Case Summary: Gayatri Balasamy v. ISG Novasoft Technologies Ltd., (2025) 1 SCC 1501

• Case Title: Gayatri Balasamy  v. ISG Novasoft  Technologies Ltd.
• Citation: (2025) 1 SCC 1501
• Court: Supreme Court of India, Constitution Bench (5 Judges)
• Bench: Constitutional Bench comprising Chief Justice Sanjiv Khanna; Justice B.R.Gavai; Justice P.V. Sanjay Kumar; Justice K.V. Viswanathan; Justice A.G. Masih
• Date of judgment: 30/04/2025
• Relevant statutes: Arbitration and Conciliation Act, 1996
• Key provisions:

1. Section 5 –It restricts judicial intervention in arbitration to what is expressly permitted by the Act, thus maintaining the autonomy of the arbitral process.
2.  Section 33 – It empowers the arbitral tribunal to correct trivial errors, like clerical or arithmetical errors, or to clarify obscure points in its award prior to it becoming final. This does not apply to granting jurisdiction to courts to modify the merits or substance of the award, and hence continues to keep the central position of the tribunal in dispute resolution.
3. Section 34 – It prescribes restricted grounds on which a court can set aside an arbitral award. They are a party’s incapacity, invalid arbitration agreement, failure to provide proper notice or hearing, consideration of matters beyond the scope of arbitration, wrong composition of the tribunal, and violation of India’s public policy. Significantly, Section 34 contains no room for the modification or amendment of an award by courts.
4. Section 37 – In like manner, Section 37 allows appeals from some orders like those denying refusal to set aside an award under Section 34 but does not allow appellate courts to amend the award itself either. This deficiency led to a contentious issue before the Court regarding whether Indian courts have any power to amend arbitral awards. The Indian arbitration structure, based on the UNCITRAL Model Law on International Commercial Arbitration (1985, as amended in 2006), emphasizes minimal interference by the judiciary in arbitral procedures.

Brief Facts:

Gayatri Balasamy became Vice President (M&A Integration Strategy) at a technology company on April 27, 2006. Three months later, in July 2006, she quit, alleging sexual harassment by the CEO of the company. Her resignation was not acted upon, and about a year after that, she was served three termination notices. Balasamy complained against the CEO and another executive under criminal and state legislation concerning harassment. As a counter to it, the company filed cases against her, charging defamation and extortion.

The matter ultimately went to the Supreme Court, which sent it to arbitration. The arbitral tribunal ordered the company to pay Balasamy ₹2 crore. Not satisfied with some parts of the award, she filed for setting aside the award in the High Court, claiming that some of her claims had not been dealt with properly. A single judge modified the award on September 2, 2014, awarding her another ₹1.6 crore. On appeal, a Division Bench upheld her right but slashed the additional amount to ₹50,000 on August 8, 2019, finding the earlier amount to be high.

Balasamy then turned to the Supreme Court, raising the question of whether or not courts can amend arbitral awards. This matter finally led to a landmark Constitution Bench decision in 2025.

Issues involved:

1. Whether courts have power to modify an arbitral award?
2. Whether such power of modification is confined only to situations where the award is severable?
3. Whether the Section 34 power to set aside an award necessarily carries with it a narrower power to modify, and if so, its extent?
4. Whether or not the power of modification can be implied or read into the Section 34 power of setting aside?
5. Whether or not the decision in M. Hakeem (2021) is still good, given other cases where courts permitted or accepted modification of awards?

Arguments:

Appellant’s Arguments: 

In order to rationalize granting courts the power to modify arbitral awards under Section 34, Senior Advocate Arvind Dattar and other counsels who appeared in court pointed out the lacuna in judicial dicta on the topic. They mentioned cases where the Supreme Court had directly altered an award or sanctioned alterations, thus suggesting that precedent established in M. Hakeem deserves reconsideration.

It was further contended that the UNCITRAL Model Law drafted on the template of the ‘1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards’ foresees a broader paradigm of judicial supervision under which there can also be placed a restricted ability to alter awards. This comparative approach, they asserted, indicates a more expansive approach to court intervention in arbitral processes.

The counsels also appealed to the principle “omne majus continet in se minus” which means the greater includes the lesser, arguing that if courts already have power to revoke arbitral awards, they must by necessity have the narrower power to amend them, since amendment constitutes a less invasive sort of interference.

Respondent’s Arguments: 

In arguing before the Court, Solicitor General Tushar Mehta and the other counsels advocated that the Arbitration and Conciliation Act, 1996 was passed with the key aims of securing finality of arbitral awards and restricting judicial intervention. Bestowing upon courts the power to make changes in awards, they argued, would undermine these aims and be judicial encroachment by inserting into the statute a power which the legislature had not given.

It was also emphasized that the 1996 Act, based on the UNCITRAL Model Law, had deliberately excluded modification provisions, in contrast to the Arbitration Act of 1940, which had specifically made provision for it under Section 15. This exclusion, they said, reflected a conscious legislative choice. In aid, reliance was had on comparative legal regimes like Singapore, the United Kingdom, and the United States where powers of modification are statutorily provided for. The non-provision in Indian law, they submitted, reiterates the purpose of Parliament to limit judicial review to annulling or affirming arbitral awards only.

They also repudiated appeal to the maxim ‘omne majus continet in se minus’, upholding that the power of annulment and the power of modification are in totally different classes of power and cannot be compared.

Judgment

The Apex court examined both the ‘Arbitration Act of 1940’ and the ‘Act of 1996’ to comprehend the objective of the legislature and the degree to which courts can get involved under Section 34. Even though the 1996 Act does not clearly empower the courts to adjust arbitral awards, the Court opined that there is a limited, implied power. This restricted power enables courts to offer minimum supervision and avoid excessive hardship, delay, or unnecessary expense in arbitration proceedings.

The Court observed that this discretion is exercisable mainly when the award is severable, i.e., a defective part can be isolated from the rest of the award. In this context, courts can correct or strip only the defective part without interfering with the valid part of the award. The Court referred to Grindlays Bank Ltd case, underscoring that the tribunals possess inherent powers necessary for the dispensation of justice and that any procedural errors cannot be construed as re-hearing of the case.

The Court also drew upon international judgments, specifically CAI v. CAJ & CAK from Singapore, which held that courts are able to partially set aside awards and grant ancillary or consequential orders even without an express statutory provision. The Singapore Court of Appeal affirmed this approach, which the Supreme Court considered to be instructive.

In defining the scope of modification, the Court explained that under Section 34, modifications are limited to “computational, clerical, typographical, or other patent errors,” as long as correcting them does not entail reevaluating the merits. Modifications must be founded on errors patent from the record. If the error is not apparent, parties must seek redress either before the arbitral tribunal under Section 33 or under Section 34(4), which allows the tribunal to resume proceedings to remove the grounds for setting aside.

As far as interest is concerned, the Court separated pendente lite from post-award interest under Section 31(7). Post-award interest cannot be modified by courts, as doing so would amount to reopening the merits, which is not permitted. Section 31(7) (b) permits limited modification of post-award interest in exceptional circumstances since it addresses events after the award. The Court clarified that the exercise of the power should be done only where there are cogent reasons.

Lastly, the Court also referred to ‘Article 142 of the Constitution,’ observing that though it allows the Supreme Court to act to bring about absolute justice, it cannot be used to remold or re-write the merits of an arbitral award. This can only be used to decide procedural flaws or to put an end to litigation and not to circumvent the restrictions under the 1996 Act.

Ration Decidendi:

1. Courts have an implied, limited power to reform arbitral awards under Section 34 to correct evident and manifest errors.
2. Modification is permissible only if the award is severable so that only the erroneous part is amended or set aside without prejudicing the rest.
3. Section 34 does not allow re-examination of the merits; errors have to be evident on the record.
4. Courts can’t interfere with pendente lite interest, but post-award interest can be altered in special situations under Section 31(7) (b).
5. Article 142 cannot be employed to change the merits of an award and is confined to rectifying procedural faults or providing for finality.

Obitor Dicta:

1. International jurisprudence, including Singapore’s CAI v. CAJ & CAK, demonstrates that courts can have limited powers to alter awards even without express statutory terms.
2. Tribunals necessarily possess ancillary powers to deliver justice, as was brought out in Grindlays Bank Ltd. v. Central Government Industrial Tribunal.
3. Courts need to exercise restraint in altering awards, as over-intervention by the judiciary would deplete the aims of the 1996 Act, which is set on finality and minimal intervention.

Dissenting Opinion

Justice K.V. Viswanathan agreed courts would be able to rectify obvious clerical or typographical errors but disagreed forcefully with the majority’s expansive interpretation permitting modification or severance of arbitral awards. ‘Section 34 of the Arbitration Act,’ he said, leaves one with only two possibilities: annul the award or refer the award to the arbitral tribunal for fresh consideration. Any further power to vary or amend an award, he insisted, can only be so exercised by Parliament, not the courts.

He also warned that the majority’s approach could open the door to abuse, as disgruntled parties might be able to cloak behind-the-scenes objections in the guise of “manifest errors” in order to qualify for this narrow exception. This trend, he cautioned, endangers the doctrine of finality in arbitration and might make it harder to enforce amended awards under the New York Convention.

Conclusion

The Supreme Court of India declared that courts possess a restricted power to modify arbitral awards under Section 34 of the Arbitration and Conciliation Act, 1996, especially in the context of severable parts, clerical or arithmetic errors, post-award interest, or exceptional cases under Article 142. The 4:1 majority upheld that this power is needed to avert manifest injustice without compromising the finality of arbitration, while the dissent strongly opined that this power must emanate from legislation, not judicial imagination. The judgment is important as it meets judicial oversight with the efficiency and finality of arbitration, albeit at the cost of triggering debates over the requirement for more determinate legislative direction.