Why Courts Should Be Given the Power to Modify Awards in Domestic Arbitration
India's arbitration framework is designed to ensure speedy dispute resolution with minimal judicial interference. However, the limited scope of judicial intervention under Section 34 of the Arbitration and Conciliation Act, 1996, has raised concerns about situations where an arbitral award contains serious legal errors but cannot be effectively corrected by the courts.
The Need for Legislative Reform
In a legal analysis published by Bar & Bench on November 6, 2026, Sourav Roy, Advocate-on-Record at the Supreme Court of India, argues that Parliament should amend the Arbitration and Conciliation Act, 1996, to expressly empower courts to modify domestic India-seated arbitral awards when they violate public policy.
Under the existing framework, Section 34 primarily provides for setting aside an arbitral award on specified grounds. Although the Supreme Court has recognised limited modification powers, the scope of such intervention remains restricted.
The Gayatri Balasamy Judgment
In Gayatri Balasamy v. ISG Novasoft Technologies Limited, decided on April 30, 2025, a five-judge Constitution Bench of the Supreme Court, by a 4:1 majority, recognised limited judicial powers to modify arbitral awards under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996.
The recognised circumstances include severing invalid portions of an award, correcting clerical, computational and typographical errors, and modifying post-award interest in appropriate circumstances. The Supreme Court also recognised its constitutional power under Article 142 to modify awards in appropriate cases.
However, these powers do not permit courts to conduct a general review of the merits of an arbitral award.
Why Broader Modification Powers Are Necessary
The author argues that merely setting aside an award can create unnecessary complications. When an award is invalid because the arbitral tribunal has ignored substantive law or rewritten contractual terms, setting aside the entire award may force the parties to restart arbitration proceedings.
This can result in additional expenses, prolonged litigation and uncertainty for businesses. A limited statutory power to modify the offending portion could provide a more practical solution without requiring parties to undergo the entire arbitration process again.
Maintaining the Principle of Minimal Judicial Intervention
The proposed reform does not advocate unrestricted judicial interference. The author emphasises that the existing high threshold under Section 34 should remain intact.
- Courts should not reassess the merits of the dispute.
- Evidence should not be reappreciated by the setting-aside court.
- Arbitral tribunals should remain the primary decision-makers on facts and evidence.
- Valid and severable portions of an award should be preserved wherever possible.
- Modification should be permitted only in clearly defined circumstances.
International Arbitration Practices
The article also refers to the United Kingdom's Arbitration Act, 1996, and Singapore's Arbitration Act, 2001, which provide statutory mechanisms for varying or modifying certain arbitral awards in specified circumstances. These comparative examples are used to support the argument that carefully restricted judicial modification powers need not undermine an arbitration-friendly jurisdiction.
Conclusion
The proposed legislative reform seeks to strike a balance between arbitral autonomy and judicial oversight. Giving courts a carefully defined power to modify domestic arbitral awards could reduce repetitive proceedings, improve procedural efficiency and strengthen confidence in India's arbitration framework.
However, any such reform must preserve the fundamental principle that arbitration is intended to provide an independent and efficient alternative to conventional litigation.
Source: Bar & Bench, published November 6, 2026. The article presents the author's legal opinion and does not announce a new judicial ruling or legislative amendment.