Limited Power to Modify’ Conundrum:- Settled by the Supreme Court in Gayatri Balasamy v. ISG Novasoft Technologies Limited

Jagatpal Choudhary analyses the landmark decision passed by the Constitutional Bench of the Hon’ble Supreme Court of India with respect to modification of arbitral awards.

Introduction

For several decades, Section 34 of the Arbitration and Conciliation Act, 1996 (“A&C Act”) was interpreted with utmost rigidity as a binary mechanism that confined judicial review to two discrete outcomes: upholding or setting aside an award in its entirety¹. Precedents such as “NHAI v. M. Hakeem”² explicitly cautioned that courts lacked competence to intervene in the substance of arbitral determinations, warning against transgressing the traditionally recognized boundaries of arbitral autonomy. However, in this landmark Constitution Bench decision, Gayatri Balasamy v. ISG Novasoft Technologies Limited³, the Hon’ble Supreme Court fundamentally recalibrated this interpretative framework. Under the stewardship of Hon’ble Chief Justice Sanjiv Khanna, the majority opinion articulated that the statutory grant of power to nullify an award, which is the greater authority, thereby necessarily encompasses the circumscribed capacity to excise or recalibrate portions that lack juridical sustainability, thereby invoking the classical Roman maxim omne majus continet in se minus.⁴ The judgment delineates four narrowly circumscribed scenarios justifying intervention: (1) surgical severance of an invalid segment that exhibits factual and legal independence; (2) correction of accidental and manifest errors of a clerical, computational or typographical character; (3) modulation of post-award interest in circumstances warranting equitable consideration; and (4) invocation of Article 142 and its constitutional mandate to achieve comprehensive justice in exceptionally compelling circumstances.⁵

1. DETAILED ANALYSIS OF THE BALASAMY RULING:-

I. Severability & Partial Setting-Aside:

The proviso to Section 34(a)(iv) inaugurates the doctrine of ‘severability of awards,’ permitting courts to excise exclusively those portions of an award tainted by the vitiating grounds⁶ enumerated in Section 34(2)(a), provided such segments remain logically and functionally severable. This judicial authority operates within clarificatory parameters: no commonality of factual underpinnings should exist, and the surviving portion must retain substantive integrity independent of the severed component.⁷

Courts may exercise this bifurcation only when the disputed and untainted segments of the award stand as clearly demarcated and mutually independent entities, both in law and operationally,⁸ The doctrine of omne majus continet in se minus — conceptualizing the greater authority as inherently incorporating lesser authorities—applies with full force in this context.⁹

The Hon’ble Court articulated the doctrine of implied powers, asserting that the circumscribed authority to sever an award carries within itself the power to vary or modify the remainder.¹⁰ The Supreme Court affirmed the Delhi High Court’s determination in NHAI v. Trichy Thanjavoor Expressway Ltd.¹¹ that partial annulment distinguishes itself fundamentally from modification.

II. Scope & Limits of Modification:Constraining the Judicial Ambit:-

The accidental oversights manifesting as computational, clerical or typographical deficiencies, along with kindred manifest errors, now become susceptible to judicial rectification in Section 34 proceedings, provided such correction remains within purely technical domains without necessitating meritorious evaluation.¹² The equitable maxim actus curiae neminemgravabit, which signifies that judicial acts shall occasion no prejudice, applies judicially in such circumstances.¹³ These corrective capacities remain intrinsically connected to the court’s supervisory jurisdiction.

Nevertheless, courts must exercise extraordinary circumspection, ensuring this corrective authority does not devolve into substantive rewriting or meritorious modification.¹⁴ The Court adopted the reasoning from Grindlays Bank Ltd. v. Central Government Industrial Tribunal¹⁵, endorsing the inherent capacity of courts to conduct procedural scrutiny, a domain fundamentally divergent from merits-based adjudication.¹⁶

III. Inherent Power to Modify and Interest Award:-

Modifications merit judicial consideration only where the absence of ambiguity, doubt, or manifest patent illegality obtains, permitting courts to recalibrate post-award interest in justified circumstances.¹⁷ Per Section 31(7)(b), supervisory courts retain authority to modulate—increasing or reducing—the interest quantum where factual circumstances substantiate such modification, without necessitating merit-based reassessment.¹⁸

Under Section 31(7)(a), arbitral institutions enjoy authority to incorporate interest at justifiable rates for the interregnum between the cause of action’s emergence and award issuance (pendente lite interest).¹⁹ And if it was granted contrary to the terms of the contract, while consideration under Section 34, the Court identified two options, those are:-

• i. To set aside the rate of interest awarded, or
• ii. Remand the matter to the arbitral tribunal under Section 34(4) for reconsideration.²⁰

Where such interest contradicts contractual specifications, courts retain two options: either to annul the interest determination or to remit the matter to arbitrators for reconsideration under Section 34(4).

Post-award interest proves contingent upon subsequent developments; courts possess discretion to modulate the interest rate if circumstances like enforcement delays or obstructive conduct supervene.²¹

IV. Modification of award for ‘complete justice’: Article 142’s Circumscribed Ambit

The extraordinary constitutional jurisdiction vested by Article 142, empowering courts to dispense comprehensive justice, may ordinarily be invoked exclusively grounded in fundamental public policy imperatives, thus restricting modification to exceptionally limited circumstances. Courts may marshal this authority to terminate protracted litigation; however, it cannot facilitate rewriting or meritorious alteration of awards. ²²

2. COMPARATIVE PERSPECTIVES:A BRIEF OF SINGAPORE AND THE UNITED KINGDOM [“UK”] ARBITRATION REGIME

I. Singaporean Jurisprudence: Procedurally-Sensitive Severance Architecture

The Singaporean International Arbitration Act of 1994²³ permits courts to partially set aside awards where tribunals exceed jurisdiction or breach natural justice. In the landmark judgement of CAI v. CAJ &Anr.²⁴, the Hon’ble High Court excised parts of an award that relied on an unpleadeddefence, deeming it procedurally unfair. This methodical approach permits modification through extractive subtraction rather than substantive substitution. The Singapore Court of Appeal's affirmation in CAJ &Anr. v. CAI (2021)²⁵ further reinforced this “surgical excision” paradigm, emphasising that the power to set aside necessarily encompasses the authority to “formulate consequential orders ensuring efficacious enforcement of such annulment”.²⁶

Yet the Gayatri Balasamy judgment operationalizes crucial distinctions from Singapore’s methodology: while Section 34 facilitates portion severance, Indian jurisprudence consciously refrains from substantive alteration. Singapore’s implied modification provision risks “fragmenting” awards, whereas India’s approach privileges finality, permitting intervention solely under extraordinary correction imperatives

II. UK: Express Statutory Authority to “Vary” Awards

The UK Arbitration Act 1996²⁷ explicitly empowers courts to “vary” domestic awards via Sections 67, 68, and 69, enabling direct compensatory adjustments and jurisdictional error rectification. The Gayatri Balasamy majority specifically contrasted this with India’s statutory architecture, noting legislative silence on modification. While the UK model promotes procedural economy through codified parameters, Indian jurisprudence has demonstrated institutional caution regarding award rewriting, restricting modifications to post-award interest and severable determinations. The judgment cautioned that transplanting UK arbitration modalities without corresponding procedural safeguards constitutes a dangerous form of judicial overreach.

Thus, ‘modification’ remains admissible only where express statutory conferral exists.

3. CRITICAL EVALUATION OF THE GAYATRI BALASAMY:-

In his dissenting opinion, Hon’ble Justice K.V. Vishwanathan disagreed with the majority, asserting that Section 34 of the ACA does not grant courts the power to modify arbitral awards, and such a power cannot be implied in contradiction to the legislature’s intent. Furthermore, his Lordships opined that courts also lack the authority to change the rate of interest. Justice Vishwanathan also emphasised that the Hon’ble Supreme Court cannot use its powers under Article 142 to modify an award, as inherent power cannot be invoked contrary to the statutory limitations of Section 34. This is based on the principle of actus curiae neminemgravabit, which means the act of the court shall prejudice no one. However, his Lordships acknowledged that courts may correct computational, clerical, or typographical errors, provided these do not result in substantive changes to the award.²⁸

There are certain serious concerns about the long-term credibility and resilience of India’s arbitration ecosystem, with the rising judiciary’s role significantly expanded and the government opting to avoid dispute resolution via arbitration. The Hon’ble Supreme Court has delineated limited grounds for modification; courts across the country don’t need to strictly restrict themselves to those limited grounds when modifying an arbitral award, especially in cases where there are compelling circumstances. This concern is also exacerbated by the Hon’ble Supreme Courtallowing a court exercising jurisdiction under Section 34 to rectify ‘other manifest errors’ (in addition to rectifying clerical or typographical errors). As such, despite the Hon’ble Supreme Court’s warning to the contrary, the risk of a court effectively reviewing the merits of a dispute while modifying an arbitral award cannot be ruled out.²⁹

4. INTERNATIONAL ENFORCEMENT AND CROSS-BORDER RECOGNITION CHALLENGES

I. A Critical Lacuna in the Gayatri Balasamy Framework

While the Gayatri Balasamy judgment delivers salutary clarity regarding the domestic supervisory architecture, it inadequately addresses critical complexities arising from international enforcement regimes and cross-border recognition frameworks.³⁰ This lacuna threatens to undermine India’s strategic positioning as a preferred arbitration seat within the international commercial dispute resolution ecosystem.

The foundational challenge emanates from the divergence between India’s newly created modification authority and the restrictive enforcement paradigms established by international conventions. The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, commonly referred to as the New York Convention, establishes the preeminent global framework for recognising arbitral awards across treaty-member states.³¹ Critically, the Convention constrains enforcement recognition to decisions issued exclusively by arbitral tribunals. As framed in the Convention's operative language, “arbitral award” designates specifically the arbitral tribunal’s determination, thereby excluding judicial reconstructions or substantively-altered instruments bearing the imprint of court modification.³²

This textual demarcation generates substantial enforcement vulnerability for Indian-seated awards undergoing modification under the newly articulated Gayatri Balasamy principles. Consider a practical scenario: an international commercial arbitration with a seat in India concludes with a tribunal's final award. One party applies to the Indian High Court under Section 34, successfully demonstrating that a portion of the award contravenes patent illegality. The supervisory court, invoking its newly-recognized modification authority, surgically severs the defective component while preserving and reinforcing the remaining portions. The modified award is then enforced by Indian courts as per Section 36 of the A&C Act.

Subsequently, the successful Indian party seeks enforcement of this judicially-modified award in a foreign jurisdiction, say Singapore, the United Kingdom, or the United States, themselves signatories to the New York Convention. Sophisticated enforcement-hostile respondents will interpose a formidable objection: the modified instrument no longer qualifies as a pristine “arbitral award” under Convention Article I, having undergone substantive judicial recalibration subsequent to tribunal issuance. The foreign court may decline recognition and enforcement, characterizing the instrument as a hybrid creature—neither pure arbitral award nor conventional judicial decree.

This enforceability predicament generates cascading practical complications. First, international commercial parties lose predictability regarding post-award remedies. Where a contract specifies London or Hong Kong as the enforcement jurisdiction but designates Mumbai as the arbitration seat, the prospect of judicial modification renders the award’s ultimate recognizability uncertain. Risk-averse multinational enterprises may consequently view Indian arbitration seats as introducing unquantifiable enforceability risks, thereby degrading India’s competitive positioning vis-à-vis established arbitration hubs such as Singapore, London, or Paris.³³

Secondly, temporal complications compound the predicament. Under Convention frameworks, enforcement applications typically operate within defined procedural windows. Yet, if Indian supervisory proceedings extend beyond the standard three-month window following the award's issuance, modification determinations may occur years after the tribunal's issuance. Foreign enforcement courts, confronting modified awards predating substantive judicial alteration by considerable periods, may question whether recognition obligations extend to post-modification configurations.³⁴ Convention-rooted jurisprudence in multiple jurisdictions presumes award finality following issuance, rather than retrospective judicial reengineering.

Thirdly, a fragmented international enforcement landscape emerges. Certain jurisdictions, notably the UK and Singapore, possess express statutory modification authorities that permit the recognition of modified awards from abroad. However, other Convention signatories maintain stricter interpretations, declining to enforce domestically-modified awards absent explicit statutory authorization. This jurisdictional heterogeneity creates an untenable scenario where an Indian-modified award achieves recognition in some jurisdictions but encounters refusal in others, resulting in multiplicitous proceedings across various legal systems.

The Gayatri Balasamy majority attempted to address this international dimension, relying upon Brace Transport Corporation v. Orient Middle East Lines Ltd. reasoning to contend that New York Convention recognition diverges from enforcement, with the latter necessarily presupposing the former. Yet this jurisprudential reliance proves inadequate.³⁶

II. Prospective Solutions and Legislative Imperatives

Addressing this enforcement vulnerability necessitates multifaceted reform initiatives. First, the legislature should consider amendments to the A&C Act that explicitly address international enforcement implications. Statutory provisions should clarify whether judicially-modified awards qualify for recognition under international conventions, potentially requiring modified awards to be separately certified as maintaining Convention-compliant status. Second, India should undertake bilateral engagement with the principal Convention signatories—the UK, Singapore, and the United States—to establish reciprocal understandings regarding modified-award recognition. Third, the Supreme Court should issue clarificatory pronouncements in subsequent cases, potentially establishing a doctrine that permits modification only where parties explicitly consent to extra-conventional modifications or where international law principles demonstrably accommodate such recalibrations.³⁷

CONCLUSION:-

The Constitution Bench has delicately balanced two competing values, and those are:-

• i. Party autonomy and finality of arbitral awards; and
• ii. The court’s duty to do justice and prevent multiplicity of proceedings.

The Constitution Bench struck a delicate balance between two competing imperatives: party sovereignty and arbitral finality versus judicial capacity to administer justice and prevent multiplicitous proceedings. By enshrining the doctrine of circumscribed judicial modification, the decision escapes the artificial dualism of remission or complete annihilation, while simultaneously fortifying the threshold against comprehensive appellate scrutiny.

This Constitution Bench determination carries far-reaching consequences for India's arbitral jurisprudential advancement. By delineating the Section 34 supervisory authority to encompass modification capacity, the judgment endeavours to terminate protracted contestation through renewed arbitration, economising litigant and institutional resources. Practically, lower courts will benefit from enhanced clarity regarding available remedial modalities in post-award litigation.³⁸ Nevertheless, critical concerns merit acknowledgement. Ascribing modification authority risks corroding the foundational principles of minimal judicial intervention and awarding finality upon which the A&C Act was architected.³⁹

But, nevertheless, the quandary still stands: how can we prevent this ‘minuscule and balanced doorway’ from progressively turning into an indirect route to merit review? It’s rather a very delicate divide, which needs to be seen!