Gayatri Balasamy v. M/S Isg Novasoft Technologies Limited 9

Introduction 

This case is about whether Indian courts have the legal right to change (or modify) arbitration awards under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996. Since earlier Supreme Court decisions gave mixed answers, a special five-judge bench was set up to clear the confusion. The Court looked closely at the law, past rulings, global practices, and the main purpose of arbitration in India to come to a final decision. 

Facts  

• The case originated from the appeal Gayatri Balasamy v. ISG Novasoft Technologies Ltd., among others, which questioned the extent of powers courts hold under Sections 34 and 37. 
• Multiple benches had passed conflicting judgments — some courts modified arbitral awards while others declared such power unavailable under the 1996 Act. 
• A three-judge bench referred key legal questions to the Chief Justice, leading to the formation of a constitutional bench. 
• Central to the dispute was whether setting aside an award inherently includes the power to partially modify it. 
• The court analyzed Section 34, including its explanation, provisos, and related sections like 5, 31, 33, 37, and 48. 
• The case also involved comparison with international arbitration laws under the UNCITRAL Model Law and the New York Convention. 
• Specific attention was paid to post-award interest, clerical errors, and the doctrine of severability. 
• Arguments for and against judicial modification powers were presented, citing various domestic and foreign judgments. 
• The judgment ultimately clarified that courts do have limited power to modify arbitral awards under certain specific conditions. 
• The decision aimed to reduce litigation cycles while upholding legislative intent and judicial restraint. 

Issues Raised  

• Whether Indian courts, under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, have the jurisdiction to modify an arbitral award, or if their powers are strictly limited to setting aside such awards. 

Court’s Observations 

• The court noted that Section 34 does not expressly confer power to modify arbitral awards, but judicial practice has occasionally allowed it. 
• It observed a distinction between setting aside (which nullifies an award) and modifying (which alters it), recognizing the need for limited intervention to avoid injustice and repetitive arbitration. 
• The court held that modification may be permitted where the award is severable, contains clerical or computational errors, or involves post-award interest issues. 
• It acknowledged international practices and emphasized that silence in the statute does not equate to prohibition. 
• The power to modify should be narrowly exercised, without reviewing the merits of the case or turning courts into appellate bodies. 
• The court upheld the use of Article 142 in rare cases to ensure complete justice but cautioned against rewriting awards on merits. 

Conclusion  

The Supreme Court held that courts do have limited powers to modify arbitral awards under Sections 34 and 37 in specific scenarios like severable errors, clerical mistakes, or post-award interest. This interpretation balances judicial efficiency with the sanctity of arbitral autonomy.