Supreme Court of India holds that Indian Courts have power to modify arbitral awards

29 May 2025

In the recent decision of Gayatri Balasamy v M/S Isg Novasoft Technologies Limited, the Supreme Court of India in a 4:1 majority ruled that Indian Courts have limited powers under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 to modify arbitral awards in specific circumstances.

Background

The original dispute centred around allegations of sexual harassment and wrongful termination made by the Claimant, Gayatri Balasamy, against her former employer, ISG Novasoft Technologies Limited. Although the parties arrived at an out-of-Court settlement to arbitrate the dispute, Balasamy later filed various appeals against the arbitral award in the Indian Courts.

The question for decision

The decision arose in the context of Balasamy’s appeal to the Supreme Court of India. As part of those proceedings, the three-Judge Bench noticed that there were decisions which have either modified arbitral awards or have refused to do so based on differing interpretations of Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 (the “Act”). After observing that an authoritative pronouncement was required on this issue, a five-Judge Bench was asked to determine whether the Indian Courts are jurisdictionally empowered to modify an arbitral award, and if so, to what extent.

Decision

The five-Judge Bench delivered a 4:1 decision, with the majority affirming that the Indian Courts have limited powers to modify arbitral awards in specific circumstances. The majority decision was accompanied by a strong dissent, asserting that the Indian Courts are not entitled to modify any arbitral award.

Majority Opinion

The majority opinion, delivered by the Chief Justice of India (“CJI”) Sanjiv Khanna, concluded that the Indian Courts have a limited power to modify arbitral awards. In rendering the majority’s decision, CJI Khanna highlighted the following justifications for allowing limited judicial intervention:

CJI Khanna characterised modification as a “limited, nuanced power”;
While arbitration generally warrants minimal judicial interference, intervention is legitimate and necessary when it furthers the ends of justice;
Specifically, “to deny courts the authority to modify an award—particularly when such a denial would impose significant hardships, escalate costs, and lead to unnecessary delays—would defeat the raison d'être of arbitration”; and
If Courts are unable to modify awards, parties would be compelled to undergo an extra round of arbitration solely to “affirm a decision that could easily be arrived at by the court”.

Ultimately, CJI Khanna listed four situations in which modifications may be permitted:

The Courts may “apply the doctrine of severability and modify a portion of the award while retaining the rest” where the “valid” and “invalid” portions are not inter-dependent or intrinsically intertwined;
The Court reviewing an arbitral award has the inherent power to rectify computational, clerical, or typographical errors “even when not explicitly granted by the legislature”;
The Courts have the power to modify interest, especially post-award interest. Arbitral Tribunals, when determining post-award interest, “cannot foresee future issues that may arise”. As such, it is appropriate for the Court to modify post-award interest “if the facts and circumstances justify such a change”; and
Where an amendment is necessary pursuant to Article 142 of the Indian Constitution, i.e., modification is necessary for the Court to do complete justice in the matter before it.

Minority Opinion

Justice K.V. Viswanathan, in his dissenting opinion, argued that Indian courts do not have the power to modify arbitral awards under Sections 34 and 37 of the Act:

Justice Viswanathan clarified that modification is not a “lesser power” compared to the power to set aside. Rather, the two powers have different purposes. The power to modify cannot be “subsumed in the power to ‘set aside’”;
Arbitration has its origin in contract where “parties have stepped out of the ordinary judicial process and in that sense there is an ouster of the jurisdiction of the Court’s power to adjudicate”. Accordingly, the Courts cannot vary arbitral awards as it would be tantamount to exercising the power of merits review; and
The argument that the Courts’ inability to modify arbitral awards will result in hardship has no merit, as the law makers were fully conscious that setting aside an award would result in the dispute continuing to be thrown open at large. Further, parties would have consciously opted out of the normal judicial process to have their disputes resolved by a third party.

Subsequently, Justice Viswanathan made the following conclusions:

The Courts have the power to sever parts of an arbitral award in setting aside, but not for modification;
While the Courts do not have the power to modify arbitral awards, they can correct computational, clerical, or typographical errors based on the principle that no individual should suffer due to an error or oversight by the Court. This limited exception ensures that such corrections do not alter the original award, preserving its finality;
The Courts cannot modify interest under Section 34 – it may only record reasons in an order and remit the matter to the Tribunal for correction; and
The power to do complete justice under Article 142 should not be exercised if it conflicts with a fundamental principle of a statute; modifying an arbitral award would be undermine the core principles of the Act.

Implications

The decision sits uneasily with the pro-arbitration, minimal-curial-intervention stance that the international arbitration community has long championed. For instance, neither the International Arbitration Act 1994 (Singapore) nor the Arbitration Act 1996 (England) provides for any judicial power to vary an arbitral award. With this ruling, India risks being perceived as an outlier in the global arbitration community.

Ironically, corrections that are “permitted” by the decision — such as computational or typographical errors — are already accounted for under most institutional arbitration rules (e.g., SIAC Rules 2025 r 54.1, ICC Rules 2021 r 36(1)). Given the inherent risks of judicial intervention, Courts ought to defer to these built-in correction mechanisms and encourage institutional arbitration rather than recast arbitral awards themselves.

Given India’s history of judicial overreach in arbitration, the decision is a worrying sign of a renewed shift towards interventionism. By recognising a judicial power to modify arbitral awards, the majority decision has opened the door for post-award challenges, virtually inviting disappointed parties to seek a second bite at the cherry. The resulting satellite litigation may erode the finality that makes arbitration attractive and which India has otherwise sought to encourage through recent policy initiatives.

Content relating to India is based on our experience as international counsel representing clients in their business activities in India. We are not permitted to advise on the laws of India, and should such advice be required we would work alongside a domestic law firm.