From Finality To Flexibility: Post-Gayatri Balasamy Jurisprudence In Indian Arbitration (2025)
The Hon'ble Justice M.N. Venkatachaliah in his speech “Keeping the Spirit of the Common Law Alive”, once said that “Flexibility is the prime virtue of common law. The genius of common law lies in its capacity for evolution and adaptability, as well as its resilience to cope with the demands of the times.”[1] This statement fits well within Indian arbitration jurisprudence. Last year,...
The Hon'ble Justice M.N. Venkatachaliah in his speech “Keeping the Spirit of the Common Law Alive”, once said that “Flexibility is the prime virtue of common law. The genius of common law lies in its capacity for evolution and adaptability, as well as its resilience to cope with the demands of the times.”[1] This statement fits well within Indian arbitration jurisprudence. Last year, a constitutional bench of the Supreme Court pronounced the decision of Gayatri Balasamy v. ISG Novasoft Technologies Ltd.,[2] which deals with the powers of the court under Section 34 and 37 of the Arbitration and Conciliation Act, 1996 (“Act”) in modification of Arbitral awards.
However, any action by the Courts to modify or alter an arbitral award may amount to judicial overreach and jeopardize the principles of limited judicial interference and finality of the arbitral award. The Apex court in the Balasamy Judgment dealt with this delicate issue. This article undertakes a doctrinal review of judicial decisions delivered in 2025 which have relied upon the ratio of Balasamy.
Position before Balasamy
Section 34 of the Act is derived from Article 34 of the UNCITRAL Model Law on International Commercial Arbitration of 1985[3] which states that setting aside is the only recourse against an arbitral award. Indian law before the Balasamy Judgment was that Section 34 of the Act does not constitute an appeal and solely offers the recourse of setting aside.
In NHAI v. M. Hakeem[4] the Hon'ble Supreme Court stated that no power to modify an award could be derived from Section 34 of the Act. Modification would mean exercising appellate authority beyond the Act's limited scope, and only the legislature could grant such powers.[5] The Court adopted a literal textual interpretation determining that the express authorization to “set aside” excludes implied authority to modify. Actions under Section 34 of the Act do not permit a challenge regarding the merits of the award.[6]
Thereafter, judgments clarified that even in the absence of authority to alter an award, a court could partially set aside severable portions of an award.[7]
Doctrinal Shift after Balasamy
In Balasamy[8] the Hon'ble Supreme Court held that Appellate Courts have limited powers to modify arbitral awards under Section 34 or 37 of the Act in the following circumstances:
- When the award is severable by separating the invalid portion from the valid portion;
- To correct clerical, computational, or typographical mistakes apparent on the face of the record;
- To modify post-award interest where appropriate;
- The Supreme Court may exercise powers under Article 142 of the Constitution, but with great care and caution.[9]
An award could be partially modified to the extent the invalid portion can be separated (doctrine of severability), clearly acknowledged in Section 34(2)(a)(iv) of the Act.[10] Computational/clerical errors and not adjudicatory errors can be rectified.
The majority held that in relation to pendente lite interest courts cannot exercise power of modification. However, courts can modify post-award interest where facts justify such modification, as arbitrators cannot predict future events. This power may lower or raise the interest rate. Section 31(7)(b)[11] of the Act was intended to guide the arbitrator's judgment regarding post-award interest and may be reviewed by Courts.
Contours of Judicial Review: The 2025 Jurisprudence
Supreme Court
On limitation by way of demurrer, the Court held that party autonomy is not expansive enough to strike at basic principles of limitation law under Section 3 of the Limitation Act. Section 43 of the Act falls within “Subject to this Part” under Section 19(2) of the Act. Relying on the dissenting opinion in Balasamy, the finding that claims were within limitation and forever foreclosed was severable and offended basic notions of justice, and therefore had to be set aside, while the remaining award remained intact.[12]
On modification of contractual terms and discriminatory treatment, the Court held that where the Arbitral Tribunal awarded claims neither pleaded nor argued, modified express contractual terms, and meted out discriminatory treatment in violation of Section 18, the award was in conflict with public policy and could not be severed. The entire award was set aside.[13]
On Article 142, the Court held that where an award is perverse, opposed to public policy or patently illegal, and setting aside would relegate parties to prolonged litigation after 16 years, jurisdiction under Article 142 may be exercised.[14] Equities would be served by moulding relief rather than remanding.
Delhi High Court
Where counterclaims were rejected without foundational reasoning or consideration of contractual provisions, the Award to that extent was in contravention of public policy. Counterclaims 1 to 3 were severable from 4 and 5; hence partial setting aside was permissible.[15]
On pre-suit/pre-reference interest, the Court observed that Balasamy did not mention it specifically. However, such interest shall be treated similar to pendente lite interest. Since post-award interest relates to a future event, modification is permissible; the same cannot be said for pendente lite or pre-reference interest. Therefore, courts cannot modify pre-suit/pre-reference interest.[16]
On force majeure, the finding that breakdown of machinery qualifies as force majeure was held incorrect but severable, and partially set aside.[17]
Bombay High Court
Where the arbitrator rewrote contractual timelines and travelled beyond terms of agreement, dismissal of counterclaim on limitation was set aside. However, direction on sharing of costs was sustained as severable.[18]
Where the Tribunal went beyond covenants of the contract and considered extraneous material, interference was warranted only to that extent, and the rest of the award confirmed.[19]
On computational and inadvertent error, where commission was noted for deduction but not deducted, such computational error could be corrected without setting aside the entire award or remand under Section 34(4) of the Act.[20]
On severance of bad part from good part, only claims relating to interest on delayed payment and defacement charges were set aside, as not inseparably intertwined.[21]
Madras High Court
On interest at 24%, the Court set aside forfeiture of security deposit as patent illegality but scaled down interest to 12% relying on Balasamy.[22]
Where two reliefs became infructuous or beyond scope of reference, they were severable and excluded; remaining award sustained. The Court observed that removing chaff is prudent rather than discarding the entire milk.[23]
On patent illegality due to lack of reasoning on attribution of delay, post-award interest was enhanced to 12% while retaining pre-award interest at contractual rate.[24] Further, on unintelligible award and damages without proof, interference was necessary; damages awarded without basis were modified in accordance with Balasamy principles.[25]
Calcutta High Court
Where limitation objection was not adjudicated, findings unsupported by record, damages awarded without evidence, and interest granted without reasoning, the Award was vitiated by patent illegality and violated Section 31(3) of the Act. Entire award was set aside.[26]
Where Tribunal granted relief for future and un-crystallised claims and rewrote contractual allocation of risks, the award was vitiated by patent illegality and contrary to fundamental policy of Indian law. Balasamy was not relevant as the entire award was vitiated as a whole.[27]
Impact of the Balasamy Judgment
The judgment addresses the prior rigid stance and promotes flexibility. Courts have applied Severability to excise invalid portions from valid awards, corrected computational/clerical errors, adjusted post-award interest, and invoked Article 142 to end protracted disputes where awards were perverse yet partially salvageable.[28]
The Balasamy Judgment presents unresolved issues regarding scope and limits of modification. First, power under Article 142 may open floodgates for modification cases. Secondly, Section 34(4) of the Act permits tribunal intervention and may obviate court intervention. Thirdly, permissibility of modifying pre-suit/pre-reference interest remains unclear notwithstanding Delhi High Court consideration.
These problems cannot be settled by judicial interpretation alone but need legislative intervention by updating the arbitration framework and expressly delineating a provision on modification of award.
Venkatachaliah, M. N., Keeping the Spirit of the Common Law Alive, 5 NUJS L. Rev. 291 (2012). ↑
Gayatri Balasamy v. ISG Novasoft Technologies Ltd., 2025 INSC 605. ↑
UNCITRAL Model Law on International Commercial Arbitration (1985) , art 34. ↑
NHAI v. M Hakeem, 2021 INSC 344. ↑
MMTC Ltd v. Vedanta Ltd, 2019 INSC 218. ↑
MMTC Ltd v. Vedanta Ltd, 2019 INSC 218. ↑
National Highways Authority of India v Trichy Thanjavur Expressway Ltd, 2023:DHC:5834. ↑
Gayatri Balasamy v. ISG Novasoft Technologies Ltd., 2025 INSC 605. ↑
INDIA CONST. art. 142. ↑
The Arbitration and Conciliation Act 1996, s 34(2)(a)(iv). ↑
The Arbitration and Conciliation Act 1996, s 37(7)(b). ↑
Urban Infrastructure Real Estate Fund v. Neelkanth Realty (P) Ltd., 2025 INSC 1255, Para 112- 120 & 130-133. ↑
Sepco Electric Power Construction Corpn. v. Kamalanga Energy Ltd., 2025 INSC 1171, Para 115-124. ↑
Lancor Holdings Ltd. v. Prem Kumar Menon, 2025 INSC 1277, Para 59- 63. ↑
Union of India v. Prestressed Udyog, (O.M.P. 462/2016), Delhi High Court, Para 40-46. ↑
Orient Green Power Co. Ltd. v. SM Milkose Ltd., 2025:DHC:10528, Para 61-65 & 69. ↑
NCERT v. Murli Industries Ltd., 2025:DHC:9027, Para 76-78. ↑
Purabi Telefilms v. Chandramohan, 2025:BHC-OS:20879, Para 29, 30. ↑
Central Railway-Mumbai Division v. A-1 Laundry Services (JV), 2025:BHC-OS:21909, Para 47. ↑
MahaOnline Ltd. v. Aksentt Tech Services Ltd., 2025:BHC-OS:23591, Para 52 – 53. ↑
Signpost India (P) Ltd. v. Brihan Mumbai Electric Supply & Transport Undertaking, 2025:BHC-OS:23431, Para 66. ↑
Andal Dorairaj v. Rithwik Infrastructure (P) Ltd., (27.11.2025 – MADHC), Para 40-43. ↑
NJR Constructions (P) Ltd. v. Union of India, (12.11.2025- MADHC), Para 23- 32. ↑
Sugesan Transport (P) Ltd. v. E.C. Bose & Co. (P) Ltd., (05.09.2019 – MADHC), Para 33-39. ↑
Ibid. ↑
Hindustan Cables Ltd. v. Joy Maa Santoshi Saw Mill, (12.12.2025 – CALHC), Para 39-41. ↑
Kolkata Metro Rail Corpn. Ltd. v. ITD-ITD Cem Joint Venture, 2025:CHC-OS:211, Para 88- 99 & 105. ↑
Urban Infrastructure Real Estate Fund v. Neelkanth Realty (P) Ltd., 2025 INSC 1255, Para 79-80. ↑
Author is an Advocate practicing at Supreme Court of India and Delhi High Court. Views are personal