CASE COMMENT: GAYATRI BALASWAMY v. ISG NOVASOFT TECHNOLOGIES LIMITED
By Tarannum Jahan
CITATION: 2025 INSC 605
APPELLANT: Gayatri Balasamy
RESPONDENT: M/s ISG Novasoft Technologies Limited
BENCH: Chief Justice of India, Sanjiv Khanna (who wrote the majority opinion), Justice B.R. Gavai, Justice P.V. Sanjay Kumar, Justice A.G. Masih, and Justice K.V. Viswanathan.
COURT: Supreme Court of India (Civil Appeal Nos. of 2025)(Arising out of SLP(C) Nos.15336-15337 of 2021
DATE OF JUDGMENT: April 30, 2025
INTRODUCTION :
The case of Gayatri Balasamy v. M/s ISG Novasoft Technologies Ltd., 2025 INSC 605, is an important judgment delivered by the Constitution Bench of the Supreme Court of India. It deals with the scope of judicial intervention in arbitration proceedings under the Arbitration and Conciliation Act, 1996. The main issue before the Court was whether, while exercising powers under Sections 34 and 37 of the Act, courts can modify an arbitral award or whether they are restricted only to setting aside or upholding the award. Before this judgment, there were differing opinions among Indian courts on this issue because the Act does not specifically provide for the power to modify an arbitral award. To remove this uncertainty, the Constitution Bench, by a majority of 4:1, held that courts have a limited power to modify an arbitral award in certain exceptional situations. These include correcting clerical or accidental errors, modifying a part of the award that can be separated from the rest, and making necessary changes relating to post-award interest as permitted by law. The Supreme Court also made it clear that this limited power does not allow courts to act as appellate authorities or to reconsider the merits of the dispute decided by the arbitral tribunal. The judgment seeks to balance two important objectives: reducing unnecessary judicial interference in arbitration while ensuring that justice is served in appropriate cases. At the same time, the dissenting opinion expressed concern that recognising such a power might lead to greater judicial intervention in the future. Overall, this decision is an important development in Indian arbitration law because it provides clarity on the powers of courts while preserving the finality of the arbitration process.
THE LEGAL LANDSCAPE BEFORE BALASWAMY:
Prior to Balaswamy, Indian courts generally held that Section 34 of the Arbitration and Conciliation Act, 1996 (“the Act”) permitted only the setting aside of awards, not their modification, as affirmed in cases like McDermott International and M. Hakeem. A few exceptions existed, like Vedanta Ltd. v. Shenzen Shandoing Nuclear Power Construction Co. Ltd. and Oriental Structure Engineers (P) Ltd. v. State of Kerala, primarily concerning interest components, occasionally invoking Article 142 for complete justice. This background sets the stage for evaluating the Supreme Court’s doctrinal stance.
FACTS OF THE CASE
The appellant, Gayatri Balaswamy, was an employee of the respondent, ISG Novasoft Technologies Ltd., and was appointed as Vice President in the M&A Integration Strategy department. In 2006, she resigned, citing sexual harassment by the CEO. However, the company did not accept this. Instead, she was issued three termination letters in the course of one year. Later, she lodged a criminal complaint under the erstwhile Indian Penal Code, 1860, and the Tamil Nadu Prohibition of Harassment of Women Act, 1998. The matter reached the Supreme Court, where it was referred to arbitration, and the Arbitral Tribunal awarded Rs. 2 crore to the appellant. Aggrieved by the same, Gayatri Balasamy moved the High Court of Madras to set aside the award, on the ground that not all of her issues were considered by the Arbitral Tribunal.
The High Court of Madras modified the award of the Tribunal by adding compensation of Rs. 1.6 crore in addition to the Rs. 2 crore award. The Division Bench of the Madras High Court then modified the award, stating that the compensation awarded was excessive and lacked arithmetic logic. The compensation was thereby reduced from Rs. 1.6 crore to Rs. 50,000. Aggrieved by the same, Gayatri Balasamy moved the Hon'ble Apex Court through a Special Leave Petition (SLP).
ISSUE(S)
Whether the power of the Court under Section 34 and 37 of the Arbitration and Conciliation Act, 1996 will include the power to modify an arbitral award?
If courts have the power to modify the award, can such power be exercised only where the award is severable, and a part thereof can be modified?
Whether the judgment of the Supreme Court in M. Hakeem and subsequent decisions that follow the position in M. Hakeem lay down the correct law?
Whether the power to modify an award can be read into the power to set aside an award under section 34 of the Act
LEGAL CONTENTIONS
Arguments from Appellant-
It was argued that the judgment given in the M.Hakeem case should be reconsidered as past Supreme Court decisions have allowed changes to arbitral awards. The Court has upheld the Modification of awards by High Courts and District Courts in other cases too. Another point raised was that the Model law based on the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958, permits a broader scope of judicial intervention. Many countries follow this approach and allow courts to not only cancel Award but also change or partially change them. If courts can cancel an award under Section 34 they should also be able to modify it, as modification is a lesser power.
A reference was made to the case Ahmedabad St. Xavier College Society vs. State of Gujarat, where the court used the Latin maxim “ omen majus continent in se minus”, which means “ a greater power includes a lesser one”. So, if the court has the power to cancel or set aside an award, then it should be able to modify or partially cancel it. And if an arbitral award goes against public policy under Section 34(2)(b)(ii) or contains a legal error under Section 34(2A), the court should have the power to change or cancel it.
Three additional Arguments were raised. The first argument was that the word “ recourse” in Section 34 is wide in meaning. It can include any actions to enforce a right, such as modifying or varying an award. The second argument relates to the public law aspects of land acquisition under the National Highways Act, 1956; courts can increase compensation, showing they have the power to modify. Finally, it was argued that courts should have the inherent power to modify awards under Section 34 when appropriate.
ARGUMENTS FROM RESPONDENT
The learned counsel opposing the court’s power of modification argue that the Model Law was made by many countries to follow one common rule: courts should not change arbitral awards because it could create confusion and problems in enforcing awards internationally.
For eg. Under the New York Convention, only arbitral awards are recognised and enforceable, not court decrees/orders that modify those awards. Courts cannot replace an award with their own decision unless Indian law specifically allows it, and Indian law does not permit it.
It is further submitted that the maxim “omne majus continent in se minus” – the greater contains the lesser should not be applied. The power to set aside an award is a sui generis power, which is intrinsically different from the power to modify it. The power to set aside is not the same as the power to modify it. Sec 34 allows only annulment, not changes.
After giving the award, the tribunal's duty is over, and the courts do not have appeal power in case of arbitration, so the court can not modify the award either.
JUDGEMENT
The judgment was delivered by the then Chief Justice of India, Hon'ble Justice Sanjiv Khanna, on behalf of the Constitution Bench. The Court held that although the Arbitration and Conciliation Act, 1996 does not expressly grant courts the power to modify arbitral awards, such a power exists in limited and exceptional circumstances. At the same time, the Court made it clear that this power cannot be exercised in a manner that converts the court into an appellate authority over the arbitral tribunal. The Court first explained that an arbitral award may be modified when it is severable. This means that if the invalid part of the award can be separated from the valid part without affecting the rest of the decision, the court may modify only that portion instead of setting aside the entire award. In support of this view, the Court relied on the legal principle omne majus continet in se minus, which means that a greater power includes a lesser one. Therefore, if a court has the power to set aside an entire award, it also has the lesser power to modify only the defective part. However, where the valid and invalid portions are so closely connected that they cannot reasonably be separated, modification is not permissible. The Court also recognised that courts may correct obvious clerical, typographical, or computational mistakes appearing on the face of the award. Although Section 33 of the Arbitration and Conciliation Act empowers the arbitral tribunal to correct such errors, the Court observed that while exercising jurisdiction under Section 34, it may also rectify these limited mistakes, provided that doing so does not require a fresh examination of the merits of the dispute. Another important issue before the Court was whether it could modify the interest awarded by the arbitral tribunal, particularly post-award interest. The Court answered this question in the affirmative and held that post-award interest may be modified where the facts of the case justify such interference. It observed that an arbitral tribunal cannot always anticipate future events or changing circumstances while fixing post-award interest. Therefore, courts may make suitable modifications in exceptional cases. However, the Court emphasised that this power must be exercised carefully and only for valid reasons. The Constitution Bench also considered the scope of Article 142 of the Constitution of India. It held that this extraordinary constitutional power should be exercised with great caution and only when necessary to ensure complete justice. The Court clarified that Article 142 cannot be used to rewrite an arbitral award or to reconsider the merits of the dispute. Nevertheless, in exceptional situations, it may be invoked to bring an end to prolonged litigation and to save the parties from unnecessary delay, expense, and further legal proceedings.
DISSENTING REASONING BY HON’BLE JUSTICE K.V. VISWANATHAN :
Hon’ble Justice Viswanathan’s dissenting opinion is notable for its constitutional caution and clarity: Courts cannot modify arbitral awards. Sections 34 and 37, he argued, enumerate limited negative powers to set aside, not rewrite or re-engineer awards. He pointed out that nowhere in the text does it give judges the authority to change decisions made by a tribunal that was mutually agreed upon. Modification would transform the Court from a supervisory body to an appellate forum, violating both the letter and spirit of the Act. He views severability as nullifying an unlawful portion rather than rewriting what remains; it is not a modification. This distinction, he argued, must remain sharp.
He also objected to the modification of the interest in the arbitral award. A court may only set aside or return the award to the tribunal as a remedy under Section 34. Even post-award interest cannot be unilaterally changed by the Court if it violates the law. Only typographical, clerical, or computational errors may be fixed, according to the dissent. This is not considered “modification” in the substantive sense and is limited to technical mistakes, not changes in legal reasoning or merit-based outcomes.
He rejected arguments that courts can rely on inherent powers under Section 151 of the Code of Civil Procedure, 1908 to modify awards. Section 34 is a complete Code, and importing general CPC powers would conflict with the legislative scheme. Implied or inherent powers cannot override express statutory limits. He also underlined that, in contrast to constitutional courts that have the authority to invoke Article 142, arbitral power is statutory. Its use would undermine legislative supremacy and the scheme of minimal judicial intervention.
This dissent stems from an institutional concern that judicial modification would essentially take the role of the arbitral tribunal, blurring the binding and final character of arbitration. His analysis emphasised statutory restraint and legislative intent, contending that Parliament, not the judiciary, must be the source of any expansion of judicial authority over arbitral awards. Otherwise, the arbitral process becomes less predictable, particularly in business partnerships where enforcement certainty is as important.
ANALYSIS
The judgment in Gayatri Balaswamy v. M/s ISG Novasoft Technologies Ltd. represents an important development in Indian arbitration law. In my opinion, the decision adopts a practical approach by recognising that courts should not always be forced to choose between completely setting aside an arbitral award and leaving it untouched. By allowing limited modification in exceptional situations, the Supreme Court has provided a more balanced solution that can reduce unnecessary litigation and save both time and costs for the parties. This judgment is also likely to influence the way arbitral awards are drafted. Since courts may examine only limited aspects of an award, arbitrators will have to be more careful while preparing their decisions. They should ensure that calculations are accurate, clerical mistakes are avoided, issues are dealt with separately wherever possible, and the reasons for awarding interest are clearly explained. Such careful drafting can reduce the possibility of judicial intervention and strengthen confidence in the arbitration process. At the same time, the Supreme Court has rightly placed strict limits on the power of modification. The judgment makes it clear that courts cannot reassess the evidence, reconsider the merits of the dispute, or substitute their own view for that of the arbitral tribunal. This restriction is essential because arbitration is intended to provide a speedy and final resolution of disputes with minimal court interference. The merit in the concerns expressed in the dissenting opinion, which cautions that an expanded use of the power to modify awards could gradually weaken the independence of arbitration if not exercised carefully. The future impact of this decision will largely depend on its implementation by the courts. If lower courts follow the principles laid down by the Constitution Bench and exercise this power only in exceptional cases, the judgment will improve the effectiveness of arbitration while preserving its autonomy. However, if the power is interpreted too broadly, it may encourage unnecessary judicial intervention and reduce the finality that arbitration seeks to achieve. Overall, the judgment successfully balances the need for limited judicial correction with the principle of minimum court interference. It provides much-needed clarity on the powers of courts under the Arbitration and Conciliation Act, 1996, while continuing to respect the independence and efficiency of the arbitral process. Its long-term success will depend on how consistently and cautiously these principles are applied in future cases.
CONCLUSION
This judgement is an important step in the development of arbitration law in India. The judgement has held that limited modification of arbitral awards is allowed and necessary by Courts, which is a significant and conclusive shift from the catena of judgements that gave divergent opinions on the same. The judgement has paved the way for the Courts to intervene and modify awards while also respecting arbitral autonomy by allowing it to do so only in limited circumstances. This is a welcome change, which, if used effectively, will significantly reduce re-arbitration or fresh litigation. The legislature must also take this into account and take legislative action to reduce ambiguity regarding the modification of arbitral awards. Going forward, it would be interesting to see how Courts balance this without hampering arbitral autonomy or the objectives the Act seeks to achieve.