GAYATRI BALASAMY versus M/S ISG NOVASOFT TECHNOLOGIES LIMITED (30/04/2025) — Supreme Court headnote

AI-generated headnote. Verify against the judgment before relying on it. Paragraph numbers refer to the judgment.

Summary

A five-Judge Bench answered a reference on whether courts under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 can modify an arbitral award, revisiting Project Director, NHAI v. M. Hakeem. The majority (Sanjiv Khanna CJI) held that the power to set aside includes a limited power to modify: by severing an invalid, separable part of the award; by correcting clerical, computational or typographical errors apparent on the face of the record; by modifying post-award interest in some circumstances; and, with great caution, under Article 142. Kinnari Mullick was disapproved insofar as it required a written request under Section 34(4). Viswanathan J. dissented in part: Section 34 courts cannot modify an award or its interest (the remedy is remand under Section 34(4)) and Article 142 should not be so used; he agreed only on severance and correction of clerical errors.

Issues

Whether the powers of a court under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 include a power to modify an arbitral award, and if so to what extent.
Whether the power to set aside an award includes the power to set it aside in part (severance) and whether such severance is a form of modification.
Whether a Section 34 court may correct computational, clerical or typographical errors in an award notwithstanding the arbitrator's power under Section 33.
Whether a court may modify the rate or period of post-award interest under Section 31(7)(b), or must instead remit the award under Section 34(4).
Whether a request for remand under Section 34(4) must be in writing and whether it may be made after the Section 34(1) application is decided, including before the Section 37 court (correctness of Kinnari Mullick v. Ghanshyam Das Damani).
Whether the Supreme Court may invoke Article 142 of the Constitution to modify an arbitral award.
Whether a court-modified award would be unenforceable under the New York Convention by reason of the doctrine of merger, and whether statutory arbitrations under the National Highways Act, 1956 warrant a wider power of modification.
Whether Project Director, NHAI v. M. Hakeem lays down the correct law.

Provisions considered

Section 34 (sub-sections (1), (2), (2A), (3), (5), (6)), Arbitration and Conciliation Act, 1996Majority: Section 34(1) confines recourse to an application for setting aside on the grounds in sub-sections (2) and (3), but does not restrict the range of relief the court may fashion within those guardrails; modification is a more limited power than annulment, silence in the Act is not a prohibition, and the power of judicial review and setting aside under Section 34 inherently includes a limited power to modify within its confines, without exercising appellate power under Order XLI CPC. Dissent (paras 51-59, 70-76, 89-90, 106 of that opinion): 'recourse', 'set aside' and 'only if' make annulment the only permitted interference; reading in words would be judicial legislation. (¶¶ 27, 28, 29, 30, 43, 44, 45, 46, 85)
Proviso to Section 34(2)(a)(iv), Arbitration and Conciliation Act, 1996The proviso, allowing only that part of an award dealing with matters not submitted to arbitration to be set aside, was held clarificatory: the power to sever an invalid portion from the valid portion is inherent in the court's setting-aside jurisdiction, so the greater power includes the lesser power to set aside in part. Partial setting aside is possible only where the valid and invalid portions are not interdependent or intrinsically intertwined, particularly as to liability and quantum. The dissent (paras 142-153) agreed that severance of standalone claims is permissible under Section 34 subject to the same riders, but treated it as conceptually distinct from modification. (¶¶ 32, 33, 34, 35, 36, 45)
Section 34(4), Arbitration and Conciliation Act, 1996Majority: where uncertainty clouds a proposed modification the court must not modify but may, on a request that may be oral, adjourn to let the tribunal eliminate the grounds for setting aside; the remand power is discretionary, limited to the issues identified, unavailable where the defect is irreparable or remand would embarrass the tribunal or cause undue cost or delay, and remains available to the Section 37 court even after the award is set aside. Dissent (paras 130-136): the request may be oral and the court may invoke Section 34(4) suo motu after recording reasoned opinion that grounds for setting aside exist; it is the only route to correct interest. (¶¶ 30, 55, 56, 57, 58, 59, 60, 61, 62, 63, 64, 65)
Section 33, Arbitration and Conciliation Act, 1996Section 33 lets the tribunal correct computational, clerical or typographical errors, give interpretations and make additional awards, and under Section 33(7) such corrections are themselves awards. Notwithstanding Section 33, a Section 34 court may rectify such errors and other manifest errors where no merits evaluation is needed and the court has no doubt; if the error is not apparent on the face of the record the party should go under Section 33 or Section 34(4). The dissent (paras 128, 137-141) reached the same limited exception on the principle actus curiae neminem gravabit, where the party has not moved under Section 33 or the tribunal has obstinately refused correction. (¶¶ 47, 48, 49, 54)
Section 31(7)(a) and (b), Arbitration and Conciliation Act, 1996Clause (a) lets the tribunal award pendente lite interest unless the parties agree otherwise; clause (b) supplies a default post-award rate of 2% above the current rate unless the award directs otherwise. Majority: for pendente lite interest contrary to contract the court may set aside the rate or remit under Section 34(4); for post-award interest, which is future-oriented and benchmarked by the legislature, the court may modify it (up or down) or grant it where omitted, only for compelling reasons and ordinarily at the statutory rate. Dissent (para 135): interest cannot be modified under Section 34; the court must record reasons and remit under Section 34(4). (¶¶ 72, 73, 74, 75, 76, 77, 78, 79)
Section 5, Arbitration and Conciliation Act, 1996Section 5 limits judicial intervention in matters governed by Part I to what that Part provides. The majority treated it as framing the narrow Section 34 jurisdiction within which the limited modification power operates; the dissent (paras 42-45, 59-60, 76) relied on it, with the seven-Judge decision in Interplay Between Arbitration Agreements and Stamp Act, as a general rule of judicial non-interference that forbids reading a power to modify into Section 34. (¶ 27)
Section 37, Arbitration and Conciliation Act, 1996An appeal lies against an order setting aside or refusing to set aside an award; the appellate jurisdiction under Section 37 is coterminous with and as broad as the Section 34 court's jurisdiction, so the Section 37 court also possesses the Section 34(4) power of remand (while being mindful where the award was upheld below), and the limited power of modification is available to it. The dissent likewise held the appellate hierarchy has no power to modify but may sever. (¶¶ 62, 63, 85)
Section 48(1)(e), Arbitration and Conciliation Act, 1996Section 48(1)(e), mirroring Article V of the New York Convention, permits refusal of enforcement where the award has not become binding or has been set aside or suspended under the law of the seat; the majority reasoned that enforcement courts therefore look to the law of the seat, so reading a limited modification power into Section 34 does not conflict with the Convention, and the award would be read as modified by the court's order. (¶¶ 66, 67, 68, 69)
Section 43(4), Arbitration and Conciliation Act, 1996Where an award is set aside, the period between commencement of the arbitration and the court's order is excluded in computing limitation for fresh proceedings, including arbitration. The majority noted this as the mechanism for resolving the dispute after annulment; the dissent (paras 58, 77, 81, 103) treated it as showing that Parliament consciously contemplated recommencement of proceedings, so the hardship argument for a power of modification fails. (¶ 81)
Article 142, Constitution of IndiaMajority: the power to do complete justice may be exercised in arbitration matters only with great care and caution, in consonance with the objectives of the 1996 Act, not to rewrite or modify an award on merits, but where necessary to bring the litigation to an end (relying on Shilpa Sailesh). Dissent (paras 108-115): following Supreme Court Bar Association and Shilpa Sailesh, Article 142 cannot supplant substantive statutory provisions or breach a pre-eminent prohibition at the core of the Act, so the Court should refrain from using it to modify awards in Section 34 matters. (¶¶ 82, 83, 84, 85)
Section 152, Code of Civil Procedure, 1908Section 152 allows a court to correct clerical or arithmetical mistakes and accidental slips in its judgments and decrees at any time. The majority drew on it, with Century Textiles v. Deepak Jain and the inherent power of procedural review recognised in Grindlays Bank, to hold that a Section 34 court can likewise correct inadvertent errors in an award; the dissent (paras 128, 140-141) relied on it and U.P. SRTC v. Imtiaz Hussain to limit the exception strictly to errors that can be corrected without modifying, altering or adding to the award. (¶¶ 50, 51, 53, 54)
Section 151, Code of Civil Procedure, 1908The argument that the inherent powers saved by Section 151 CPC allow a Section 34 court to modify awards was rejected in the dissenting opinion (paras 98-99): following Manohar Lal Chopra and Padam Sen, inherent powers cannot be exercised in conflict with what the legislature has expressly provided, and Section 34 lays down the parameters for setting aside in mandatory terms. The majority opinion rested its conclusions on the inherent and implied powers of a Section 34 court rather than on Section 151. (¶¶ 49, 50, 51, 52)

Held

Majority: The reference was answered by holding that the court has a limited power under Sections 34 and 37 of the 1996 Act to modify an arbitral award, exercisable (i) where the award is severable, by severing the invalid portion from the valid portion; (ii) by correcting clerical, computational or typographical errors apparent on the face of the record; (iii) by modifying post-award interest in some circumstances; and/or (iv) under Article 142 of the Constitution, exercised with great care and caution within constitutional limits. (¶ 85)
Majority: The power conferred by the proviso to Section 34(2)(a)(iv) is clarificatory; the authority to sever the invalid part of an award from the valid part, within the confines of Section 34, is inherent in the court's jurisdiction when setting aside an award, and on the maxim omne majus continet in se minus the power to set aside necessarily includes the power to set aside in part. Partial setting aside is impermissible where the valid and invalid portions are legally and practically inseparable, interdependent or intrinsically intertwined; it should be exercised only where they can be clearly segregated, particularly as to liability and quantum. The practical effect of partial setting aside is modification, and the limited power of severing an award implies a power to vary or modify it. (¶¶ 33, 34, 35, 36, 44, 45)
Majority: Modification and setting aside have different consequences, the former altering and the latter annulling the award, but recognising a limited modification power does not inevitably lead to a merits examination. Denying courts the authority to modify would impose hardship, costs and delay and force parties into a fresh arbitration merely to affirm a conclusion the court could easily reach, making arbitration more cumbersome than litigation. Section 34 limits recourse to an application for setting aside but does not restrict the range of relief the court may grant within the statute's guardrails; the court does not exercise appellate power under Order XLI CPC. Following Mustill and Boyd, an order varying an award is not an appellate process and is appropriate where the variation follows inevitably from the determination of a question of law; silence in the Act is not a complete prohibition. (¶¶ 38, 39, 40, 41, 42, 43, 44, 46)
Majority: Notwithstanding Section 33, a court reviewing an award under Section 34 may rectify computational, clerical or typographical errors and other manifest errors, provided the modification requires no merits-based evaluation; every court has ancillary powers of procedural review (Grindlays Bank) and recall (Budhia Swain), and the doctrine of implied power effectuates the object of the Act. Unlike the arbitrator under Section 33, the Section 34 court must have no uncertainty or doubt: if the error is not apparent on the face of the record, the party should seek recourse under Section 33 or Section 34(4). This power must not be conflated with appellate or review jurisdiction. (¶¶ 49, 50, 51, 52, 53, 54)
Majority: Where a fog of uncertainty obscures a proposed modification, the court must not modify but should remand under Section 34(4), a discretionary and limited power confined to the issues the court identifies, under which the tribunal may record additional evidence or take other corrective action; modification, by contrast, demands precision. Remand is not available where the defect is inherently irreparable, nor appropriate where it would place the tribunal in an invidious position or not serve the parties' interests in time-sensitive matters. Kinnari Mullick was not accepted insofar as it required a written request and required the request to precede the Section 34(1) decision: the request may be oral but must be recorded, and the Section 37 court, whose jurisdiction is coterminous with the Section 34 court's, retains the power of remand even after the award is set aside. Following Dyna Technologies and I-Pay Clearing Services, Section 34(4) serves to cure gaps in reasoning and curable defects, not to review findings; it enables but does not compel the tribunal to amend. (¶¶ 55, 56, 57, 58, 59, 60, 61, 62, 63, 64, 65)
Majority: The doctrine of merger and New York Convention objections were rejected as misconceived: Section 48(1)(e) and Article V of the Convention make enforcement depend on whether the award has become binding under the law of the seat, so a limited power of modification under Section 34 does not affect the international enforcement regime; the award is read as modified by the court's judgment. Section 34 does not distinguish statutory from consensual arbitration, so no expansive power to modify compensation under the National Highways Act, 1956 could be read in, the validity of that Act's provisions being left open. (¶¶ 66, 67, 68, 69, 70, 71)
Majority: Section 31(7) is a creation of the Indian legislature not found in the Model Law. Where pendente lite interest under Section 31(7)(a) is contrary to contract, the court may set aside the rate or remit under Section 34(4). For post-award interest under Section 31(7)(b), the legislature has fixed a standard rate against which the award can be scrutinised, and because post-award interest is inherently future-oriented and depends on events the arbitrator could not foresee, the Section 34 court may modify it, increasing or decreasing the rate, and may grant it where the award is silent; but it must do so only for compelling and well-founded reasons, ordinarily applying the statutory rate, acting under limited and not appellate authority. Parties may also enter into post-award settlements in accordance with Order XXIII CPC, provided they are verifiable and free of fraud, coercion or undue influence. (¶¶ 72, 73, 74, 75, 76, 77, 78, 79, 80)
Majority: Article 142 must be exercised with great care and caution and in consonance with the fundamental principles and objectives of the 1996 Act; following Shilpa Sailesh v. Varun Sreenivasan, it should not be used where the effect would be to rewrite or modify an award on merits, but may be used where necessary to bring the litigation or dispute to an end and save the parties' time and money. (¶¶ 82, 83, 84, 85)
Viswanathan J. (dissenting in part; paragraph numbers are of that opinion): Courts under Section 34 and the appellate hierarchy have no power to modify an award. The words 'recourse', 'set aside' and 'only if', read with Section 5, permit only annulment; words cannot be read into Section 34; the hardship argument fails because Section 43(4) expressly contemplates fresh proceedings and the arbitration agreement ordinarily survives the setting aside; parties who contractually oust the ordinary judicial process cannot claim appellate-type powers available under Sections 107-108 and Order XLI CPC; modification is not a lesser power subsumed in setting aside since the two are not of the same genus; neither Section 151 CPC nor the doctrine of implied powers can override the express scheme; the 1940 Act had an express power to modify that Parliament omitted in 1996 and did not add in 2015, 2019 or 2021 despite the Viswanathan Committee's recommendation; guardrails cannot be laid down as there are no judicially manageable standards; no different reading applies to statutory arbitrations; enforcement of modified awards abroad would face real complications; and Article 142 should not be used to modify awards as that would breach a pre-eminent prohibition at the core of the Act (Supreme Court Bar Association; Shilpa Sailesh). Hakeem is not per incuriam and lays down the correct law. (¶¶ 70, 76, 77, 81, 82, 89, 90, 91, 93, 96, 99, 103, 113, 115, 117, 119, 123, 126, 127)
Viswanathan J. (dissenting in part; paragraph numbers are of that opinion): The only exception to Hakeem is that, on the principle actus curiae neminem gravabit, a Section 34 court may correct computational, clerical or typographical errors or errors of a similar nature (read ejusdem generis) without modifying, altering or adding to the award, where the party has not moved under Section 33 or the tribunal has obstinately refused. Interest cannot be modified under Section 34; where interest is omitted, excessive, abysmally low or beyond the agreement, the court must record reasons and remit under Section 34(4), and if the grounds are not eliminated, set aside the award. Kinnari Mullick does not lay down the correct law in requiring a written request; an oral request suffices and the court may invoke Section 34(4) suo motu after recording reasons that grounds for setting aside exist. Severance of standalone parts of an award that are not inseparably intertwined with the rest is permissible under Section 34 and by the appellate courts (J.G. Engineers; Trichy Thanjavur Expressway approved), but not where claims are netted into a composite award; compromises or abandonment of claims may be given effect only by severance, failing which the award must be set aside or the application dismissed as not pressed. (¶¶ 131, 132, 135, 136, 139, 141, 146, 147, 149, 153, 154, 155, 156, 157)

Result

Reference answered and disposed of. By the majority, courts under Sections 34 and 37 have a limited power to modify an award by severance, by correcting errors apparent on the face of the record, by modifying post-award interest in some circumstances, and under Article 142 with great caution; Hakeem is read accordingly and Kinnari Mullick disapproved on the written-request requirement. Viswanathan J. dissented on modification of interest and use of Article 142, holding Hakeem correct subject only to correction of clerical and computational errors. Delay in refiling condoned; leave granted.