Supreme Court: Court U/s. 34 A&C Act Can Rectify Computational, Clerical, Or Typographical Errors In Arbitral Award If Such Modification Doesn't Require Merits-Based Evaluation

The Court, in a 4:1 majority, held that Courts have a limited power to modify an arbitral award under Sections 34 and 37 of the Arbitration and Conciliation Act. The Court held that “if a fog of uncertainty obscures the exercise of modification powers, the courts must not modify the award. Instead, they should avail their remedial power and remand the award to the tribunal under Section 34(4).”

The Constitution Bench comprising Chief Justice of India Sanjiv Khanna, Justice BR Gavai, Justice Sanjay Kumar, Justice KV Viswanathan, and Justice Augustine George Masih held that Courts may exercise a limited power to alter arbitral awards, but only under specific conditions, which were, “When the award is severable; to rectify clerical or typographical mistakes; in certain cases involving post-award interest; and under Article 142 of the Constitution, which must be applied sparingly and with restraint.”

However, Justice KV Viswanathan delivered a dissenting opinion, holding that Courts do not have the power to modify arbitral awards at all, stating, "Section 34 cannot modify or vary the arbitral award…It is crystal clear that they cannot change or vary arbitral award as it will hit the core aspect."

Solicitor General Tushar Mehta and Senior Advocate Arvind Datar appeared for the Appellant, while Senior Advocates Saurabh Kirpal, Naresh Markanda, Ritin Rai, Benny P. Thomas, Gourab Banerji, Shekhar Naphade, Aniruddha Joshi, Prashanto Chandra Sen, Darius J. Khambata, Gaurav Pachnanda and Sumeet Pushkarna represented the Respondent.

Brief Facts

The key issue before the Constitution Bench in this case was the question of law concerning whether Courts, when dealing with challenges to an arbitral award under Sections 34 and 37 of the Act, have the power to modify an arbitral award.

This legal controversy arose because the Act does not expressly empower Courts to modify awards. Section 34 of the Act primarily confers the power to set aside an award on limited grounds. The case was specifically referred to a larger bench to determine the correctness of previous Supreme Court judgments, particularly Project Director, NHAI v. M. Hakeem (2021), which had held that Courts under Section 34 do not possess the power to modify an award. However, other Benches had, in various instances, modified awards or upheld such modifications.

Arguments by Parties

Arguments against modification emphasised that Section 34 of the Act provided limited grounds for setting aside, differing significantly from appellate powers, that allowing modification would undermine the finality and minimal judicial intervention principle of arbitration, and that reading words into Section 34 was not permissible statutory interpretation. Concerns were also raised about potential complications for the enforcement of foreign awards under the New York Convention if modifications were allowed without a clear statutory basis like in other jurisdictions.

Those favouring the power to modify argued it would prevent injustice, allow Courts to ensure an obviously wrong decision on a point of law is corrected, could ensure speedy resolution, and that the power to set aside (a larger power) should include the power to modify (a lesser power). Concepts like severability were also referenced.

Court’s Reasoning

The Supreme Court held that “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.”

“Notwithstanding Section 33, we affirm that 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. The scope of these inherent powers depends on the nature of the provision, whether it pertains to appellate, reference, or limited jurisdiction as in the case of Section 34. The powers are intrinsically connected as they are part and parcel of the jurisdiction exercised by the court,” it clarified.

The Bench explained that “once Section 34 is reinterpreted to include a limited power to modify awards, this authority will not affect the international commercial arbitration regime or the enforcement of foreign awards.”

The Court stated, “As discussed earlier in this judgment, the scope of the power under Section 34(4) is not to be restricted to a rigid, straitjacket formula. Rather, it depends on the specific facts and circumstances of each case. Being a discretionary power, it is to be exercised by the Court judiciously, keeping in mind the grounds raised in the application under Section 34(1). The Court should be prima facie satisfied that the wrong and illegality in the award are curable.”

“Our reasoning is bolstered when considering the practical aspects. 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. Since the future is unpredictable and unknown to the arbitrator at the time of the award, it would be unreasonable to suggest that the arbitrator, as a soothsayer, could have anticipated or predicted future events with certainty. Therefore, it is appropriate for the Section 34 court to have the authority to intervene and modify the post-award interest if the facts and circumstances justify such a change,” the Bench explained.

Consequently, the Court held that the “Court has a limited power under Sections 34 and 37 of the 1996 Act to modify the arbitral award. This limited power may be exercised under the following circumstances:

• when the award is severable, by severing the “invalid” portion from the “valid” portion of the award, as held in Part II of our Analysis.
• by correcting any clerical, computational or typographical errors which appear erroneous on the face of the record, as held in Part IV and V of our Analysis;
• post award interest may be modified in some circumstances as held in Part IX of our Analysis; and/or
• Article 142 of the Constitution applies, albeit, the power must be exercised with great care and caution and within the limits of the constitutional power as outlined in Part XII of our Analysis.”

Cause Title: Gayatri Balasamy v. M/S. ISG Novasoft Technologies Limited (Neutral Citation: 2025 INSC 605)

Appearance:

Appellant: Solicitor General Tushar Mehta; Senior Advocate Arvind Datar; AOR Sudarshan Lamba, K.V. Mohan, Amrendra Kumar Mehta, Jinendra Jain, T. Harish Kumar, Nishanth Patil and Manish K. Bishnoi; Advocates Debmalya Banerjee, Rohan Sharma, Vikas Gogne, Kanu Agarwal, Ashwin Shanker, Sanjay Grover, Ridhi Nyati, Vaibhav Dang, Ajay Jain, Krishna Sharma, Bijay Lakshmi, M.N. Mishra, Bharathi Subramanian, Shubham P. Chopra, M.V. Mukunda, Mithun Shashank, M.V. Swaroop, Khubaib Shakeel, et al

Respondent: ASG Vikramjit Banerjee; Senior Advocates Saurabh Kirpal, Naresh Markanda, Ritin Rai, Benny P. Thomas, Gourab Banerji, Shekhar Naphade, Aniruddha Joshi, Prashanto Chandra Sen, Darius J. Khambata, Gaurav Pachnanda and Sumeet Pushkarna; AOR Chritarth Palli, Prakash Ranjan Nayak, Surjendu Sankar Das, Nikilesh Ramachandran, Alok Tripathi, et al; Advocates Deepanwita Priyanka and Mohit D. Ram; Advocates Manmeet Kaur, Debmalya Banerjee, Rohan Sharma, Gurtej Pal Singh, Abhishek Kshetarpal, Ritika Sinha, Ankita Gupta, Dhiliban Varadarajan, Rahul G. Tanwani, et al

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