INTRODUCTION
The Arbitration and Conciliation Act, 1996 limits judicial involvement in arbitral processes to maintain the main features of arbitration: finality, party choice, and speed. The law does not allow for a thorough appeal of arbitral awards. Instead, it offers a few corrective and supervisory methods in Sections 33, 34, and 37 to address genuine mistakes without reopening the dispute on its merits.
Section 33 lets the arbitral tribunal correct minor errors or omissions. Section 34 allows courts to set aside an award, but only for specific reasons. Section 37 restricts appellate actions by permitting appeals only for certain orders. Together, these sections ensure arbitral awards quickly achieve finality while allowing for the correction of real and significant legal errors.
The recent decision by the Supreme Court in Gayatri Balasamy v. ISG Novasoft Technologies Ltd. (2025) reassesses this balance and clarifies when courts can modify rather than just set aside an arbitral award.
SECTION 33: CORRECTION AND INTERPRETATION BY THE ARBITRAL TRIBUNAL
Section 33 allows parties to ask the arbitral tribunal to fix issues themselves, reducing the need for court involvement. Within thirty days of receiving the award, a party can request:
* correction of clerical, typographical, or computational errors
* interpretation of a specific part of the award (with consent from both parties)
* issuance of an additional award for any claim missed during arbitration
If the tribunal finds the request valid, it must make the correction or interpretation within thirty days. An additional award can be issued within sixty days. The tribunal can also correct errors on its own within thirty days of the award.
All corrections, interpretations, and additional awards must follow Section 31. They must be in writing, signed, reasoned (unless waived), and sent to the parties. Section 33 shows lawmakers’ intent that minor defects should be corrected within the tribunal without going to the courts.
SECTION 34: SETTING ASIDE OF ARBITRAL AWARDS
Section 34 establishes the only method for challenging an arbitral award in court. It specifically does not allow appeals based on merits. The court’s job is to oversee rather than review performances.
Grounds for Setting Aside at the Instance of a Party
Under Section 34(2)(a), the party challenging the award must show, based on the arbitration record, one or more of these reasons:
* legal incapacity of a party
* invalid arbitration agreement
* lack of proper notice of arbitral proceedings or inability to present their case
* the award addressing disputes outside the arbitration agreement’s scope
* improper tribunal composition or procedural violations against the Act or the parties’ agreement
These reasons focus on procedural fairness and jurisdiction, not facts.
Court-Initiated Grounds for Setting Aside
Section 34(2)(b) allows courts to intervene on their own when:
* the dispute is not arbitrable under Indian law, or
* the award goes against India’s public policy
The Act carefully defines public policy violations to include fraud or corruption, breaching the fundamental principles of Indian law, or conflicting with basic notions of fairness or justice. This definition helps prevent misuse of the doctrine for reviewing merits.
Patent Illegality in Domestic Awards
Section 34(2A) adds the ground of patent illegality visible in the award, which applies only to domestic arbitrations. This includes serious errors, such as ignoring key contract terms, but excludes merely wrong applications of law or re-evaluating evidence.
Limitation Period
An application under Section 34 must be filed within three months of receiving the award, extendable by only thirty days for valid reasons. No further extension is allowed, emphasizing the importance of finality.
SECTION 34(4): REMISSION TO THE TRIBUNAL
Section 34(4) lets the court, upon request, delay proceedings and send the award back to the tribunal to fix correctable defects. This power is used when the defect does not justify completely nullifying the award and can be resolved with clarification or limited correction, thus avoiding unnecessary cancellations.
PROCEDURAL SAFEGUARDS AND SPEEDY DISPOSAL
Sub-sections (5) and (6) of Section 34 require prior notice to the other party and mandate that the court aims to resolve the challenge within one year from the service of notice. These rules are intended to prevent delays and ensure timely resolutions.
SECTION 37: LIMITED APPELLATE INTERFERENCE
Section 37 provides a complete list of orders eligible for appeal. Appeals can only be made against:
* refusal to send parties to arbitration under Section 8
* orders granting or denying interim measures under Sections 9 and 17
* orders setting aside or refusing to set aside an arbitral award under Section 34
* tribunal orders accepting jurisdictional challenges under Section 16
No second appeals are allowed, but parties can turn to the Supreme Court under Article 136. This rule reinforces that arbitration should not mimic lengthy judicial reviews.
CASE STUDY: Gayatri Balasamy vs. ISG Novasoft Technologies Ltd
(i) Facts: Gayatri Balasamy joined ISG Novasoft Technologies Ltd. as Vice President (M&A Integration Strategy) in April 2006. She resigned months later, citing sexual harassment by the CEO. Her resignation was not accepted, and she was eventually terminated. Criminal complaints and counter-allegations followed, leading to arbitration.
The arbitral tribunal awarded her Rs. 2 crore. When challenged, a Single Judge of the Madras High Court increased the compensation by Rs. 1.6 crore, which the Division Bench later reduced to ₹50,000. Unhappy with this outcome, Balasamy took the case to the Supreme Court.
(ii) Supreme Court Judgment (30 April 2025)
A five-judge Constitution Bench, with a 4-1 majority, ruled that Indian courts have limited authority to modify arbitral awards under Sections 34 and 37, but only in very specific and exceptional situations, such as:
* correcting clerical or computational errors
* changing post-award interest
* separating parts of an award
* in rare cases, using powers under Article 142 to achieve complete justice
The Court clearly stated that this power does not include rewriting the award, reassessing evidence, or replacing the tribunal’s findings with judicial rulings.
(iii) Dissent: Justice K. V. Viswanathan disagreed, arguing that Section 34 only allows for setting aside or sending back the case, not modification. He warned that allowing modification could undermine the finality of arbitration, party choice, and the law’s structure.
CONCLUSION
The Arbitration and Conciliation Act, 1996 strikes a careful balance between finality and fairness. The Supreme Court’s ruling in Gayatri Balasamy confirms that while courts can correct or adjust arbitral awards in rare and justified cases, arbitration remains a process driven by the tribunal, not a lead-in to judicial re-evaluation. Judicial modification should be an exception, not a standard practice, and must be exercised cautiously to maintain the integrity of arbitration in India.
