Judicial Modification Of Arbitral Awards: A Re-Reading Of Section 34 Post Gayatri Balasamy Judgment

By Manav Aggarwal (Student of Chanakya National Law University, Patna)

Abstract

The article discusses an important legal issue that forms an integral part of the recently passed judgement of Gayatri Balasamy vs ISG Novasoft Technologies Limited[1]. The most important question surrounding the case was whether the court has the power to modify an arbitral award (Hereinafter referred as “AA”) given by an arbitration tribunal under sec 34 & sec 37 of the Arbitration and Conciliation Act, 1996 (Hereinafter referred to as “A & C Act, 1996” or “1996 Act”). Does the power to modify an AA come within the ambit of the power of partially setting aside of an AA? The following judgement passed on 30th April 2025 is a landmark judgement discussing the jurisprudence of the Indian courts’ power of modification of AA under sec 34 and sec 37 of the 1996 act. This judgment has brought in a lot of discussions and debates in the Indian Legal Paradigm. The objective of this article is to let the readers know about the significance of the following judgment, along with its impact on the field of arbitration. Further, the article will also shed light on the key changes brought by this judgment on the current Indian laws, along with a comparative analysis with other jurisdictions like the UK, Singapore, and Australia.

Key Words: Modification, Setting Aside, Inherent power, Arbitration & Conciliation Act, 1996, Section 34, etc.

1. Introduction

While defining arbitration in simple terms, arbitration can be termed as an alternative method of solving the dispute without the need to refer to court, just like parties do in the simple litigation process. An arbitration proceeding is carried out following the mandates of the 1996 act. As per the act, as mentioned above, “arbitration means any arbitration, whether or not administered by a permanent arbitral institution”.[2] Arbitration is generally referred to in disputes related to businesses, partnerships, and investment transactions where the parties submit their disputes for resolution to a neutral third-party arbitrator rather than to the courts.[3] It saves time and costs for the parties while providing a chance for an amicable solution. Apart from the above-mentioned advantages, there are other advantages as well that the parties enjoy while opting for arbitration in disputes. One of them is that arbitrations are efficient and flexible, i.e, it is easier to schedule and provides a quicker resolution as compared to traditional courts, where it can even take several years to procure a trial date because of thousands of existing backlogged cases. While the arbitration process is less complicated, providing simple rules of evidence and procedure, it also provides you privacy as arbitration is a process of private resolution, and the information used in the resolution is kept confidential.

The A & C Act, 1996 was made after several modifications from the A & C Act, 1940. One such major modification was the courts’ modification powers when it comes to the AA. When we look back at the 1940 Act, courts had extensive supervisory powers over arbitral proceedings and AA. For the next 56 years, there had been a lot of discussions and debates on this provision because the following power of the court resulted in frequent judicial intervention in revisiting AA, making it resemble traditional litigation more.

The court’s permission and approval were required at many stages of the arbitration.[4] Courts also possessed the power to remit, modify, and correct AA in limited circumstances.[5] Certain provisions, like Section 30, providing grounds for setting aside an AA, and Section 33, providing grounds for challenging the AA, were widely interpreted.[6] This led to the process of Arbitration being costly, slow, and inefficient, while defeating the actual purpose of arbitration being a faster alternative dispute resolution. The 176^th Report of the Law Commission of India also criticized the 1940 Act for having provisions providing excessive judicial intervention.[7]

The frustration of Supreme Court on the 1940 Act is visible in the words of D.A. Desai J. in Guru Nanak Foundation v Rattan Singh[8]: “Interminable, time consuming, complex and expensive Court procedures impelled jurists to search for an alternative Forum, less formal, more effective and speedy for resolution of disputes, avoiding procedural claptrap and this led them to Arbitration Act, 1940. However, the way in which the proceedings under the Act are conducted and without exception challenged in Courts, has made Lawyers laugh and legal philosophers weep.”

To curb these defects of the 1940 Act, it was superseded by the 1996 Act. The 1996 Act was based on the UNCITRAL model law.[9] It made changes to several provisions, transforming them to minimize the court’s intervention in the arbitral process and awards while promoting autonomy and finality in the arbitral tribunal decisions. The main purpose of these amendments was to restore confidence in the arbitration process and reduce the long-standing enormous number of cases pending in the courts. Apart from the abovementioned purposes, it also served the purpose to align Indian laws with universally accepted principles and international best practices.

Section 5 of the 1996 Act expressly states a limitation on judicial intervention by stating that “Notwithstanding anything contained in any other law… no judicial authority shall intervene except where so provided in this Part.”[10] Under Section 34 of 1996 Act, courts proceeded with the premise that they do not exercise any kind of appellate or revisional jurisdiction. The court’s powers include either setting aside AA in entirety or remitting matters to the arbitrator.[11]

While Sec 37 of the 1996 Act provides for a limited appeal mechanism,[12] Sec 16 of the said act empowers the arbitral tribunal, by which the tribunal can rule on its jurisdiction following the kompetenz-kompetenz principle.[13]

The following changes made to the 1996 Act were a cornerstone in the development of arbitration as a methord of dispute mechanism in the Indian Legal landscape. The act was followed by several judgments by the apex court that reaffirm the purpose of the act. The SC in McDermottInternational Inc. v. Burn Standard Co. Ltd.[14] held – “The 1996 Act makes a significant departure from the 1940 Act… the court cannot correct the errors of the arbitrators.” Under Sec 34 of the 1996 Act, courts only had the power to set aside an AA and not to correct or modify it. The SC in ONGC Ltd. v. Saw Pipes Ltd[15], while expanding the scope of “public policy” under Sec 34, reaffirmed the court’s limited interference in arbitral proceedings compared to the 1940 Act.

The jurisprudential puzzle discussed in this article is whether the courts can modify the AA or set it aside as per Sec 34 of the 1996 Act. Sec 34(1) of the 1996 Act specifies that the resort available to a Court against an AA may be made only via an application for setting aside such AA. Sec 34(2)(a) specifies five conditions under which a party can submit an application for setting aside of an AA in the court, and Sec 34(2)(b) specifies two conditions under which the court can suo-moto set aside the AA. [16] There is no mention regarding the modification of an AA in Sec 34.

In the landmark case of Project Director, NHAI v. M. Hakeem (2021), the court held: “In an application taken out under the Act, the Court can set aside the AA leaving the parties free to begin the arbitration again if it is desired. Under Section 34 of the Arbitration Act, the Court may either dismiss the objections filed, and uphold the AA, or set aside the AA if the grounds contained in sub-sections (2) and (2A) are made out. There is no power to modify an AA.”[17]  The court can’t even modify the rate of interest post-AA. [18] Any attempt to “modify an AA” under Sec 34 would be inferred as “crossing the Lakshman Rekha”.[19]

Even after the existence of Section 34, courts delivered conflicting judgments on whether modification of an AA was permissible. There was still a lot of uncertainty in the law because some courts modified AA while other courts held it impermissible.

In the case of Vedanta Ltd. v. Shenzhen Shandong Nuclear Power Construction Co. Ltd[20], the Court modified the post-award interest rate by taking different rates for INR and Euro-denominated components into consideration. It was held that even though Section 34 doesn’t expressly confer this power of modification, it was justified to reflect the currency differences.

In yet another case of Oriental Structural Engineers Pvt. Ltd. v. State of Kerala[21], the arbitral tribunal granted an interest rate of 18%, although the court later modified it by reducing it to 8% p.a., considering equity and economic rationale.

In the case of Shakti Nath v. Alpha Tiger Cyprus Investment No.3 Ltd[22], the Court modified parts of the AA by making corrections in specific findings while adjusting the awarded compensation along with the contractual stipulation

In these conflicting judgements, the court made use of Article 142 of the constitution – “The Supreme Court in the exercise of its jurisdiction may pass such decree or make such order as is necessary for doing complete justice in any cause or matter pending before it, and any decree so passed or order so made shall be enforceable throughout the territory of India in such manner as may be prescribed by under any law made by Parliament and, until provision in that behalf is so made, in such manner as the President may by order prescribe”[23] This provision allows the Supreme Court to take action beyond its usual powers to ensure a just outcome. 

These inconsistencies in the pronouncement of conflicting judgments led to the case of Gayatri Balasamy v. ISG Novasoft (2025), where the constitutional bench had the mandate of finally deciding whether the court possesses modification powers under sec 34 and sec 37 of the 1996 Act. If yes, then to what extent?

The following article aims to critically examine the laws related to setting aside and modification of AA under Article 34 of the A & C Act, 1996 and discuss the role of these changes in the context of Indian arbitration jurisprudence in light of the recent clarification by the SC in Gayatri Balasamy v. ISG Novasoft[24]. Along with this, the following article will also provide a comparative study of Arbitration laws with other jurisdictions like the UK, Singapore, and Australia.

• The Legal Framework

Sec 34 of the 1996 act deals with the application for setting aside an AA.[25] It provides the grounds on which an AA rendered under Section 31 can be challenged in the court.

An AA can be set aside under the following conditions-

1. When the party is incapable
2. When the agreement of arbitration is invalid
3. When proper notice is not provided the party

1.  When the subject matter is beyond the arbitration’s scope
2. When the arbitral tribunal’s composition is not as per to the contract

Apart from these grounds, the court can also opt to set aside the AA if it is satisfied that:

1. The subject matter of the dispute is incapable of settlement by the means of arbitration under the law in force for the time being
2. The AA does not align with the public policy of India[26]

After the 2015 amendment, AA other than those from international commercial arbitration can also be set aside by the court on the grounds of patent illegality.[27]

The court possesses the discretion not to entertain an application for setting aside the AA after 3 months from the date when the party filling the application had received the AA. But in case the court is convinced that the applicant had sufficient or reasonable cause that prevented him from applying for setting aside the AA, it may allow the applicant to apply within an extended period of 30 days. After that period, the time limit expires.[28]

After receiving the application, the court may provide a chance to the arbitral tribunal to remove the grounds which can give rise to setting aside the AA.[29] The court has a mandate to dispose the application within a year from the date on which the notice was provided to the other party.[30]

Sec 37 provides for specific circumstances for appeals, such as when the court sets aside or refuses to set aside an AA under the provisions of Sec 37.  The provision bars a second appeal but doesn’t nullify the right of appeal to the apex court.[31]

• “Setting Aside” vs. “Modification”

It is imperative to know the difference between the two terms, which are the major bone of contention in this debate. The following distinction lies at the heart of the courts’ judicial interpretation of the 1996 Act. While setting aside an AA results in the entire nullification of the AA, erasing its legal effect, modification refers to only a substantive revision of the AA with the intention of correcting its outcome rather than nullifying the AA in its entirety.

The above distinction was highlighted in the 2006 case of McDermott International Inc. vs Burn Standard Co. Ltd[32], where the Supreme Court held that:

“The 1996 Act provides for the supervisory role of courts, for the review of the AA only to ensure fairness. The court cannot correct errors of the arbitrators. It can only quash the AA, leaving the parties free to begin the arbitration again if it is desired.”

Despite the provision and several interpretations by various High Courts, when it comes to practice, several courts, including the Supreme Court, have engaged in interventions consisting of modification of the AA, particularly where the subject matter of the modified clause is related to the date of enforcement, interest charged, or computational errors. In the landmark Vedanta case, the Court had modified the post-award interest rate for different currency denominations.[33]

The 2025 Constitutional Bench in the case of Gayatri Balasamy had highlighted this tension and therefore held in their judgment that the court have a limited inherent power of modification of an AA, particularly when it finds that the issue is severable and there is no need of either reappreciation of any evidence or interference with the merits of the AA.[34]

• Comparison with the 1940 Act and International Arbitration Models

Comparing the existing framework with that of the 1940 Act, the latter act provided the courts with expansive power to modify, supervise, and even dictate the terms of the arbitration process. This was widely criticized as it defeats the original purpose of an alternative dispute resolution being free from court intervention and procedurally less burdensome. The abovementioned criticisms were famously highlighted in Guru Nanak Foundation v. Rattan Singh & Sons[35]:

“The way in which the proceedings under the Arbitration Act are conducted and without exception challenged in courts, has made lawyers laugh and legal philosophers weep.”

The 1996 Act, however, followed the UNCITRAL Model Law on International Commercial Arbitration (1985) [Hereinafter referred to as “Model Law”], which had prescribed minimal intervention and taking part of the courts. It also restricts modification of the AA by the courts. [36]

Looking at some of the other jurisdictions, we can find some statutory exceptions:

Singapore:  Sec 48(9) of the Singapore Arbitration Act, 2001[37] allows the court to vary the AA of domestic arbitration. In International commercial arbitration, courts are empowered to remit AA but can’t modify them directly.

United Kingdom:  As per Sec 67(3) of the UK Arbitration Act, 1996 [Hereinafter referred as “UK AA”],[38] the courts are empowered to “vary” an AA, but they only have a limited power which is applicable in special circumstances.

Australia: It allows for the correction of the AA in the case of domestic arbitration.

The landmark case of Gayatri Balasamy has now accommodated a limited power to courts to modify the AA when it seems justified, but it remains restrictive regarding express legislative authority.

• Conflicting Jurisprudence

It has been one of the most contentious international debates – whether Indian courts can modify an AA under Sec 34 of the 1996 act, or not. There had been different benches of the apex court as well as high courts that have adopted conflicting opinions, where in some cases the courts emphasized on the plain reading of the section while the other courts showed instances of the modification of the AA. This led to doctrinal uncertainty and inconsistency, which finally led to the Gayatri Balasamy Case.

• Restrictive View: Courts can’t modify the Award under Section 34

The following cases adopted a strict textual interpretation of the provisions permitting only the setting aside of an AA based on narrow statutory grounds restricting the scope of modification:

a. In this landmark case of Project Director, NHAI v. M. Hakeem[39], the Supreme Court bench unanimously held that Section 34 does not authorize modification of AA. The Court stated –“If one goes by the provisions of Section 34, it is clear that a court can only set aside an AA. There is no power to modify an AA.”The Court also held that, unlike the 1940 Act, which gave scope for modification, the 1996 Act intentionally limits judicial intervention following the UNCITRAL Model Law.

b. The Court in McDermott International Inc. v. Burn Standard Co. Ltd.[40],held that – “The court cannot correct errors of the arbitrators. It can only quash the AA, leaving the parties free to begin the arbitration again.” The Court in the following case did reduce the interest rate, but it has used Article 142 of the Constitution rather than Sec 34 of the1996 Act.

c. The case of Larsen Air Conditioning v. Union of India followed Project Director, NHAI v. M. Hakeem and highlighted that reduction of the interest rates or compensation by the courts under was not permissible under Sec 34 of 1996 Act, unless it falls within the ambit of either “patent illegality” or procedural defect.[41]

• Expansive View: Courts May Modify in Limited Situations

Contrary to the restrictive approach of interpretation, several judgments have taken an equity-based and pragmatic approach, avoiding strict interpretation to do complete justice. We are most likely to find modification of AA in cases of dates of applicability, interest, etc.

a. In the famous case of Vedanta Ltd. v. Shenzhen Shandong Nuclear Power Construction Co. Ltd[42], the arbitral tribunal had awarded post-award interest uniformly on both INR and Euro amounts. The Supreme Court has set the interest on the Euro component to LIBOR rate + 3%, while retaining 9% for the INR part. The important point to note in this decision was that it didn’t involve the use of Article 142, verifying courts’ limited power of modification under the 1996 Act.

b. The Court in the case of Oriental Structural Engineers Pvt. Ltd. v. State of Kerala[43] reduced the interest rate of the awarded amount from 18% to 8% per annum. The court applied the principles from the Secretary, Irrigation Department, Govt. of Orissa, Secretary & Ors. vs G.C. Royand Sec 31(7) of the A & C Act 1996, stating that exorbitant interest was opposed to statutory reasonableness and rules of equity.

c. In the case of Tata Hydro-Electric Power Supply Co. Ltd. v. Union of India[44], the Court had changed the effective date of the application of the AA, highlighting the judicial intention to refine or adjust the AA to reflect the fairness of the contract.

• Acknowledging The Judicial Conflict: Gayatri Balasamy Case

The variation in the various judgments highlighted above, showing restrictive and expansive incidents of precedent, highlights the dire need for clarification regarding the exact interpretation of Section 34. The 3-Judge bench in the Gayatri Balasamy case referred the matter to a constitutional bench to clarify the following questions:

1. Whether Sec 34 of the 1996 Act includes the powers of modification of an AA?
2. Whether courts can partially modify severable parts of an AA?
3. If the court can modify the AA, then to what extent?

The court, in the following judgment by the 5-judge constitutional bench, clarified that while Section 34 does not expressly come up with modification powers, the courts still possess a limited, inherent power of modification in the following cases:

• Where the offending part of the AA is severable.
• Where the modification is mechanical in nature (regarding interest rate or date of implementation).
• When the AA is causing unnecessary delay and cost.[45]

This decision proved to be a landmark decision in the area of arbitration, settling a long-awaited dispute while reconciling the conflicting areas of authority on one hand, and reaffirming judicial flexibility along the boundaries of law on the other hand.

• The Gayatri Balasamy Judgment – A Jurisprudential Shift

The Supreme Court, while pronouncing the judgment in the case of Gayatri Balasamy v. M/S ISG Novasoft Technologies Ltd[46], brought a transformative moment in the area of Indian Arbitration Jurisprudence. It not only ended the long-standing debate on the interpretation of Sec 34 of the 1996 act, but also brought clarity and balance to the arbitration framework in the Indian Legal Scenario. The decision resolved the issue whether Sec 34 of the 1996 act provides the power of modification of AA to the courts– a question that needed an answer after the conflicting Vedanta Ltd. & M. Hakeem judgements.

The legal controversy in the following case was brought up when the AA of Rs 2 crore offered to Gayatri Balasamy was challenged by her on the ground that the tribunal failed to consider several of her issues. A single-judge bench of the Madras High Court modified the AA and added a compensation of Rs 1.6 crore along with the Rs 2 crore awarded by the tribunal. The division bench of the Madras High Court modified the AA yet again by changing the additional compensation amount of Rs 1.6 crore to Rs 50,000 on the ground that the damages are legally unsustainable and considered the previous amount “excessive and onerous”.

The matter was finally referred to the constitutional bench after recognising and acknowledging the conflict between the different views and earlier precedents of Vedanta Ltd[47], M. Hakeem[48], etc. The main question before the court was whether Sec 34 of the 1996 Act permits or provides any power to the courts to modify an AA to any extent?

The Supreme Court in its landmark decision partly overrules M. Hakeem and held that Court do have the power of limited modification of AA under the provision of Sec 34 of the 1996 Act – especially when the defect is – self-evident, severable and can be remediable without the need of appreciating evidences.

The court, while discussing the severability of AA, highlighted – “if the decisions on matters submitted to arbitration can be separated from those not submitted, only that part of the AA which contains decisions on matters non-submitted may be set aside”. It will serve two purposes. While it aligns with Sec 16 of the 1996 Act, affirming the principle of kompetenz-kompetenz on one hand, it will enable the court to sever and preserve the valid portions of the AA while at the same time setting aside the invalid portions.[49] The court, at the same time, also highlighted that severability might not be feasible when both the valid and the invalid parts are not legally and practically severable, particularly related to liability and quantum.[50]

The court also reaffirms the idea that the greater power of setting aside includes the lesser power of modification.[51] But the powers of modification resting with the court are limited in nature. The court stands in favour of the legitimacy and necessity of Judicial intervention when it meets the ends of justice, including the disputes resolution.[52]

The Court emphasized that where modification would avoid unnecessary remand and going into extra round of arbitration, it will be under the jurisdiction of the court to opt for the modification.  The court also possess the power to provide a different relief if it does not contradict with essence or language of Sec 34. Silence in the 1996 act regarding the modification should not be read as a complete prohibition.[53]

The court also reaffirmed that while reviewing an AA under Sec 34, it possesses the power to correct clerical, computational, or typographical errors, including other manifest errors. Merit-based evaluation of evidence is not necessary in such modification.[54] The court may also provide interim relief if the circumstances arise as such.[55]

If any uncertainty arises as to whether to modify the AA or to remit the same to the tribunal, the court should exercise the remedial power it possess and remand the AA to the  tribunal under Sec 34(4). The court said, “Courts must act with certainty when modifying an AA – like a sculptor working with a chisel, needing precision and exactitude”.[56]

 But this remitting power of the court is a “may” provision, and courts enjoy a discretion in it. A key consideration while exercising the power is the determination of proportionality when it comes to comparing the harm caused by the defect and the way available to remedy it. “If the AA suffers from serious acts of omission, commission, substantial injustice, or patent illegality, the same may not be remedied through an order of remand.”[57]

The courts can’t modify the quantum of compensation.[58] Further, the Court noted that modification is also permissible in cases of post-award interests. It can both increase or decrease the interest rate depending on the prevailing situation and anticipating future events. [59]

This judgment completely modified the framework for post-award judicial review. Courts now possess the following powers-

• It can correct legal errors that are severable and apparent without the need to set aside the AA.
• It can modify interest components, date of enforceability, and illegal providing of damages.
• It can avoid remanding cases back to the arbitral tribunal to reduce delay and litigation costs.

This decision will enable arbitrators to structure AA with clearly separable claims while allowing litigants to frame challenges related to Section 34 more precisely, focusing on the portions of AA rather than looking for setting aside.

The bench, while pronouncing its landmark judgment, considered 2 things. It maintained a balance between equitable and pragmatic views while also noting that it must not defeat the express & implied legislative intent of the A & C Act 1996. This court’s modification approach aligns with the broader object and purpose of the 1996 Act — ensuring minimal intervention while preserving arbitral efficiency.[60]

• Comparative Analysis In Other Jurisdictions

While the constitutional bench in the case of Gayatri Balasamy acknowledged the limited inherent power of the courts to modify the AA under Sec 34 of the 1996 Act, balancing the judicial efficiency and autonomy of the arbitral tribunal,[61] the same is not the case in the legal system of other countries. In this chapter, we will compare the question of modification, remission, and correction of AA in respect of other jurisdictions, particularly those following UNCITRAL Model Law norms.

1. United Kingdom

Under Sec 68 of the UK Arbitration Act, 1996, the court may remit the AA for reconsideration in cases of “serious irregularity” and it may set aside or declare the AA ineffective.[62] The court enjoys a limited supervisory role. The rules regarding modification or variation are narrowly construed and can only be exercised where justice so demands.[63]

Sec 69 provides for appeal on the point of law, but it can only be exercised when all the parties agrees or when the court permits.[64] The UK arbitration structure affirms minimal court intervention, where courts usually avoid substantive modification of AA.

• Singapore

Under Sec 19B of the Singapore International Arbitration Act 1994, an AA provided by the arbitral tribunal stands final and binding on the parties. However, the court may remit an AA to the tribunal “to resume the arbitral proceedings or to take such other action as in the arbitral tribunal’s opinion will eliminate the grounds for setting aside”.[65] The court can also set aside the AA in cases of fraud or corruption, or where rules of natural justice have been breached, which has prejudiced a party’s rights.[66] There is no express provision regarding the modification of the AA by the courts.

• United States

Sec 11 of the United States Federal Arbitration Act expressly provides judicial modification of the AA in the following cases:

• Where the miscalculation of figures or a material mistake is prima facie evident related to the description of a person, thing, or property referred to in the AA.
• Where an AA is submitted on a matter not submitted to the arbitration, not affecting the merits.
• Where there exists an imperfect AA, not affecting the merits.[67]

Hence, the US recognizes limited statutory grounds for modification, while courts remain obsequious to the arbitral tribunal’s authority. Even the AAA-ICDR rules provide for the correction of AA, but it must be made by the arbitrator directly.[68]

• Australia

There is no provision expressly provided for modification of the AA in the International Arbitration Act, 1974. Courts may remit the matters back to the tribunal in cases of a lack of procedural fairness.[69] The process of judicial correction is not substantive but primarily procedural.

• UNCITRAL Model Law

The Model Law adopted by countries like India, Singapore, and Australia empowers the courts under Sec 34 to set aside the AA in cases of incapacity, public policy, and procedural irregularity.[70] But it doesn’t provide the modification powers. While Section 33 permits the correction of AA but the correction must be initiated by the tribunal and not by the court.

The above comparisons signify India’s standing post-Gayatri Balasamy judgment among the jurisdictions based on the UNCITRAL Model Law that restricts the court’s power of modification of AA. These comparisons have given us the following takeaways-

1. Judicial modification of AA  is rare, where most countries prefer remission over modification.
2. India needs legislative guidance defining the limits of the permissible modification. For the following codification, it can draw inspiration from Sec 11 of the US Federal Arbitration Act or the remission principles of UK Law.
3. Implications and Critique         

The verdict in Gayatri Balasamy case[71] has been a landmark judgment in the Indian Arbitration arena, generating serious doctrinal and practical ripple effects. The judgment clarified the court’s limited modification power in case of AA, but at the same time raises concerns related to autonomy of parties, judicial boundaries, and legislative interpretation. The following chapter explores the systematic implications of the judgment while weighing the jurisprudential innovation.

• Practical Impact on the Indian Arbitration Ecosystem

The court’s recognition of modification power provides opportunities for a more efficient and robust dispute resolution system. The court may do away with the option of remitting the AA or setting them aside in cases where the defect in the AA is minor, procedural, and severable. For example, Correction of interest rates, clerical or typographical errors. [72]

In this way, litigation time as well as cost can be drastically reduced, especially in cases of high-stakes commercial arbitration where small mistakes or errors can waste a lot of time in long cycles of arbitrations. The practitioners of arbitration will now have to ensure severability and clarity in drafting the AA to facilitate judicial review if necessary. 

However, inconsistent application of this doctrine by the Courts is one of the major risks potentially leading to uncertainty related to the AA’s enforcement or forum shopping. With the absence of procedural guidelines, this power of modification has the power of being used unevenly, which can undermine the objective of certainty in the arbitration process.[73]

• Concerns Regarding Judicial Overreach

The arbitration process ensures 2 things: finality of AA & party autonomy in dispute resolution. With judicial interference, however limited, people’s trust and confidence in the arbitration process will weaken if courts are supposed to second-guess the AA. The same worry is amplified when the court decides to favour purposive interpretation over a literal one.[74] Section 34 does not provide for modification – already highlighted in cases like McDermott International Inc., M. Hakeem, where the court signified that it has a supervisory role, not corrective.[75]

This judgment will incentivise future litigants to seek broader modification. It will likely risk a slow transformation of Section 34 into a quasi-appellate review mechanism while defeating the legislative intent and the UNCITRAL Model Law, which India mostly follows.[76]

• Reconciling Party Autonomy with Judicial Supervision

Even after all these risks, Gayatri Balasamy’s judgment strikes a weighed balance between the protection of party autonomy while preserving the integrity of arbitration. The power of modification may be used in cases of severability, legal or clerical error, and disproportionate or futile remand.[77]

This structure opts for a system of functional reconciliation, where the courts, instead of having the power to re-evaluate the substance of arbitral reasoning, have been given the power to correct the defects falling outside the arbitrator’s jurisdiction or the ones arising from manifest errors. This kind of fine-tuned intervention protects the legitimacy of the arbitration process while proving justice in cases when process defects subvert enforceability.

To ascertain this much-needed balance, the law must impose clear bounds regarding the exercise of modification powers. This could include written reasons certifying:

• There was no reappreciation of evidence.
• The modification done is purely mechanical or legal.
• The defect, which is remedied, does not impair the essence of the AA.

• Doctrinal Soundness and Legislative Silence

The Jurisprudential basis of Gayatri Balasamy Judgment remained as its most contentious element. On one hand, the court accepts that the word “modify” is absent in Section 34, while on the other hand, it derives the medication power via functional and purposive interpretation.[78] This approach questions the limits of judicial creativity and also points towards judicial legislation.

In the rulings of M. Hakem and McDormott,[79]the court highlighted that judicial modification results in an impermissible addition to the statute and hence violates the principle of casus omissus pro omisso habendus est.[80] But on the other side, the exponents of purposive interpretation signify that statutory object and remedial justice can uphold these innovations when executed cautiously.[81]

The major point of contention here is the absence of legislative guidance. The Parliament had several opportunities in the past, particularly in 2015 and 2019, to bring amendments and clarify the scope of Section 34, but it didn’t opt to introduce a provision akin to Sec 11 of the U.S. FAA, which explicitly defines grounds of modification. [82] The reluctance to insert such a provision created a legal vacuum that the judiciary has now desired to fill.

The judgment provided an arguably practical and fair solution, but it also underlines the need for legislative intervention, which can be brought up by a short and clarificatory amendment to Section 34, highlighting the grounds of judicial modification in the act. This would act as a 3-fold solution: restoring clarity, safeguarding arbitral autonomy, and guiding lower courts regarding the application of the new doctrine.

• Conclusion and Recommendations

The constitutional bench in the Gayatri Balasamy judgment has decisively clarified the long-standing dispute in the Indian arbitration scenario by recognising the courts’ power of limited and inherent modification of AA under Sec 34 of the 1996 act. The court also made a refined but significant shift from cases of M. Hakeem and McDermott. This chapter is the concluding chapter of the paper, highlighting the major findings of this jurisprudential evolution while presenting a strategy for legislative clarity and the limitations of the judiciary in the implementation of the said framework.

• Summary of findings
• The A & C Act 1940 gave express powers of remission or modification to the courts.[83]
• The A & C Act 1996, in its literal sense, restricts the powers of courts to set aside an AA on specific grounds, adhering to the UNCITRAL Model Law.[84]
• Cases such as Project Director, NHAI v. M. Hakeem reaffirmed that the Court does not possess modification powers under Section 34.[85]
• Cases such as Vedanta Ltd. and Budhraja, on the other hand, permitted modification by the courts in cases such as post-award interest and clerical errors.[86]

The landmark verdict of Gayatri Balasamy finally harmonizes this conflict by allowing modification by the courts when the AA is severable or contains non-merit-based errors.  But the intervention of the court must be minimal, proportionate, and justified.[87] This structural framework provides the finality of the arbitration process and ensures judicial efficiency at the same time.

• Suggestions for Legislative Amendment

Even after the Court’s verdict, an important concern that remains is that there is an absence of a statutory guideline that highlights a risk of inconsistency and potential misuse of this doctrine. Therefore, a statutory amendment to Section 34 is the need of the hour. The amendment could firstly provide a clear and definite provision regarding the Court’s power of modification in limited cases, such as illegally awarded interest, severable parts of the AA given beyond its jurisdiction, wrong mathematical calculations, and clerical and typographical errors. Secondly, the amendment can also provide a mandatory requirement for the court to record reasons for preferring modification over remand or setting aside of the AA. Lastly, an express procedural restriction on reappreciation of facts in the course of modification is also required.

To facilitate this amendment, the legislature may refer to Section 11 of the U.S. Federal Arbitration Act, which provides for the limited grounds of modification instead of setting aside the AA in its entirety. [88]

• Conclusion

The landmark judgment of Gayatri Balasamy has been a jurisprudential inflection point where the court, while providing the systematic framework, looked to balance judicial oversight with arbitral integrity.  The following doctrine ticked the criteria of necessity and equity, but there is still a need for legislative enforcement and institutional discipline. Time will tell if this framework will improve the arbitration framework in India or further increase the traditional court’s burden. With properly framed limitations, the Indian arbitration regime can achieve a model that meets the goal of finality and fairness, adaptable to the challenges yet responsive to justice.

---

[1] Gayatri Balasamy vs ISG Novasoft Technologies Limited (2025) INSC 605.

[2] Arbitration & Conciliation Act, 1996, §2(a).

[3] SAC Attorneys LLP, The Advantages and Disadvantages of Arbitration, (May 29, 2025, 10:06 AM), https://www.sacattorneys.com/articles/the-advantages-and-disadvantages-of-arbitration/

[4] Arbitration & Conciliation Act, 1940, §14.

[5] Id §15.

[6] Id §30,33(a).

[7] Law Commission of India, 176th Report on the Arbitration and Conciliation (Amendment) Bill, 2001 (2001).

[8] Guru Nanak Foundation v Rattan Singh, (1981) 4 SCC 634

[9] UNCITRAL Model Law on International Commercial Arbitration, 1985

[10] Arbitration & Conciliation Act, 1996, §9.

[11] Barucha & Partners, The Supreme Court holds that courts do not have the power to modify arbitral awards (May 31, 2025), https://www.lexology.com/library/detail.aspx?g=56a4775b-dce9-4011-b17d-7825547669c4

[12] Supra note 2, §36.

[13] Id §16.

[14] McDermottInternational Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181.

[15] ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705.

[16] Supra note 2, §34.

[17] Project Director, NHAI v. M. Hakeem (2021) 9 SCC 1.

[18] Vedanta Ltd. v. Shenzhen Shandong Nuclear Power Construction Co. Ltd., (2019) 11 SCC 465.

[19] S.V. Samudram v. State of Karnataka, (2024) 3 SCC 623.

[20] Supra Note 18.

[21] Oriental Structural Engineers Pvt. Ltd. v. State of Kerala, (2021) 6 SCC 150.

[22] Shakti Nath v. Alpha Tiger Cyprus Investment No.3 Ltd., (2020) 11 SCC 685.

[23] Indian Const. art 142, cl.1.

[24] Supra note 1

[25] Supra note 2, §34.

[26] Id §34(2).

[27] Id §34(2A).

[28] Id §34(3).

[29] Id §34(4).

[30] Id §34(6).

[31] Id §37.

[32] Supra Note 14.

[33] Supra Note 18.

[34] Supra note 1.

[35] Supra Note 8.

[36] Supra Note 9, §34.

[37] Singapore International Arbitration Act, 1994, §19B.

[38] UK Arbitration Act, 1996, §67(3).

[39] Supra Note 17.

[40] Supra note 14.

[41] Larsen Air Conditioning v. Union of India, (2023) 15 SCC 472

[42] Supra note 18

[43] Supra note 21

[44] Tata Hydro-Electric Power Supply Co. Ltd. v. Union of India, (2003) 4 SCC 172

[45] Supra note 1

[46] Id.

[47] Supra note 18.

[48] Supra note 17.

[49] Supra note 1, ¶ 32.

[50] Id at ¶ 36.

[51] Id at ¶ 34.

[52] Id at  ¶ 40.

[53] Id at  ¶¶ 42-45.

[54] Id at ¶¶ 47-49.

[55] Id at ¶ 51.

[56] Id at ¶¶ 55-56.

[57] Id at ¶¶ 57-60.

[58] Id at ¶¶ 70-71.

[59] Id at ¶¶ 74-78.

[60] Id at ¶¶ 25.

[61] Id.

[62] Supra note 37, §68(3).

[63] Lesotho Highlands Dev. Auth. v. Impregilo SpA, [2005] UKHL 43.

[64] Supra note 37, §69.

[65] Supra note 36, § 19B.

[66] Supra note 64, § 34.

[67] Federal Arbitration Act, 2023, § 11 (USA)

[68] AAA-ICDR Arbitration Rules, 2021, Article 36(1)(a),

[69] International Arbitration Act, 1974 (Cth) (Austl.); Commercial Arbitration Act 2010 (NSW), §34A.

[70] Supra note 35, Art. 34, 33.

[71] Supra note 1

[72] Id at ¶ 42.

[73] Anmol Kaur Bawa, Courts Can Modify Arbitral Awards in Certain Circumstances Under S.34/37 Arbitration Act: Supreme Court by 4:1 (May 30, 2025), Live Law, https://www.livelaw.in/supreme-court/courts-have-limited-power-to-modify-arbitral-awards-in-certain-circumstances-supreme-court-by-4-1-majority-290823.

[74] Supra note 1, ¶ 39.

[75]  Supra note 14, ¶ 52.

[76]  Supra note 17, ¶ 32.

[77] Supra note 1, ¶¶ 42–48.

[78] Supra note 1, ¶ 50.

[79] Supra note 17; Supra note 14

[80] G.P. SINGH, PRINCIPLES OF STATUTORY INTERPRETATION 62 (15th ed. 2021).

[81] Supra note 1, ¶¶ 56–57 (on purposive interpretation and legislative object).

[82] Supra note 66

[83] Supra note 4, §15.

[84] Supra note 35, Art. 34.

[85] Supra note 17, ¶ 32.

[86] Supra note 18; J.C. Budhraja v. Orissa Mining Corp., (2008) 2 SCC 444.

[87] Supra note 1, ¶¶ 42–48.

[88] Supra note 66