Whether a court hearing a challenge under Section 34 of the Arbitration and Conciliation Act, 1996 can modify an award — rather than only set it aside or uphold it — divided benches for years. In Gayatri Balasamy v. M/s ISG Novasoft Technologies Ltd., 2025 INSC 605, decided on 30 April 2025, a five-judge Constitution Bench presided over by Chief Justice Sanjiv Khanna answered the reference: courts under Sections 34 and 37 possess a limited power of modification, confined to severable portions, manifest clerical and computational errors, and post-award interest in some circumstances — with the Supreme Court's Article 142 power available within its own constitutional limits. The decision now frames every award challenge filed in Delhi.
The question and why it mattered
Section 34 speaks only of setting aside an award; Section 37 provides the appeal. On that spare text, one line of authority held that courts had no power to modify at all — a challenge either succeeded, destroying the award, or failed, preserving it whole. The opposing line pointed to the waste this produced: an award correct except for one severable head, or marred by an arithmetic slip, had to be annulled entirely and the parties sent back to arbitrate afresh. The reference in Gayatri Balasamy asked the Constitution Bench to choose.
The answer: a limited, defined power
The Bench anchored the power in proportionality: the greater power to annul contains the lesser power to sever and correct — omne majus continet in se minus — while rejecting any suggestion of a blanket modification jurisdiction. Modification, the Court held, is a more limited, nuanced power in comparison to annulment, not a licence for appellate correction.
What remains prohibited
- Re-appreciating evidence or substituting the court's view of the merits for the tribunal's;
- Rewriting quantum, recasting contractual interpretation, or supplying reasons the tribunal did not give;
- Correcting anything about which the court entertains doubt — the modification power operates only on the indisputable;
- Using Section 37 appeals to obtain modifications the Section 34 court could not itself have made.
Consequences for Delhi arbitration practice
Three practical shifts follow. First, pleadings: Section 34 petitions before the Commercial Division and district commercial courts should structure the challenge head-wise, so that severance can be granted head-wise — a single undifferentiated attack invites a single undifferentiated answer. Second, computation schedules: where the complaint is arithmetic, file the corrected calculation as a schedule; the court will not do forensic accounting, and the face-of-the-record standard rewards petitions that make the error visible at a glance. Third, interest strategy: award-holders resisting challenges should defend post-award interest with reasons tied to Section 31(7)(b), since that head is now the most exposed to judicial adjustment in either direction.
The decision also matters upstream, in the arbitration itself. Tribunals aware that only severable, clearly erroneous portions of their awards can be judicially trimmed have every incentive to structure awards claim-wise with separate findings and computations — and parties have every incentive to ask for exactly that structure in their post-hearing submissions.
Note: This article discusses a reported Constitution Bench judgment for general information. The application of the modification power is intensely record-specific, and nothing here is legal advice.
Frequently Asked Questions
What exactly can a Section 34 court now modify?
Four things, per the operative conclusions: it may sever the invalid portion of an award from the valid where the two are separable; it may correct clerical, computational or typographical errors apparent on the face of the record; it may in some circumstances modify post-award interest; and the Supreme Court may act under Article 142, exercised with great care and within constitutional limits.
Can a court reduce or reassess damages it considers excessive?
No. Modification is not a merits review. An error that requires re-appreciation of evidence or fresh fact-finding is outside the power; the court must have no uncertainty or doubt when it corrects, and anything debatable belongs to setting-aside analysis under the established Section 34 grounds, not to modification.
How does severance work in practice?
The proviso to Section 34(2)(a)(iv) already contemplates separating decisions on matters submitted to arbitration from those not submitted. The Constitution Bench generalised the logic: where valid and invalid parts are legally and practically separable — not interdependent or intrinsically intertwined — the court may set aside only the offending part and preserve the rest.
Does the judgment change drafting strategy in Section 34 petitions?
Materially. Challenges should now plead modification and severance as express alternative prayers: identify the discrete, severable findings attacked; specify computational errors with the arithmetic; and address post-award interest separately with reasons. A petition that prays only for wholesale setting aside forfeits the narrower remedies the law now offers.