Gayatri Balasamy v. M/S. Isg Novasoft Technologies Limited
2025 INSC 605 | Civil Appeal @ S.L.P.(C) Nos.15336-15337 of 2021
Supreme Court of India| Decided: April 30, 2025
- FACTS
The dispute arose out of the employment relationship between Gayatri Balasamy and ISG Novasoft Technologies Limited, an information technology company. On 27 April 2006, Gayatri Balasamy was appointed as the Vice President (M&A Integration Strategy) of the company.
A few months after her appointment, on 24 July 2006, Balasamy tendered her resignation alleging that she had been subjected to sexual harassment by the Chief Executive Officer of the company, Krishna Srinivasan. The resignation, however, did not take effect. Thereafter, the employment relationship between the parties deteriorated, culminating in the issuance of three termination letters by the company.
Subsequently, Balasamy initiated criminal proceedings against Krishna Srinivasan and another senior officer of the company, alleging offences under the Indian Penal Code, 1860 and the Tamil Nadu Prohibition of Harassment of Women Act, 1998. In response, the company instituted criminal proceedings against Balasamy alleging defamation and extortion. Thus, the dispute expanded beyond an employment disagreement and evolved into multiple civil and criminal proceedings between the parties.
As the litigation progressed, the matter eventually reached the Supreme Court of India. In an effort to resolve the disputes comprehensively, the Court referred the parties to arbitration. After considering the claims and counterclaims, the arbitral tribunal awarded compensation of ₹2 crore in favour of Balasamy.
Dissatisfied with the award, Balasamy challenged it before the Madras High Court under Section 34 of the Arbitration and Conciliation Act, 1996, contending that several of her claims and grievances had not been adequately considered by the arbitral tribunal. On 2 September 2014, a Single Judge of the Madras High Court modified the arbitral award and granted an additional compensation of ₹1.6 crore over and above the amount awarded by the tribunal.
The company challenged the decision before a Division Bench of the Madras High Court. On 8 August 2019, the Division Bench held that although the Single Judge was justified in granting additional compensation, the quantum awarded lacked a proper basis and was excessively high. Consequently, the Division Bench reduced the additional compensation from ₹1.6 crore to ₹50,000.
Aggrieved by the decision of the Division Bench, Balasamy approached the Supreme Court through a Special Leave Petition. During the hearing, the Supreme Court noticed conflicting judicial opinions regarding whether courts possess the authority to modify arbitral awards under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996. Since this issue had generated inconsistent precedents, the matter was referred to a Constitution Bench for authoritative determination.
The Constitution Bench was therefore called upon to decide the broader question of law concerning the extent of judicial powers in relation to arbitral awards and whether courts can modify such awards while exercising jurisdiction under Sections 34 and 37 of the Act.
- ISSUES RAISED
- Whether the powers of the Court under Sections 34 and 37 of the Arbitration and Conciliation Act 1996 will include the power to modify an arbitral award?
- If the power to modify the award is available, whether such power can be exercised only where the award is severable, and a part thereof can be modified?
- Whether the power to set aside an award under Section 34 of the Act, being a larger power, will include the power to modify an arbitral award and if so, to what extent?
- Whether the power to modify an award can be read into the power to set aside an award under Section 34 of the Act?
- CONTENTIONS
- In Favour of Modification:
The parties supporting modification argued that the judgment in Project Director, NHAI v. M. Hakeem should be reconsidered because it conflicted with several earlier Supreme Court decisions where arbitral awards had been modified. They also pointed out that many High Courts had exercised similar powers, showing that modification was already accepted in practice.
It was further argued that several countries following the UNCITRAL Model Law, such as the United Kingdom, Singapore, and Australia, allow courts to modify arbitral awards in certain situations. Therefore, Indian courts should also adopt a practical approach instead of compelling parties to begin fresh arbitration for minor errors.
The supporters relied on the legal maxim omne majus continet in se minus, meaning “the greater power includes the lesser.” Since Section 34 allows courts to set aside an arbitral award, they argued that it should also permit the lesser power of modifying or partially setting aside an award when appropriate.
They further submitted that courts should be able to modify awards that are against public policy or suffer from patent illegality under Section 34. They also argued that the word “recourse” in Section 34 should be interpreted broadly to include the power to modify an award. Finally, it was contended that courts should have the authority to alter post-award interest or compensation where necessary, as requiring a fresh arbitration for such limited issues would only increase costs and delay justice.
II.Against Modification:
The parties opposing modification argued that the Arbitration and Conciliation Act, 1996 is based on the UNCITRAL Model Law, which was designed to limit judicial interference in arbitration. They submitted that the Model Law does not allow courts to modify arbitral awards, and Indian courts should follow the same approach unless Parliament specifically provides otherwise.
It was also argued that under the New York Convention, only arbitral awards are recognised and enforced internationally, not court orders that modify those awards. Allowing courts to change arbitral awards could create difficulties in enforcing them in other countries.
The opposing side further submitted that the power to set aside an award is different from the power to modify it. Once an award is set aside, it ceases to exist and therefore cannot be altered. They argued that the legal maxim omne majus continet in se minus does not apply in this situation because setting aside and modification are two separate powers. They also pointed out that once an arbitral tribunal delivers its award, it becomes functus officio and has no further authority over the dispute. If courts begin modifying awards, they would effectively be exercising appellate powers, which Section 34 does not grant.
Lastly, it was argued that any changes made by a court do not become part of the original arbitral award. This could create uncertainty at the enforcement stage, as international law recognises and enforces only the arbitral award and not the court’s modified version.
- RATIONALe
The Supreme Court adopted a balanced approach while deciding the issue. It observed that although Section 34 of the Arbitration and Conciliation Act, 1996 only refers to setting aside an arbitral award, this does not completely prevent courts from making limited modifications where necessary. At the same time, the Court stressed that such power must be exercised carefully so that it does not interfere with the merits of the dispute.
The Court explained that the purpose of arbitration is to provide a quicker and more cost-effective method of resolving disputes. If courts are forced to set aside an entire award for a minor error, the parties may have to undergo another round of arbitration, leading to unnecessary delay and expense. Therefore, allowing limited modification helps achieve the objective of speedy dispute resolution.
The Court relied on the doctrine of severability and held that if the valid and invalid parts of an award can be clearly separated, the court may set aside only the defective portion while preserving the rest of the award. However, this power can be exercised only when the different parts of the award are independent of each other. If they are closely connected, the award cannot be partially modified.
The Court further held that courts can correct clerical, computational, typographical, or other obvious errors that appear on the face of the award. Such corrections do not amount to an appeal because they do not require the court to re-examine evidence or reconsider the merits of the dispute.
The Court also clarified that where there is uncertainty or the defect requires further examination, the matter should be remanded to the arbitral tribunal under Section 34(4) instead of being modified by the court. This ensures that courts do not exceed their limited jurisdiction.
Lastly, the Court held that it has limited power to modify post-award interest where the facts of the case justify such intervention. It also recognised that, in exceptional cases, the Supreme Court may exercise its powers under Article 142 of the Constitution to do complete justice, provided such power is exercised cautiously and does not amount to rewriting the arbitral award.
- DEFECTS OF LAW
Despite its practical appeal, the judgment raises certain concerns
First, the Court recognised a limited power to modify arbitral awards even though Section 34 does not expressly provide for such a power. The provision only refers to “setting aside” an award. By reading modification into the statute, the Court has adopted a purposive interpretation that some may view as going beyond the language chosen by Parliament. This raises concerns about judicial overreach and whether such a significant change should have been introduced through legislative amendment instead.
Secondly, the judgment does not clearly define the limits of the modification power. While it states that courts cannot re-examine the merits of the dispute, it provides no precise test for distinguishing a permissible modification from an impermissible review. This may result in inconsistent application by different courts.
Another concern is that expanding judicial powers may weaken one of the basic principles of arbitration, namely minimal judicial intervention. Parties choose arbitration because it offers finality and limited court interference. If modification becomes more common, courts may gradually assume a broader role, reducing the autonomy of arbitral tribunals.
The judgment also departs from the strict approach adopted in Project Director, NHAI v. M. Hakeem. Although the Court explained why a limited modification power is necessary, it did not fully address concerns about maintaining consistency with the UNCITRAL Model Law, on which the Arbitration and Conciliation Act, 1996 is based. This may create uncertainty regarding India’s alignment with international arbitration standards.
Despite these concerns, the judgment attempts to strike a balance between ensuring justice and preserving the efficiency of arbitration. Its long-term impact will depend on how cautiously future courts exercise the limited power of modification
- INFERENCE
The decision in Gayatri Balasamy v. ISG Novasoft Technologies Ltd. represents a landmark development in Indian arbitration law. The Constitution Bench successfully resolved a long-standing conflict regarding the scope of judicial powers under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996.
By recognizing a limited power of modification, the Court sought to balance arbitral autonomy with the need for effective justice. The judgment prevents unnecessary annulment of awards and reduces the likelihood of repetitive arbitration proceedings. At the same time, it attempts to preserve the principle of minimal judicial intervention by restricting modification to narrowly defined circumstances.
Although concerns regarding judicial overreach remain valid, the decision provides greater flexibility to courts and enhances the practical effectiveness of arbitration in India. Its ultimate success will depend upon whether future courts continue to apply the modification power cautiously and within the limits prescribed by the Constitution Bench.
Submitted By- Khushi Jain
Amity University Haryana