This article is written by Manshi Raj, a final-year BBA LL.B. student at Usha Martin University, Ranchi, Jharkhand. The landmark Constitution Bench decision of the Supreme Court in Gayatri Balasami v. ISG Novasoft Technologies Ltd., 30 April 2025, resolves the controversy regarding the authority of courts under the Arbitration and Conciliation Act, 1996 to revise an award made by an arbiter. The judgment discusses the competing interests of finality versus fairness in arbitration, and its effects on India’s developing arbitration system.
Because of its efficiency, party autonomy, confidentiality, and procedural flexibility, Arbitration is one of the most popular methods of resolving disputes in today’s world. The provisions of the Arbitration and Conciliation Act, 1996 (based on the UNCITRAL Model Law) promote party autonomy while limiting judicial interference. Nevertheless, the determining question that has puzzled Indian courts for an extended period of time, is whether courts exercising Section 34 and Section 37 power can only set aside arbitral awards or if they may modify them.
Contrasting opinions exist between the courts, as to the level of judicial interference permitted. While some voided awards based on a strict interpretation of the Act, others permitted minor modifications to help prevent delays and/or multiple proceedings. As a result of this uncertainty, this issue was taken to a Constitution Bench of the Honourable Supreme Court of India in Gayatri Balasamy v. ISG Novasoft Technologies Ltd. (30 April 2025), which resolved this issue with a landmark judgement.
The judgement is significant because it reconciles both the concept of finality in arbitration with the requirements of substantive justice. Furthermore, the judgement clarifies the existing law and significantly contributes to the evolution of Indian arbitration law.
Case Laws
Facts of the Case
The parties in dispute with respect to the claims that were before the Arbitrator are Gayatri Balasamy (the “Claimant”) and ISG Novasoft Technologies Ltd (the “Respondent”). An award has already been made by the Arbitrator after the conclusion of the arbitral proceedings; however, both parties were dissatisfied with several parts of the award and sought recourse through the courts pursuant to Section 34 of the Arbitration and Conciliation Act 1996. A jurisdictional question about whether or not the courts have the ability to alter an arbitral award when presented with a Section 34 application arose during the course of the judicial proceedings, as did evidence of an increasing number of conflicting precedents between the superior courts of the various jurisdictions.
The matter was ultimately referred to a Constitution Bench for an authoritative determination on the issues raised therein.
Issues Before the Court
The primary issue that was presented before the Court was whether the power granted to the courts by Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 includes the authority to modify arbitral awards or whether that power is limited to the authority to set aside an arbitral award.
Additionally, the Court also analyzed whether permitting the modification of an arbitral award would impact the foundation principles of party autonomy and minimal judicial interference that support the modern arbitration regime.
Judgment of the Constitution Bench
The Constitution Bench recently ruled (4-1) that courts have the authority to modify some arbitration award if there is limited justification to do so. However, if courts are not permitted to modify arbitration awards, there may be instances where parties may have to re-arbitrate disputes, thus causing further delay on resolving disputes due to minor corrections, which would make going to the courts an extremely undesirable experience.
The majority opined that the courts should only use the authority to apply modification powers of arbitration awards in extraordinary circumstances and only to promote the cause for justice, while not defeating the objectives of providing prompt and efficient resolution of disputes.
Justice K.V. Viswanathan dissented and warned that allowing courts to apply modification powers of arbitration awards could result in the court rewriting the statute, and severely compromising the finality of arbitration as an alternative means to resolve disputes.
Previous Judicial Precedents Considered
The Supreme Court made it clear that courts that have jurisdiction under Section 34 do not hear appeals from arbitral awards and typically will only have the power to set aside a defective award.
This judgment laid the foundation for the traditional view that Section 34 provides only a setting-aside remedy and not an appellate power to rewrite awards.
The Supreme Court went on to hold that Section 34 does not confer the power to amend an arbitral award and therefore, may not overturn the award.
It became the leading authority rejecting any judicial power to modify arbitral awards, making it the principal precedent reconsidered in Gayatri Balasamy.
The Court has clearly stated the standard for judicial review of arbitral awards and has laid down the rule for limited intervention by Courts.
The case established the narrow grounds on which courts may interfere with arbitral awards, reinforcing the principle of minimal judicial intervention.
The Supreme Court reiterated that Arbitral awards should be given great deference and that intervention should be limited to the rarest of circumstances.
Significance of the Judgment
The judgement is considered an important landmark in Indian arbitration law; as it establishesā much needed definition of the term ‘judicial powers’ under the Arbitration and Conciliation Act, 1996.
The judgement seeks to achieve a balance between preserving the finality of arbitral awards and ensuring that technical rigidities do not prevent the administration of substantive justice. The judgement should have a significant impact upon future arbitrations in India as well as enhance India’s quest for becoming a global arbitration centre.
Conclusion
Gayatri Balasamy v. ISG Novasoft Technologies Ltd. The decision represents a significant development in recent Indian arbitration law. The limited powers of modification noted by the Supreme Court have attempted to balance the principles of finality and fairness.
While the Court’s consistent concerns about excessive judicial intervention remain, the ruling provides clarity and insight into possible future direction of arbitration jurisprudence in India. Significantly, the Court has made every effort to allow substantive justice to occur without the hindrance of procedural technicalities while ensuring that the essential features of arbitration as an effective method of resolving disputes remain intact.
Frequently Asked Questions
1. What was the main issue in Gayatri Balasamy v. ISG Novasoft Technologies Ltd. (2025)?
The primary issue before the courts was whether they have the jurisdiction to alter an arbitral award, as set out in Sections 34 and 37 of the Arbitration and Conciliation Act, 1996.
2. What did the Supreme Court hold?
In a majority decision of four to one, the Constitution Bench held that courts may modify an arbitral award under certain circumstances.
3. Why is this judgment important?
This ruling resolves a conflict between differing appellate court decisions regarding judicial intervention in arbitration and clarifies what constitutes permissible judicial intervention in matters of arbitration.
4. Which earlier decision had denied this power to courts?
The Supreme Court held in Project Director, NHAI v. M. Hakeem (2021) that the judiciary does not possess the power to alter an arbitral award.
5. How will this judgment impact arbitration in India?
This ruling is likely to increase the strength of the arbitration framework by ensuring the balance between fairness and finality was maintained, and will assist in meeting India’s goals of becoming a global hub for arbitration.
