Judgement Briefs

Alternative Dispute Resolution

Gayatri Balasamy v. ISG Novasoft Technologies Ltd.

(2025) 7 SCC 1; 2025 INSC 605

Citation
(2025) 7 SCC 1; 2025 INSC 605
Court
Supreme Court of India
Date
30 April 2025
Bench
Sanjiv Khanna, C.J.; B.R. Gavai, Sanjay Kumar, Augustine George Masih and K.V. Viswanathan, JJ.

Facts

  • The disputes raised a common question because earlier authorities, especially:
  • McDermott International; and
  • M. Hakeem, had broadly stated that Section 34 did not permit modification.
  • In practice, courts had sometimes:
  • severed invalid claims;
  • corrected obvious calculations;
  • altered interest;
  • or used Article 142 to avoid unnecessary fresh arbitration.
  • A Constitution Bench was therefore asked to determine whether any modification power exists under Sections 34 and 37.
  • The Bench delivered a majority judgment and a partly dissenting opinion.

Issue

  • Whether Sections 34 and 37 permit modification of an arbitral award.
  • Whether partial setting aside includes severance.
  • Whether courts may correct clerical or computational errors.
  • Whether post-award interest may be altered.
  • Whether Article 142 can be used in exceptional arbitration cases.

Rule

  • By a 4:1 majority, the Supreme Court recognised a limited power of modification.
  • The court may:
  • sever and set aside an invalid portion where it is legally and practically separable;
  • correct clerical, typographical or computational errors apparent on the face;
  • modify post-award interest under Section 31(7)(b) where legally necessary;
  • and, in exceptional cases, use Article 142 to do complete justice.
  • The court cannot:
  • reappreciate evidence;
  • decide the dispute afresh;
  • substitute its preferred contractual interpretation;
  • alter the basic merits;
  • or rewrite the award.
  • Modification and setting aside are distinct powers and must remain carefully confined.

Application

  • The majority reasoned that an absolute no-modification rule could produce unnecessary injustice.
  • For example:
  • if one severable claim is unlawful, the valid remainder should not automatically fall;
  • if totals contain an obvious arithmetic mistake, a new arbitration is wasteful;
  • and if post-award interest violates the statute, the court should be able to correct it.
  • The Court found limited textual support within:
  • the expression “set aside” as capable of partial operation;
  • severability recognised in Section 34;
  • the court’s authority over interest;
  • and the need to make the statutory remedy effective.
  • However, it repeatedly warned that modification cannot become an appeal.
  • Courts must identify the exact defect and ask whether correction is possible without:
  • taking new evidence;
  • reconsidering liability;
  • reassessing damages;
  • or choosing between competing factual conclusions.
  • Where the proposed change requires any such merits inquiry, the only lawful choices remain:
  • uphold;
  • set aside;
  • partially set aside where severable;
  • or remit under Section 34(4) where appropriate.
  • The majority qualified the categorical language in McDermott and Hakeem.
  • It did not approve the broad compensation reassessment rejected in Hakeem.
  • Article 142 was also confined to exceptional Supreme Court cases and cannot be treated as an ordinary power of every Section 34 court.
  • The partly dissenting opinion warned that even limited modification lacked sufficient statutory foundation.
  • The majority view is nevertheless controlling law.

Conclusion

  • The Constitution Bench held that courts possess a narrow modification power under Sections 34 and 37.
  • It is limited to severable portions, obvious errors, post-award interest and exceptional Article 142 situations.
  • General merits-based rewriting remains prohibited.
  • Use this case for: the current and controlling law on limited judicial modification of arbitral awards.