This article has been authored by Ms. Gati Jhamb and Mr. Vasudev Mishra, 3rd-year Law Students at the National Law Institute University, Bhopal.
Introduction
On 30 April 2025, the Supreme Court of India delivered a significant judgment in the case of Gayatri Balasamy v ISG Novasoft Technologies Ltd., interpreting the scope of Section 34 of the Arbitration and Conciliation Act, 1996 (“Act”). Traditionally, the Section has been understood as a provision enabling courts to set aside arbitral awards on specific, limited grounds. However, in this decision, the Court held that Section 34 permits judicial modification of awards.
The central question addressed is whether the doctrine of severability can be read under Section 34(2). This issue has long been debated, considering the limited grounds available for judicial interference in arbitral proceedings. The Court’s reasoning in the present case adds a new dimension to the interpretation of the provision.
This article focuses on the scope of severability of arbitral awards under Section 34(2). It examines how Indian courts have previously approached this question. It then analyses the reasoning adopted by the Court in Gayatri Balasamy. Further, it provides comparative perspectives by examining how similar issues are treated in leading international jurisdictions. Finally, it analyses the implications of the judgment for the future of arbitration in India, in light of broader legislative and judicial trends.
Pre-Balasamy Interpretation of Section 34
Section 34 of the Act has been under discussion regarding judicial intervention in the process of Arbitration for a long time. The courts have accorded various interpretations to the section; largely, Courts have been reluctant to modify awards to maintain the tribunals’ independence. Section 34(2)(a) enlists specific grounds on which the court may modify a tribunal’s order.
In the past cases, like McDermott International Inc. v. Burn Standard Co. Ltd., Project Director, NHAI v. M Hakeem and MMTC Ltd., Sangyoung Construction Ltd. v. NHAI, the Courts, while dealing with the issues, along with the issue of modification of arbitral awards, have ruled in favour of limited power of the court to ‘set aside’ the arbitral award, and denied itself the powers of modification of an award. The courts in these judgements held that the power of modification cannot be read into the power to set aside the order of an arbitral tribunal.
However, a few other judgements accorded a broader interpretation to the Section and held that the courts could modify awards under Section 34. Judgements like Vedanta Limited v. Shenzden Shandong Nuclear Power Construction Company Limited, Oriental Structural Engineers Pvt. Ltd. v. State of Kerala, Tata Hydroelectric Power Supply Co. Ltd. v. Union of India, held that the court has the power to modify the award of the arbitral tribunal and that it could be read into the power of the court to set aside an award.
The judgment of Gayatri Balasamy is monumental in the arena of modification of arbitral awards, considering that the bench was a constitutional bench, before which even a division bench had already given its judgment in the matter. The court settled the dispute about the modification of the award by ruling that the award could be modified if it could be severed from the valid portion of the award.
The Severability Debate
The constitutional bench discussed the scope to which an arbitral award could be modified. The judges attempted to lay down the grounds for the modification of an arbitral award. Section 34(2)(a)(iv) is relevant for the scope of this discussion; the section discusses the ability of the courts to sever portions of the award which are non-arbitrable from those which are. Essentially, the court can remove, remand or modify a part of the award or declare it invalid, if it is severable from the valid portion of the award.
The Court states, “We hold that the power conferred under the proviso to Section 34(2)(a)(iv) is clarificatory in nature. 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”. It has also referred to Pratap Chamaria v. Durga Prasad Chamaria, stating that the power of partially setting aside the award may be exercised when the valid and invalid portions of the award can be severed from each other.
The subject of severability was earlier also discussed in ONGC Ltd. v. Western GECO International Ltd., wherein, it was held that an award could be modified if it was severable, this conflicted with the judgement in NHAI v. MA Hakeem, which stated that the award could not be modified under any circumstance, and the five-judge bench in this case of Gayatri Balasamy was responsible for reconciling these two.
Thus, it was ruled that the award could be modified to the extent of its severability from the valid portion. Further, it discussed the scope of Sections 33 and 34 of the Act and stated that Section 33 also conferred powers upon the tribunal to modify an award but could not allow it to make material changes to it, and only correct computational errors, typographical errors, and other ‘manifest errors’. Section 34 differs in scope, in the sense that it does not correct clerical errors but can sever parts of judgments based on other grounds that have been laid down in Section 34.
The court has squarely applied the doctrine of ‘omne majus continet in se minus’, meaning the greater power includes the lesser (paragraph 34). Thus, they have read into the power to set aside an award under Section 34, to include within itself the power to modify an award. The court, as is usual in matters of arbitration, is walking a thin line, balancing party autonomy and the responsibility to serve justice. A long-standing debate has been settled through this case, although the effects have yet to be assessed.
Justice Viswanathan’s dissent argues that the Arbitration Act does not permit modification of arbitral awards, reflecting a conscious shift from the pre-1996 regime. He warns that judicial modification, even if limited, risks undermining arbitral finality and autonomy. The dissent stresses that post-2015 and 2019 amendments show a clear legislative intent to restrict judicial intervention. Justice Viswanathan maintains that courts already have sufficient remedies, such as Section 33 and Section 34(4), and warns against blurring the line between interpretation and legislation.
The Global Perspectives
Historically, arbitration hubs such as England and Wales, the United States, and Singapore have maintained a strict non-interventionist stance towards arbitral awards. India’s Supreme Court has charted a different path in Gayatri Balasamy, endorsing the targeted severance and correction of awards to preserve their essence.
In England and Wales, under the Arbitration Act 1996, English courts may confirm, vary, or set aside an award in part, on tightly defined grounds. Section 67 allows partial relief, where the tribunal lacks substantive jurisdiction. Section 68 provides the ground for ‘serious irregularity’ for the setting aside or modification of an award. In practice, courts rarely dissect awards, and they prefer to remit issues back to the tribunal rather than rewrite the awards, preserving arbitral finality unless a clear, separable defect is demonstrated.
In the United States, the Federal Arbitration Act confines federal courts to three narrow remedies, which are either to confirm the award under Section 9, vacate it for enumerated missteps, such as arbitrator misconduct or excess of powers under Section 10, or correct only clerical or computational errors under Section 11. Under U.S. law, courts cannot strike out illegal portions of an arbitral award while enforcing the rest. Instead, they apply an ‘all-or-nothing’ rule, i.e. an award is either confirmed or vacated entirely.
Singapore’s statutes, which mirror the UNCITRAL Model Law, also maintain strict limits on judicial intervention. Courts may set aside awards for defects that are in excess of jurisdiction, biased and/or result in a public policy breach. It can require the tribunal to correct or interpret its award first. Only in rare cases, such as severing unenforceable awards against minors, have Singaporean Courts excised invalid portions, upholding the rest.
In contrast, Gayatri Balasamy endorses severance of invalid parts of an award, adjusting post-award interest, and remedying obvious mistakes, without remitting the award back to the arbitral tribunal.
Conclusion
The Gayatri Balasamy judgment significantly shifts Indian arbitration jurisprudence by recognising a limited, implied power for courts to modify arbitral awards under Section 34 of the Act. This aims to enhance efficiency and achieve “complete justice” by rectifying manifest errors and severable parts, thereby reducing the need for costly re-arbitration. However, this judicial innovation introduces complexities, as the subjective nature of “manifest errors” and the distinction between permissible modification and merits review remain open to interpretation, risking increased judicial intervention and undermining arbitral finality.
When viewed against global arbitration practices, the judgment’s approach presents several concerns. Unlike the stricter, statutorily defined powers in jurisdictions like the US, England and Singapore, which primarily limit intervention to setting aside, with clerical errors handled by the tribunal, India’s judicially implied power introduces unpredictability. This ambiguity could deter foreign investors and commercial parties who prioritise finality and efficiency, potentially impacting India’s credibility as an arbitration-friendly jurisdiction.
To address these challenges, legislative intervention is crucial. An amendment to Section 34 is highly recommended to explicitly define the precise scope of judicial modification, the types of errors amenable to correction, and the clear relationship between direct modification by courts and remission to the arbitral tribunal. Such statutory clarity would enhance predictability, align India’s arbitration framework more closely with international best practices, and reinforce its commitment to arbitral finality, thereby strengthening its appeal as a global arbitration hub.