Hidden Doctrine In Gayatri Balasamy: How Supreme Court Used Implied Powers To Transform Arbitration Law

When the Supreme Court ruled on Gayatri Balasamy v. ISG Novasoft Technologies Ltd^[1] it made waves, earning the title of the “modification judgment.” Most discussions centered on a key takeaway: Indian courts can now, in certain situations, modify arbitral awards rather than just nullifying them. However, if you dig a little deeper into those 61 pages, you'll uncover a more subtle yet significant shift. For the first time, the Court tapped into the Doctrine of Implied Powers to broaden the jurisdiction of courts under Section 34 of the Arbitration and Conciliation Act, 1996^[2] all without any amendments from Parliament.

This doctrine, well-known among constitutional and administrative lawyers, has never been applied to extend judicial authority in arbitration before. That's what makes this case a pivotal moment, not just for arbitration law, but also for our understanding of the boundaries of statutory silence.

Reading Between the Lines of Silence

Section 34 of the 1996 Act allows a party to approach a court solely to annul an arbitral award based on specific reasons: incapacity, fraud, violation of public policy, or clear illegality. Notably, it doesn't mention “modification.” For years, courts interpreted this omission as intentional. The reasoning was straightforward: if Parliament intended for judges to alter awards, it would have explicitly stated so.

However, the Gayatri Balasamy Bench took a different stance, arguing that silence shouldn't be seen as a prohibition. Chief Justice Sanjiv Khanna and his colleagues posited that since Section 34 grants the broader authority to annul, it must inherently include the narrower authority to modify. In simpler terms, the power to completely annul is the greater authority, while the ability to make adjustments is the lesser one, and the greater encompasses the lesser.

While this might seem like a neat logical progression, it carries significant implications. The Court didn't merely interpret the law; it also addressed its shortcomings. By inferring an unspoken power within Section 34, the Bench transformed judicial review from a strictly negative remedy “set aside or nothing” into a more constructive approach: “correct what's wrong and uphold what's fair.”

The Doctrine of Implied Powers: A New Visitor in Arbitration

The Doctrine of Implied Powers originates from public law. It suggests that when a law grants an authority the power to achieve a lawful goal, it also implicitly provides all the necessary powers to fulfill that goal. Courts have applied this doctrine to constitutional bodies like the Election Commission and quasi-judicial regulators, but it has never been used for regular civil courts operating under a private-law statute like the Arbitration Act.

By adopting this doctrine, the Court has effectively brought arbitration procedures under constitutional principles. It determined that a Section 34 court has certain “inherent and ancillary powers necessary to do complete justice,” even if those powers aren't explicitly mentioned in the Act. This includes the ability to correct clerical or computational mistakes, adjust post-award interest, and separate invalid parts of an award while keeping the valid portions intact.

This shift is subtle yet significant. The 1996 Act was crafted based on the UNCITRAL Model Law, which intentionally limits judicial intervention. However, the Indian Supreme Court has now established a domestic version that, while theoretically advocating for minimal interference, allows for practical corrections when fairness requires it.

From Legislative Minimalism to Judicial Creativity

The fact that Parliament chose not to address modifications wasn't just a coincidence. The creators of the 1996 Act aimed for finality. They were concerned that if courts were allowed to adjust awards, arbitration would simply become another round of litigation. This is why earlier courts, particularly in the case of Project Director, NHAI v. M. Hakeem^[3], ruled that judges don't have the power to change an award.

The Constitution Bench in Gayatri Balasamy didn't outright overturn Hakeem, but it did soften its impact. It clarified that while courts can't revisit the merits or rewrite contracts, they can step in under Section 34 to prevent injustice. For instance, if an arbitrator mistakenly applies the wrong interest rate after the award or makes a clerical error, the court doesn't have to throw out the entire award and send the parties back to arbitration. It can simply fix the mistake.

This reasoning is quite persuasive, but it also brings up some uncomfortable questions. When a court interprets a power that Parliament intentionally left out, are they really interpreting the law or are they effectively making new legislation?

The Risk of the Expanding Shadow

Judicial creativity can be a bit of a double-edged sword. On one side, it helps avoid procedural absurdities no one should have to endure years of delays just because an award has a simple typo. But on the flip side, it can blur the lines between interpreting the law and changing it outright.

Once courts start claiming an “implied power” to tweak an award, what's to stop a future judge from suggesting they can change other elements like damages or factual findings all in the name of justice? The same logic that allows for minor corrections could, in less careful hands, lead to much broader interference.

This is where the implications of this doctrine can get really concerning. The Doctrine of Implied Powers, if left unchecked, could turn into a tool for judicial overreach. It transforms statutory silence into a playground for creative authority. Arbitration, which was designed to cut down on litigation, risks being pulled back into the very system it aimed to escape.

A Subtle Constitutional Undertone

One aspect of the judgment that often flies under the radar is how it interacts with Article 142 of the Constitution^[4]. The Court made it clear that while its power to “do complete justice” should be used with care, it still sees this power as a crucial safety net in arbitration disputes. This acknowledgment effectively links private arbitration to constitutional fairness.

When we look at the reasoning behind implied powers, we find ourselves in a unique situation: one foot firmly planted in strict statutory limits and the other stepping into the broader realm of constitutional rights. This creates an arbitration framework that might appear self-sufficient at first glance, but it actually carries a deeper understanding of constitutional principles.

Reimagining the Future of Arbitration

Whether we view this as judicial overreach or a sensible adjustment really depends on our perspective. For many, this decision represents a significant leap forward, as Indian arbitration law starts to trust the courts to intervene with precision rather than a heavy-handed approach. However, for others, it raises alarms about the slow erosion of the Act's original promise of finality and independence.

No matter where you stand, Gayatri Balasamy provides a refreshing perspective on the relationship between statute and silence. She points out that silence in legal terms doesn't always mean absence; sometimes, it's an invitation to interpret, to fill in the blanks, and to find a balance between justice and rigidity.

However, this invitation comes with its own responsibilities. The legitimacy of implied powers depends on how carefully they are wielded. If courts use them wisely to correct rather than completely overhaul, this doctrine could serve as a stabilizing force, blending equity with efficiency. On the other hand, if misapplied, it could reopen the floodgates of judicial interference that the 1996 Act sought to close.

In the End

The Gayatri Balasamy judgment goes beyond merely adjusting arbitral awards; it explores how courts navigate legislative silence. For the first time, India's highest court has asserted that the pursuit of justice shouldn't be stalled by the slow pace of Parliament. If you take a closer look, this ruling is less about arbitration and more about the innovative ways in which the law can articulate itself, even when it seems to be quiet.

Author is Advocate. Views Are Personal. 

1. 2025 LiveLaw (SC) 508. ↑

2. Section 34 of the Arbitration and Conciliation Act, 1996 https://www.indiacode.nic.in/bitstream/123456789/1978/3/a1996-26.pdf. ↑

3. (2021) 9 SCC 1. ↑

4. Article 142 of the Constitution of India https://www.indiacode.nic.in/bitstream/123456789/19150/1/constitution_of_india.pdf. ↑