ON February 19, 2025, a five-judge Constitution Bench of the Supreme Court reserved judgement in
Gayatri Balasamy v. ISG Novasoft Technologies Ltd on whether courts have the power to modify an
arbitral award under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996.
Section 34 of the Act provides the mechanism to set aside an arbitral award in the court. It lays down
certain grounds such as the agreement being invalid, the tribunal lacking jurisdiction, or the
agreement violating the public policy. However, the provision does not allow the court to go into the
merits of the award.
Section 37 of the Act provides for the appeals against certain orders made under the Act. It allows
the aggrieved party to appeal with issues related to the enforcement of arbitral award or interim
protection under Section 9 of the Arbitration Act. However, the scope of Section 37 is limited as it
only provides a set of categories of decisions which can be appealed. Both of these Sections reflect
the idea of the Act of minimum court intervention and expediting the dispute resolution process.
Both of these Sections reflect the idea of the Act of minimum court intervention and expediting the
dispute resolution process.
Legislative intent and schizophrenic court rulings
The 1996 Act, which repealed the erstwhile Indian Arbitration Act1940 drew inspiration from the
UNCITRAL Model Law on International Commercial Arbitration, 1985 (‘Model Law’). Sections 15 and
16 of the 1940 Arbitration Act expressly provided for the varying of an arbitral award; However,
Section 34 of the 1996 Act, a replica of Model law, provided for setting aside an arbitral award as the
absolute recourse. Article 34 of the model law never emphasised on changing or modifying the
arbitral award by the court. This shows that Parliament did not intend to include the power to
modify awards under Section 34 of the Act.
In December 2019, the Supreme Court in Dyna Technologies Ltd. v, Crompton Greaves Ltd. clarified
thatSection 34(4) was inserted to give the opportunity to an arbitral tribunal to rectify its mistakes
which ultimately minimises the risk of setting aside an arbitral award. It empowers the tribunal to
reopen a complete award and eliminate the grounds of setting aside. However, modification meant
changing an existing award.
The Courts, time and again, have emphasized the restrictive nature of Section 34. In Project Director
NHAI v. M Hakeem (2021), the Supreme Court widely discussed the scheme of Section 34 and held
that the court has no power to modify an arbitral award under the Act.It declared that Section 34
only provided limited grounds to challenge the award and did not permit them to ‘correct errors of
arbitrators’, but only to quash and set it aside.
In Larsen Air Conditioning and Refrigeration Company v. UOI (2023), the Court held that there is no
power of court to modify an award under the Act and at best, it could set aside the award if
preconditions under Section 34 were met. Recently, in SV Sundaram v. State of Karnataka (2024), the
Supreme Court held that the power of the court to modify the award would be a travesty to the Act
and would amount to “crossing the Lakshman Rekha”. Clearly, while enacting the 1996 Act, the
legislature wanted to do away with such a provision.
However, contrary to the accepted rules, the Court on multiple occasions, has either modified the
award or upheld the modification done by lower courts. In Tata Hydro-Electric v. UOI (2003), the
Court modified the date of effect of the award. Similarly, in J.C. Budharaja v. Chairman, Orissa Mining
Corporation Ltd. (2008), the total sum award to the claimant was reduced, while keeping the interest
unchanged, on the grounds that the award was not vitiated by any illegality or legal misconduct. The
rate of interest was modified by the Supreme Court in certain instances on the grounds of
unreasonability or the consent terms.
In all these aforementioned cases, the court had duly given the reasons which compelled them to
modify the awards. Nevertheless, the substantial question of law as to whether such powers could
be exercised under Section 34 of the Act was not discussed.
Modification in other jurisdictions
In the international regime, pro-arbitration countries such as the United Kingdom, United States,
Canada, Singapore and Australia have particular provisions in domestic legislations to govern the
modification of awards. The English Arbitration Act, 1996 lays down three major grounds under
which the award can be challenged namely on the question of substantive jurisdiction (Section 67);
serious irregularity (Section 68) and Appeal on the point of law (Section 69). The power of court to
set aside is available under all three Sections; however, the power to ‘vary’ the award is only with
Sections 67(3) and 69(7) when the challenge is on substantive jurisdiction or appeal on the point of
law.
The Australian Arbitration regime is governed by two different legislations which cover their
domestic and international arbitration respectively. As the Act is in pari materia with the UNCITRAL
model law, Section 34 of the Act provides for recourse by way of setting aside the award or opting for
an appeal under Section 34-A. However, unlike the Model Law, Section 34-A(7) empowers the court
to either confirm, vary remit or set aside the award. Hence, a literal interpretation of Section 34A
would give the power to modify or vary the awards to the Australian courts.
The Canadian Commercial Arbitration Act,1985 mostly derives its provisions from the Model Law.
Schedule I of the Act contains a commercial arbitration code which is the reproduction of model law
and Section 34 of the Code uses the same expressions namely recourse to a court and setting aside
the award. It does not grant any power to vary or remit the award.
In the international regime, pro-arbitration countries such as the United Kingdom, United States,
Canada, Singapore and Australia have particular provisions in domestic legislations to govern the
modification of awards.
As far as the U.S. is concerned, Section 11 of the Federal Arbitration Act,1925 allows the American
courts in the district where the award is made, to make an order for modification on three major
grounds: miscalculation of figures and mistakes in description, award on a non assigned matter and
imperfect award in matter of form affecting the disputed merits. The clause is intended to promote
justice between the parties.
Some jurisdictions have provided for the modification of awards since their inception, whereas
others empowered their courts through statutory amendment to keep up with the Global Arbitration
Regime.
How Article 142 has been invoked
The statute clearly does not provide the court with the powers to modify the award. Therefore, such
a modification is done by the Supreme Court under Article 142 of the Constitution, by exercising its
powers to do “complete justice”. Under Article 142, the Court, at its discretion, can pass any decree
or order to do complete justice and make the same applicable across the country. The importance of
these powers has been explained by using strongly worded phrases such as by calling it entirely of
“different level and of a different quality, which cannot be limited or restricted by the provisions
contained in the statutory law”, “not dependent or conditioned”, and “co-extensive in each case”.
However, the expanse of this power has resulted in the court taking a cautious approach to using it
and advising to exercise it sparingly and only in extraordinary cases.
The Court uses such powers in cases where the law is absent, there is no proper remedy, or
intervention is needed in public interest. Similarly, the Court used Article 142 to modify the arbitral
award. However, the very nature of the powers under Article 142 means that can be used on a case-
to-case basis. Hence the judgements cannot be used as a precedent for future cases, and as a result,
the basic question of whether an arbitral award can be modified by a court has remained
unanswered.
An examination of the historical use of Article 142 tells that, in practice, it has undergone several
changes. It was interpreted in such a manner that it gave the Court unfettered and absolute powers,
by enlarging the scope and making it a carte blanche to ignore the existing statutory provisions and
constitutional restrictions. The exercise of such powers has been considered not to be limited to the
cases concerning fundamental rights.
However, this trend of unbridled powers of the Court came to an end with tSupreme Court Bar
Association v. Union of India (1998) where it was held by the Court that:
“Article 142, even with the width of its amplitude, cannot be used to build a new edifice where none
existed earlier, by ignoring express statutory provisions dealing with a subject and thereby to achieve
something indirectly which cannot be achieved directly”
Therefore, the use of Article 142 is limited to work as a supplement, rather than a replacement of
substantive law. It cannot be a tool to override the legislative intent and should be used to tackle
lacunae, legislative loopholes, and procedural defects in furtherance of the constitutional mandate.
In Vishakha (1997), Article 142 was used to fill in the legislative vacuum regarding sexual harassment
of women in the workplace. However, there were some cases where such rules were not strictly
followed by courts, resulting in the Supreme Court clarifying that these instances could not be
followed as precedents.
Most cases which require such broad exercise of powers are inherently related to public interest, or
some imminent need.
Modification of award: Not justifiable under Article 142
The exercise of the powers under Article 142 for modification of arbitral award raises serious
questions.
Is it justified, even, to use Article 142 for modification of arbitral award given the nature and scope of
powers under Article 142?
The very nature of arbitration is the settlement of disputes without the intervention of the court, a
position amply solidified in Section 5 of the 1996 Act. This means that courts can intervene only for
purposes like providing interim measures, taking evidence, appointment of arbitrators in case of
failure to do so by the parties, extending the period of arbitral proceedings on request of parties,
setting aside awards, and enforcement of award. All these instances are such that they do not
require the Court to enter into the merits of the case.
Further, there is no explicit provision to modify the award, and hence no ground for the court to
intervene. Analysing this situation on the anvils of Supreme Court Bar Association (1998) shows that
express statutory provisions cannot be ignored while exercising powers under Article 142. Thus,
modification using extraordinary powers is not justified. If done then it will result in undermining the
express provision of substantive law, limiting court intervention.
In Union Bank of India V. Rajat Infrastructure Pvt. Ltd. & Ors (2023), the Court was asked to extend
time under the SARFAESI Rules for purchaser’s deposit. The Court dismissed the petition stating that
its plenary powers under Article 142 were inherent and complementary to the powers conferred on
the court by various statutes. They could be used to supplant the substantive law.
Explainer: Why the 'curing' of arbitral award under Article 142 is sheer judicial overreach
Why the Supreme Court struck down Kerala legislation to revoke arbitral awards as unconstitutional
The other concern is regarding the nature and types of cases where Article 142 is mostly used or
expected to be used. Most cases which require such broad exercise of powers are inherently related
to public interest, or some imminent need. Some examples include the absence of guidelines on
sexual harassment in the workplace and the legal process for the administration of passive
euthanasia.
Contrarily, arbitration is inherently a private matter, where the core principle is the honour of the
agreement between the parties, upholding their contractual rights and obligations. It only concerns
the commercial interests of the parties involved and respects their autonomy, without the court
intervention, unless required by the statute. So, the exercise of the powers of that wide amplitude
becomes questionable in such instances.
When it comes to commercial cases, the Supreme Court has limited its intervention through Article
142, to cases where there is an apparent lacuna in the law. This was observed in cases related to
insolvency, where there was no provision for withdrawal of insolvency upon settlement of
outstanding debt.
When it comes to arbitration, there is a settled law, based on international practices, and there exists
no lacuna regarding the powers to modify the award. The provisions of the Act are clear on the scope
of intervention by the court and at the same time, to make sure that the grievance of the aggrieved
party is not going unheard, it provides for the remission of the award back to the tribunal, wherein,
an award can be saved from setting aside if the same qualifies for it.
In the cases where the Court has used powers under Article 142 for the modification of the award,
such elements of public interest were not visible, hence not qualifying as a case where the use of
powers to do ‘complete justice’ was suitable. The decision in MBL Infrastructures also helped in
achieving the ultimate object of the law. And if we look at the judgments regarding the modification
of the award, it cannot be called to be delivered in furtherance of the objective of substantive law, as
such an intervention by the Court undermines the finality of the arbitral award and express
provisions of the law.
Fostering a pro-arbitration culture would require strict adherence to the legal framework, and
judicial restraints in matters where court intervention is not permitted.
Then, what next?
Fostering a pro-arbitration culture would require strict adherence to the legal framework, and
judicial restraints in matters where court intervention is not permitted. However, regular instances of
modification have made this position contentious. Sections 34 and 37 in the 1996 Act, gives limited
grounds to the Court to intervene. The basic idea here is to uphold the finality of the award, without
the courts getting into the merits of the award.
The comparison of Indian law with foreign jurisdiction shows that India has a strict adherence to the
UNCITRAL Model Law, which also has no provision for modification. Many jurisdictions do not
provide for such a power, and the finality of the award is maintained. However, based on internal
laws, in some jurisdictions, the courts are vested with the power to ‘vary’ the award on certain
grounds. The legal position in India cannot be called uncertain, as the legislative intent is writ visible
with the fact that the provision to modify, which was present in the old law of 1940, was explicitly
removed from the 1996 Act.
Despite these explicit legislative restraints, the Court has invoked Article 142 to modify awards -
interventions that pose as judicial overreach. Extraordinary powers under Article 142 are meant to
be used only for special purposes which showcase public interest, urgency, lacuna in law etc. and
caution has to be taken to make sure that such an exercise of powers does not nullify the object of
the substantive law.
Article 142 is a unique provision. It grants the Supreme Court the power to pass any order necessary
to secure complete justice. (use it in a separate para and also mention its cases)
In Supreme Court Bar Association v Union of India (1998), a landmark case on the use of Article 142,
the Court referred to the provision as “a valuable weapon in the hands of the Court to prevent
clogging or obstruction of the stream of injustice.” But it also imposed a kind of fetter on the
provision by noting that it can “supplement” but not “supplant” the substantive law under
consideration.
There is a long line of cases, including recent ones, that suggest that the Court has not been as
trigger-happy with Article 142 as is being argued in some quarters following the Judgement in the
State of Tamil Nadu. In a judgement from the first week of this month (Jomon K.K. v Shajimon P.),
the Court refused to exercise its powers under Article 142 on the ground that the appellant failed to
demonstrate a “palpable injustice”.
The facts were such that the appellant had a higher qualification than was prescribed for
appointment to the post of Lascar in the Kerala State Water Transport Service. Yet, he did not have
the “current” Lascar’s licence as mentioned in the advertisement. Since he had gained entry through
a process that was invalid, the Bench held that he could not seek relief under Article 142.
In Shilpa Sailesh v Varun Sreenivasan (2023), even as the Court said it could depart from procedural
as well as substantive laws, it noted that its use of Article 142 has to be based on considerations of
“fundamental general and specific public policy.” Fundamental general conditions of public policy,
according to the Court in Shilpa Sailesh, refer to fundamental rights, secularism, federalism and other
basic features of the Constitution.
Decision in Balasamy
The dispute in Balasamy pertained to clear computational mistakes and an unjustified rate of post-
award interest. When the appellant sought modification of award, faced with the restrictive
precedents, a Constitutional Bench was constituted to decide whether Section 34 absolutely bars
modification.
The Bench held that a court may alter an award, but only in four situations: (1) where the invalid part
is severable; (2) where there is a manifest clerical or computational error; (3) where post-award
interest requires adjustment for equity; and (4) where the Supreme Court exercises its power under
Article 142 of the Constitution to secure complete justice. Importantly, the Court stressed that judges
must not reconsider the merits of the dispute.
Reasons Given by the Court
The Court’s reasoning rests on three pillars. Efficiency has been considered as paramount: the Court
observed that forcing a remand to rectify minor errors is a wastage of resources and undermines
confidence in the alternative dispute resolution process.
Next, the Court relied on the ancillary powers doctrine, placing reliance on Grindlays Bank Limited. v.
Central Government Industrial Tribunal[5] which recognises that a statutory forum, though limited in
jurisdiction, is not denuded of inherent powers essential to prevent injustice and holding that even a
limited statutory jurisdiction carries incidental powers needed to give effective relief.
Finally, the Bench cited comparative practice. Many Model Law jurisdictions (for example, the United
Kingdom and Singapore) allow limited variation of awards. The Court observed that aligning Indian
law with these systems promotes international enforceability and supports India’s ambition to
become a preferred arbitral seat.
At the same time the Court cautioned that the power must remain narrow; and courts must resist
the temptation to revisit facts or evidence.
The Dissenting Opinion
Justice K.V. Viswanathan, while concurring on the need to correct clerical slips, dissented from the
majority’s broader power to sever or vary an award. Justice Viswanathan opined that Section 34 has
only two outcomes: setting aside the award or its remittance and warned that any further relief must
flow from Parliament, not judicial invention. Justice Vishwanathan predicted that the majority’s test
could tempt disappointed parties to label substantive grievances as manifest errors in the award,
thereby diluting arbitral finality and risking a conflict with the New York Convention. Although a
minority view, the dissent offers lower courts a strict textual roadmap and may encourage future
challenges to modifications, pressing Parliament to clarify the statute once and for all.
Practical Implications
The ruling possibly changes strategy for litigants while filing applications under Section 34 of the A&C
Act. Counsel may consider incorporating alternative reliefs, such as severance of invalid parts of the
award, correction of errors apparent, or recalibration of interest, alongside the usual prayers to set
aside the award. It may also be recommended to present clear interest calculations so that the court
may adjust and/or compute rates rationally. In case a party may seek remand for clarification; the
absence of a written application is no longer fatal.
