Gayatri Balasamy v. ISG Novasoft: Supreme Court's Landmark Ruling on Arbitral Award Modification

Introduction

The Supreme Court's Constitution Bench decision in Gayatri Balasamy v. M/S ISG Novasoft Technologies Limited (2025 INSC 605) marks a watershed moment in Indian arbitration jurisprudence. By a 4:1 majority, the Court held that Indian courts are jurisdictionally empowered to modify arbitral awards under Section 34 and 37 of the Arbitration and Conciliation Act, 1996.

Background of the Case

Gayatri Balasamy, an employee at ISG Novasoft Technologies Ltd., filed a criminal complaint against senior officers for sexual harassment offences. The matter was referred to arbitration where the Tribunal awarded her ₹2 crores. Dissatisfied, she sought to set aside the award under Section 34. The Madras High Court modified the award, granting an additional ₹1.6 crores, but a Division Bench on appeal reduced this to ₹50,000.

Key Legal Questions

• Whether Indian Courts are jurisdictionally empowered to modify an arbitral award
• Whether the power to set aside includes the power to modify
• Whether Article 142 can be used to modify awards

The Majority Decision

Chief Justice Sanjiv Khanna, writing for the majority, held that:

• Severability Doctrine: The proviso to Section 34(2)(a)(iv) embodies the doctrine of severability, allowing courts to separate invalid portions while upholding valid parts
• Limited Modification Power: The power of judicial review under Section 34 inherently includes a limited power to modify arbitral awards
• Post-Award Interest: Courts can modify post-award interest where justified

The Dissenting Opinion

Justice Viswanathan dissented, holding that courts cannot modify arbitral awards as Section 34 only permits setting aside, and reading in modification power would be unwarranted judicial overreach contradicting clear legislative intent.

Implications for Businesses

This judgment significantly impacts commercial arbitration in India by providing courts flexibility to correct awards without complete annulment, potentially reducing litigation time and costs while maintaining arbitration's efficiency.