Gayatri Balasamy v. M/s ISG Novasoft Technologies Limited
Background
This case arose from a dispute between Gayatri Balasamy and her former employer, ISG Novasoft Technologies, that had gone to arbitration and produced an award later challenged in court. Because previous Supreme Court benches had given conflicting answers on a recurring and important question, whether a court reviewing an arbitral award under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 can modify the award, or can only set it aside: a three-judge bench referred the question to the Chief Justice, who in turn constituted this five-judge Constitution Bench to settle the law once and for all.
Decision Breakdown
By a 4:1 majority, the Court held that Sections 34 and 37 courts do have a limited power to modify an arbitral award, though not a general appellate power to review it on its merits. This limited power applies in four situations: (i) severing and setting aside only the "invalid" portion of an award where it is separable from the valid part; (ii) correcting clerical, computational, or typographical errors that are obvious on the face of the record; (iii) modifying post-award interest in appropriate circumstances; and (iv) invoking the Supreme Court's special Article 142 "complete justice" power, used sparingly and never to rewrite an award's merits. Justice K.V. Viswanathan dissented, holding that the earlier ruling in Project Director, NHAI v. M. Hakeem (that courts cannot modify awards) was correctly decided, and that only the narrow power to fix clerical or computational errors should be recognised: modification, in his view, is not a "lesser" power contained within the power to set aside, but a fundamentally different one that risks turning courts into appellate bodies over arbitration.
Lesson Learnt
Parties who go to arbitration in India should know that courts reviewing the award can now, in limited and defined situations, tweak or partially fix an award rather than only accepting or scrapping it entirely, but this is a narrow exception, not a licence for courts to re-decide the case on its merits.