In the recent case of Gayatri Balasamy v. ISG Novasoft Technologies Ltd., the Supreme Court of India addressed a longstanding controversy: Can courts modify arbitral awards under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996? The case arose after Gayatri Balasamy, a former Vice President at ISG Novasoft, was awarded INR 2 crore by an arbitral tribunal after her resignation following allegations of sexual harassment and wrongful termination. Dissatisfied with the quantum, she challenged the award in the Madras High Court. The Madras High Court modified the sum upwards and the legal journey culminated before a five-judge Constitution Bench of the Supreme Court, which delivered its judgment on April 30, 2025.

The Legal Issue
The central legal question was whether courts possess the power to modify arbitral awards when hearing challenges under Sections 34 or 37. This issue had divided previous benches, with some judgments permitting modification and others strictly limiting judicial intervention to setting aside awards. The Constitution Bench was also tasked with clarifying whether such modification, if allowed, is permissible only in cases where the award is severable and whether the power to modify could be implied from the power to set aside.

The Majority View
The majority, led by Chief Justice Sanjiv Khanna, held that courts have the power to modify arbitral awards under Section 34, but only within a narrowly defined scope. Specifically, courts may make necessary corrections that are evident, such as rectifying clerical or computational errors, but cannot engage in a broader review of the merits of the case or rewrite the award. The majority reasoned that the power to sever invalid parts of an award (as recognized in the proviso to Section 34(2)(a)(iv) inherently includes a limited power to modify, provided the valid and invalid portions are legally and practically separable. This approach, they held, avoids unnecessary delays and costs that would result from setting aside an award in its entirety and sending parties back to arbitration.

They also formulated a test to guide when limited modification is permissible: i) When the award is severable; ii) To correct clerical, computational or typographical errors; iii) To alter post-award interest in justified cases; and iv) When Article 142 of the Constitution is invoked to do complete justice.

The Dissenting Opinion of Justice K.V. Viswanathan
Justice K.V. Viswanathan delivered a strong dissent, fundamentally disagreeing with the majority’s interpretation of the Act. He emphasized that the Arbitration and Conciliation Act, 1996, unlike its predecessor, does not expressly confer on courts the power to modify arbitral awards. Relying on Sections 5, 13(5), 16(5), and 33 of the Act, he argued that judicial intervention is intentionally circumscribed, limited to setting aside or annulling an award on specific grounds. To read a power of modification into Section 34, he cautioned, would be to add words to the statute and go against clear legislative intent. According to him, “modification done through the powers under S.34 strikes at the very core and root of the ethos of the arbitration process. Such an exercise of power will derogate from the core aspects of the A&C Act and will breach a pre-eminent prohibition in the said Act”.

Implications and Conclusion
The Supreme Court’s decision in this case provides much needed clarity on the extent of judicial intervention in arbitral awards in India. Ultimately, the ruling highlights the importance of legislative clarity and judicial restraint in arbitration law. While the majority view now governs, Justice Viswanathan’s dissent will likely continue to influence debates on the role of courts in arbitration and the interpretation of the Arbitration and Conciliation Act, 1996.

By - Sayjal Deshpande & Khushi Thawani