Can Arbitral Awards Be Modified in Setting Aside Proceedings? — A Brief on the Supreme Court’s Reinterpretation of Section 34 of the Arbitration and Conciliation Act, 1996

Section 34¹ of the Arbitration and Conciliation Act, 1996, governs the setting aside of awards arising from arbitrations seated in India. This provision does not provide any powers for the setting aside court to vary or modify portions of the award.

This was the legal position in vogue under Indian law, until the Supreme Court’s reinterpretation of Section 34, by its judgment dated 30-4-2025 in Gayatri Balasamy v. ISG Novasoft Technologies Ltd. (Balasamy)². In the decision by 5-Judge Bench (by a majority of 4:1) Section 34 has been “reinterpreted to include a limited power to modify awards”. The Supreme Court has also explained the limitations on such power, while also touching upon several allied issues, such as the severability of awards and the specific power to modify the interest awarded by a tribunal.

Position prior to Balasamy

In a previous decision by a two-Judge Bench of the Supreme Court in NHAI v. M. Hakeem (Hakeem)³ the Court declared that no power to modify an award could be derived from Section 34, holding as follows:

48. Quite obviously if one were to include the power to modify an award in Section 34, one would be crossing the Lakshman Rekha and doing what, according to the justice of a case, ought to be done. In interpreting a statutory provision, a Judge must put himself in the shoes of Parliament and then ask whether Parliament intended this result. Parliament very clearly intended that no power of modification of an award exists in Section 34 of the Arbitration and Conciliation Act, 1996. It is only for Parliament to amend the aforesaid provision in the light of the experience of the courts in the working of the Arbitration and Conciliation Act, 1996 and bring it in line with other legislations the world over.

The Supreme Court in Hakeem⁴ also reconciled earlier decisions wherein awards were modified with the above statement of law — holding that those decisions were rendered under the extraordinary jurisdiction of the Supreme Court under Article 142⁵ of the Constitution of India.

Subsequently, several judgments further clarified that even despite the lack of power to modify an award, a setting aside court could “partially set aside” severable portions of an award. This would not amount to modification but merely setting aside a divisible part of an award (to the extent such division is possible). As explained by the Delhi High Court in NHAI v. Trichy Thanjavur Expressway Ltd.⁶:

43. … The expression “modify” would clearly mean a variation or modulation of the ultimate relief that may be accorded by an Arbitral Tribunal (AT). However, when a Section 34 Court were to consider exercising a power to partially set aside, it would clearly not amount to a modification or variation of the award. It would be confined to an offending part of the award coming to be annulled and set aside. It is this distinction between a modification of an award and its partial setting aside that must be borne in mind.

The position post Balasamy

The Supreme Court in Balasamy⁷, while recognising that the Act “does not expressly empower courts to modify or vary an arbitral award” has clarified that such power exists, albeit in a limited context, as an inherent power of courts.

Interestingly, although not a dispositive part of the decision, the approach adopted by the majority of Judges is reflected in the question posed by them as: “to what extent can we weave the principles of equity and justice while not offending the jurisdictional fabric of Section 34?” The majority in Balasamy⁸ thereafter came to the following conclusions in relation to the question of modification.

(i) Partial setting aside of severable portions of an award

The majority held that an award may be partially set aside (to the extent that the invalid portion of the award is severable from the remainder of the award). The Court reasoned that:

33. … The authority to sever the “invalid” portion of an arbitral award from the “valid” portion, while remaining within the narrow confines of Section 34, is inherent in the court’s jurisdiction when setting aside an award.⁹

This ruling reaffirms several decisions of High Courts wherein (even in the pre-Balasamy¹⁰ scenario) awards have been partially set aside, despite the absence of powers to modify an award.

(ii) Modification in principle

Squarely departing from the view in Hakeem¹¹, the majority also found that a limited power of modification is inherent within Section 34. The majority in Balasamy¹² arrived at this conclusion on two bases:

First, that Section 34 is merely silent on and does not expressly prohibit modification. This is evident from the majority ruling that:

43. … Section 34 does not restrict the range of reliefs that the court can grant, while remaining within the contours of the statute. A different relief can be fashioned as long as it does not violate the guardrails of the power provided under Section 34.…

44. … It will be wrong to argue that silence in the Arbitration and Conciliation Act, 1996, as projected, should be read as a complete prohibition.¹³

Second, that the policy of arbitration being an expeditious mechanism would be undermined if the setting aside court was forced to only set aside the award, requiring a fresh arbitration to be commenced, followed by consequential litigation. As explained by the majority:

42. Given this background, if we were to decide that courts can only set aside and not modify awards, then the parties would be compelled to undergo an extra round of arbitration, … In effect, this interpretation would force the parties into a new arbitration process merely to affirm a decision that could easily be arrived at by the Court. This would render the arbitration process more cumbersome than even traditional litigation.¹⁴

(iii) Extent of modification permissible

Interestingly, the majority, when elaborating on the extent of modification which is permissible under Section 34, appears to have restricted such powers to issues of procedural errors of the kind contemplated under Section 33¹⁵ (i.e. those involving computational or typographical errors).

In its analysis, the majority decision affirmed that:

49. … a court reviewing an award under Section 34 possesses the authority to rectify computational, clerical, or typographical errors, as well as other manifest errors, provided that such modification does not necessitate a merits-based evaluation. There are certain powers inherent to the Court, even when not explicitly granted by the legislature.¹⁶

The words “as well as other manifest errors” could have opened a debate on the extent of modification powers recognised by the Supreme Court. However, perhaps intentionally, these words do not find a mention in the dispositive part of the decision in Balasamy¹⁷, wherein, in its ultimate conclusions, the Court limits the powers of modification to “correcting any clerical, computational or typographical errors which appear erroneous on the face of the record”.

Furthermore, the intent to limit the use of such modification powers to patent errors (not involving reappreciation of merits) is evident from: (a) the Court’s ruling that the limited modification power recognised by it does not entail a review on merits; and (b) the Court setting out at an extremely high threshold for applying such powers, holding that the appropriateness of the modification should not be “debatable” or in “doubt”. Differentiating between a “procedural review” and a “review on merits”, the majority holds that:

54. … inadvertent errors, including typographical and clerical errors can be modified by the Court in an application under Section 34. However, such a power must not be conflated with the appellate jurisdiction of a higher court or the power to review a judgment of a lower court. The key distinction between Sections 33 and 34 lies in the fact that, under Section 34, the Court must have no uncertainty or doubt when modifying an award. If the modification is debatable or a doubt arises regarding its appropriateness i.e. if the error is not apparent on the face of the record, the court will be left unable to proceed, its hands bound by the uncertainty.¹⁸

By reducing the power of modification to typographical or similar errors and increasing the threshold for its application to one of “no uncertainty or doubt”, “non-debatable”, the majority has, while granting recognition to such power, also leashed it considerably.

(iv) Interest

The power of modification in relation to interest (both forming part of an award, and interest on the awarded sums) has also been clarified by the Supreme Court.

First, in relation to pendente lite interest (i.e. interest for the period spent during the arbitration) the majority appears to have held that there can be no power of modification exercised by the setting aside court.

Since the correctness of the rate of pendente lite interest would entail a review on merits, this would therefore not be strictly subject to a “modification” in the limited extent recognised by the Court. Therefore, the majority reasoned that in cases where the pendente lite interest has been awarded in violation of Section 31(7)(a) (for example, where the rate of interest awarded is contrary to a contractual provision) — this could only entail either a setting aside or a remand, by asking the Tribunal to redetermine the rate of interest under Section 34(4) of the Arbitration and Conciliation Act, 1996.

However, in relation to “post-award interest” in terms of Section 31(7)(b) of the Arbitration and Conciliation Act, 1996, the Court reaffirmed that it would have the power to modify the interest “where the facts justify such modification”.

While at first glance, this appears to depart from the limitations set by the majority on the power of modification — such power in relation to post-award interest appears to have been recognised on the reasoning that:

76. … Arbitral Tribunals, when determining post-award interest, cannot foresee future issues that may arise. Post-award interest is inherently future-oriented and depends on facts and circumstances that unfold after the award is issued. … Therefore, it is appropriate for Section 34 Court to have the authority to intervene and modify the post-award interest if the facts and circumstances justify such a change.¹⁹

In this context, therefore there is no “reappreciation” of facts considered by the Tribunal, but rather a power of modification of the post-award based on new facts that may emerge.

Position in other jurisdictions

The legislation governing international arbitrations in Singapore (i.e. the International Arbitration Act, 1994) also does not provide for any power of modification or variation of an arbitral award by the setting aside court. Contradistinctly, the power to “vary” an award (on appeals from questions of law) has expressly been provided in the Singaporean legislation governing domestic arbitrations (i.e. the Arbitration Act, 2001).

Despite the evident (and intentional) absence of such power in the International Arbitration Act, 1994 — Singaporean courts have held that an implied power to variation/modify awards is available in setting aside proceedings under this legislation. The Singapore High Court in CAI v. CAJ & CAK²⁰, after noting that such power was absent in the International Arbitration Act, 1994 (while being present in a limited context in the legislation governing domestic arbitrations) reasoned that the power to set aside a part of an award necessarily includes the power to “make ancillary or consequential orders to give effect to its setting aside”. The Court held that such power is “built into” the setting aside power. While declaring that a part of the quantification of delay (in a construction dispute) was to be set aside, the Singapore High Court therefore modified the delay quantification for which liquidated damages were to be paid. The decision of the High Court was affirmed by the Singapore Court of Appeal in CAJ & CAK v. CAI²¹.

In some other jurisdictions, such as the United Kingdom, the power to vary an award is expressly provided within the legislation itself. Parties are therefore enabled to seek a variation or setting aside of an award from the jurisdictional courts in United Kingdom.

Evidently, leading arbitral jurisdictions adopt varying approaches to the issue of modification. As briefly explained above, the Supreme Court in Balasamy²² appears to have adopted a middle path, wherein a limited power of modification has now been recognised under Section 34 of the Arbitration and Conciliation Act, 1996.

Conclusion

By its decision in Balasamy²³, the Supreme Court has answered much-debated questions on modification in a pragmatic manner. While a very limited power of modification has been recognised, the Court has also reaffirmed that: (i) awards can be partially set aside to the extent the invalid portions are severable; and (ii) reiterated that even its extraordinary jurisdiction to “do complete justice” available under Article 142 of the Constitution may ordinarily only be exercised based on fundamental considerations of public policy.