Case Comment on Gayatri Balasamy v. ISG Novasoft Technologies Ltd. (2025)

Introduction

The Supreme Court’s Constitution Bench decision in Gayatri Balasamy v. ISG Novasoft Technologies Ltd. (2025 INSC 605, decided 30 Apr. 2025) represents a significant turning point in Indian arbitration law. At issue was the long-standing question of whether courts under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 (“A&C Act”) possess the power not merely to set aside an arbitral award but also to modify it.

This question carried wide consequences for India’s ambition to be a global arbitration hub. While the text of the A&C Act—modeled on the UNCITRAL Model Law—appeared to limit judicial recourse to setting aside awards, inconsistent High Court precedents had permitted limited modifications, generating doctrinal uncertainty. The Constitution Bench was convened to resolve this conflict.

Facts

The case arose from an employment dispute between Ms. Gayatri Balasamy, a senior executive, and ISG Novasoft Technologies Ltd. Allegations of sexual harassment and wrongful termination led to arbitral proceedings, where the tribunal awarded Ms. Balasamy ₹2 crore in damages. The Madras High Court modified this award twice—first increasing it substantially, then reducing it to a nominal ₹50,000. The core question before the Supreme Court was whether such judicial modification was consistent with the statutory framework of the A&C Act.

Disposition

By a 4:1 majority, the Constitution Bench held that courts do indeed possess a limited power of modification, exercisable in narrowly circumscribed scenarios: (i) where the award contains severable findings, (ii) clerical or computational errors, (iii) correction of post-award interest, and (iv) in exercise of the Supreme Court’s plenary power under Article 142 of the Constitution. Justice Viswanathan’s dissent, however, warned that such a reading impermissibly expands judicial power at the expense of arbitral finality and legislative intent.

Background

The debate over modification powers traces back to the legislative history of arbitration law in India. Under the Arbitration Act, 1940, courts were explicitly empowered to “remit” or “modify” awards. However, the A&C Act, 1996, enacted to harmonize Indian law with the UNCITRAL Model Law, deliberately omitted modification as a judicial remedy. Instead, Section 34 confined judicial recourse to setting aside awards, with Section 37 providing for appeals against such orders.

Earlier Precedents

McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181.

The Court held that courts could not correct or modify an award, but only set it aside and remit the matter to the tribunal.

ONGC v. Saw Pipes Ltd., (2003) 5 SCC 705.

While expanding the scope of “public policy” as a ground for setting aside awards, the Court did not authorize modification.

Project Director, NHAI v. M. Hakeem, (2021) 9 SCC 1.

The Court emphatically reiterated that Sections 34 and 37 do not permit modification of arbitral awards.

Against these binding authorities, some High Courts carved exceptions. In Vedanta Ltd. v. Shenzen Shandong Nuclear Power Construction Co. (Delhi HC 2018) and Tata Hydro-Electric v. Union of India (Bombay HC 2006), courts modified awards in limited scenarios, citing judicial efficiency. This divergence created doctrinal uncertainty, prompting the reference to a Constitution Bench.

Analysis

This section evaluates the Court’s decision against four questions: (i) appropriateness of the decision, (ii) conformity with existing law, (iii) adequacy of reasoning, and (iv) policy implications.

(i) Was the Court’s decision appropriate

The majority’s pragmatic approach acknowledged the inefficiency of forcing parties back to arbitration for minor corrections. Permitting limited modifications reduces costs, expedites justice, and prevents arbitral proceedings from becoming unnecessarily repetitive. For example, where an award grants interest at an unintended rate (say, 18% instead of 8%), requiring parties to recommence arbitration would be absurd. In such circumstances, judicial modification advances the cause of efficiency.

Yet, while desirable in practice, the appropriateness of such a decision must also be tested against statutory fidelity. Courts cannot rewrite statutes simply to promote efficiency—especially in arbitration, where minimal intervention is a foundational principle.

(ii) Does the decision conform with existing law

Here lies the difficulty. The textualist reading of Section 34(1)—“recourse to a Court against an arbitral award may be made only by an application for setting aside such award”—suggests exclusivity. By contrast, the majority invoked implied ancillary powers and the maxim omne majus continet in se minus (“the greater power includes the lesser”) to argue that the power to set aside necessarily includes the lesser power to modify.

This reasoning conflicts with earlier binding precedent (M. Hakeem), where the Court held that no such ancillary power exists. The dissent rightly underscores that omission of “modification” from the 1996 Act was deliberate, reflecting India’s alignment with UNCITRAL standards. In that sense, the majority’s ruling does not fully conform with existing law but instead charts a new course through judicial innovation.

(iii) Did the Court adequately justify its reasoning

The majority carefully carved out narrow categories for permissible modification—clerical errors, severable findings, interest correction, and Article 142 intervention. This limitation is commendable. However, several reasoning flaws persist:

• Party Autonomy: Arbitration rests on the principle that parties choose a private tribunal to decide their dispute, with courts having minimal interference. By enabling modification, courts risk displacing arbitral autonomy.
• Legislative Intent: The deliberate omission of modification powers in 1996 suggests legislative choice. The Court’s reading effectively re-introduces powers the legislature removed.
• Comparative Jurisprudence: Under the UNCITRAL Model Law, courts are not empowered to modify awards. India’s deviation may create uncertainty in enforcement abroad, particularly under the New York Convention.

(iv) What are the policy implications

Positive:

• Reduces delay and costs.
• Prevents multiplicity of proceedings.
• Provides finality in cases of minor errors.

Negative:

• Risks diluting arbitral finality and party autonomy.
• May encourage losing parties to challenge awards seeking judicial “correction,” increasing litigation.
• Could undermine India’s credibility as an arbitration-friendly jurisdiction, especially in cross-border disputes.

A more appropriate policy response would have been to acknowledge the legislative gap and recommend statutory amendment rather than judicially creating modification powers.

Conclusion

The Gayatri Balasamy decision reflects a pragmatic compromise: while the Court preserved arbitral integrity by restricting modification powers to narrow categories, it simultaneously departed from the text and intent of the A&C Act. This raises questions about separation of powers and judicial overreach.

The dissenting opinion, favoring legislative reform over judicial innovation, is arguably more faithful to India’s statutory and international commitments. Yet, the majority’s approach is not without merit—it responds to genuine inefficiencies in the arbitral process and reflects judicial willingness to adapt law to practical realities.

Ultimately, the decision leaves Indian arbitration at a crossroads. If followed cautiously, it could enhance efficiency without undermining autonomy. But if broadly applied, it risks eroding confidence in arbitral finality. The judgment underscores the urgent need for Parliamentary intervention—perhaps through an amendment re-introducing a carefully circumscribed power of modification—thereby aligning judicial practice with legislative clarity.

Also Read:

• Arbitral Awards: Limited Judicial Power to Modify Arbitral Awards: Analysis of Gayatri Balasamy v/s ISG Novasoft and NHAI v. Hakeem
• Judicial Conundrum: Analyzing The Jurisprudence Of Court’s Power To Modify The Award U/S 34 And 37