Gayatri Balasamy v. ISG Novasoft Technologies Ltd.

The decision in Gayatri Balasamy v. ISG Novasoft Technologies Ltd. (2025) marks a significant development in Indian arbitration law. The case was decided by a five-Judge Bench of the Supreme Court of India and addressed a long-standing question regarding the scope of judicial powers under Section 34 of the Arbitration and Conciliation Act, 1996.

Traditionally, Indian courts followed a restrictive approach while dealing with arbitral awards. The power of courts was limited to either setting aside the award or remitting the matter back to the arbitral tribunal. The present case revisits this rigid framework and recognises a limited power of modification in specific circumstances. The judgment attempts to strike a balance between preserving arbitral finality and addressing practical inefficiencies in dispute resolution.

Facts of Gayatri Balasamy v. ISG Novasoft Technologies Ltd. Case

The dispute in this case arose from an arbitral award which contained certain defects. These defects included clear computational mistakes and an issue relating to the rate of post-award interest. The aggrieved party approached the court seeking modification of the arbitral award.

However, existing precedents created a barrier. Earlier decisions of the Supreme Court had consistently held that courts do not possess the power to modify arbitral awards under Section 34. Given this conflict and the practical difficulties faced by parties, the matter was referred to a Constitution Bench to determine whether such a power could be recognised within the statutory framework.

Legal Framework

The case revolves around the interpretation of key provisions of the Arbitration and Conciliation Act, 1996:

• Section 34 provides for recourse against an arbitral award by way of an application for setting aside the award on limited grounds.
• Section 37 allows an appeal against orders passed under Section 34.
• Section 34(4) permits the court to adjourn proceedings and remit the matter to the arbitral tribunal for curing defects.
• Section 31(7)(b) deals with post-award interest.

The statutory scheme reflects minimal judicial intervention, as reinforced by Section 5 of the Act, which restricts court interference except where expressly provided.

Issues Before the Court

The Supreme Court in Gayatri Balasamy v. ISG Novasoft Technologies Ltd. considered several important questions:

• Whether the powers of the court under Sections 34 and 37 include the power to modify an arbitral award.
• Whether such power, if available, is limited to cases where the award is severable.
• Whether the power to set aside an award includes a lesser power to modify it.
• Whether modification can be read into Section 34 despite the absence of express statutory language.
• Whether earlier judgments, particularly NHAI v. M. Hakeem, correctly laid down the law.

Earlier Judicial Position

Before this decision, the legal position was largely settled in favour of a strict interpretation of Section 34.

In McDermott International Inc. v. Burn Standard Co. Ltd., the Supreme Court held that courts cannot correct errors in arbitral awards and can only set them aside. Similarly, in NHAI v. M. Hakeem, the Court clearly ruled that modification of arbitral awards is not permissible under Section 34.

The decision in Kinnari Mullick v. Ghanshyam Das Damani further restricted the scope of remand by requiring a written request before setting aside the award. Once the award was set aside, the court became functus officio.

These decisions reinforced the principle that courts should not act as appellate authorities in arbitration matters.

Gayatri Balasamy v. ISG Novasoft Technologies Ltd. Judgment

In Gayatri Balasamy v. ISG Novasoft Technologies Ltd. (2025), a five-Judge Bench of the Supreme Court of India addressed whether courts have the power to modify arbitral awards under Section 34 of the Arbitration and Conciliation Act, 1996.

By a majority of 4:1, the Court held that a limited power of modification does exist, even though the statute does not expressly provide for it. The Court adopted a purposive interpretation and held that the power to set aside an award includes a narrower power to modify it in appropriate cases.

The Court clarified that such power can be exercised only in specific situations, including where the defective portion of the award is severable, where there are manifest clerical or computational errors, and where post-award interest requires adjustment. The Court emphasised that modification must not involve reappreciation of evidence or reconsideration of the merits.

The judgment also relaxed earlier procedural constraints, allowing more flexibility in remand under Section 34(4) and rejecting the rigid application of the functus officio principle.

Justice K.V. Viswanathan dissented, holding that Section 34 permits only setting aside or remand, and any power of modification must come from legislative amendment.

Conclusion

The decision in Gayatri Balasamy v. ISG Novasoft Technologies Ltd. marks an important development in Indian arbitration law. The Supreme Court has recognised a limited power to modify arbitral awards, moving away from a strictly binary framework of setting aside or remand.

The judgment attempts to introduce flexibility while preserving the core principles of arbitration, namely autonomy and finality. At the same time, it highlights the need for caution in exercising this power.