Gayatri Balasamy v. ISG Novasoft Technologies Limited
Author: Harleen Kaur, D. Y. Patil Law College
To the point
Gayatri Balasamy worked at ISG Novasoft Technologies Limited. A couple months within her employment as the Vice President of ISG, Balasamy resigned accusing the company’s CEO Mr. Krishna Srinivasan of sexual harassment. The resignation did not materialize and was followed by 3 letters of termination after a year.
Thereafter, she lodged a criminal complaint against the company under IPC and Tamil Nadu Prohibition of Harassment of Women Act, 1998.
In due course, the company initiated extortion and defamation proceedings against the petitioner. Thereafter, the Supreme Court referred the matter to arbitration, where Balasamy was awarded a sum of ₹2 crore.
Dissatisfied with the award, the petitioner approached the Madras High Court seeking to set aside the arbitral award.. Madras HC accordingly awarded her with an additional compensation of 1.6cr. Later, a Division Bench of Madras HC found the earlier order by the subordinate bench to be excessive and devoid of logical calculation.
Thereafter, the additional amount was reduced to 50,000. Followed by which, the petitioner moved the SC.
Legal Jargon
The question of significance arising out of this case is whether a Court can alter an arbitration award or not? And to what extent?
Section 34, Arbitration and Conciliation Act, 1996: provides statutory grounds for a party to set aside an arbitral award in India on certain limited grounds.
Section 37, Arbitration and Conciliation Act, 1996: governs appeals in arbitration matters and specified certain orders which are capable of being appealed, ensuring limited but necessary judicial scrutiny over arbitral proceedings.
Article 142, Constitution of India: Supreme Court has the authority to exercise its special powers facilitated by article 142 and modify awards within constitutional borders.
Proof
Modification vs. Setting Aside
Arbitration provides for speedy resolution apart from court cases that usually cause judicial backlogs, party autonomy and confidentiality are major perks of the process. Law provides limited grounds for appeal to arbitral awards, meaning greater finality, reducing chances of drawn-out appeals. Section 34 doesn’t explicitly allow complete modification of an arbitral award but severance of an award is permitted. Severance is the removing of invalid parts from the award upholding the valid parts and maintaining the ingenuity of arbitration. This rule relies on the principle of “omne majus continet in se minus” that translates to the greater power the lesser. Section 34 also provides that the severed parts be removed without impacting the inseparable ones. Court held that modification is a lesser form of setting aside, therefore it is permissible. Thus, it affirms limited judicial intervention and maintains the independence of arbitration.
Abstract
The crux of the legal controversy lies in the following questions: Do Indian courts possess the jurisdiction to modify an arbitral award? If yes, what is the permissible extent of such modification? This issue emerges from the fact that the Arbitration and Conciliation Act, 1996, does not expressly confer upon courts the authority to modify or vary an arbitral award. Section 34 of the Act provides only for the setting aside of an award, not its alteration. However, in several cases, the judiciary has felt compelled to intervene and modify arbitral awards, primarily to avoid prolonged litigation and to serve the ends of justice. Conversely, a series of judgments have firmly held that courts cannot modify arbitral awards, emphasizing the limited and narrow scope of Section 34. As a result, the jurisprudence reflects divergent and conflicting judicial viewpoints on this matter.
Case Laws
McDermott International Inc. v. Burn Standard Co. Ltd. and Others,
This case highlights the role of arbitrators in determining claims and counterclaims. The court cannot correct the arbitrator’s mistakes, whether factual or legal. Rather, its role is confined to setting aside the award, leaving the parties the option to initiate fresh arbitration proceedings if they wish.
NHAI v. M. Hakeem
In a previous judgement, court declared that section 34 provides only for setting aside an arbitral award, not modifying or altering it. The judiciary cannot act as an appellate forum over arbitral tribunals. Allowing courts to alter awards would defeat the objective of minimal court interference.
Conclusion
The Gayatri Balasamy case is a recent pivotal judgement in Indian arbitration law. It affirms the limited yet significant power of courts to alter arbitration awards ensuring that the principles of justice and legality are upheld. Thus, this ruling bridges the gap between strict statutory interpretation and maintains the soul of arbitration endorsing a balanced approach to justice.
FAQS
Can Indian courts modify arbitral awards under section 34?
Yes, in limited and severable cases, particularly where modification is necessary to avoid injustice and fresh arbitration, courts can alter and modify awards.
What constitutes patent illegality?
An error that is evident on the face of the award, such as ignoring material evidence or a clear violation of legal principles is termed as Patent Illegality.
Is this rule applicable in all arbitration cases?
No, section 34 is explicitly available on cases where the defect is severable and modification does not amount to reappreciation of evidence.
