Arbitration’s chief virtue is finality—the idea that once an arbitral tribunal issues its award, parties avoid protracted court battles. Yet in Gayatri Balasamy v. ISG Novasoft, the Supreme Court of India carved out a new “limited” power for courts under Section 34 of the Arbitration and Conciliation Act, 1996 (“A&C Act”) to modify awards rather than merely set them aside.
On its face, this seems a sensible way to correct minor defects without sending parties back to square one. In practice, however, it risks diluting arbitration’s certainty and inviting fresh rounds of litigation.
The New “Limited” Modification Power
Under Section 34(2)(a)(iv), courts could already “set aside in part” those portions of an award beyond the tribunal’s jurisdiction. In Gayatri Balasamy, the majority extended this to allow severance of invalid parts and correction of errors of a “typographical, computational or similar nature” without annulling the entire award.
Crucially, the Court held: The power to sever an invalid portion implies a limited power to vary the award. By embracing severance and remand under Section 34(4), the Court sought to avoid needless re-arbitration for trivial mistakes—a practical solution, it argued, that yields more just outcomes.
Where Practicality Meets Peril
On one level, this decision addresses litigants’ frustrations with procedural dead ends. If a tribunal awards ₹1 crore but miscalculates interest, parties can now ask the court to correct the figure rather than annul and restart the process.
Yet this “flexibility” masks a slippery slope:
Merits Re-examination: Distinguishing clerical fixes from substantive modifications will be fraught. When damages are consolidated, cutting out an “invalid” portion may require re-analysing evidence—exactly what Section 34 forbids.
Increased Challenges: Disappointed parties gain a new tool—every ambiguous clause or miscalculation invites another application under Section 34.
Global Outlier: Unlike India’s neighbors (like Singapore) or the UK’s Arbitration Act, most modern statutes do not empower courts to modify awards, relying instead on tribunal-administered correction mechanisms. This places India at odds with the global norm of minimal judicial intervention.
Justice Viswanathan’s Dissent: A Cautionary Voice
Justice K.V. Viswanathan warned that “recognising any modification power may invite judicial interference with the merits of the dispute,” thereby undermining both the A&C Act’s framework and India’s obligations under the New York Convention.
He emphasized that Section 34(4) was meant as a “safety valve” to cure defects—not rewrite awards. Unless lower courts apply the ruling with “strict judicial discipline,” the door now opened may risk ushering in the very judicial intervention the Act intended to avoid.
Diluting Finality, or Enhancing Justice?
Proponents argue this narrow power balances doctrine with pragmatism: parties no longer need to return to the tribunal just to fix a simple calculation error. Yet arbitration’s certainty rests on the independence of the tribunal and the finality of its award.
When courts begin tinkering—even “limitedly”—they risk eroding confidence in India as a pro-arbitration seat. Terming the power “tightly limited” does not erase the fundamental shift: awards become susceptible to litigation, not just challengeable.
Looking Ahead: The Need for Legislative Clarity
Given the ruling’s potential to spawn divergent interpretations, Parliament should clarify the scope of Section 34(4)—either by codifying limits on modification or by reaffirming the A&C Act’s finality-centric ethos.
Until then, litigants and courts must navigate uncertain terrain: a hybrid regime where arbitration and litigation blur.
Conclusion
Gayatri Balasamy v. ISG Novasoft marks a turning point for Indian arbitration—granting courts a pragmatic tool to preserve awards, but also inviting fresh controversy over the finality arbitration promises.
As arbitration practitioners and users adjust to the post-Balasamy landscape, the challenge will be to harness the ruling’s benefits without sacrificing the core stability and independence that make arbitration an attractive alternative to litigation.
Award-Winning Article Written By: Ms.Syedah Elena Zare
Final-year law student at Symbiosis International University with a deep interest in exploring how diverse facets of law impact society. My areas of focus include Technology Law, International Human Rights Law, Intellectual Property Law, Corporate Law, and Sports Law.
