includes the lesser to argue that the power to set aside an award in whole necessarily includes the lesser power to set it aside in part or modify a portion of it. Second, the doctrine of implied powers drawn from Grindlays Bank Ltd. v. Central Government Industrial Tribunal to hold that every court possesses inherent ancillary powers necessary to discharge its functions effectively, even where not expressly granted by statute. Third, Article 142 of the Constitution of India which empowers the Supreme Court to pass such orders as are necessary for doing complete justice in any cause as a residual basis for modification in cases where complete justice demands intervention beyond annulment.
The Proof
The majority opinion, authored by Chief Justice Sanjiv Khanna, held that courts possess a limited modification power under Sections 34 and 37 in four specific circumstances: first, where the award is severable, by severing the invalid portion from the valid portion, relying on the proviso to Section 34(2)(a)(iv); second, by correcting clerical, computational, or typographical errors that appear erroneous on the face of the record; third, by modifying post-award interest in appropriate circumstances; and fourth, under Article 142 of the Constitution, exercised with great care and caution to do complete justice. The Court was explicit that this power does not extend to reappreciation of evidence, merit-based review, or substantive revision of the tribunal’s findings the hallmarks of an appellate court, not a curial review court.
The dissent of Justice K.V. Viswanathan offers the more compelling analytical position. He held that Section 34 does not permit modification because: the legislature consciously chose not to include a modification power, unlike the English Arbitration Act 1996 (Section 69) and the Singapore International Arbitration Act (Section 24) which expressly permit limited variation; the power of remand under Section 34(4) already provides an adequate and less intrusive alternative for correcting errors; and, most critically, a court-modified award may encounter enforcement difficulties under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (NYC), to which India is a party, because a modified award is no longer purely an arbitral tribunal’s award raising the question of whether what is being enforced is an award or a court judgment.
This enforcement concern is not theoretical. The Linklaters arbitration team noted that award debtors may object in New York Convention member states that what is being enforced is an Indian court’s modification not an arbitral tribunal’s award rendering the NYC’s enforcement protections potentially inapplicable. The Columbia University American Review of International Arbitration characterised the judgment as a ‘supreme blow to finality’ and warned of the ‘dangerous opening of floodgates to judicial second-guessing.’ The International Bar Association’s arbitration committee noted that the judgment, while pragmatically motivated, ‘has introduced significant ambiguity into Indian arbitration law’ by blurring the fundamental boundary of arbitral finality the very quality that makes arbitration commercially preferable to litigation.
Case Laws
Gayatri Balasamy v. M/S ISG Novasoft Technologies Limited, 2025 INSC 605 / 2025 SCC OnLine SC 986
The Constitution Bench’s 4:1 majority held that Section 34 of the Act implicitly includes a limited judicial power to modify arbitral awards. Chief Justice Sanjiv Khanna’s majority opinion identified four modification scenarios: severance of invalid from valid portions; correction of manifest clerical, computational, or typographical errors; modification of post-award interest; and exercise of Article 142 jurisdiction with restraint. Justice Viswanathan’s dissent held that modification is impermissible under Section 34, as the legislature deliberately chose not to include it, and that Section 34(4) remand provides a sufficient alternative. The judgment is binding on all courts in India and applies to both domestic and international commercial arbitrations seated in India.
Project Director, NHAI v. M. Hakeem, (2021) 9 SCC 1
This three-judge bench judgment, directly overruled by the Constitution Bench in Gayatri Balasamy, had held unequivocally that Section 34 of the Act does not grant courts any power to modify an arbitral award the court’s recourse is confined to setting aside or confirming the award. The National Highways Authority of India case had become the leading authority relied upon by parties resisting judicial modification of awards, and its reversal by the Constitution Bench marks the most significant shift in Indian award-challenge jurisprudence in the post-2015 amendment era.
McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 18
The Supreme Court held that the Act is a self-contained code on arbitration meaning courts cannot travel beyond its express provisions to invoke inherent powers derived from the Civil Procedure Code, 1908. This judgment was the analytical foundation of the restrictive school of thought on Section 34. The Gayatri Balasamy majority engaged carefully with McDermott ultimately distinguishing rather than overruling it, by holding that the limited modification power derives from implied statutory construction of Section 34 itself, not from external inherent powers.
ONGC v. Saw Pipes Ltd., (2003) 5 SCC 705
The Supreme Court introduced the ground of ‘patent illegality’ as a basis for setting aside domestic awards a significant expansion of judicial review that was subsequently codified in Section 34(2A) by the 2015 Amendment. The case is relevant to Gayatri Balasamy because it represents an earlier instance of judicial enlargement of Section 34’s scope through interpretive means a methodology the majority in Gayatri Balasamy adopted and the dissent characterised as incompatible with a self-contained statutory code.
Delhi Metro Rail Corporation Ltd. v. Delhi Airport Metro Express Pvt. Ltd., (2024) SCC DMRC Case
The Supreme Court invoked its extraordinary curative powers to overturn a final arbitral award in the DMRC case a development that preceded Gayatri Balasamy and contributed to the mounting concern about judicial overreach in Indian arbitration. The Gayatri Balasamy judgment acknowledged the DMRC episode, with the majority treating it as an exercise of Article 142 jurisdiction while critics characterised both decisions as illustrative of the same underlying problem: Indian courts are structurally reluctant to treat arbitral finality as genuinely non-negotiable.
Conclusion
The Gayatri Balasamy judgment is a product of good intentions operating in a bad institutional context. India’s arbitration courts have historically been slow, interventionist, and deferential to domestic parties challenging foreign-favoured awards. The majority’s pragmatism its desire to prevent parties from being sent back into expensive re-arbitration for errors that a court could correct in minutes is understandable. But arbitration’s commercial value rests on finality, and finality cannot be selectively honoured. A modification power that is ‘limited’ today creates the template for a modification power that is ‘expanded’ tomorrow, through the same doctrines of implied powers and Article 142 that the majority deployed.
The coherent solution was available throughout: Section 34(4) already permits remand to the tribunal for correction of errors. The Constitution Bench could have directed its consistent use before modification is considered. Parliament could amend the Act to expressly codify a narrow modification power with statutory guardrails as England has done under Section 69 of the Arbitration Act, 1996, and Singapore under Section 24 of the International Arbitration Act. What the judgment should not have done and what it did is create a judicially implied modification power whose contours are defined by subsequent case-by-case development rather than legislative deliberation. India is competing with Singapore, London, and Hong Kong for its status as a preferred international arbitration seat. Every time an Indian court rewrites an award that an arbitral tribunal wrote, it sends a signal to international commercial parties that Indian awards are not final until a court says they are. That signal is incompatible with arbitral leadership. Parliament must legislate. Until it does, Gayatri Balasamy will be both a landmark and a liability.
FAQ
Q1. What did the Supreme Court actually decide in Gayatri Balasamy?
A five-judge Constitution Bench held by a 4:1 majority on 30 April 2025 that courts have a limited power to modify arbitral awards under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996. The power is restricted to four scenarios: severing invalid portions from valid ones, correcting clerical or computational errors, adjusting post-award interest, and invoking Article 142 of the Constitution with great caution to do complete justice.
Q2. How does this judgment change the law from NHAI v. M. Hakeem (2021)?
NHAI v. M. Hakeem had held that Section 34 does not grant any modification power courts can only confirm or set aside an award. Gayatri Balasamy directly overrules this position, holding that a limited modification power is implied within Section 34. However, the Court emphasised that expansive modification reappraising evidence or revising the tribunal’s substantive findings remains impermissible
.Q3. What is the enforcement risk created by court-modified awards?
A court-modified award may face challenges under the New York Convention, 1958, in foreign jurisdictions. Award debtors may argue that what is being enforced is an Indian court’s order not a tribunal’s award and therefore outside the Convention’s enforcement regime. This risk, highlighted in Justice Viswanathan’s dissent, is a significant concern for parties seeking to enforce India-seated awards internationally.
Q4. What is the dissenting judge’s position and why does it matter?
Justice K.V. Viswanathan dissented, holding that modification is impermissible under Section 34 because the legislature deliberately omitted it, Section 34(4) remand to the tribunal provides an adequate alternative, and court modification risks enforcement complications under the New York Convention. The dissent matters because it is doctrinally more faithful to the Act’s text and to India’s UNCITRAL Model Law commitments and it may gain renewed prominence if Parliament legislates on this issue.
Q5. What reform does the judgment demand from Parliament?
Parliament should amend the Arbitration and Conciliation Act, 1996, to expressly codify a narrow modification power under Section 34 with statutory guardrails specifying precisely the grounds, procedure, and limits of judicial modification. This would provide the certainty and predictability that the majority judgment attempted but failed to deliver through implied statutory construction alone. The English Arbitration Act, 1996, and Singapore International Arbitration Act offer ready-made legislative templates.
References
Gayatri Balasamy v. M/S ISG Novasoft Technologies Limited, 2025 INSC 605 / 2025 SCC OnLine SC 986, Supreme Court of India, 30 April 2025 (Constitution Bench — CJI Sanjiv Khanna; JJ. B.R. Gavai, Sanjay Kumar, A.G. Masih, K.V. Viswanathan
