[Shyamal Anand is a Principal Associate at Shardul Amarchand Mangaldas & Co and Pranjal Kushwaha is a 5th Year B.A. LL.B. (Hons.) Student at National Law Institute University, Bhopal]
Having outlined the majority’s reasoning and its rationale in Part I, the discussion now turns to a critical but constructive examination of the broader implications of the Gayatri Balasamy ruling. While the decision marks a significant development in India’s arbitration jurisprudence, it also raises important questions about statutory interpretation, party autonomy, and the role of courts in arbitral proceedings. Part II explores these concerns and concludes by outlining possible legislative and policy reforms to ensure that the evolving Indian arbitration framework remains both effective and globally aligned.
Critique of the Majority Decision
Beyond a mere interpretive shift, this ruling equips courts with a tool to deliver justice but risks undermining the fragile thread of party autonomy. In its pursuit of extending justice, the Supreme Court might have interpreted the statute in an overly expansive manner, reading into it something not explicitly written, thus opening a Pandora’s box and potentially jeopardising India’s aspirations to emerge as a global arbitration hub.
Statutory Interpretation: Assessing the scope of the Act
The tension between perceived necessity and statutory constraint lies at the heart of the Act. Senior Advocate Gaurab Banerji, who was also a member of the TK Vishwanathan committee that recommended inserting the word “vary” in section 34 to empower courts to modify arbitral awards, highlighted this gap during the hearings of this case. He noted, however, that in its current form, the Act does not explicitly grant such authority to courts.
This tension reflects a deliberate legislative design to minimize judicial interference in arbitral proceedings. In the interpretation of arbitration legislation based on the UNCITRAL Model Law, it has been widely accepted that in the absence of any explicit provision, the recourse available to parties is limited to the text of the provision (see paragraph 10.68, Redfern and Hunter on International Arbitration (6th ed. 2015)).
The majority opinion held that the power to set aside an award, being a greater power, inherently includes the lesser power to modify an award, based on the legal maxim omne majus continet in se minus, i.e. the greater includes the lesser. However, this argument falters when considering that setting aside and modification are qualitatively distinct judicial functions operating on different planes. Setting aside is a negative act of invalidation grounded in statutory criteria, such as those listed in section 34, aimed at nullifying an award for fundamental flaws. In contrast, modification involves a merits-based revision, which risks undermining the finality of awards and the principle of party autonomy, which is central to arbitration. This is further supplemented by the Supreme Court’s ruling in Shamnsaheb M. Multtani v. State of Karnataka, where it was clarified that the omne majus maxim applies only to cognate powers sharing similar characteristics, not to dissimilar functions like annulment and alteration.
In this context, the majority’s reliance on extra-statutory sources, such as section 151 of the Code of Civil Procedure and article 142 of the Constitution, as a panacea is deeply problematic. While these provisions confer inherent procedural powers on the courts, they are not meant to override the clear limits and intent of the Arbitration Act. Section 5 of the Act reinforces this principle by expressly restricting judicial intervention to what is permitted within the Act’s own framework. As Solicitor General Tushar Mehta rightly noted, the Act is intended to function as a self-contained code. Although the Supreme Court’s power to do complete justice under article 142 is quintessential, such powers must be exercised with restraint. An expansive interpretation risks distorting the legislative scheme and eroding the distinction between judicial interpretation and judicial legislation.
Risks to Party Autonomy
The majority opinion in this case underscores the virtues of expediency and cost-effectiveness as guiding principles of arbitration. Yet, a careful examination of the decision reveals a troubling oversight: the marginalization of party autonomy, which forms the bedrock of the arbitral process. The majority references the phrase “party autonomy” only once, while asserting without rigorous analysis that permitting courts to modify arbitral awards does not encroach upon it. This assumption, however, fundamentally conflicts with the core principles of arbitration, which enshrine the parties’ freedom to define not only the initiation but also the culmination of their chosen dispute resolution process, with courts serving as limited overseers, not as arbiters of the outcome.
The majority’s ruling permits courts to rectify “inadvertent errors, including typographical and clerical errors,” but fails to define the scope of such errors clearly. The use of the term “including” introduces dangerous ambiguity, leaving open the possibility that courts may expansively interpret “inadvertent errors” to venture into factual or legal reassessments. This vagueness risks transforming judicial review under section 34 into a de facto appellate mechanism, contrary to the Act’s intent, which emphasizes the finality of awards and restricts judicial scrutiny to questions of legality, not correctness.
The majority’s approach threatens to undermine the certainty and finality that make arbitration an attractive alternative to litigation. Parties opt for arbitration to avoid protracted court battles, relying on the tribunal’s award as the conclusive resolution of their dispute, save for exceptional cases involving fraud, bias, or grave procedural irregularities. Yet, recent judicial trends reveal an alarming pattern of overreach. For example, in Ssangyong Engineering & Construction Co. Ltd. v. NHAI, the court replaced the majority award with the minority opinion, effectively nullifying the tribunal’s authority. Similarly, in cases such as Vedanta Ltd. v. Shenzhen Shandong Nuclear Power Construction Co. Ltd., Oriental Structural Engineers Pvt. Ltd. v. State of Kerala, and J.C.Budhraja v. Chairman, Orissa Mining Corporation Ltd., courts have adjusted award terms, interest rates, or specific claims, often under the pretext of severability or correcting “patent illegality”. Such actions blur the distinction between permissible review and impermissible revision, reducing arbitration to a preliminary step before judicial adjudication rather than an independent process.
This judicial trend is particularly striking given conflicting signals within the judiciary itself. Most notably, Justice Nariman, who shared the bench in Ssangyong, also authored the decision in Project Director, NHAI v. M. Hakeem, which contrastingly advocated for a restrictive approach to judicial modifications. When courts begin to revise awards, they remove the certainty that draws parties to arbitration in the first place. Thus, the majority’s passing reference to party autonomy fails to confront the deeper consequence that, unless strictly checked, modification allows courts to override outcomes the parties voluntarily accepted. This not only weakens the integrity of the arbitral process but shifts control back to the courts, undermining its foundational principle that parties, not judges, should define how their disputes are resolved.
Conclusion and Way forward: Aligning with The Global Standards
Unless the scope of “inadvertent error” is clearly defined and narrowly demarcated, courts might themselves inadvertently review the actual issues of an arbitration award while trying to identify such errors. This ambiguity creates uncertainty for both domestic and foreign parties, who may fear that courts could reinterpret or alter awards, thereby turning section 34 proceedings into de facto appeals. Such uncertainty undermines confidence in India as a reliable seat of arbitration. To mitigate these concerns and bring the Indian arbitration regime in line with international best practices, the following suggestions may help clarify the framework and enhance its global credibility:
Legislative Reform for Clarity and Precision
To resolve the ambiguity in section 34 of the Act, legislative reform is imperative. Parliament should amend the provision to delineate, with precision, the contours of judicial authority to modify arbitral awards. Such authority must be narrowly circumscribed: confined solely to the rectification of clerical or typographical errors, computational miscalculations, or decisions rendered on issues not submitted to arbitration provided such components are severable and do not impinge upon the core merits of the award
International models offer guidance in this regard. Section 11 of the United States Federal Arbitration Act limits judicial modification to evident material miscalculations, misdescriptions of persons or property, or rulings that exceed the arbitral mandate resolutely excluding substantive review to uphold the finality of arbitral determinations. Similarly, section 30 of South Africa’s Arbitration Act, 1965, confines corrections to patent errors or accidental omissions, thereby reinforcing the principle of minimal curial intervention. Although section 33 of the Act vests arbitral tribunals themselves with the power to correct comparable inadvertent errors, its underutilization in practice has left a regulatory lacuna. To address this, legislative amendments must provide that courts may intervene only where the tribunal is unable or unwilling to effect the correction, and even then, solely in relation to objectively verifiable and narrowly defined errors. This approach would preserve the integrity of the arbitral process, while addressing the legitimate need to correct manifest errors, as underscored by the majority.
Safeguarding Party Autonomy Through Consent
Any provision permitting judicial modification of arbitral awards must operate strictly within the boundaries of the parties’ express consent. Such consent must be either rooted in the arbitration agreement itself or subsequently memorialized in writing. This approach safeguards the integrity of the parties’ original bargain and ensures that any judicial intervention remains confined to the scope explicitly authorized by the parties.
Jurisdictions like Singapore exemplify this balance between party autonomy and judicial oversight. The Singapore Arbitration Act 2001 (“SAA”) sharply curtails judicial interference with arbitral awards. Section 47 of the SAA clearly states that courts have no jurisdiction to confirm, vary, set aside, or remit an award except as expressly provided in the SAA. Section 49 of the SAA further reinforces the principle of consent by establishing a framework for appeals on questions of law that is contingent upon party agreement. Under section 49(2) of the SAA, parties may jointly exclude the court’s jurisdiction to hear such appeals, reflecting a strong deference to their contractual autonomy. Where such exclusion is not exercised, appeals may proceed only with the agreement of all parties or with leave of the court granted under stringent conditions outlined in section 49(5) of SAA, such as where the decision is obviously wrong or raises a question of general public importance.
Hong Kong’s Arbitration Ordinance adopts a similarly calibrated approach. Appeals on points of law are allowed only if the parties have expressly agreed or if leave is granted under narrowly defined statutory criteria, thereby reinforcing the primacy of party consent and maintaining a high threshold for judicial review.
India would benefit from emulating these consensual frameworks by permitting judicial modification only for narrowly circumscribed and objectively verifiable errors. However, any such reform must be accompanied by a broader commitment to judicial restraint. Only through a calibrated synergy between legislative design and judicial restraint can India foster a truly arbitration-friendly legal ecosystem.
– Shyamal Anand & Pranjal Kushwaha