Court: Supreme Court of India
Bench: Constitution Bench (5 Judges)
Date of Judgment: April 30, 2025
Key Statute Involved: Arbitration and Conciliation Act, 1996
Relevant Provision: Section 34 (Application for setting aside arbitral award)

🧾 Background and Facts

The dispute originated from an employment and stock-option agreement between Gayatri Balasamy (Appellant) and ISG Novasoft Technologies Ltd. (Respondent). Following her termination, the appellant initiated arbitration proceedings seeking damages for wrongful termination and enforcement of stock-option benefits.

An arbitral award was passed in her favor but with partial relief. Dissatisfied with certain calculations and interpretations, she filed a petition under Section 34 of the Arbitration Act, seeking modification of the award.

The trial court allowed partial modification. The High Court reversed this order and observed that courts cannot modify arbitral awards under Section 34 but may only set them aside on specific grounds. Due to conflicting High Court views on the scope of Section 34, the matter reached the Supreme Court and was referred to a Constitution Bench.

⚖️ Issues for Determination

1. Whether Indian courts have the power to modify arbitral awards under Section 34 of the Arbitration and Conciliation Act, 1996.
2. Whether courts can partially alter an award in cases involving severable errors, interest miscalculations, or unjust reliefs.
3. Whether the constitutional powers under Article 142 allow the Supreme Court to intervene beyond Section 34 limitations.

📚 Legal Framework

Section 34 of the Arbitration and Conciliation Act, 1996:

• Allows a court to set aside an arbitral award on limited grounds such as:
  • Incapacity of parties
  • Invalid arbitration agreement
  • Lack of notice
  • Award beyond scope of submission
  • Conflict with public policy

Notably, Section 34 does not contain the word “modify”—it only mentions “setting aside” the award.

🔍 Judgment and Reasoning

The Constitution Bench, speaking through Justice D.Y. Chandrachud, held:

🔹 1. No Power of Modification Under Section 34

• Courts are not empowered to alter, vary, or substitute terms of an arbitral award.
• Section 34 is intended to maintain minimal judicial interference in arbitral decisions, consistent with the UNCITRAL Model Law.
• Judicial review is corrective, not creative; courts cannot rewrite what arbitrators have decided.

🔹 2. Exception for Severable and Clerical Corrections

• Courts may, in exceptional circumstances, modify awards only when:
  • There are clerical or arithmetical errors (per Section 33).
  • Severable portions of an award are patently illegal, and the rest is salvageable.
  • Interest calculations are erroneously applied.
• Even in such cases, the modification must not touch the core merits of the dispute.

🔹 3. Article 142 Powers Reserved for the Supreme Court

• The Supreme Court may exercise Article 142 jurisdiction to do complete justice, including modifying awards where justice demands it.
• However, this is not available to civil courts or High Courts, which are bound by the statutory limits of Section 34.

🔹 4. Overruling of Previous Conflicting Judgments

• The Court clarified and overruled earlier conflicting High Court judgments which allowed full or partial modification of arbitral awards under Section 34.
• Also clarified the position laid down in cases like MMTC v. Vedanta Ltd. (2019) and ONGC v. Western Geco (2014).

🧑‍⚖️ Final Holding

• The appeal was dismissed, and the High Court’s decision was upheld.
• The arbitral award could not be modified as prayed.
• The petitioner was advised to approach the Supreme Court under Article 136 or 142, if further intervention was sought.

📌 Key Takeaways

Principle	Ruling
✅ Judicial Review	Permitted under Section 34 on narrow grounds.
❌ Modification of Awards	Not permitted under Section 34; only setting aside allowed.
✅ Clerical & Severable Corrections	Allowed, provided they do not affect core findings.
✅ Supreme Court’s Power	Article 142 can be invoked in rare, compelling cases for full justice.

🧭 Significance of the Judgment

• Reinforces finality of arbitration and promotes speedy resolution of disputes.
• Ensures that courts respect arbitral autonomy and don’t assume appellate jurisdiction.
• Provides clarity on a long-standing ambiguity in the interpretation of Section 34.
• Aligns Indian arbitration jurisprudence with international best practices under the UNCITRAL framework.