Anjali Yadav
There is an intricate change in India’s arbitration landscape, as it looks to find the right balance between the expedience of alternative dispute resolution and the necessity of some judicial oversight. The Arbitration and Conciliation Act, 1996, was enacted in part to decrease and limit instances of judicial intervention and enhance party autonomy. Recent Supreme Court pronouncements have added some nuance to this landscape and raised the question of judicial intervention in arbitration, particularly under Section 34, and whether the modifications of an arbitral award smooth the process of arbitration or undermine the core principles of arbitration. Although Section 37 of the Act allows an appeal against the orders passed under Section 34 of the Act but it is limited to scrutinising the correct application without revisiting the merits of the case or modification in the award.
A recent instance is Gayatri Balasamy v. M/s. ISG Novasoft Technologies Limited, where the Supreme Court was asked to determine whether the courts have the power to modify an arbitral award and to what extent. This question delves very much into the statutory scheme under section 34, where courts can broadly only set aside an arbitral award and only on a very limited number of grounds. The courts, in applying Section 34, have continuously struggled with clearly defining these grounds, and various High courts have interpreted it in very contradictory ways, and more than one Supreme Court case has come to the same result based on arbitration appeals. Moreover, this matter poses a further and necessary question of whether the evolving doctrine and judicial interventions are legitimate modifications that allow arbitration to be more just, or an impermissible intrusion which offends the concept of autonomy. This paper systematically deals with the judicial tightrope and examines the difference between oversight and overreach by the court, followed by an analysis of section 34 as a misstep or a required modification. Furthermore, it suggests a balanced model through the comparison of different Jurisdictions.
THE JUDICIAL TIGHTROPE: BETWEEN OVERSIGHT AND OVERREACH
Section 34 is unequivocal in limiting a court’s jurisdiction to instances of incapacity, procedural unfairness, or violations of public policy. The statute neither expressly nor implicitly permits a court to “modify” the substantive terms of an award. In the case of M. Hakeem & Ors. v. Project Director, NHAI, and McDermott International Inc. v. Burn Standard Co. Ltd.,[1] the court made it clear that a court only had the authority to set aside the award or remand it under Section 34. It also warned against the slippery slope of recasting commercial contracts as remaking them in the guise of correction. However, there have been occasions where Indian courts have not adhered to this rigid approach. In the case of Pure Helium India (P) Ltd. v. ONGC andMukand Ltd. v. Hindustan Petroleum Corp., courts have reduced interest rates that were awarded by arbitrators under the guise of equity or fairness. ONGC & Western GECO is the epitome where the Supreme Court observed that an award may become susceptible to challenge where it has not drawn inferences that it ought to have drawn, and may therefore be subjected to challenge for patent illegality or gross injustice. Although the cases above highlight the courts’ willingness to intervene to prevent a miscarriage of justice, the cases also highlight how it is difficult to draw the proverbial line between legitimate oversight and substantive appellate review.
This further raises a question about the power of the Supreme Court vested under Article 142 of the Constitution of India. There have been several instances in which, SC used its power under Article 142 to modify an arbitral award. It often acts as a constitutional safety valve to close legal loopholes, particularly when social justice or fundamental rights are at issue. However, the repetitive use of Article 142 over trivial matters defeats the legislative intent behind Section 34 of the Arbitration and Conciliation Act, 1996. It also acts as a barrier in commercial cases because, due to contradictory judgments, the business holder will question the validity of the arbitral award. It creates a sense of ambiguity in the commercial landscape.
The decisions rendered under Article 142 of the Constitution of India often serve as an effective tool for bridging the legal loopholes, but there is a need for a comprehensive statute which determines the extent of power to be exercised under this article. In some cases, such as the Delhi Judicial Service Association. v. State of Gujarat,[2]the court held that it is a part of the basic structure and no other legislation can override it. However, in the case of A.B. Bhaskara Rao v. CBI,[3]the court opted an opposite opinion.
This kind of judicial inventiveness creates a mix of admiration and unease. On one hand, it marks a willingness to protect parties against atrocious results, but it does risk changing courts into second-tier tribunal appeal bodies, second-guessing the arbitral merits, contrary to the legislative intention of the 1996 Act and contrary to the expectations of these commercial parties worldwide.
REDEFINING SECTION 34: MODIFICATION OR MISSTEP?
The approach of the Supreme Court in Gayatri Balasamy exemplifies this developing thought process. The Court understood “recourse” under Section 34 of the Act as including possibly minor amendments, especially to avoid a breach of a fundamental principle or public policy and signalled a practical hybrid form of jurisprudence. The reasoned logic is convincing. If a minor procedural amendment achieves a just result quicker than setting aside an award altogether and sending the parties back to the arbitral process, then why do we not favour efficiency?
But there is a serious doctrinal issue. Modification, unlike annulment (which sets aside an award because of its defects), changes the substantive conclusion of the arbitral tribunal that arguably limits party autonomy at the heart of arbitration, and the jurisdiction assigned explicitly to arbitrators. The UNCITRAL Model Law that India adhered to when it sought an arbiter’s jurisdiction provides for only annulment of the arbitral award, with no reference to the powers of the domestic courts to amend it. The New York Convention also has no provision for modification, either, creating potential questions for enforcing “court-corrected” awards as well, due to uncertainty.
The ongoing discussion regarding the permissible limits on judicial interference in arbitration raises important concerns about finding the right relationship between judicial supervision and arbitral independence. The Vishwanathan Committee has provided courts with limited power in amending the arbitral award. It states that there is no explicit statutory provision; there is a danger that repeated use of Article 142 to modify arbitral awards will obscure constitutional boundaries and distort legislative intentions.[4]
In this context, courts should not have sufficient powers to modify arbitral awards, although it may be appropriate to permit limited procedural reviews with respect to procedural determinations, i.e. where there may have been a misunderstanding of an interest calculation, or where a clearly identifiable procedural mistake occurred that could be remedied. Permitting limited amendments to an award would only increase efficiency without detracting from the core purpose of minimal court involvement in the regime under the Arbitration Act. The specific measurements and mechanisms outlined above will help ensure that the courts do not risk morphing into other arbitral venues from which arbitrators’ awards are no longer final. It is paramount to ensure that any amendatory measures offered by courts do not threaten the integrity of the arbitration regime in India.
TOWARDS A BALANCED MODEL: LEARNING FROM OTHER COMPARATIVE JURISDICTIONS
Several jurisdictions globally have favoured clarity. Singapore andHong Kong both have clearly defined non-interventionist regimes. Both jurisdictions expressly permit a Court to set aside an award in limited circumstances (like incapacity or procedural unfairness), but neither jurisdiction permits a Court to change the award itself, insofar as it relates to a substantive determination made by the Arbitral Tribunal. These limitations sensibly increase certainty, whilst limiting judicial second-guessing of the arbitral experts.
The variability from the UK, which allows the court to remit if the tribunal has exceeded its jurisdiction under Section 67 of the Arbitration Act 1996 and under Section 69 allows an appeal on points of law or significant errors. Yet it transparently allows this appeal under a completely defined statutory regime, and in stark contrast to India’s case-based, ad hoc judicial modifications of arbitral awards under Section 34. Accordingly, this comparative framework suggests that India’s approach is emerging both in a permitted manner ultimately less legally certain, yet flexible.
Nevertheless, India’s current approach could also be read, in more progressive times, as a new experiment: a measure of calibrated intervention which shares some hallmarks of neither interventionist regimes of Singapore andHong Kong, nor a more defined style of appeal like the UK. India’s tentative limited modification regime permits courts to retain what appears to be more interventionist to achieve substantial justice, particularly in awards which are severable, or awards which on their own terms include gross illegality. If we consider this issue as an approach to harmonise the two regimes, India is taking a middle path: being a ‘somewhat’ interventionist jurisdiction under limited circumstances would appear to harmonise the two regimes in more favourable regulatory practices. The note of caution is that this is a novel and bold step, which requires discipline from civil law systems like India to properly assess whether a modification amounts to achieving justice or whether a court is simply replacing the court’s views, preferences or perspective, for that of an arbitral tribunal for an award made.
CONCLUSION
In discussions of evolving case law, the arbitration regime in India has emerged as a synthesised model that delicately balances arbitral independence with judicial oversight. The Gayatri Balasamy outcome is illustrative of this approach – it is a method to refine arbitration with minor, contextual amendments, not total overruling and rethinking.
However, the exercise of powers under Section 34 should be done with great care. Arbitration is of course, dependent on limiting judicial intervention to only the most extreme of cases – cases which engage patent illegality, fundamental principle violation and public policy interests. If not, the courts replace the very tribunal a party voluntarily chose instead of litigation.
A more positive approach would support remand under Section 34(4), so that arbitrators themselves remedy these flaws and allow for arbitral independence. As a general proposition, a court should consider modifying an arbitral award only in circumstances where remand is not a successful option due to extreme injustice or impracticality to correct by remand, and even then, the judge ought to be biased towards the least court intervention.
If it may be suggested India has started to evolve, it is arguably a sophisticated yield that at least matches arbitration to commercial realities and local institutional weaknesses, effectively ensuring justice without entirely giving away arbitral independence. It is also important that future jurisprudence identify clear doctrinal demarcation, with reference to comparative jurisprudence and India’s legislation.
[1] McDermott International Inc. v. Burn Standard Co. Ltd., 2006 (11) SCC 181.
[2] Delhi Judicial Service Association. v. State of Gujarat, 1991 (4) SCC 406.
[3] A.B. Bhaskara Rao v. CBI, AIR 2011 SUPREME COURT 3845.
[4] The Indecision in Modification of Awards under Section 34 and 37 of the Arbitration and Conciliation Act, Skv Law Offices(June. 30, 2025, 10:00 AM), https://skvlawoffices.com/the-indecision-in-modification-of-awards-under-section-34-and-37-of-the-arbitration-and-conciliation-act/#:~:text=While%20Sections%2034%20and%2037,Article%20142%20to%20modify%20awards.