BY Arnav Kaushik and Saloni Kaushik, THIRD and FIFTH- YEAR studentS AT Dr. Ram Manohar Lohiya National Law University, Lucknow And MahArashtra NaTIONAL LAW UNIVERSITY, NagPUR
INTRODUCTION
On 30 April 2025, in Gayatri Balasamy v. ISG Novasoft Technologies Ltd. (‘Gayatri Balasamy’), a Constitution Bench of the Hon’ble Supreme Court by a 4:1 majority, held that courts possess a limited power to modify arbitral awards. This power was interpreted as falling within courts’ express powers under Section 34 of the Arbitration and Conciliation Act, 1996 (‘1996 Act’). The judgment departs from Project Director, National Highway v. M. Hakeem (‘M. Hakeem’), where such powers were expressly denied. The Court identified three limited circumstances permitting modification: (1) severance of invalid portions of award, (2) alteration of post-award interest, and (3) correction of inadvertent errors or manifest errors. Justice Vishwanathan dissented, arguing that modification cannot be read into Section 34, except to rectify inadvertent errors. While the majority sought to resolve a legal impasse, it arguably introduced new interpretative ambiguities.
PARTY AUTONOMY AND JUDICIAL NON-INTERVENTION
To discern the implications of this ruling, one must consider the foundational principles of arbitration law—party autonomy and minimal judicial intervention. The 1996 Act, modelled on the UNCITRAL Model Law (‘Model Law’), enshrines these core principles. Party autonomy, the grundnorm of arbitration, allows parties procedural freedom, as contemplated in Article 19(1) of the Model Law and Section 19(2) of the 1996 Act. Complementing party autonomy, the Model Law’s non-interventionist approach is adopted by the 1996 Act, emphasizing minimal judicial interference and finality of awards. The Statement of Objects and Reasons of the 1996 Act clearly reveals the legislative intent to limit courts’ intervention, with sub-point (v) of Point 4 expressly aiming to minimize courts’ supervisory role. Section 5’s non obstante clause confines the scope of judicial intervention to matters governed by Part I of the 1996 Act, while Section 35 ensures finality of awards, highlighting the legislative intent of minimal judicial interference.
NO POWER TO MODIFY ARBITRAL AWARD?
There is no express provision in the 1996 Act, which recognizes the power to modify or vary arbitral award. The majority in Gayatri Balasamy invoked the maxim omne majus continet in se minus, arguing that the bigger power to set aside an arbitral award inherently subsumes the lesser power to modify. In contrast the minority, relying on Shamnsaheb M. Multtani v. State of Karnataka, argued that this maxim, rooted in criminal law, applies only when two offences are ‘cognate’— sharing common essential elements. Since modification and setting aside differ fundamentally in their legal consequence, the former results in alteration whereas the latter leads to annulment, therefore, the power to modify cannot be subsumed within power to set aside. Nonetheless, the application of this maxim violates the cardinal rule of statutory interpretation. According to this rule, where the language is unambiguous, it must be given plain and ordinary meaning. Notably, the majority held that Section 34 does not restrict the range of ‘reliefs’ the court can grant. However, in our opinion, the plain text of Section 34 limits the recourse to ‘only’ setting aside an award. This deliberate restriction, supported by expressio unius est exclusio alterius, and upheld in M. Hakeem signifies the legislative intent to exclude other remedies such as modification. Unlike foreign jurisdictions such as the U.K., U.S.A, and Singapore, and Section 15 of the erstwhile 1940 Act, the 1996 Act does not expressly provide for modification powers. Despite Vishwanathan Committee’s recommendation, the legislature has not evinced any intent to incorporate an express provision, as is evident from the Draft (Amendment) Bill 2024. Therefore, imputing a power of modification would amount to the courts engaging in a merit-based review of the arbitral award, a course of action unauthorized by law.
MODIFICATION V. SEVERANCE
As discussed in the preceding section of this blog, the powers to modify and to set aside an award are fundamentally distinct in their legal consequences. This raises the question: can the powers to partially set aside an award, that is to sever certain portions, be equated with the powers to modify? The minority view relies on the definition of “sever as to separate” to justify the power to set aside an arbitral award partly. Section 34(2)(a)(iv) contemplates severance, allowing partial setting aside of an award where the invalid portion is separable, in variability and quantum, to preserve the valid portion. Severance is possible where claims are structurally independent. As held in J.G Engineers Pvt. Ltd. v. Union of India , distinct claims—separate in subject-matter, facts, and obligations can be severed without altering award’s substance. A decision on a particular claim is an independent award in itself, capable of surviving despite invalidity of another claim, as endorsed in NHAI v. Trichy. While power to partial setting aside is recognised, this does not equate to a power to modify. Essentially, severance entails elimination of invalid portions without examining the merits, whereas modification entails a pro-active alteration which may or may not require a merit-based review. Furthermore, the majority view remained silent on a pertinent question: whether modification can fill the gap where severance fails due to structural dependence of claims, as with composite awards? With respect to invalid portions, Section 34 contemplates the initiation of fresh proceedings which re-affirms that severance is not an alternative to setting aside of an award but an ‘exception’ within it.
BUILT-IN FIXES: SECTION 33 & 34(4) OF 1996 ACT
Despite express provisions under Section 33, the Supreme Court held that courts may also rectify errors in arbitral awards by invoking inherent powers under Section 151 of the Code of Civil Procedure (‘CPC’). However, it is our considered view that inherent powers cannot override express statutory provisions, even under the pretext of serving justice. This is because it is presumed that procedure specifically laid down by the legislature, including under Section 34 of 1996 Act, is guided by the notions of justice.
Both the opinions invoked Section 152 of the CPC, which allows correction of accidental slips in judgments to avoid undue hardship. The minority held that this may apply only where (a) errors were not raised under Section 33; or (b) despite being raised, were not rectified by the arbitral tribunal. The majority, however, broadened this to include “manifest errors” by combining Section 152, the power to recall, and the doctrine of implied powers. Yet, term “manifest errors”lack clear scope: does it refer only to inadvertent errors under Section 33(1)(a), or also to curable procedural defects? We draw a distinction here: inadvertent errors are unintentional and apparent, while curable defects involve procedural irregularities affecting the award’s integrity, such as lack of reasoning, or inadequate award interest. Addressing such defects require discretion, and rightly falls squarely within tribunal’s authority under Section 33. Interestingly, the majority itself conceded that remand, unlike modification, enables tribunal to take corrective measures such as recording additional evidence. This position was further reinforced by the majority’s holding that where any doubt arises as to the propriety of a correction, the appropriate course is to remand the award to the tribunal under Section 34(4). This aligns with judicial pronouncements in I-Pay Clearing Services (P) Ltd. v. ICICI Bank Ltd. and Dyna Technologies Private Ltd. v. Crompton Greaves Ltd., which clarified that courts ought to provide the tribunal an opportunity to rectify curable defects. Moreover, Sections 33(2) and (3) explicitly empower the tribunal to evaluate whether correction requests are justified, reaffirming its authority over its procedural irregularities. In our view, curable procedural defects, such as post-award interest, should mandatorily be remanded to the tribunal, while courts may independently rectify inadvertent, clerical errors, under Section 152, CPC.
JUDICIAL OVERREACH AND ARTICLE 142
The minority view, while referring to the Supreme Court Bar Association v. Union of India and Shilpa Sailesh v. Sreenivasan (‘Shilpa Sailesh’), emphasized that Article 142 should not be invoked to construct a new legal framework in the absence of express provisions, such as modification powers under Section 34 of 1996 Act. In the case of Union Carbide Corporation v. Union of India, the Supreme Court had enunciated that Article 142, while rooted in equity, must conform to statutory prohibitions, especially those grounded on some fundamental principles of general or specific public policy. Citing interpretation of “specific public policy” in the case of Shilpa Sailesh, the minority held that the powers under Article 142 cannot override non-derogable principles central to a statute— in this context party autonomy and minimal judicial interference.
While we agree with the minority, the majority opinion warrants a closer scrutiny. While stating that Article 142 powers should not be invoked to modify awards on merit, the majority simultaneously observed that it may be invoked to end litigation, thereby blurring the scope of intervention. The equitable principles under Article 142, such as patent illegality, notions of morality and justice, and principles of natural justice, are already embedded as grounds for setting aside arbitral awards. Interestingly, the Vishwanathan Committee had recommended insertion of an express proviso allowing courts to make consequential orders varying the award only in exceptional circumstances to meet the ends of justice. However, this recommendation didn’t materialise, thereby indicating that the legislature intended the mechanism of setting aside an award to serve the purpose of ensuring complete justice.
CONCLUSION
The Supreme Court’s ruling in Gayatri Balasamy marks a significant shift in Indian arbitration law by permitting courts limited power to modify arbitral awards. Citing legal maxims like omne majus continet in se minus, and inherent powers, the majority blurred the distinction between setting aside and modifying awards, risking judicial overreach and merit-based review. The issue of modifying arbitral awards is inherently complex and must be approached with restraint. While courts may justifiably correct inadvertent, clerical errors, given that such corrections do not amount to review on merits, any broader exercise of this power must be checked. The vague and undefined use of the term ‘manifest errors’ creates a troubling lacuna, allowing scope for subjective judicial interpretation. The Apex Court must clarify the contours of what constitutes a ‘manifest error’, otherwise the courts risk exceeding the boundaries of minimal intervention. In the pursuit of doing complete justice, the courts must not undermine the legislative intent of excluding modification as a remedy, particularly when such a change can only be brought through a legislative policy decision. To resolve the present ambiguity, the legislature should reconsider the Vishwanathan Committee’s recommendation and expressly delineate the limited circumstances under which courts may vary an award. Despite being well-intentioned, the judgment introduces new complexities, necessitating legislative intervention to preserve the delicate balance between finality of awards and fairness of outcomes
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