Gayatri Balasamy Vs M/s Isg Novasoft Technologies Limited C.a. No. 6178-6179/2025

In a significant and potentially far-reaching judgment, the Supreme Court of India in Gayatri Balasamy v. M/s ISG Novasoft Technologies Ltd., C.A. No. 6178–6179/2025, has introduced a limited but firm shift in how courts may interact with arbitral awards under the Arbitration and Conciliation Act, 1996. Departing from its earlier, rigid position that courts could only set aside or remand awards, the majority has now held that courts may, in limited circumstances, modify arbitral awards.

This development marks a judicial recalibration, which may well redefine India’s arbitration ecosystem. At its core lies the tension between finality of arbitral decisions—a hallmark of the global arbitration regime—and the need for judicial equity where procedural or technical errors cause manifest injustice.

Traditionally, Indian courts, particularly in McDermott International v. Burn Standard and later in Project Director, NHAI v. M. Hakeem, maintained a strict construction: no modification of arbitral awards under Sections 34 or 37. The judiciary adopted a minimalist stance, aligned with the UNCITRAL Model Law, which does not expressly provide for judicial modification of awards.

But the Balasamy verdict takes a pragmatic departure. Writing for the majority, Chief Justice Sanjiv Khanna ruled that courts do possess a limited power of modification, especially when the award contains severable errors or is marred by computational or clerical mistakes. This power, the Court held, is implicit in the broader mandate to ensure justice and efficiency in judicial intervention.

To prevent overreach, the Court laid down four specific grounds under which modification may be permitted:
(1) when the invalid part of an award is clearly severable;
(2) to rectify manifest errors apparent on the face of the record;
(3) to correct post-award interest in line with statutory guidelines; and
(4) in rare circumstances, through the Supreme Court’s special powers under Article 142 to do complete justice.

Such carefully delineated boundaries aim to balance judicial restraint with fairness, offering relief in situations where a complete setting aside of the award would cause unnecessary litigation and hardship. In effect, the Court has acknowledged what many practitioners long suspected—that a hard bar on modifications often did more harm than good, especially in domestic arbitration.

Yet, the judgment has not gone unchallenged. In a forceful dissent, Justice S. Viswanathan warned against diluting arbitration’s foundational principles. He argued that the legislature’s deliberate silence on modification should not be overridden judicially. To allow courts even a limited power to modify awards, he cautioned, could open the floodgates to appellate-style interference, threatening the very autonomy and efficiency that arbitration is meant to uphold.

The dissent also raises concerns regarding international enforceability. Modified awards, particularly where courts have rewritten operative portions, may face resistance under the New York Convention’s enforcement regime. This creates uncertainty for India’s aspirations to become an international arbitration hub, especially if foreign investors view Indian courts as intrusive.

Nonetheless, Balasamy does not represent an abandonment of arbitral finality—it reflects an attempt to introduce procedural fairness and equitable flexibility into a rigid structure. In many ways, it mirrors international developments, where courts in jurisdictions such as the UK, Singapore, and Australia allow limited corrections without dismantling the award.

The judgment’s true test will lie in its implementation by lower courts, who must resist the temptation to treat it as a license for judicial activism. The “modification” power must remain the exception, not the rule, reserved for objectively clear and narrowly defined circumstances.

This verdict also signals a possible need for legislative clarification. If the arbitration bar and judiciary are to move forward cohesively, Parliament may consider amending the Act to either codify or curtail this emergent doctrine.

In conclusion, Gayatri Balasamy is a landmark decision not because it revolutionizes arbitration law, but because it nudges the system towards a more realistic, balanced, and justice-oriented approach. The Indian judiciary, through this judgment, has reaffirmed its role not only as a guardian of legal form, but also of substantive justice—a goal as vital to arbitration as to any other field of law.