Gayatri Balasamy v. ISG Novasoft Technologies Ltd.

Facts

Section 34 of the Arbitration and Conciliation Act, 1996 permits recourse to a court against an arbitral award only by an application to set it aside, and does not expressly allow the court to modify it. Decisions of the Supreme Court diverged: Project Director, NHAI v. M. Hakeem and later cases held that a Section 34 court cannot modify an award, while other decisions had modified awards, especially the rate of interest, sometimes under Article 142. By order dated 20 February 2024, a three-Judge Bench hearing the special leave petitions in Gayatri Balasamy directed that the matter be placed before the Chief Justice to consider a reference of these questions. A five-Judge Bench was constituted to answer them.

Questions before the Court

1. Do the powers of the court under Sections 34 and 37 of the 1996 Act include the power to modify an arbitral award, and if so, to what extent?
2. Can such a power be exercised only where the award is severable?
3. Is the power to modify included in the larger power to set aside an award under Section 34?
4. Do Hakeem and the cases following it lay down the correct law, given other decisions that modified awards?

What the Court held

• The court has a limited power under Sections 34 and 37 to modify an arbitral award. The power of judicial review and setting aside under Section 34 inherently includes this limited power, exercised within the confines of Section 34 and not as an appellate court reviewing the merits.
• The power to set aside includes the power to set aside in part. The proviso to Section 34(2)(a)(iv) is clarificatory. The invalid portion may be severed only where it is legally and practically separable from the valid portion and the two are not interdependent.
• A Section 34 court may correct computational, clerical or typographical errors and other manifest errors apparent on the face of the record, provided no merits-based evaluation is needed. Where the correction is doubtful, the court should remit the award under Section 34(4) or leave the party to Section 33.
• Post-award interest under Section 31(7)(b) may be modified, upward or downward, where the facts justify it, but only for compelling reasons. Pendente lite interest contrary to the contract may be set aside or remitted.
• This Court may use Article 142 with great care and caution, consistently with the 1996 Act. It should not be used to rewrite the award or modify it on merits, but may be used where necessary to end the litigation.

Why it matters

The Constitution Bench settles the conflict between Hakeem and the decisions that modified arbitral awards by recognising a limited power of modification under Sections 34 and 37. It confines that power to four situations: severance, correction of clerical or computational errors, post-award interest, and Article 142 by this Court. It rejects any wider power to revisit the merits, including for statutory arbitration under the NHAI Act.

In the Court's words

Copied from the official judgment; each passage links to its page.

Provisions interpreted

• Section 34, Arbitration and Conciliation Act, 1996
• Section 37, Arbitration and Conciliation Act, 1996
• Section 33, Arbitration and Conciliation Act, 1996
• Section 31(7), Arbitration and Conciliation Act, 1996
• Section 48, Arbitration and Conciliation Act, 1996
• Article 142, Constitution

Related judgments

• Follows Shilpa Sailesh v. Varun Sreenivasan (2023)“While exercising power under Article 142, this Court must be conscious of the aforesaid dictum.” (page 36)

Case and bench

Parties

Gayatri Balasamy v. M/s. ISG Novasoft Technologies Limited

Case

Civil Appeal Nos. ____ of 2025 (Arising out of S.L.P.(C) Nos. 15336-15337 of 2021)

Decided

30 April 2025

Bench

Sanjiv Khanna, CJI, B.R. Gavai, Sanjay Kumar, K.V. Viswanathan, Augustine George Masih

Opinions

Majority 4:1. Opinion by Sanjiv Khanna, CJI, signed also by B.R. Gavai, Sanjay Kumar and Augustine George Masih, JJ. K.V. Viswanathan, J. wrote separately and dissented: he accepted severance and correction of clerical, computational and typographical errors, but held that Section 34 courts cannot modify awards, including post-award interest, and that Article 142 should not be used to modify awards.

Questions on this case

From free Law Maker papers. Try each one before you open the answer.

1. Question 1 · Landmark Judgments Practice Set 3

   In Gayatri Balasamy v. ISG Novasoft Technologies Ltd. (Constitution Bench, 30 April 2025), how did the majority answer the reference on the power of a court to modify an arbitral award under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996?

   1. A. Courts may modify an award only in an appeal under Section 37, because the jurisdiction under Section 34 is confined to setting the award aside
   2. B. Courts have no power to modify an award in any respect, and the only course open to them is to set the award aside wholly and leave the parties to a fresh arbitration
   3. C. Courts have a limited power to modify, for instance by severing an invalid part, correcting clerical or computational errors and, in some cases, altering post-award interest
   4. D. Courts may modify an award on its merits whenever they find that the arbitral tribunal reached a wrong conclusion on the evidence placed before it
   Show the answer

   C. Courts have a limited power to modify, for instance by severing an invalid part, correcting clerical or computational errors and, in some cases, altering post-award interest

   The majority (4:1) answered the reference by holding that the court has a limited power under Sections 34 and 37 to modify an award: by severing the invalid portion from the valid, by correcting clerical, computational or typographical errors apparent on the record, by modifying post-award interest in some circumstances, and through Article 142 used with great care. It did not permit a review of the award on merits, and the absolute view that a court can never modify an award was not accepted.

2. Question 2 · Landmark Judgments Practice Set 3

   With reference to Gayatri Balasamy v. ISG Novasoft Technologies Ltd. (2025), consider the following statements: 1. The majority treated the power to sever the invalid portion of an award as inherent in the power to set the award aside, applying the maxim omne majus continet in se minus. 2. The majority held that Article 142 of the Constitution applies, but that the power must be exercised with great care and caution. 3. The opinion of the five-Judge Bench was unanimous. Which of the statements given above is/are correct?

   1. A. 2 and 3 only
   2. B. 1, 2 and 3
   3. C. 1 and 2 only
   4. D. 1 only
   Show the answer

   C. 1 and 2 only

   Statements 1 and 2 reflect paragraphs 33-34 and conclusion IV of the majority opinion delivered by Khanna CJI. Statement 3 is wrong: K.V. Viswanathan J. wrote a separate dissenting opinion, so the reference was answered by a 4:1 majority.