INTRODUCTION
Arbitration in India is founded on the principles of party autonomy, finality of awards, and minimal judicial intervention, as embodied in the Arbitration and Conciliation Act, 1996. However, the extent to which courts may interfere with arbitral awards, particularly whether they possess the power to modify such awards has remained a contentious legal issue. The present case involving Gayatri Balasamy v. ISG Novasoft Technologies Limited brings this debate into sharp focus.
Originating from an employment dispute that culminated in an arbitral award of compensation, the matter traversed multiple judicial forums, raising crucial questions on the scope of judicial powers under Sections 34 and 37 of the Act. The case examines whether courts, while exercising their supervisory jurisdiction, can go beyond merely setting aside or upholding an arbitral award and instead alter or modify its terms. This article analyses the factual background, rival contentions, and judicial reasoning to understand the evolving jurisprudence on the limits of court intervention in arbitral proceedings.
FACTS
a. Gayatri Balasamy was employed by ISG Novasoft Technologies Limited and was appointed as Vice President (M&A Integration Strategy) on 27 April 2006.
b. On 24 July 2006, a few months after joining, Balasamy submitted her resignation alleging sexual harassment by the Chief Executive Officer (CEO) named Krishna Srinivasan but her resignation was not accepted.
c. A year later, ISG issued a termination letter of her employment and then the aggrieved party(Gayatri Balasamy) filed criminal complaints against the CEO.
d. By arbitration, the arbitral tribunal passed an award granting Rs 2 crore as compensation.
e. But, the plaintiff approached the Madras High Court under Section 34 of the Arbitration and Conciliation Act, 1996, alleging non-consideration of multiple claims by the arbitral tribunal.
f.On 2 September 2014, aSingle Judge of the Madras High Court modified the arbitral award and granted additional compensation of Rs 1.6 crore, over and above the original Rs 2 crore awarded by the tribunal.
g. On 8 August 2019, a Division Bench of the Madras High Court again changed the earlier order. While it agreed that the plaintiff was entitled to additional compensation, it found that the amount fixed by the Single Judge was not properly calculated and was unreasonably high. Therefore, the Division Bench reduced the additional compensation from Rs 1.6 crore to Rs 50,000. The plaintiff filed a Special Leave Petition (SLP) under Article 136 before the Supreme Court of India.
ISSUES
a. Whether the powers of the Court under Sections 34 and 37 of the Arbitration and Conciliation Act 1996 will include the power to modify an arbitral award?
b. Whether the power to modify an arbitral award, if available, can be exercised only when the award is severable and a specific part thereof is capable of being modified?
c. Whether the power to set aside an award under Section 34 of the Act, being a larger power, will include the power to modify an arbitral award and if so, to what extent?
d. Whether the power to modify an award can be read into the power to set aside an award under Section 34 of the Act?
CONTENTIONS BY THE PLAINTIFF
a. The plaintiff argued that while deciding the case under Section 34, the High Court went beyond its powers by re-examining the merits of the dispute and changing the amount of compensation awarded.
b. The plaintiff stated that under Section 34 of the Arbitration and Conciliation Act, 1996, the court does not have the power to modify or rewrite an arbitral award except to the limited extent expressly permitted by the statute. It was argued that Section 34 only empowers the court to either set aside an arbitral award or uphold it, and not to modify, vary, or enhance the relief granted by the arbitral tribunal.
c. The plaintiff argued that the Arbitration Act is based on the principle of minimal judicial intervention, and that permitting courts to modify arbitral awards would undermine the objective of ensuring speedy and final resolution of disputes through arbitration.
d. It was also contended that even where an award is severable, severability merely enables the court to set aside the invalid portion and does not confer any power to replace it with a modified version.
e. It was stated that modifying awards undermines party autonomy and requires legislative intervention and not judicial power.
CONTENTION BY DEFENDANT
a. The defendant argued that under Section 34 of the Arbitration and Conciliation Act, 1996, the High Court has the authority to modify or correct an arbitral award to fix errors in calculation or reasoning.
b. The defendant contended that the arbitral award is severable, so the court may intervene to correct only the defective part without altering the other part of the award. It was stated that the compensation awarded by the Single Judge was excessive and lacked proper arithmetic and legal reasoning which justifies the modification.
c. The defendant argued that altering only the defective portion of the award does not violate the principle of minimal judicial intervention.
d. The defendant argued that the modification is corrective, and the decision retains most of the arbitral tribunal’s original decision.
e. The defendant stated that judicial intervention is necessary to ensure fairness and to prevent awards that are excessive or unjust.
COURT’S REASONING AND DECISION
The court held that there is a limited power that may be exercised under the following circumstances-
a. When the award is severable, the invalid part can be separated from the valid part of the award. If the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside as mentioned in the proviso of Section 34(2)(a)(iv).
b. The court examining an award under Section 34 has the power to correct computational, clerical, typographical or other obvious errors as long as such corrections do not require a re-evaluation of the merits of the case. The principal mechanism is to provide a quicker and cost-effective alternative to courtroom litigation.
c. Post award interest may be modified in some circumstances. Section 31(7)(b) provides that if the award does not specify interest on a sum that must be paid, that sum will automatically earn interest at a rate 2% higher than the prevailing interest rate on the date of the award.
d. Although Article 142 of the Constitution is applicable, it should be exercised carefully and must be used with due caution and strictly within the scope of constitutional limits. The court stated that Article 142 empowers the Court to ensure complete justice in any case or matter before it. However, the exercise of this power must align with the fundamental principles and objectives of the 1996 Act and must not undermine or override them.
CONCLUSION
The judgment in Gayatri Balasamy v. ISG Novasoft Technologies Limited clarifies that courts exercising jurisdiction under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 have only a limited power to interfere with arbitral awards. The Court reaffirmed that the power to set aside an award does not ordinarily include the power to modify it, except in narrow circumstances such as severable awards, correction of clerical or computational errors, or limited adjustments relating to post-award interest. By restricting judicial intervention and discouraging re-examination of merits, the decision strengthens the principles of finality, party autonomy, and minimal court interference, thereby reinforcing arbitration as an efficient and reliable mode of dispute resolution in India.
REFERENCES
a. https://api.sci.gov.in/supremecourt/2021/20788/20788_2021_1_1501_61506_Judgement_30-Apr-2025.pdf
b. Arbitration and Conciliation Act, 1996
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