Case Name: Gayatri Balasamy v. ISG Novasoft Technologies Ltd.
Court: Supreme Court of India
Citation: 2025 SCC OnLine SC 98
Bench: Justice Sanjiv Khanna, Justice Bela M. Trivedi, Justice J.B. Pardiwala, Justice Manoj Misra, and Justice Sanjay Kumar (Constitution Bench)
Appellant: Gayatri Balasamy
Respondents: ISG Novasoft Technologies Ltd.
Date of Judgment: 28 August 2025
Introduction
This Constitution Bench decision of the Supreme Court of India, rendered by five judges, addresses a question that had generated considerable uncertainty and inconsistency in the jurisprudence of Indian courts: whether a court exercising jurisdiction under Section 34 or Section 37 of the Arbitration and Conciliation Act, 1996 possesses the power to modify an arbitral award, as distinct from the power to set it aside in whole or in part. The question is of fundamental significance to the architecture of the arbitral process in India, which is premised upon the finality of awards and the principle of minimal judicial interference. If courts were freely empowered to modify arbitral awards, the finality and independence of arbitration as an alternative dispute resolution mechanism would be substantially compromised. The case arose from an employment dispute in which the High Court had modified portions of an arbitral award rather than set the award aside entirely, prompting the unsuccessful party to challenge the extent of that judicial intervention before the Supreme Court. The judgment delineates with care the boundary between the permissible correction of obvious clerical or computational errors and the impermissible rewriting of an award on the merits, while also recording a notable dissent from Justice Sanjay Kumar.
Summary of Facts
The appellant, Gayatri Balasamy, was employed by the respondent, ISG Novasoft Technologies Ltd. A dispute arose between the parties concerning the terms and conditions of her employment and the payments due to her. The dispute was referred to arbitration and an award was passed by the arbitrator that was only partially in the appellant’s favour. The award left certain claims of the appellant unsatisfied.
The appellant challenged the arbitral award before the High Court under Section 34 of the Arbitration and Conciliation Act, 1996, seeking not a complete setting aside of the award but a modification of specific portions that she considered erroneous. The High Court proceeded to modify certain parts of the award rather than set aside the offending portions entirely. Both parties being aggrieved by the High Court’s exercise of modification, the matter was brought before the Supreme Court of India, which referred the question of whether courts possess the power to modify arbitral awards under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 to a Constitution Bench for authoritative determination.
The Constitution Bench was constituted specifically to resolve the conflicting views expressed in prior decisions of the Supreme Court on the question of modification, and the judgment delivered on 28 August 2025 represents the authoritative and binding position of the Court on this question.
Issues Before the Court
1. Whether a court exercising jurisdiction under Section 34 of the Arbitration and Conciliation Act, 1996 possesses the power to modify an arbitral award, as opposed to merely setting it aside in whole or in part.
2. Whether a court exercising appellate jurisdiction under Section 37 of the Arbitration and Conciliation Act, 1996 possesses the power to modify an arbitral award.
3. Whether the power to set aside a separable portion of an arbitral award under Section 34 extends to replacing that portion with a judicially determined alternative, or is confined to annulment of the offending portion.
Arguments Given by Both Parties
Arguments on Behalf of the Appellant
It was submitted on behalf of the appellant that the High Court’s modification of the arbitral award was warranted in the circumstances, as certain portions of the award were demonstrably erroneous and capable of correction without disturbing the remaining findings. It was argued that a power of modification, limited in scope to obvious errors and separable portions of an award, is consistent with the purpose of Section 34, which permits a court to set aside an award in part, and that the setting aside of a severable portion necessarily involves a degree of judicial intervention in the award’s content. The appellant contended that a blanket prohibition on modification would compel courts to set aside entire awards for errors confined to severable portions, which would be more disruptive to the arbitral process than a targeted modification.
Arguments on Behalf of the Respondents
The respondent submitted that the Arbitration and Conciliation Act, 1996 is a complete code on the subject of arbitration and that the courts derive their powers in arbitration matters exclusively from the provisions of that statute. Neither Section 34 nor Section 37 of the Act confers a power of modification upon the court; the jurisdiction of the court under Section 34 is confined to the setting aside of an award on the limited grounds specified in that provision, and the court has no power to substitute its own determination for that of the arbitrator. It was further argued that conferring a power of modification would undermine the institutional autonomy of arbitration and encourage parties to approach courts with modification requests, converting the limited judicial oversight of arbitration into a merits-based appellate review.
Reasonings and Findings
The Constitution Bench of the Supreme Court of India held, by a majority of four to one, that the power to modify an arbitral award does not exist as a general or broad judicial power under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996. The majority reasoned that the Act is a self-contained code and that the powers of a court in arbitration matters are circumscribed by what the statute expressly provides. Section 34 confers on the court only the power to set aside an award on the specified grounds; it does not confer a power to substitute the court’s view for that of the arbitrator on questions of fact or law.
The majority acknowledged, however, that a limited and narrow power of correction exists in respect of clerical, computational, or typographical errors that are apparent on the face of the award and require no examination of the merits. Such corrections, the Court held, fall within the inherent power of the court to ensure that its orders and the awards it upholds accurately reflect what was intended, and do not constitute a substantive modification of the award. The Court drew a careful distinction between this narrow corrective power and any broader power to rewrite, supplement, or replace portions of an award with a judicially determined alternative.
The Court also addressed the question of severability, holding that where an offending portion of an award is separable from the remainder, the court may set aside that portion alone under Section 34 without disturbing the rest of the award. This power of partial setting aside, however, does not extend to replacing the set-aside portion with a different determination; the court must confine itself to annulment of the offending portion and leave the parties to seek fresh relief if required.
Justice Sanjay Kumar, dissenting, took the view that the statute confers no modification power whatsoever, not even in relation to clerical or computational errors, and that courts must therefore decline to make any alteration to an arbitral award however apparent the error may be. The learned judge reasoned that the legislature had considered and deliberately declined to confer a modification power, and that the court could not supplement the statute by reading in a power that Parliament had chosen not to grant.
Judgment and Conclusion
The Supreme Court of India held by a majority of four to one that Indian courts do not possess a broad power to modify arbitral awards under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996. A narrow corrective power limited to clerical, computational, or typographical errors apparent on the face of the award was recognised. The power to set aside a separable portion of an award was affirmed but held not to extend to replacing the set-aside portion with a judicially crafted substitute.
The judgment authoritatively resolves the uncertainty in Indian arbitration jurisprudence on the question of modification and reinforces the principle of finality of arbitral awards. It confines judicial intervention in arbitration to the grounds and remedies expressly prescribed by the Arbitration and Conciliation Act, 1996, thereby protecting the institutional integrity of arbitration as a mode of dispute resolution in which the arbitrator’s determination is final and binding, subject only to limited judicial oversight on the grounds specified in the statute.
Frequently Asked Questions (F&Q)
Q1: What is the scope of Section 34 of the Arbitration and Conciliation Act, 1996?
Section 34 of the Arbitration and Conciliation Act, 1996 provides for the setting aside of an arbitral award by a court on specified grounds, including that the award is in conflict with the public policy of India or is vitiated by patent illegality appearing on the face of the award. The provision confers on the court only the power to set aside the award, in whole or in part, and does not confer any power to modify, supplement, or replace the award or any part of it. The Supreme Court in this case confirmed that Section 34 is exhaustive of the court’s powers in challenge proceedings and that no additional powers may be read into the provision.
Q2: What is the difference between setting aside a part of an award and modifying it?
Setting aside a part of an award involves the annulment of a separable portion of the award that is found to be vitiated by one of the grounds specified in Section 34, leaving the remainder of the award intact and enforceable. Modification, by contrast, involves the substitution of the court’s own determination for that of the arbitrator in respect of a particular issue or relief. The distinction is significant because modification effectively converts the court into an appellate arbitral tribunal, which is inconsistent with the limited supervisory role that the Arbitration and Conciliation Act, 1996 assigns to the courts.
Q3: What errors may a court correct in an arbitral award without crossing into impermissible modification?
The majority of the Constitution Bench recognised that courts may correct clerical, computational, or typographical errors that are apparent on the face of an arbitral award, as such corrections do not involve any re-examination of the merits or substitution of judicial judgment for the arbitrator’s determination. This narrow corrective power is distinguishable from modification in that it merely gives accurate effect to what the arbitrator intended, without altering the substance of the award. Beyond this narrow category, however, courts have no power to alter the content of an arbitral award.
Q4: What was the basis of Justice Sanjay Kumar’s dissent?
Justice Sanjay Kumar dissented from the majority on the question of whether even a narrow corrective power exists. The learned judge took the view that the Arbitration and Conciliation Act, 1996 confers no power of modification whatsoever, including in relation to clerical or computational errors, and that the court is therefore bound to decline to make any alteration to an arbitral award regardless of how obvious the error may appear. The dissent rested on the principle that courts cannot supplement a statute by reading in powers that Parliament has chosen not to grant, and that the deliberate omission of a modification power from the Act must be given its full legal effect.
Q5: How does this judgment affect the practice of arbitration in India?
The judgment provides clarity and certainty to parties, arbitrators, and courts by definitively resolving the question of whether courts may modify arbitral awards. By holding that no broad modification power exists, the Court reinforces the finality of arbitral awards and discourages parties from approaching courts with requests for judicial correction of the merits of an award. This outcome strengthens the institutional integrity of arbitration in India and aligns Indian law more closely with international arbitration norms, which generally recognise only a limited supervisory role for national courts in relation to arbitral awards.
