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The Hon’ble Madras High Court in ISG Novasoft Technologies Ltd v. Gayatri Balasamy1 dealt with a challenge to an Arbitral Award arising from an employment dispute wherein the Arbitral Tribunal had awarded compensation to the employee. The Award, however, allegedly suffered from a quantification error concerning back wages and consequential dues. Rather than adhering to the traditional norm of either setting aside the award or remitting it to the Arbitral Tribunal for reconsideration, the Hon’ble High Court chose an unorthodox path by modifying the award directly purporting to rectify what it termed a manifest and severable error.
The Hon’ble Madras High Court justified this intervention by reasoning that the defect in the award pertained solely to a computational aspect which could be corrected judicially without disturbing the tribunal’s reasoning on liability or factual findings. This marked an apparent deviation from the judgment pronounced by the Hon’ble Supreme Court in the case of McDermott International Inc. v. Burn Standard Co. Ltd.2 (hereinafter referred to as ‘McDermott case‘) and was also seen to be in direct conflict with the case of Project Director, NHAI v. M. Hakeem3 (hereinafter referred to as ‘M Hakeem case‘), wherein the Hon’ble Supreme Court held that Courts, under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘Arbitration Act‘), lacked the jurisdiction to modify an award and could only either set it aside or remand it under Section 34 (4).
Following the order of the Madras High Court, the aggrieved party preferred a Special Leave Petition, which initially raised concerns of intra-court doctrinal conflict. Recognizing the systemic implications, a three-judge bench of the Hon’ble Supreme Court referred the matter to the Hon’ble Chief Justice of India for the constitution of a larger bench to firmly settle whether the power of modification may be read within Sections 34 and 37 of the Arbitration Act.
The 5-judge Constitution Bench4 presided over by the Hon’ble Chief Justice of India undertook an exhaustive review of prevailing laws, judicial precedents, and comparative international practice, subsequent to which, a majority of 4 judges held that, while the Arbitration Act does not expressly confer power on courts to modify Arbitral Awards, a narrow and limited power to do so is, however, implicit in certain scenarios. These include situations where the award is severable, where clerical, typographical or computational errors are evident on the face of the record, and where modification relates to post-award interest under Section 31 (7) (b). Additionally, the Hon’ble Court clarified that the jurisdiction Article 142 of the Constitution of India could be invoked in exceptional cases to do complete justice, though not to reappraise merits.
Significantly, the Hon’ble Supreme Court observed that a rigid application of Section 34 as interpreted in M. Hakeem case could lead to undue procedural hardship and compel parties to undergo a fresh round of arbitration for correctable flaws, defeating the fundamental objectives of arbitration such as efficiency, cost-effectiveness, and finality. The Court thus advocated a functional and purposive interpretation that balances party autonomy with judicial oversight limited to curative contexts. This re-reading of Section 34 was positioned not as a dilution of arbitral sanctity, but as a pragmatic judicial response to operational realities.
Nonetheless, Hon’ble Mr. Justice K.V. Viswanathan, in his dissent, strongly cautioned against this interpretative expansion, arguing that any power to modify must flow from legislative command and not judicial construction. He warned that introducing ‘nebulous concepts’ like “manifest error” without statutory clarity could erode predictability and compromise the arbitration framework’s integrity.
Key Issues before the Hon’ble Supreme Court
The fundamental question that fell for consideration before the Hon’ble Supreme Court in Gayatri Balasamy v. ISG Novasoft Technologies Ltd.5 (hereinafter referred to as ‘Gayatri Balaswamy case’) was whether Indian courts, acting under the statutory framework of the Arbitration Act, possess the jurisdiction to modify an arbitral award, or whether their powers are strictly confined to setting aside or remanding the award as contemplated under Sections 34 and 37 of the Act.
Section 34, which is modelled on Article 34 of the UNCITRAL Model Law, permits a limited judicial intervention, through an application, to set aside an award on specific enumerated grounds such as incapacity of parties, procedural impropriety, patent illegality, or contravention of public policy. The provision does not, however, expressly confer the power to vary or amend the substance of the arbitral award. Likewise, Section 37 of the Arbitration Act provides a narrow appellate mechanism limited to certain classes of orders passed under Section 34, but even the latter is silent on the issue of modification.
The absence of an express statutory mandate permitting courts to modify arbitral awards led to conflicting judicial opinions over the years. While judgments such as the M. Hakeem case espoused a strict constructionist view, categorically rejecting any inherent or implied power of modification, other decisions, including those pronounced in the cases of Vedanta Ltd. v. Shenzen Shandong Nuclear Power Construction Co. Ltd.6 and Tata Hydro-Electric Power Supply Co. Ltd. v. Union of India7, had tacitly allowed modifications, particularly in the context of interest and computational adjustments.
Against this backdrop, the Hon’ble Court was called upon to reconcile the tension between judicial restraint envisioned by the Arbitration Act and the need to remedy manifest errors in awards that are otherwise substantively sound. The matter, thus raised a pivotal doctrinal issue: whether the inherent logic and structure of Section 34, when read in light of its objectives and ancillary provisions (such as Section 34(4) and Section 33), could sustain a limited and calibrated power of modification?
Towards a Calibrated Framework for Controlled Judicial Oversight
The majority opinion in the Gayatri Balasamy case signals a pragmatic shift from the stringent interpretative posture previously adopted in decisions such as the M. Hakeem case and McDermott case, both of which underscored that the jurisdiction of courts under Section 34 of the Arbitration Act is confined to setting aside awards on limited grounds and does not extend to any appellate or corrective function. These authorities affirmed that Arbitral Tribunals are the sole adjudicators of fact and law, and judicial intervention must remain circumscribed within the statutory limits.
However, the judgment in the Gayatri Balasamy case marks a subtle doctrinal recalibration. While reaffirming the narrow architecture of Section 34, the Court has acknowledged that certain categories of errors namely, clerical, typographical, computational mistakes, and what it termed “manifest errors apparent on the face of the record” can justifiably invite limited judicial correction, provided such a correction does not intrude upon the merits of the dispute or revisit factual findings. This nuanced demarcation reflects the Court’s effort to reconcile the principle of arbitral finality with the need to remedy procedural or calculative anomalies that could otherwise result in miscarriage of justice.
Nevertheless, this judicially evolved framework has not been immune to critique. Hon’ble Mr. Justice Viswanathan, in a forceful and well-reasoned dissent, cautioned against judicial improvisation in matters where legislative silence is deliberate. He observed that any expansion of judicial power to modify arbitral awards must emanate from an express legislative mandate, as seen in foreign jurisdictions such as the United Kingdom (Section 57 of the Arbitration Act, 1996) and Singapore (International Arbitration Act, 1994), where specific statutory provisions authorize correction or variation of awards under delineated circumstances. In the absence of such statutory articulation in India, Hon’ble Mr. Justice Viswanathan warned that the judicial assumption of curative power risks undermining the structural discipline of the arbitral framework and may precipitate interpretive instability.
Further, the majority’s use of the term “manifest error” introduces a layer of conceptual opacity. Absent a statutory definition or doctrinal consensus on its contours, this term may become a convenient proxy through which litigants repackage substantive grievances as technical defects, thereby inviting judicial scrutiny that Section 34 was designed to preclude. Such elasticity in interpretation could dilute the very safeguards that were intended to insulate Arbitral Awards from merit-based judicial intervention and compromise the objectives of finality, efficiency, and economy which the arbitral process seeks to serve.
Prospective Implications for the Indian Arbitral Regime
- Legislative Clarification May Be Warranted
The Gayatri Balasamy case is likely to stimulate a re-examination of Section 34 by the legislature. Now that the judiciary has recognised a narrow yet consequential power of modification, it may be incumbent upon Parliament to codify the contours of such jurisdiction. This would ensure uniform application and reduce interpretive subjectivity. A statutory template akin to Section 15 of the erstwhile Arbitration Act, 1940 or provisions prevailing in comparative jurisdictions could serve as a model. Clear legislative articulation would reinforce the foundational equilibrium between arbitral autonomy and judicial oversight.
- Evolving Jurisprudence and the Risk of Increased Litigation
Although the Hon’ble Supreme Court has endeavoured to delineate a narrow band of permissible judicial corrections restricted to non-merit-based anomalies such as facial clerical or computational mistakes, the interpretive elasticity of terms like “manifest error” leaves room for procedural exploitation. There may even be a possibility that litigants may reframe substantive grievances as technical lapses, thereby expanding the scope of Section 34 applications. This, in turn, could burden the judiciary and engender procedural uncertainty, contrary to the objectives of expedited dispute resolution.
- Imperative of Judicial Discipline and Consistency
The legitimacy and efficacy of the newly recognised power will rest heavily on its application by subordinate courts. A lack of doctrinal restraint may lead to the inadvertent transformation of Section 34 into a de facto appellate forum. This would dilute the arbitral process and undermine the legislative intent underpinning the 1996 Act. Courts must exercise this jurisdiction with circumspection, treating it as a narrowly tailored corrective mechanism and not as an avenue for re-adjudication of substantive claims.
- Institutional Response and Procedural Fortification
In anticipation of post-award judicial scrutiny, arbitral institutions and contracting parties may begin incorporating bespoke mechanisms for internal review and correction, particularly by invoking Section 33 of the Arbitration Act. Drafting of Arbitral Awards may also witness a shift in practice, where greater attention being attributed to quantification methodologies and interest computation is likely to become a norm. These procedural reinforcements may serve to insulate awards from avoidable challenges and further reduce the risk of judicial intervention.
- Demarcating the Outer Limits of Article 142
The majority opinion, while affirming the Hon’ble Court’s plenary power under Article 142 to do complete justice, also reiterates the constitutional principle that such power is not absolute in specialized statutory domains. It has been clearly articulated that Article 142 cannot be invoked to rewrite the substantive terms of an arbitral award. This holding not only preserves the sanctity of arbitral finality but also reinforces the principle that constitutional equity powers must operate within the confines of legislative architecture in areas governed by specialized statutory regimes such as arbitration.
Comparative Jurisprudence: A Global Perspective on Judicial Intervention
The Indian legal framework governing arbitration, as interpreted in the Gayatri Balasamy case, reflects a jurisprudential departure from the restrained approach adopted in several leading arbitration jurisdictions. While the Hon’ble Supreme Court of India has read into Sections 34 and 37, a limited power to modify arbitral awards under specific circumstances, such interpretive latitude contrasts with the more textually conservative stance maintained internationally.
Under the Federal Arbitration Act (FAA), particularly Section 11, the role of the judiciary is narrowly tailored. Courts may correct Arbitral Awards only to the extent of “evident material miscalculations,” clerical mistakes, or issues involving Arbitrators exceeding their powers. Importantly, this statutory provision does not envisage any intervention into the substantive reasoning or merits of the award. The correction is thus confined to rectifying patent, objective errors without impinging on the Arbitral Tribunal’s adjudicatory autonomy.
Section 57 of the Arbitration Act, 1996, permits limited recourse for the correction of awards. The provision allows the Arbitral Tribunal, upon application by a party, to correct errors in the award, including clerical slips or ambiguities. The Courts, in turn, may remit an Award back to the tribunal for clarification or correction in cases involving “serious irregularity” under Section 68. However, the judiciary does not possess an independent authority to vary the content of an award or review its substantive merits.
Articles 33 and 34 of the Model Law, upon which the Indian Arbitration Act is largely based, emphasize procedural safeguards. These provisions allow parties to request the Arbitral Tribunal to interpret, correct, or issue an additional award on omitted claims. The Model Law also permits courts to remit Awards to the tribunal for curing procedural defects. However, such remittance is strictly circumscribed and does not extend to modification or rewriting of awards on matters of substance.
Conclusion
The Hon’ble Supreme Court’s decision in the Gayatri Balasamy case navigates a delicate equilibrium between fidelity to the statutory scheme and responsiveness to procedural inequities. By recognising a circumscribed judicial power to modify Arbitral Awards in narrowly defined circumstances, the Hon’ble Court has endeavoured to mitigate the adverse consequences of setting aside awards for minor and severable defects. This shift facilitates a more calibrated form of judicial intervention aimed at ensuring that technical anomalies do not defeat the substantive justice of arbitral determinations. At the same time, the ruling invites careful scrutiny. It raises pertinent questions regarding the limits of judicial interpretive power, the potential divergence from legislative intent, and the risk of gradual doctrinal dilution. The absence of explicit statutory authority for modification under Sections 34 or 37 necessitates a disciplined judicial approach, lest the exception morph into an unregulated avenue for merits-based review under the guise of correction.
Accordingly, the judgment should not be misconstrued as an open-ended licence for judicial revision of arbitral awards. It must be viewed as a narrowly tailored exception, a remedial tool reserved for exceptional cases involving facial or clerical irregularities. To preserve the foundational principles of finality, party autonomy, and arbitral sanctity, courts must exercise this power with utmost restraint and analytical precision. Equally, the ruling signals a timely moment for legislative introspection to clarify the permissible scope of judicial intervention in arbitral outcomes.
In the final analysis, the Gayatri Balasamy case represents a cautious, though significant, inflection point in Indian arbitration law, one that offers a remedial avenue without abandoning the core ethos of minimal curial interference. Its legacy will depend not only on how it is applied, but on how vigilantly its boundaries are preserved.
Footnotes
1 ISG Novasoft Technologies Ltd vs. Gayatri Balasamy, 2019 SCC OnLine Mad 15819.
2 McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181.
3 Project Director, NHAI v. M. Hakeem, (2021) 9 SCC 1.
4 Gayatri Balasamy v. ISG Novasoft Technologies Ltd, 2025 SCC OnLine SC 986.
5 Id.
6 Vedanta Ltd. v. Shenzen Shandong Nuclear Power Construction Co. Ltd., (2019) 11 SCC 465.
7 Tata Hydro-Electric Power Supply Co. Ltd. v. Union of India, (2003) 4 SCC 172.