Introduction

The Supreme Court’s recent judgment in Gayatri Balasamy v. ISG Novasoft Technologies Ltd[i] marks a crucial development in India’s arbitration jurisprudence. It addresses the long-standing debate on the extent of judicial powers under Section 34 of the Arbitration and Conciliation Act, 1996[ii] (the “Act”). The judgment reconciles conflicting precedents and reaffirms the foundational principle of minimal judicial intervention in arbitral proceedings. By distinguishing between corrections and modifications, the Court has provided crucial interpretative guidance on the nature and limits of judicial scrutiny over arbitral awards.

Key Questions Before the Court

The case emerged against a backdrop of judicial uncertainty. A prior bench of the Supreme Court had confronted conflicting decisions regarding the permissible degree of judicial intervention in arbitral awards under Sections 34 and 37 of the Act. Accordingly, the matter was referred to the Chief Justice of India for a conclusive determination.

The key issues framed in the Special Leave Petition revolved around whether Sections 34 and 37 of the Act empower the courts to modify arbitral awards, wholly or partially. Specifically, the Supreme Court was asked to consider if the power to set aside the arbitral award exists also implies an incidental or narrower power to modify such award, especially where the award is severable. Crucially, the SC was asked to revisit the current standing of its earlier ruling in Project Director, NHAI v. M. Hakeem[iii], a precedent which categorically defined the power of modification under Section 34. This ruling, although followed in subsequent cases, had been questioned by other coordinate and larger benches that had permitted modifications or partial alterations of awards in specific contexts. The present case allowed the Court to settle the legal position and bring uniformity to interpreting judicial powers under the Act.

SC's Opinion on Judicial Limits Under Section 34

The Supreme Court explained that the scope of judicial scrutiny under Section 34 is narrow. It held that courts are not authorised to modify or alter the substance of arbitral awards, reassuring that Section 34 explicitly allows for the setting aside of awards under certain enumerated grounds, such as the incapacity of a party, an invalid arbitration agreement, procedural irregularities, or decisions beyond the scope of the arbitration agreement. The Court emphasised that Section 34 permits the severance of an award if the invalid portion is separate and the rest can be executed independently. The court clarified that these grounds only justify the setting aside of an award, not its amendment.

While differentiating between severance and modification, the SC explained that minor clerical or typographical errors could be corrected under Section 34, substantive changes such as any attempt to change the reasoning, recalibrate amounts awarded, or substitute findings amount to impermissible judicial overreach and could not be introduced under the guise of correction. For ambiguity or complex defects, the Court pointed to the remedy under Section 33 (clarification or correction by the arbitral tribunal) or a remand under Section 34(4) for limited rectification. The Court allowed limited judicial discretion on the issue of interest under Section 31(7).

The Court further confirmed the legal validity of post-award settlements, subject to compliance with the Civil Procedure Code and the absence of fraud, coercion, or undue influence. Interestingly, while acknowledging the Court’s wide powers under Article 142 of the Constitution allows them to do justice, the SC cautioned that these powers cannot be used to rewrite arbitral awards on merits. This restraint underscores the commitment to the arbitral award and its finality, thereby reiterating party autonomy central to the arbitration framework.

In a separate dissenting opinion, Justice Viswanathan reiterated the position from Project Director, NHAI v. Hakeem (2021), maintaining that Section 34 does not support modification except for minor clerical corrections. His opinion reinforced the conceptual distinction between removing an invalid portion of an award and rewriting its operative parts, arguing that any dilution of this line would erode the finality that arbitration is designed to uphold. He further cautioned that allowing courts to modify the awards partially risked converting judicial review into an appellate process, which may eventually undermine the efficiency and decisional independence that make arbitral awards a preferred mode of dispute resolution.

Analysis

The Supreme Court’s decision carries significant implications for India’s arbitral regime. It upholds the sanctity of arbitral autonomy, ensuring that procedural corrections don’t transform into a review of merits. This ruling supports the policy of promoting arbitration as a time-bound, final, and enforceable dispute resolution mechanism, thus strengthening India’s arbitration infrastructure.

Equally important is the judgment’s impact on commercial predictability. The parties now have a clearer visibility into the finality of arbitral awards and the limited extent to which such awards may be questioned in court. Additionally, by distinguishing between procedural amendments and unauthorized alterations, the Court’s approach empowers India’s trajectory towards a pro-arbitration regime consistent with global best practices.

While this decision brings clarity to the scope of judicial interference under Section 34, it has also raised concerns about excessive rigidity. By reaffirming that the courts may not be in a position to modify arbitral awards even partially, the judgment may have inadvertently prioritized purity over substantive justice. Even though, this strict approach may align with the principle of minimum interference, it does make arbitral proceedings slightly inflexible especially in complex commercial disputes where minor severable errors might be corrected without overturning the entire amount. Moreover, the refusal to engage with a broader scope of remedy under Article 142 of the Indian Constitution, especially in matters of manifest injustice, may reflect a narrow interpretation of the Indian Constitution.

A more calibrated approach that allows minimal modification in rare and exceptional cases could have better balance arbitral integrity with practical justice.

References:

[i] Gayatri Balasamy v ISG Novasoft Technologies Ltd (April 2025) 2025 INSC 605.
[ii] See Arbitration and Conciliation Act 1996 (India), s 34.
[iii] Project Director, NHAI v M  Hakeem (2021) 9 SCC 1.