Gayatri Balasamy v. ISG Novasoft Technologies Ltd. 2025 INSC 605 | Supreme Court of India (Constitution Bench) | 30 April 2025 | 4:1 Majority
BACKGROUND OF THE CASE
Ms. Gaytri Balasamy joined ISG Novasoft Technologies limited on 27 April 2006 as Vice president (M&A Integration strategy). Within months, on 24th July 2006 she tendered a resignation giving the reason as sexual harassment by the companys Chief Executive Officer.The resignation did not take effect. Three letters of termination followed. Both parties filed criminal complaints against each other and when the matter reached the Supreme court and the Court referred the dispute to arbitration, the tribunal awarded Balasamy Rs. 2 crore.
She challenged the award before the Madras High court under section 34 of the Arbitration and conciliation act 1996 arguing that several of her claims had been overlooked. A single judge, on 2 September 2014, enhanced the compensation by an additonal Rs. 1.6 crore. A Division bench disagreed on the quantum. On 8 August 2019, it held the enhanced amount excessive and arithmeticaly unsound and reduced the additional compensation to Rs 50,000.Balasamy approached the Supreme Court by special leave petition. A three judge Bench confronted with sharply conflicting lines of authority on whether courts could modify arbitral awards under Section 34 refrred the matter to a five judge Consitution Bench by order dated 20 February 2024. The Bench was headed by then Chief Justice Sanjiv Khanna with Justices B.R Gavai, Sanjay Kumar, Augustine George Masih and K.V Viswanathan. It delivered itjudgement on 30 April 2025 by a 4:1 majority.
The conflict warranting the refernce had persisted for years. In McDermott International Inc. v Burn Standard Co. Ltd, the court held that its role under Section 34 is supervisory and not apellate and that it cannot correct an arbitrators errors, the only availabkle remedy is annulment. Project Director, NHAI v M. Hakeem3 went further categorically rejecting any modification power and restricting courts to annulment or remand under Section 34(4). Yet several two and three judge bench decisions had either modified awards or accepted High court modifications producing an irreconcilable body of case law.
ISSUES INVOLVED
The Constitution Bench was constituted to determine:
Whether the judgement in M. Hakeem correctly stated the law.
Whether the powers of courts under Sections 34 and 37 of the Act include the power to modify an arbitral award.
Whether such a power, if recognised is confined to situations where the award is severable.
Whether the power to set aside an award as the broader power subsumes a power to modify.
Whether a modification power can be read into Section 34 despite the absence of any express statutory language.
RULES/ LEGAL PROVISIONS APPLIED
Section 34(1) of the Arbitration and conciliation act 1996 restricts all court challenge of an arbitral award to an application for setting aside on grounds enumerated in Sections 34(2) and 34(2A) including invalidity of the arbitration agreement, excess of jurisdiction and violation of natural justice conflict with public policy and patent ilegality. No mention is made of modification. Section 37 confers appellate jurisdiction against Section 34 orders but does not expand what the court can do. Section 5 is explicit that judicial intervention is permissible only to the extent authorised by Part I of the act.
The contrast with the Arbitration act 1940 is what makes the debate tractable. Sections 15 and 16 of the 1940 Act expressly allowed courts to modify awards. That power was not carried into the 1996 Act which followed the UNCITRAL Model Law and was designed to reduce judicial interference. In Ssangyong Engineering & Construction Co. Ltd v. NHAI, the Court stated minimal judicial intervention as a foundational premise of the 1996 act. In McDermott, it confirmed that courts cannot correct errors, only annul awards. The standard for patent illegality developed in Associate Builders v. Delhi Development Authority set the outer limit of review, stopping short of reassessment on the merits.
The Court also examined Article 142 of the Constitution which empowers the Supreme Court to pass such orders as are neccessary for doing cmplete justice. The majority held this power available in exceptional circumstances. The dissent maintained that it cannot be used to supply what Parliament has chosen not to legislate.
REASONING OF THE COURT
Majority Opinion
The majority authored by Chief Justice Khanna held that courts possess a limited power of modification under Sections 34 and 37. The doctrinal move was to invoke the principle of omne majus continet in se minus: the greater power to set aside necessarily encompasses the lesser power to set aside in part and partially setting aside an award is in practical effect, modification. On this basis the majority drew a purposive distinction between the semantic and functional meaning of “set aside”. A court that can annul an award entirely can in confined circumstances preserve what is valid and excise what is not.
The majority recognised modification as permissible in cases involving severable awards, correction of clerical or typographical errors apparent on the face of the record, adjustment of post award interest under Section 31(7)(b) and in exceptional circumstances through Article 142 of the Constitution. None of these situations authorise a reexamination on the merits, the court does not become an appellate authority. The majority departed from M.Hakeem without formaly overuling it characterising the limited modification power as implied within Section 34 rathe than inconsistent with it.
Dissenting Opinion
The core of Justice KV Viswanathans objection is textual that Section 34 does not say “modify” and that omission is not accidental. The 1940 Act’s modification powers were deliberately left out of the 1996 Act. Parliament then had three opportunities to reverse that position through the 2015, 2019 and 2021 amendments and chose not to act even after the TK Viswanathan Committee had specifically recommended introducing a modification power.
The dissent also takes issue with the majority’s application of omne majus continet in se minus. Setting aside results in annulment, the award ceases to exist as a legal instrument. Collapsing the distinction, Justice Viswanathan argues effectively confers appellate jurisdiction on courts that the statute expressly denies them.
Once modification us available as a remedy, losing parties have an incentive to frame Section 34 applications not as attacks on the award’s validity but as requests for judicial revision in their favour.
CONCLUSION/ JUDGEMENT
The Constitution Bench by a 4:1 majority answered the reference by confirming that courts have a limited power to modify arbitral awards under Sections 34 37. M. Hakeems categorical bar was narrowed without being formally overruled. The dissent upheld M. Hakeem and confined permisible court action to severance and correctio of computational errors under the principle of actus curiae neminem gravabit.
PERSONAL ANALYSIS
The majoritys commercial reasoning is not easily dismissed. A system that mandates fresh arbitration over a severable defect or sends parties back to a tribunal merely to correct an arithmeticaly eroneous post award interest rate imposes procedural costs with no real compensating benefit.
The 1940 Act had express modification powers. The legislature removed them in 1996. The T.K Viswanathan Committee recommended reinstating them, Parliament declined across three amendment cycles. Dissent notes that annulment and modification are not simply different degrees of the same intervention.
The practical concern is still deeper. The majority calls its new power “limited” but the operative criteria, severability, manifest erors, post award interest are not self defining. Tha is a predictable expansion of court involvement in arbitration outcomes and the 1996 act was designed to prevent exactly that.
THIS ARTICLE IS WRITTEN BY PRISHA CHAUDHRY FROM O.P. JINDAL GLOBAL UNIVERSITY / JINDAL GLOBAL LAW SCHOOL
REFERENCE :
Gayatri Balasamy v. ISG Novasoft Technologies Ltd., 2025 INSC 605.
McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181.
Project Director, NHAI v. M. Hakeem, (2021) 9 SCC 1.
Ssangyong Engineering & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131.
Associate Builders v. Delhi Development Authority, (2015) 3 SCC 49.
