For years, Indian arbitration law was understood to limit courts to either setting aside an arbitral award or letting it stand.
On April 30, 2025, a Constitution Bench of the Supreme Court clarified this long-standing debate through a 4:1 majority judgment in Gayatri Balasamy v. ISG Novasoft Technologies Ltd.
The Court held that limited modification of arbitral awards is now permitted under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996.
What modifications are allowed?
- If an arbitral award contains a severable invalid part, courts can preserve the valid portion and set aside the rest.
- Clerical, typographical, or computational errors that are apparent on the face of the record can be corrected.
- Post-award interest can be modified in some instances.
- In rare circumstances, the Hon’ble Supreme Court may invoke its powers under Article 142 of the Constitution to modify an award, but this must be done cautiously.
Justice KV Viswanathan dissented, stating that modifying an arbitral award without express statutory authority compromises the finality of the arbitral process. He emphasized that Section 34 does not allow courts to enter into a merit-based review and that even partial modification strikes at the core of the arbitration framework.
Why this judgment matters?
- It resolves conflicting decisions on whether courts can modify arbitral awards
- It provides more explicit guidance for business owners, arbitrators, and counsel involved in arbitration proceedings.
- It marks the first time a Constitution Bench has interpreted the limits of Sections 34 and 37 in the Arbitration Act.
This judgment strikes a new balance between judicial oversight and arbitral autonomy in India. It reshapes the legal landscape for those engaged in drafting, challenging, or enforcing arbitral awards.
If you advise clients in arbitration or navigate disputes arising from awards, this is a decision worth studying closely.
