Gayatri Balasamy v. ISG Novasoft: A Limited Power to Modify or a Pandora’s Box?

The Supreme Court’s recent decision in Gayatri Balasamy v. ISG Novasoft Technologies Ltd. has sparked extensive commentary for “settling the law” on whether Indian courts can modify arbitral awards. While the majority judgment asserts a limited power to do so under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, it also arguably creates fresh interpretive uncertainties that could invite protracted litigation.

At first glance, the judgment appears to draw clear boundaries. In Paragraph 85, the Court sets out the limited contours of permissible modification, allowing intervention:

1. When the award is severable—i.e., the invalid part can be surgically removed from the valid portion;

2. To correct “clerical, computational or typographical errors… which appear erroneous on the face of the record”;

3. To alter post-award interest in justified cases; and

4. When Article 142 of the Constitution is invoked to do complete justice.

However, a closer examination reveals that the judgment may have opened more doors than it closed.

First, the Court’s ruling on correcting clerical or computational mistakes goes beyond mere superficial error correction. In Paragraph 49, the Court states:

“49…We affirm that a court reviewing an award under Section 34 possesses the authority to rectify computational, clerical, or typographical errors, as well as other manifest errors, provided that such modification does not necessitate a merits-based evaluation.

…

54. In the same vein as these judgments, we hold that inadvertent errors, including typographical and clerical errors can be modified by the court in an application under Section 34. However, such a power must not be conflated with the appellate jurisdiction of a higher court or the power to review a judgment of a lower court. The key distinction between Section 33 and Section 34 lies in the fact that, under Section 34, the court must have no uncertainty or doubt when modifying an award. If the modification is debatable or a doubt arises regarding its appropriateness, i.e., if the error is not apparent on the face of the record, the court will be left unable to proceed, its hands bound by the uncertainty. In such instances, it would be more appropriate for the party to seek recourse under Section 33 before the tribunal or under Section 34(4).”

The phrase “manifest errors”—undefined and open-ended—could be a Trojan horse. When read with the requirement that errors must be “apparent on the face of the record”, this potentially expands the scope of judicial review into areas that may touch upon factual appreciation, cloaked as a correction of “manifest” errors. What qualifies as “manifest” remains ambiguous, leaving wide latitude for interpretation by Section 34 courts.

Second, the ruling on severability raises both opportunities and risks. The Court clarifies in Paragraph 35:

“35. Partial setting aside may not be feasible when the ‘valid’ and ‘invalid’ portions are legally and practically inseparable… If they are, the award cannot be set aside in part.”

This principle seems uncontroversial when applied to multi-claim awards—where distinct and unconnected claims are ruled upon. But a trickier scenario arises when damages are awarded as a single consolidated amount, and the Court finds only part of the award supported by evidence. Suppose an arbitral tribunal awards ₹1 crore for delay damages, but the Court finds that the evidence supports only ₹30 lakhs. Can the court now “modify” the award to ₹30 lakhs?

Doing so would demand a merits-based inquiry—something expressly outside the remit of Section 34. Yet, by allowing modification in such cases under the garb of severability, courts may begin to exercise appellate functions in disguise. This would undercut the very arbitral finality that the 1996 Act seeks to uphold. While the judgment aspires to prevent unnecessary re-arbitration and promote efficiency, its interpretive breadth may paradoxically lead to a fresh wave of litigation over what exactly constitutes a “limited” modification.

This is precisely why the dissenting opinion notes that the modification of awards under Section 34 strikes at the very core of the ethos of the arbitration process. Hence, unless applied with strict judicial discipline, the door opened in Gayatri Balasamy risks ushering in exactly the kind of judicial intervention the Act intended to avoid.