MY TWO CENTS ON "THE COURT'S POWER TO MODIFY OR VARY AN AWARD."

There has been many mixed criticism and appreciation received by the recent ruling of the constitutional bench of the Hon’ble Supreme court in Gayatri Balasamy vs. M/s. Isg Novasoft Technologies Limited 2025 INSC 605 ('BALASAMY') that conferred the power to the court to modify an Arbitral award.  Some have welcomed the verdict as it would lead to better administration of arbitration proceedings and many have questioned the judicial inference the  verdict imposes.

I. PRELUDE.

The essence of law is that it is always evolving with respect to the changing times and its statutory provision have to be given liberal interpretations accordingly. To welcome this verdict and whether the court had the power to give a constructive meaning to the statutory provision of section 34 of the A&C Act, 1996 the court should and ought to ‘iron the creases’ of any statutes enacted by the legislation and give a holistic perspective, if required.  Jutsice krishna Iyer in Commissioner Of Income Tax (Central) vs B. N.Bhattacharjee & Anr , 1979 AIR 1725 remarked that “The judicial process does not stand helpless with folded hands but engineers its way to discern meaning when a new construction, with a view to rationalization is needed. A judge must not alter the material of which it is woven, but he can and should iron out the creases  ”

On the context of whether the court can change the intent of an enacted statute drafted by the legislation if it appears defective or lacks constructive meaning, Lord Denning in his book ‘The Discipline of Law’(l) quoted a passage from Seaford Court Estates Ltd. v. Asher(2) which says: "Whenever a statute comes up for consideration it must be remembered that it is not within human powers to foresee the manifold sets of facts which may arise, and, even if it were, it is not possible to provide for them in terms free from all ambiguity. The English language is not an instrument of mathematical precision. Our literature would be much the poorer if it were. This is where the draftsmen of Acts of Parliament have often been unfairly criticized. A judge, believing himself to be fettered by the supposed rule that he must look to the language and nothing else, laments that the draftsmen have not provided for this or that, or have beer, guilty of some or other ambiguity. It would certainly save the judges trouble if Acts of Parliament were drafted with divine prescience and perfect clarity. In the absence of it, when a defect appears a judge cannot simply fold his hands and blame the draftsman. He must set to work on the constructive task of finding the intention of Parliament and he must do this not only from the language of the statute, but also from a consideration of the social conditions which give rise to it, and of the mischief which it was passed to remedy, and then he must supplement the written word so as to give 'force and life' to the intention of the legislature. That was clearly laid down by the resolution of the judges in Heydon's case, and it is the safest guide today. Good practical advice on the subject was given about the same time."

Keeping in mind, the remarks of the Great justice Iyer and the wise words of the eminent Lord Denning, let me abbreviate the findings of the constitutional judgement in Balasamy and pen my personal opinion on it.

 

II. THE MAJORITY VIEW

The Supreme court’s verdict in Balasamy is passed on the fulcrum of Doctrine of severability.  The 4:1 majority opined that the legislation does not expressly  empower the courts to modify an award, due to the narrowly defined scope of Section 34 but the court in many instances over the years have partially modified award.

A. The majority laid down four grounds on which the court has the power to modify an Arbitral Award:

i. Severability: A portion of the award can be modified while retaining the rest of the majority and partial setting aside on Severability of award should be exercised only when the valid and invalid parts of the award can be clearly segregated—particularly in relation to liability and quantum and without any correlation between valid and invalid parts.

ii. Apparent errors: the award can be modified to correct clerical, computational, or typographical errors evident on the face of the record.

iii.  Post-Award Interest: The court have the power to modify the interest on the award if the  pendente lite interest is in violation of Section 31(7)(a) of the A&C Act, 1996 or award post-award interest where the facts justify such modification.

iv. Article 142 Powers: The court may in the rarest circumstance, where greater issues of laws are involved, modify the award by invoking its suo moto powers under Article 142 of the Indian Constitution. The power should be exercised with great care and caution, and if it requires and necessitates to bring the litigation or dispute to an end.

B. Remedial powers under section 34(4) cannot be equated to modification.

It held that if the award under challenge is found to be perverse or illegal as mentioned in section 34 (2) (a&b) of the A&C Act, 1996, the adjudicating court has the remedial power and remand the award to the tribunal under Section 34(4) for taking necessary corrective measures to eliminate the grounds for setting aside the award but this remanding power should not be presumed that the court already has the power to modify the award.  The remanding power is discretionary due to the inclusion of the word ‘may’, the court may invoke this power when it identifies a defect in the award and remand it back to the Arbitral tribunal to rectify the defect by recording additional evidence, affording a party an opportunity to present its case if previously denied, or taking any other corrective measures necessary to cure the defect.

The Section 34(4) has a limited power, confined to limited circumstances and issues identified by the court.  It does not authorize the Arbitral tribunal to rewrite the award on merits or to set it aside but rather provides the Arbitral tribunal a curative measure upon its approval.

The modification of the award empowers the court to act with certainty and can be exercised when the defect in the award is inherently irreparable and suffers from serious acts of omission, commission, substantial injustice, or patent illegality and the same cannot be remedied through an order of remand, the court can modify the award “like a sculptor working with a chisel, needing precision and exactitude.”

C. Inferences from Arbitration act of other countries.

The court also drew similar references with respect to modification of Award from different Arbitration statues like Singapore, Kenya, and the United Kingdom established under the UNICTRAL model law (akin to the Indian Arbitration Act) where they developed into accepting  modification of Award.

III. THE DISSENTING VIEW.

Justice Viswanathan dissented with a major issue that the true essence of the legislation would eradicate and the faith on arbitration would be lost with such huge power empowering judicial interference. He held that Modification and severance are two different concepts and the power to set aside does not include the power to modify. He also expressed strong dissent with respect to the Apex court exercising Article 142 to modify awards as it would defeat the intent of Arbitration and the misuse of the great power Article 142 possesses.

IV. OPINION & CONCLUSION.

i. The process of arbitration however simple and effective the legislation intended it to be have become more and more technical and complex. Since, section 34 of the A&C Act, 1996 is the only remedy available, the courts are flooded with such applications. The Arbitral process has to be followed again if the award is set aside and remanded back for curing the defects leading to an another round of Arbitral adjudication but if the award is so inherently irreparable and is not remanded but set aside, the parties have to again invoke fresh arbitration (subject that their challenges fail under section 37) and will be stuck in the never ending loop. This landmark verdict is a big leap to minimalize this endless loop. It provides finality to arbitration proceedings by empowering the section 34 courts to vary or modify the award as it deems fit and proper. This would attribute to better arbitration practice in India.

ii. The arbitration act is built on the edifice of minimal judicial intervention but in my opinion there is a reason why the legislation while framing section 34 (“An Arbitral award may be set aside by the Court”) included the word “set aside." This word has to be given a more liberal and holistic meaning which would include to modify or vary the award. If the legislative intent was not to empower the court to modify or vary the award under section 34 then the wording would have been ‘dismissal of Arbitral Award’ or "the courts power to dismiss the Arbitral Award." instead of ‘set aside’. So the interpretation of the word 'Set Aside' is of paramount importance to carve out the real intent of section 34 which the majority has so rightfully done.

iii. This majority has held that the modification of Award by way of exercising Article 142 can only be done in sui generis cases after careful consideration and determination of the point of law and the perversity/illegality of the award and the judicial finding under challenge. It should be exercised with great care and caution as per the dictum laid down in Shilpa Sailesh vs. Varun Sreenivasan (2023) 14 SCC 231 should not and cannot be invoked customarily. I believe, the institution has earned enough respect and faith for its judicially sound qualities and I strongly believe that the apex court would not exercise its powers under Article 142 haywirely.

Thus, the change brought by the verdict is welcoming towards better arbitration practice in India ensuring efficiency and better adjudication and attain the ultimate motive of arbitration i.e. speedy disposal mechanism.