Author: Prasanna Parandekar

INTRODUCTION

The Gayatri Balasamy v. case. The case of ISG Novasoft Technologies Limited is a landmark case in regard to the extent of judicial interference in the award of arbitrators as stipulated in the Arbitration and Conciliation Act, 1996. The main issue for the Supreme Court was whether the jurisdiction of the courts in setting aside arbitral awards under Section 34 (setting aside of arbitral awards) and under Section 37 (appeals), this needed the powers of the courts to alter an arbitral award, or whether they were strictly limited to either setting aside or merely upholding the arbitral award. The ruling explains how far the courts can go in interfering with arbitral proceedings without breaching the principle of minimal intervention.

1. Case Title

Gayatri Balasamy v. ISG Novasoft Technologies Limited.

2. Citation

Gayatri Balasamy v. ISG Novasoft Technologies Ltd., (Supreme Court), 

3. Court

Supreme Court of India

4. Bench

Constitution Bench (Five-Judges)

5. Date of Judgment

30, April 2025.

6. Relevant Statutes / Important Provisions 

Act of Arbitration and Conciliation, 1996 

• Section 34 – Application for setting aside arbitral award 

Amendment Rules (2 of 2004) – Amended Rules – 25% of the Daubert (2004) Rules are changed or added. 

Section 33 – Correction and interpretation of award Form and contents of arbitral award – Section 31 

Constitution of India

Special Leave Petition jurisdiction of the Supreme Court Article – 136

7. Brief Facts 

The petitioner was Gayatri Balasamy, who was employed in the respondent company, ISG Novasoft Technologies Limited. There were disputes between the parties, which led to arbitration proceedings. The arbitral tribunal passed an award for some relief. Thereafter, the petitioner moved to challenge the arbitral award before the High Court, under Section 34 of the Arbitration and Conciliation Act, 1996. During these proceedings, a question arose as to whether the court could go beyond just setting aside the award and instead modify the award. Due to conflicting judicial precedents on this issue, the matter was finally placed before a Constitution Bench of the Supreme Court for authoritative determination on the issue.

8. Issues Involved 

1. Whether the courts have power under Section 34 of the Arbitration and Conciliation Act, 1996, to alter an arbitral award? 

2. Whether the appellate courts under Section 37 can amend an arbitral award during an appeal against orders under Section 34? 

3. Whether the power of modification can be read in Section 34 based on other principles such as severability and justice?

9. Arguments 

Petitioner’s Arguments:

 Element B: While the petitioner believed that courts should not only set aside arbitral awards. 

• In some cases, it was suggested that the court should be given the option to amend or correct the arbitral award instead of entirely setting them aside, to overcome limited defects in the arbitral award. 
• The petitioner reiterated that modification ensures justice and obviates unnecessary remand or re-arbitration, which saves time and resources. 
• The petitioner relied on judicial precedents in which courts had exercised powers to modify arbitral awards to avoid injustice. 

Respondent’s Arguments: 

• Sales, Services and Real Estate – “the plaintiff argued that there is only a limited supervisory jurisdiction of the Arbitration Act.” It was submitted that Section 34 only allows for the setting aside of an award and creates no express power of modification. 
• The respondent emphasised that permission to modify would be equivalent to courts sitting in appeal on arbitral awards, which would defeat the object of arbitration and party autonomy.
• It was argued that if the courts start altering awards, it will invite excessive litigation and make the arbitral decisions not final and binding.

10. Judgment: 

The Supreme Court ruled that the courts exercising jurisdiction under sections 34 and 37 have limited jurisdiction to interfere with arbitral awards. The Court explained that the Arbitration Act did not authorise courts to serve as courts of appeal on arbitral awards. 

However, it was recognised by the Court that in certain limited circumstances, modification may be permissible where the defect is severable or where limited intervention is necessary in order to give effect to the arbitral award without disrupting its substance.

11. Ratio Decidendi 

The ratio laid down by the Supreme Court is that: 

• The power of Section 34 is mainly to set aside an arbitral award and not to alter it as an appellate body. The court must adhere to the principle of minimum judicial interference, which is the essence of arbitration law.
• The only place that modification is permissible, to the limited extent that it is incidental, is to apply severability or to correct a part of the award without rewriting it. 

Therefore, the Court found that modification cannot become a routine exercise and should be limited to a narrow scope.

12. Obiter Dicta 

The Court noted that the purpose of the arbitration is to provide an alternative method of resolving disputes, which is to be speedy, efficient, and final. Any broad construction of court powers under Section 34 would defeat the legislative intent underlying the Arbitration Act.

The Court also emphasised that excessive judicial intervention would discourage parties from opting for arbitration and thus defeat India’s objective of becoming an arbitration-friendly jurisdiction.

13. Final Decision 

The Supreme Court handed down its decision explaining that: 

Courts under Section 34 have not been given extensive powers to alter arbitral awards, such as being in appeal. 

As the Supreme Court of the United States has held that: “Any modification must be exercised only in limited circumstances, such as where the award is severable, and the valid portion can be preserved.” 

The judicial function has remained a supervisory function, rather than being appellate. Accordingly, the Court settled the legal situation on the limited scope of modification of arbitral awards.