Draft. Prepared from official sources for Adv. Varun Agarwal's review before publication.

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The case in brief

Gayatri Balasamy v. M/s ISG Novasoft Technologies Ltd was decided on 30 April 2025 (2025 INSC 605) by a five-judge Constitution BenchConstitution BenchA bench of at least five Supreme Court judges, formed to decide substantial questions of law. Its rulings bind smaller benches. of the Supreme Court: Chief Justice Sanjiv Khanna, who wrote the majority judgment, with Justices B.R. Gavai, P.V. Sanjay Kumar, K.V. Viswanathan and Augustine George Masih. The decision was 4:1, with Justice Viswanathan dissenting.

The question

Under the Arbitration and Conciliation Act, 1996, a party unhappy with an award can ask a court to set it aside (Section 34), and appeal the court’s decision (Section 37). Courts had disagreed on whether that power also lets them modify an award, rather than only uphold it or set it aside. The question was referred to a larger bench: does the power exist, and if so, how far does it go?

What the Court held

The majority held that courts hearing a challenge under Sections 34 and 37 have a limited power to modify an award, in four situations only:

  1. Severing the invalid part. Where part of an award is invalid and can be clearly separated from the rest, the court can set aside that part and keep the remainder. It cannot do this where the parts are legally and practically inseparable.
  2. Correcting obvious errors. The court can correct clerical, computational or typographical errors that are apparent on the face of the record. This allows no review of the merits. Where the error is debatable, the court should not modify the award; the route is a correction by the tribunal itself, or sending the matter back to it.
  3. Post-award interest. In some circumstances the court can raise or reduce interest running after the award, but only for compelling and well-founded reasons.
  4. Article 142Article 142The constitutional power of the Supreme Court to pass any order needed to do complete justice in a case before it.. The Supreme Court itself may modify an award under its special constitutional power, with great care and caution, and never to rewrite the award on its merits.

The Court added that this power does not turn courts into appellate bodies over arbitrators, and that a court hearing an appeal under Section 37 has the same scope as one hearing a challenge under Section 34. It also rejected the argument that an award modified by a court could not be enforced abroad under the New York Convention.1 Several commentaries describe the judgment as overruling NHAI v. M. Hakeem (2021), in which a two-judge bench had held that courts cannot modify awards. The majority’s conclusions do not say so in terms.

The dissent

Justice Viswanathan held that a court hearing a Section 34 challenge cannot modify or vary an award unless a statute expressly allows it, that Article 142 cannot be used for this purpose, and that questions about interest should go back to the arbitrator.

What it means for businesses

  • A challenge can now end in a corrected award, not only in the award being upheld or set aside. In suitable cases this can save the cost and time of a fresh arbitration.
  • The window is narrow. A court still cannot re-decide the dispute or substitute its own view of the evidence. Grounds for challenging an award on its merits remain as limited as before.
  • Obvious errors are quicker to fix at the source. A party can ask the tribunal itself to correct computational, clerical or typographical errors under Section 33, within 30 days of receiving the award unless the parties have agreed a different period.

Sources

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This article is general information about the law as of the date above. It is not legal advice. Policies and schemes change; check the current position before you act.