Last verified: 23 June 2026
Arbitration is sold on a single promise: finality. You agree to keep a dispute out of court, a tribunal decides it, and that decision – the award – binds you. So for nearly 25 years a deceptively simple question split India’s courts: if a judge spots a clear, fixable error in an arbitral award, must the whole award be struck down and the parties sent back to square one, or can the court simply correct the error? The Arbitration and Conciliation Act, 1996 only ever spoke of “setting aside” an award – never of modifying it – and judges read that silence in opposite directions.
On 30 April 2025, a five-judge Constitution Bench of the Supreme Court in Gayatri Balasamy v. ISG Novasoft Technologies Ltd. finally answered the question. What began as an employment dispute over roughly ₹2 crore ended as the definitive ruling on judicial power over arbitral awards in India.
Yes – but only barely. In Gayatri Balasamy v. ISG Novasoft Technologies Ltd. (2025 INSC 605), a five-judge Constitution Bench held by a 4:1 majority that Indian courts have a limited power to modify an arbitral award under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996. A court may modify an award in only four narrow situations: when the invalid part is severable from the valid part; to correct a clerical, computational or typographical error apparent on the face of the record; to adjust post-award interest where there are compelling reasons; and when the Supreme Court uses Article 142 to do complete justice. Courts still cannot re-examine the merits or rewrite the award.
This guide explains how the Court got there, the four situations it carved out, the limits it drew, Justice Viswanathan’s dissent, and what the ruling means in practice for anyone with a stake in an Indian arbitration.
Why this question mattered for 25 years
The Act reflects arbitration’s promise of finality with deliberately narrow court intervention. Under Section 34, a court hearing a challenge to an award can only “set aside” the award on the limited grounds listed in the section. Under Section 37, an appeal lies against an order setting aside (or refusing to set aside) an award.
Notice the word the statute uses: set aside. Nowhere does Section 34 say a court may “modify”, “vary”, “correct” or “enhance” an award. So for years, the courts were split on a simple but high-stakes question: if a court spots a clear error in an award, must it strike the whole thing down and send the parties back to square one – or can it just fix the error?
This split produced two camps of Supreme Court decisions:
- The “no modification” camp. In Project Director, NHAI v. M. Hakeem (2021), the Court held that the power to “set aside” cannot be read to include a power to “modify” – to do so would be to rewrite the statute. This line was followed in Larsen Air Conditioning v. Union of India (2023) and S.V. Samudram v. State of Karnataka (2024).
- The “we modified anyway” reality. In practice, the Supreme Court itself had, in several cases, tweaked awards – most commonly the rate of interest – to avoid the absurdity of cancelling an otherwise sound award over a single fixable defect.
The result was doctrinal chaos. Lower courts genuinely did not know whether they were allowed to wield a scalpel or only a sledgehammer. That is what the Constitution Bench was assembled to resolve.
The facts: how an employment dispute reshaped Indian arbitration
The lead case had nothing to do with construction contracts or commercial mega-deals – it began as an employment dispute, the kind that increasingly ends up in alternative dispute resolution rather than a courtroom.
Gayatri Balasamy was employed with ISG Novasoft Technologies Ltd. After she raised complaints, including allegations of workplace sexual harassment, her employment was terminated and disputes arose. The matter went to arbitration.
- The award: The arbitral tribunal awarded Balasamy roughly ₹2 crore in compensation.
- Madras High Court (single judge): Hearing her Section 34 challenge, the single judge read “recourse to a court” expansively and enhanced the compensation by about ₹1.6 crore – effectively modifying the award upward.
- Madras High Court (Division Bench): On appeal, the Division Bench found the enhancement excessive and slashed the additional sum to just ₹50,000.
Both High Court orders assumed a power to modify. When the matter reached the Supreme Court, a three-judge bench realised the underlying question of law was unsettled and conflicting, and referred it to a larger bench. A Constitution Bench was constituted to decide it once and for all.
The five questions referred to the Constitution Bench
The Bench framed the reference around five questions:
- Whether the powers of a court under Sections 34 and 37 of the Act include the power to modify an arbitral award.
- If such a power exists, whether it can be exercised only where the award is severable and only a part is modified.
- Whether the power to set aside an award under Section 34, being the “larger” power, includes the “lesser” power to modify – and if so, to what extent.
- Whether a power to modify can be read into the power to set aside under Section 34.
- Whether NHAI v. M. Hakeem (followed in Larsen Air Conditioning and S.V. Samudram) laid down the correct law.
The verdict: a limited power to modify (4:1)
The Bench comprised Chief Justice Sanjiv Khanna and Justices B.R. Gavai, P.V. Sanjay Kumar, K.V. Viswanathan and A.G. Masih. By a 4:1 majority (judgment authored by CJI Sanjiv Khanna), the Court held that courts do have a limited power to modify an arbitral award under Sections 34 and 37 – but confined that power to four narrow situations. Justice K.V. Viswanathan dissented.
The majority’s core logic was that the greater power to set aside the whole award must, by necessary implication, include the lesser power to modify it in limited ways – otherwise parties would be forced into wasteful fresh arbitration over defects a court could fix in minutes. Crucially, the Court stressed this is not an appellate power: courts may not reappreciate evidence, second-guess the tribunal’s reasoning, or rewrite the award on its merits.
The four situations where a court CAN modify an award
1. When the award is severable
If the “invalid” portion of an award can be cleanly separated from the “valid” portion – where the two are not “inseparably intertwined” and each is “separately identifiable in terms of liability and quantum” – the court may sever and strike down only the bad part, leaving the rest intact. This is partial setting-aside dressed as modification.
2. To correct clerical, computational or typographical errors
Courts have an implied power to fix obvious errors apparent on the face of the record – a wrong arithmetic total, a misplaced decimal, a typo in a figure. This requires no merits review, so it does not trespass on the tribunal’s domain. It sits alongside the tribunal’s own power to fix such slips under Section 33 of the Act.
3. To modify post-award interest
A court may alter the rate or period of post-award interest where there are “compelling and well-founded reasons”. This recognises what the Supreme Court was already doing in practice, and reflects that post-award circumstances (e.g., interest rate changes) can fall outside what the tribunal could foresee.
4. When the Supreme Court invokes Article 142
The Supreme Court alone may use its constitutional power under Article 142 to do “complete justice” – but only with “great care and caution”. The majority expressly warned that Article 142 cannot be used to rewrite or modify an award on its merits.
What the Court did NOT allow
The ruling is easy to over-read. The majority drew a hard line: the modification power is a narrow exception, not a backdoor appeal. Courts cannot:
- Re-examine the merits of the dispute or reappreciate evidence;
- Substitute their own view of the facts or quantum for the tribunal’s;
- Rewrite the award or “improve” the tribunal’s reasoning;
- Modify where the defect is inseparable from the rest of the award (in which case the remedy remains setting aside, in whole or part).
Justice Viswanathan’s dissent: a warning about finality
In a detailed dissent running over 120 pages, Justice K.V. Viswanathan held that the power to set aside under Section 34 does not include a power to modify. His key points:
- No statutory basis. The Act nowhere confers a modification power. Reading one in amounts to adding words to the statute and overriding clear legislative intent.
- A tightly limited scheme. Relying on Sections 5, 13(5), 16(5) and 33, he stressed that judicial intervention in arbitration is deliberately and exhaustively circumscribed by Part I of the Act.
- Enforceability risk. Unlike the UK Arbitration Act, India’s statute has no express modification provision. A court-modified award may struggle to be enforced abroad under the New York Convention – the regime built on the UNCITRAL framework – which contemplates enforcement of the tribunal’s award, not a court’s rewrite of it.
- The right fix is legislative. If India wants a modification power, Parliament should enact one – courts should not manufacture it.
Before versus after Gayatri Balasamy
| Issue | Position before Balasamy (NHAI v. Hakeem line) | Position after Balasamy (2025) |
|---|---|---|
| Can a court modify an award? | No. Section 34 permits only setting aside. | Yes, but only in four narrow situations. |
| Clerical / arithmetic error | Set aside the award (or leave it). | Court may correct it directly. |
| Severable invalid portion | Unclear / contested. | Court may sever and strike only the bad part. |
| Post-award interest | Inconsistent practice. | May be modified for compelling reasons. |
| Re-examining merits | Not permitted. | Still not permitted. |
In short, NHAI v. Hakeem is no longer good law to the extent it held there is no power to modify at all; but its core caution – that courts must not turn Section 34 into an appeal on merits – survives.
What this means for you in practice
- For parties challenging an award: You can now ask a Section 34 court to correct a discrete error or sever a bad part, instead of gambling on a full set-aside. But do not dress up a merits disagreement as a “modification” request – courts will reject it.
- For award-holders: A single fixable slip in the award is less likely to sink the whole thing. That improves the practical value of winning in arbitration.
- For drafting and strategy: Tribunals should be meticulous about arithmetic, interest and severable heads of claim, since these are exactly the points a court may now touch. Careful upstream drafting – starting with a well-drafted arbitration agreement – reduces the room for these defects.
- For cross-border deals: Heed Justice Viswanathan’s warning. If your award may need enforcement abroad, a court-modified award could face New York Convention objections. Where international enforceability is critical, a remand or fresh determination by the tribunal may be safer than a court modification.
The criticisms and the road ahead
Commentators are divided. Supporters call the ruling pragmatic – it ends the absurdity of cancelling sound awards over fixable defects and reduces wasteful re-arbitration. Critics, echoing the dissent, warn that “limited” powers have a habit of expanding, that the boundaries between “correcting an error” and “reviewing merits” are blurry, and that the special status of Article 142 creates a discretionary “black hole” available only at the Supreme Court. There are also live concerns about how foreign courts will treat Indian court-modified awards.
The cleanest resolution would be a legislative amendment to the Act that spells out a modification power and its limits – something the ongoing reform debate around the Arbitration and Conciliation (Amendment) Bill, 2024 may yet address. Until then, Gayatri Balasamy is the governing law.
Frequently asked questions
Can a court increase or decrease the amount awarded by an arbitral tribunal?
Generally no – that would be a merits review. A court may only adjust figures to correct a clerical or computational error, sever a clearly invalid head of claim, or alter post-award interest. It cannot reassess quantum on the merits.
Does Gayatri Balasamy overrule NHAI v. M. Hakeem?
Partly. It overrules Hakeem’s absolute position that there is no power to modify at all, but it preserves Hakeem’s caution that Section 34 is not an appeal and courts cannot re-decide the dispute on the merits.
What is the difference between “setting aside” and “modifying” an arbitral award?
Setting aside cancels the award, wholly or in part, usually leaving parties to re-arbitrate. Modifying changes the award itself – correcting an error or severing a portion – while keeping the rest operative.
Can any court modify an award, or only the Supreme Court?
The first three situations – severability, error correction and post-award interest – are available to courts under Sections 34 and 37. The fourth, Article 142, is exclusive to the Supreme Court and must be used sparingly.
Was the Gayatri Balasamy decision unanimous?
No. It was 4:1. Justice K.V. Viswanathan dissented, holding that courts have no power to modify an award and that any such power must come from Parliament.
What was the citation and date of the Gayatri Balasamy judgment?
Gayatri Balasamy v. ISG Novasoft Technologies Ltd., 2025 INSC 605, decided on 30 April 2025 by a five-judge Constitution Bench of the Supreme Court of India.
Conclusion
For the first time, the Supreme Court has authoritatively confirmed that Indian courts can modify – not merely set aside – an arbitral award, but only within four tightly drawn boundaries. The ruling trades a sliver of finality for a large dose of common sense: an award should not collapse over a typo. Whether the “limited” power stays limited, and whether court-modified awards travel well across borders, are the open questions the dissent has flagged for the years ahead. For now, Gayatri Balasamy is the definitive answer to “Can courts modify an arbitral award in India?” – and the answer is a carefully qualified yes.
References
Case law
- Gayatri Balasamy v. ISG Novasoft Technologies Ltd., 2025 INSC 605 (decided 30 April 2025) – the five-judge Constitution Bench decision holding that courts have a limited power to modify an arbitral award.
- Project Director, NHAI v. M. Hakeem, (2021) 9 SCC 1 – held that the power to set aside under Section 34 does not include a power to modify.
- Larsen Air Conditioning and Refrigeration Co. v. Union of India (2023) – followed Hakeem.
- S.V. Samudram v. State of Karnataka (2024) – followed Hakeem.
Statutes and instruments
- Arbitration and Conciliation Act, 1996 – in particular Sections 33, 34 and 37 (and Sections 5, 13(5) and 16(5) relied on in the dissent).
- Constitution of India, Article 142 (power of the Supreme Court to do complete justice).
- Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), 1958.
Note on currency
This article states the law as settled by Gayatri Balasamy as of June 2026. Any subsequent legislative amendment to the Arbitration and Conciliation Act, 1996 may alter the position; confirm the current statutory text before relying on it.
This article is for informational and educational purposes only and does not constitute legal advice. For a specific arbitration matter, consult a qualified arbitration practitioner.
