Can an Arbitral Award Be Modified?

Can arbitration stay final if courts start rewriting outcomes?

Arbitration is built on two core principles: party autonomy and finality of awards. Parties choose arbitration because it promises a binding and conclusive resolution, free from prolonged court interference. This finality is what makes arbitration faster, efficient, and commercially attractive compared to traditional litigation.

In India, this principle is reinforced by Section 35 of the Arbitration and Conciliation Act, 1996, which declares arbitral awards to be final and binding on the parties. Judicial intervention is therefore intended to be minimal and is permitted only on specific grounds expressly mentioned in the statute.

However, modern arbitration practice has begun to test this boundary. Courts are increasingly faced with requests not merely to set aside arbitral awards, but to modify them. This raises an important legal question: can courts modify arbitral awards without undermining the core principles of arbitration?

The Supreme Court’s Constitution Bench decision in Gayatri Balaswamy v. ISG Novasoft Technologies has brought this debate to the forefront, marking a significant moment in Indian arbitration jurisprudence.

What Does “Modification” of an Arbitral Award Mean?

The idea of modifying an arbitral award occupies a legally sensitive space. Modification refers to a court altering an arbitral award without setting it aside completely. This must be clearly distinguished from other post-award mechanisms recognised under Indian arbitration law.

Correction and Interpretation (Section 33)

Under Section 33 of the 1996 Act, the arbitral tribunal itself may correct:=

  • clerical errors

  • typographical mistakes

  • computational inaccuracies
    It may also clarify ambiguities in the award.

Remission (Section 34(4))

Courts may adjourn proceedings and remit the award back to the arbitral tribunal to cure defects that are capable of being corrected.

Setting Aside (Section 34)

If an award is set aside, it is annulled entirely and ceases to exist in law.

Why Substantive Modification Is Problematic

Substantive modification—where courts alter the reasoning, findings, or relief granted—raises serious concerns. Arbitration is not meant to function as an appellate system. Allowing courts to reshape arbitral outcomes risks converting supervisory review into a full merits review.

Scholars have long warned that excessive post-award interference weakens arbitration’s efficiency and predictability. As Serge Lazareff observed, frequent judicial interference encourages losing parties to delay enforcement and undermines arbitral effectiveness.

Indian Legal Position Before Gayatri Balaswamy

Before the Gayatri Balaswamy decision, Indian courts followed a largely consistent rule: courts do not have the power to modify arbitral awards.

Statutory Framework

  • Sections 34 and 37 allow challenges and appeals only on narrowly defined grounds

  • Section 36 mandates enforcement once objections fail or limitation expires

Judicial Precedents

In S. Kumar v. Delhi Development Authority, the Delhi High Court held that awards become enforceable once the challenge period ends or objections are dismissed.

The Supreme Court in Project Director, NHAI v. M. Hakeem categorically ruled that Section 34 does not permit modification of arbitral awards. The Court clarified that the power to set aside does not include a lesser power to modify.

This decision reinforced arbitration’s finality and aligned Indian law with international arbitration norms.

The Gayatri Balaswamy Judgment: A Shift in Approach

The Constitution Bench decision in Gayatri Balaswamy v. ISG Novasoft Technologies marks a nuanced departure from earlier orthodoxy.

Majority View (4:1)

The Court acknowledged that the 1996 Act does not expressly grant courts the power to modify arbitral awards. However, it adopted a pragmatic interpretation and recognised limited circumstances where modification may be permissible, including:

  • severable portions of an award

  • correction of obvious clerical or computational errors

  • modification of post-award interest under Section 31(7)(b)

The Court relied on the proviso to Section 34(2)(a)(iv), which allows partial setting aside of separable components, suggesting that invalid portions can be removed without destroying the entire award.

Importantly, the Court stressed that this power is supervisory, not appellate. Courts must not reassess evidence or re-evaluate merits.

Dissenting Opinion

Justice K.V. Viswanathan strongly cautioned against this expansion. He emphasised that severance is not the same as modification, and warned that allowing modification risks diluting India’s statutory framework and international commitments under the New York Convention.

According to the dissent, M. Hakeem correctly reflected the law and should not have been diluted.

International Arbitration Perspective

The New York Convention, 1958

The New York Convention is the backbone of international arbitration enforcement. Article V exhaustively lists the grounds on which enforcement may be refused. It does not recognise any power to modify arbitral awards.

This omission reflects a clear global consensus: courts should not replace arbitral determinations with judicial reasoning. Modified awards may also face enforcement difficulties abroad, as they may fall outside the Convention’s scope.

The Singapore Convention

The Singapore Convention governs mediated settlement agreements, not arbitral awards. While it does not directly address modification, it reinforces the values of finality, consent, and enforcement certainty, which are equally central to arbitration.

Comparative Judicial Approaches

United States

Under Section 11 of the Federal Arbitration Act, courts may modify awards only to correct:

  • evident material miscalculations

  • clerical mistakes

  • non-substantive imperfections

Merits review is strictly prohibited.

United Kingdom

The UK Arbitration Act permits limited variation, but strongly prefers remission to the arbitral tribunal rather than direct judicial modification.

Singapore

Singapore follows one of the most restrictive models globally, emphasising minimal judicial intervention and strong deference to arbitral finality.

Conclusion

Globally and domestically, arbitration law reflects a consistent theme: finality must be preserved. While procedural corrections and limited severance may be acceptable, substantive judicial modification remains deeply controversial.

The Gayatri Balaswamy decision introduces a narrow window for modification, but its long-term impact will depend on judicial restraint. If applied cautiously, it may enhance fairness without undermining arbitration. If expanded, it risks blurring the line between arbitration and litigation.

For India’s arbitration regime to remain internationally credible, courts must ensure that modification remains the exception, not the rule.

Article Written by 
Aarushi Aggarwal
B.COM LLB
University Institute of Legal Studies, Panjab University, Chandigarh