The question of whether Indian courts possess the jurisdiction to modify an arbitral award has long triggered conflicting judicial views. In a landmark ruling delivered on April 30, 2025, a Constitution Bench of the Supreme Court resolved this contentious issue in Gayatri Balasamy v. M/s ISG Novasoft Technologies Limited (Civil Appeal Nos. of 2025 arising out of SLP (C) Nos. 15336-15337 of 2021).
The Referral and Context
The core controversy originated from divergent opinions across two-judge and three-judge benches of the Court. While rulings like Project Director, NHAI v. M. Hakeem held that Section 34 of the Arbitration and Conciliation Act, 1996 permits courts only to set aside an award without modifying it, other decisions had varied interest rates or modified components of awards. The reference asked whether the power to set aside includes the authority to modify, whether an award can be partially varied, and how far judicial intervention extends.
The Majority Verdict: A Limited Power of Modification
The majority view affirmed that Indian courts exercise a strictly confined supervisory jurisdiction and do not sit as courts of regular appeal on facts or contract interpretations. However, the Court recognized that an absolute prohibition against any alteration would defeat the efficiency of alternative dispute resolution by sending parties through repeated, costly arbitration rounds merely to adjust obvious defects.
Balancing party autonomy with practical dispute resolution, the Court held that while courts cannot rewrite an award on the merits, a limited power of modification is inherent within the framework of Section 34 and Section 37.
The Four Circumstances Permitting Modification
According to the authoritative conclusion of the majority opinion, courts may exercise this limited power under four specific conditions:
Severability of Awards: When the valid and invalid parts of an award can be separated cleanly in terms of liability and quantum, courts can sever and set aside the offending portion while preserving the valid determination. The doctrine that the greater power contains the lesser applies squarely here, provided the distinct portions are not inextricably intertwined.
Correction of Manifest Errors: Courts can correct typographical, computational, or clerical errors that are evident on the face of the record without requiring an inquiry into the merits of the dispute.
Modification of Post-Award Interest: Under Section 31(7)(b), the Court noted that post-award interest is inherently future-oriented. Because tribunals cannot anticipate future events or post-award delays, courts have the power to intervene, decrease, or increase post-award interest rates to align with statutory benchmarks where the record justifies it.
Extraordinary Powers Under Article 142: The Supreme Court may invoke its constitutional power to do complete justice to end protracted litigation, provided this jurisdiction is exercised with great care and never used to substitute or rewrite the award on the merits.
Procedural Clarifications on Remand
The Court also resolved significant procedural hurdles concerning Section 34(4). It overruled the strict requirement laid down in Kinnari Mullick v. Ghanshyam Das Damani, holding that an application to remit an award to the tribunal does not need to be in writing and can be made orally. Furthermore, appellate courts acting under Section 37 also retain the power to remit curable defects back to the arbitral tribunal.
The judgment establishes clarity for commercial litigation in India by confirming that courts cannot substitute arbitral findings, but they do retain surgical authority to sever bad parts and adjust errors to ensure finality.