Case Summary: Gayatri Balasamy v. M/s. ISG Novasoft Technologies Limited

Case Name: Gayatri Balasamy v. M/s. ISG Novasoft Technologies Limited
Citation: [2025] INSC 605
Court: Supreme Court of India
Bench: Constitution Bench led by Justice Sanjiv Khanna
Date of Judgment: 2025

I. Introduction

The central question in Gayatri Balasamy v. M/s. ISG Novasoft Technologies Limited[1] concerns the scope of judicial intervention in arbitral awards, specifically, whether courts possess the power to modify such awards under the Arbitration and Conciliation Act, 1996,[2] or whether their jurisdiction is confined to setting them aside. The matter was referred to a Constitution Bench following the Supreme Court’s ruling in Project Director, NHAI v. M. Hakeem,[3] which had generated conflicting lines of authority on this precise question.

II. Facts

The case originated from a series of civil appeals before the Supreme Court arising out of arbitration awards made under the Arbitration and Conciliation Act, 1996. In each appeal, one or more parties had challenged the arbitral award under Section 34 of the Act, which provides for the setting aside of arbitral awards, or had preferred an appeal under Section 37, which governs appeals against orders made under Section 34.

A conflict had emerged in the Supreme Court’s own jurisprudence: certain decisions had held that courts possess the power to modify arbitral awards, while others had held that the court’s jurisdiction under Section 34 is limited to setting aside the award in whole or in part. The divergence prompted a three-judge bench to refer the following questions to a Constitution Bench of five judges for authoritative resolution.

The central tension arose from three intersecting issues: first, the text of the Arbitration and Conciliation Act, 1996 does not expressly confer a power of modification; second, several courts had nonetheless modified awards in the interests of justice; and third, the existing case law was irreconcilably divided on whether such modification was permissible.

III. Issues for Determination

1. Whether courts exercising jurisdiction under Section 34 or Section 37 of the Arbitration and Conciliation Act, 1996 have the power to modify an arbitral award.
2. Whether the power to set aside an award under Section 34 encompasses, by implication, a lesser power to modify it.
3. Whether modification of an award is permissible only where the award is severable into distinct and separable parts.
4. Whether the earlier ruling in Project Director, NHAI v. M. Hakeem was correctly decided.

IV. Arguments

Arguments in Favour of Modification
Those supporting a modification power contended, first, that the greater power to set aside an award necessarily includes the lesser power to modify it. Second, courts had in practice modified awards to secure just outcomes, and this institutional practice should be recognized as a legitimate exercise of jurisdiction. Third, requiring parties to recommence arbitration proceedings merely to correct discrete errors in an award is wasteful of time and resources. Fourth, several foreign jurisdictions permit courts to modify arbitral awards, indicating that such a power is consistent with broader international arbitration practice. Fifth, courts should retain the ability to adjust ancillary components of an award, such as interest rates and compensation figures, without disturbing the award as a whole.

Arguments Against Modification
Those opposing modification argued, first, that Section 34 expressly provides only for the setting aside of an award and confers no power of modification. Second, the Arbitration and Conciliation Act, 1996 is based on the UNCITRAL Model Law,[4] which does not permit court modification of arbitral awards, and departing from this framework would undermine the statute’s international orientation. Third, modification effectively constitutes appellate review of the merits of the award, a power that courts do not possess under the Act. Fourth, judicial modification of awards may create difficulties at the stage of international enforcement, particularly under the New York Convention.[5]

V. Judgment

The Constitution Bench delivered a nuanced ruling that charted a middle course between the two competing positions.

Key Findings
The Court held that courts do not possess an unlimited or general power to modify arbitral awards. The jurisdiction under Section 34 is primarily a jurisdiction to set aside. However, the Court recognized that a limited power of modification exists, subject to strict conditions. Courts may partially set aside, or sever, an award where the valid and invalid portions are separable. The practical effect of such severance may, in appropriate cases, amount to a modification of the award. Where the valid and invalid parts of an award are inseparable, however, the entire award must be set aside. The Court reaffirmed that courts cannot re-appreciate evidence or conduct a merits review of the arbitral tribunal’s findings. Courts do not sit as appellate authorities over arbitral awards.

VI. Ratio Decidendi

The power under Section 34 of the Arbitration and Conciliation Act, 1996 is primarily a power to set aside arbitral awards. It includes a limited power of modification, but only where: (i) modification is incidental to a partial setting aside of the award; (ii) the award is severable, such that the valid and invalid portions can be clearly distinguished; and (iii) the exercise of the power does not involve any merits review or re-evaluation of the evidence before the tribunal.

VII. Critical Analysis

Gayatri Balasamy v. M/s. ISG Novasoft Technologies Limited is a significant development in Indian arbitration law. It attempts to resolve a persistent conflict in judicial thinking on a foundational question: can courts modify arbitral awards, or is their jurisdiction confined to cancellation?

The Constitution Bench adopts a middle-ground approach, declining to endorse the strict position taken in Project Director, NHAI v. M. Hakeem, which had held that courts have no power whatsoever to modify an arbitral award. In its place, the judgment introduces a doctrine of limited modification power, operating through the established principle of severability. At first glance, this approach is pragmatically sound. Arbitration is designed to be an efficient alternative to litigation, and compelling parties to recommence the entire arbitral process simply to correct a discrete or peripheral error in an award is inconsistent with that objective. By permitting courts to excise the invalid portion of an award while preserving its valid core, the judgment reduces unnecessary satellite litigation and better serves the interests of the parties.

However, this flexibility carries its own risks. Severability, while a well-recognized legal concept, is also inherently fact-specific and susceptible to divergent judicial assessment. What one court regards as a separable component, another may treat as integral to the award as a whole. Without more precise guidance on when parts of an award will be treated as severable, the judgment may produce inconsistent outcomes across courts over time — an ironic consequence for a ruling intended to bring doctrinal clarity.

From a precedential standpoint, the judgment is partly consolidating and partly a departure. It firmly reaffirms the position taken in McDermott International Inc. v. Burn Standard Co. Ltd.[6] and Ssangyong Engineering & Construction Co. Ltd. v. NHAI[7], that courts may not act as appellate authorities or re-evaluate the evidence before the tribunal. That constraint is preserved in full. At the same time, the judgment effectively narrows the scope of M. Hakeem without expressly overruling it. The result is a legal landscape that is less rigid than M. Hakeem suggested, but also less certain, a trade-off that practitioners will need to navigate carefully.

The judgment’s relationship with the international arbitration framework also warrants attention. The Arbitration and Conciliation Act, 1996 is modeled on the UNCITRAL Model Law, which does not contemplate court modification of arbitral awards. By recognizing even a limited modification power, the Supreme Court departs from the Model Law framework. While the Court endeavors to keep this departure narrow, the deviation may raise concerns in cross-border arbitration proceedings, particularly at the enforcement stage, where the integrity and finality of the original award are closely scrutinized.

The Court’s reliance on the principle that a greater power includes a lesser one is intellectually attractive but doctrinally contestable in this context. Setting aside and modifying an award are, in important respects, conceptually distinct acts: one annuls the award while the other alters it. Treating modification as a subset of setting aside may not be entirely persuasive from a strict statutory construction standpoint, given that the Act’s silence on modification appears deliberate rather than inadvertent.

Overall, Gayatri Balasamy reflects a shift in the Court’s orientation toward arbitration, away from a purely proceduralist conception and toward a more justice-oriented approach. The Court appears willing to intervene in limited circumstances to avoid manifestly unfair outcomes, even where this requires reading an implied power into the statutory scheme. This signals a modestly more active judicial role in arbitration, one that is carefully restrained in principle but may prove expansive in practice depending on how lower courts apply the severability doctrine.

VIII. Conclusion

The decision in Gayatri Balasamy v. M/s. ISG Novasoft Technologies Limited is fundamentally concerned with striking a balance between two competing imperatives: preserving the finality of arbitral awards and ensuring that parties are not bound by outcomes that are, in discrete and separable respects, legally unsustainable. In addressing real-world inefficiencies, particularly the burden of restarting arbitration proceedings to correct errors of limited scope, the judgment makes a practical and contextually sensitive contribution to Indian arbitration jurisprudence.

Nevertheless, the decision introduces a degree of uncertainty that the law did not previously contain. The concept of severability, left without exhaustive definition, is likely to generate its own body of litigation as courts and parties dispute whether a given award is or is not severable. The significance of the judgment will ultimately be determined by how lower courts apply the “limited power of modification.” A disciplined and consistent application could strengthen the arbitral framework by reducing systemic waste without compromising finality. A more expansive or variable application, however, risks eroding the predictability and efficiency that arbitration is designed to deliver, producing the opposite of what the Constitution Bench intended.

References

[1] Gayatri Balasamy v. M/s. ISG Novasoft Technologies Limited, [2025] INSC 605.
[2] Arbitration and Conciliation Act, No. 26 of 1996, INDIA CODE (1996).
[3] Project Director, NHAI v. M. Hakeem, (2021) 9 SCC 1.
[4] UNCITRAL Model Law on International Commercial Arbitration, UN Doc. A/40/17 (1985), as amended (2006).
[5] Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), June 10, 1958, 330 U.N.T.S. 38.
[6] McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181.
[7] Ssangyong Engineering & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131.