Modifying arbitral awards via Article 142 defies Parliament’s intent: KC Niranjan Venkatesan

In a significant judgment, the Supreme Court of India in Gayatri Balasamy v. ISG Novasoft recently held that courts can modify arbitral awards under Sections 34 and 37 of the Arbitration Act. The majority opinion also stated that the Court can invoke Article 142 of the Constitution - which gives it the power to do "complete justice" in any matter before it - to modify awards..However, Justice KV Viswanathan dissented from the majority, ruling that Article 142 cannot be used for this purpose, lest the statutory scheme of the Arbitration Act be disturbed..King's Counsel Niranjan Venkatesan endorses the dissenting view, arguing that the power to modify arbitral awards must come from Parliament, not judicial innovation.In this interview with Bar & Bench's SN Thyagarajan, he calls the dissent “powerful” and rooted in principle, warning that expansive readings of Section 34 risk turning courts into appellate forums, thereby undermining the finality that arbitration is meant to ensure.Edited excerpts follow..SN Thyagarajan (SNT): The majority judgment in Gayatri Balasamy reads into Section 34 a limited power to modify awards, particularly when portions are severable or interest rates are excessive. Do you view this as a legitimate exercise in purposive interpretation, or a departure from the principle of minimal court intervention in arbitration?.Niranjan Venkatesan (NV): This question arises because the Indian Arbitration Act, by contrast to the arbitration legislation in some other common law jurisdictions, does not contain an express power permitting the court to vary an award. What the Supreme Court had to decide was whether, as a matter of construction or implication, that power is nonetheless available under Section 34. I would acknowledge that this is a difficult question and that views may reasonably differ. That said, the dissenting judgment seems to me to be preferable as a matter of principle. The difficulty, with respect, about the majority’s approach is that it is not easy to reconcile with the language or legislative history of the Arbitration Act. As the dissenting judgment points out at paragraphs 59 and 76, the predecessor legislation – the Arbitration Act 1940 – contained an express power to modify arbitral awards in certain circumstances. But the 1996 Act does not contain any equivalent provision. In addition, Section 34(1) states that recourse to a court against an arbitral award may be made “only” by an application for “setting aside” such award; and Section 34(2) states that an arbitral award may be “set aside”, which suggests that the only circumstance in which “recourse” may be had to the court under that provision is to have an award set aside (rather than modified). Those points about the language and legislative history which are made in the dissenting judgment, seem compelling to me..SNT: The Court relied on equitable considerations - such as avoiding fresh arbitration and reducing costs - to justify its limited modification power. From a comparative arbitration perspective, do such pragmatic justifications risk diluting arbitral autonomy or do they strengthen the system’s accessibility and fairness? .NV: I think that these policy or pragmatic considerations, as you rightly describe them, are primarily a matter for the legislature, not the courts. I don’t say that they are irrelevant to the exercise of construction, but they cannot dictate what Section 34 or any other provision in the Arbitration Act means. What it means must turn ultimately on the words used by Parliament, construed in their context and consistently with their purpose. If a provision construed in that (usual) way reveals a lacuna in the law or practical difficulties in its operation, the remedy is for Parliament to amend the law. .SNT: Justice Viswanathan, in his dissent, held that Article 142 of the Constitution cannot be used to create powers not found in the Arbitration Act. How do you assess the validity of this restraint, especially in a jurisdiction where judicial creativity is often balanced against statutory precision? .NV: I agree with that conclusion and with the reasons given for it in the dissenting judgment. As noted in paragraph 109 of the dissenting judgment, there is authority that Article 142 cannot (or perhaps should not as a matter of discretion) be used to supplant statutory provisions. Thus, if Section 34 does not permit an arbitral award to be modified in a certain respect, Article 142 cannot be used to create such a power. One could test that proposition by asking whether Article 142 can be used to set aside (rather than modify) an award on grounds other than those set out in Section 34. It seems to me that the answer is no. Section 34 contains an exhaustive list of the grounds on which an award may be set aside and to use Article 142 to expand that list would undermine Parliament’s objective of making Section 34 exhaustive. If that is correct, then the same reasoning applies in relation to modification: it is either permitted by Section 34 itself or not at all..SNT: The dissent also warns that allowing courts to “modify” awards would effectively convert them into appellate forums—contrary to the model law framework. In your view, is this concern overstated, or does it highlight a real threat to finality in arbitration? .NV: I would not go that far because the modification power recognised by the majority is a limited power. But the suggestion that Article 142 can be used to modify an award does mean that the outcome of a challenge to an award could vary depending on whether it is heard in the Supreme Court or in the lower courts. It is fair to say that it is unusual for the finality of an arbitral award to vary in this way according to the level of court in which a challenge is heard; and that is not the position in most other jurisdictions..SNT: Given India's ambition to be seen as an arbitration-friendly jurisdiction, do you think this judgment - particularly its openness to judicial modification - enhances or hinders India’s credibility in the global arbitration community? .NV: I don’t think it hinders India’s credibility. Ultimately, both the majority and minority were grappling with an interesting and difficult question of statutory interpretation on which, as I have said, views reasonably differ. Other jurisdictions have had to grapple with similarly difficult issues of arbitration law in recent years and none are the worse for it..SNT: The UK’s Arbitration Act 2025 now allows courts to vary an award in certain cases. Do you see this as evidence of a converging trend with India’s Gayatri Balasamy ruling, or are the legal and institutional safeguards in the UK too different to draw meaningful comparisons? .NV: Even before the 2025 amendment, the UK Arbitration Act contained a power to set aside or vary an award: see Section 67(3)(c) and Section 69(7)(b). I don’t doubt that the existence of such a power may be desirable in some circumstances, but whether the power exists or not must be a matter of construction of the individual legislation in question: some statutes may confer the power whereas others may not. It is important to approach that issue of construction without any presumption that the legislation does or does not contain such a power..SNT: If there is one reform you would suggest in India’s arbitration landscape - institutional, legislative or cultural - what would that be? .NV: A legislative reform which I think would benefit every arbitration jurisdiction that does not already have it is the introduction of an express power to make awards on a summary basis. One of the advantages of litigating in the English courts is the availability of the summary judgment/strike out procedure, which enables obviously unsustainable claims or defences to be put out of their misery at an early stage, thereby avoiding the delay and cost associated with a full trial. This has traditionally been more difficult to achieve in arbitration because of concerns that the award may be challenged or enforcement resisted. It is true that arbitrators already have the power to make summary awards, even without legislative reform. But the reality is that they are unlikely in practice to do so unless they are given an express power to do so either in the law of the seat or in any institutional rules applicable to the arbitration. Section 7 of the UK Arbitration Act 2025, for example, does this. It provides that the arbitral tribunal may make an award on a summary basis in relation to a claim or a particular issue if one party or another has no real prospect of success in relation to that claim or issue. That test – “no real prospect of success” – is the same test that the English courts apply in deciding whether to grant summary judgment in respect of a claim or issue; and there is an established body of authority as to what the test means.