Courts’ power to modify an arbitral award | Judgement Matrix
Court’s Power to Modify an Arbitral AwardJudges: Sanjiv Khanna CJI, B.R. Gavai J, P.V. Sanjay Kumar J, K.V. Viswanathan J, A.G. Masih J
In a 4:1 majority, the Supreme Court held that courts had a ‘limited power’ to modify arbitral awards under Section 34 of the Arbitration Act.
The majority opinion was authored by Chief Justice Sanjiv Khanna for Justices B.R. Gavai, P.V. Sanjay Kumar and A.G. Masih. Justice K.V. Viswanathan authored a dissenting opinion.
Here’s a snapshot of the key findings of the Bench.
Background
The case arose from a Special Leave Petition (SLP) filed by Gayatri Balasamy, a former Vice President at ISG Novasoft Technologies Limited. In July 2006, Balasamy resigned from her post, alleging sexual harassment by ISG’s CEO. Her resignation did not take effect and the company later terminated her through a series of letters. Both sides filed criminal complaints, and the Supreme Court eventually referred them to arbitration. The arbitral tribunal awarded Balasamy ₹2 crore in compensation.
Balasamy challenged the award before the Madras High Court, arguing that key issues were overlooked. A single judge modified the award, granting her an additional ₹1.6 crore. However, a Division Bench of the High Court later reduced the additional amount to ₹50,000, calling the modification excessive. Balasamy approached the Supreme Court through an SLP.
On 1 October 2021, the case was listed before a Bench led by then Chief Justice N.V. Ramana. It was listed before several benches before reaching Justices Dipankar Datta, K.V. Viswanathan and Sandeep Mehta in early 2024. On 20 February 2024, the Bench noted that the case involved a crucial legal question: Can courts modify arbitral awards under Sections 34 and 37 of the Arbitration Act, 1996?
The Bench also noted conflicting precedents. Cases like McDermott International Inc. v Burn Standard Co. Ltd. (2006), MMTC Ltd. Sangyoung Construction Ltd. v NHAI (2019) and Project Director, NHAI v M. Hakeem (2021) had rejected any power to modify. Others like Vedanta Limited v Shenzden Shandong Nuclear Power Construction Company Ltd, (2018) and Tata Hydroelectric Power Supply Co. Ltd. v Union of India (2003) had held that courts can vary an award. Given the inconsistency, the Bench referred the issue to a five-judge Constitution Bench.
On 13 February 2025, a five-judge Bench led by Chief Justice Sanjiv Khanna commenced hearing arguments in the case.