Balasamy Verdict: A Judicial Verdict Too Far

Superficial Interpretation of Section 34 and Judicial Overreach

The arbitration jurisprudence advocates for minimal judicial intervention to uphold the autonomy and efficiency of arbitral process. The UNCITRAL Model Law on International Commercial Arbitration, based on which Arbitration Act was enacted in India, does not promote or even indicates any modification of the award. The power of the Court as per the language of the Arbitration Act itself, is limited to remanding back the arbitral award and not modify on its own. The court in India has derived an extended interpretation beyond the scope of Section 34 of the Arbitration Act which directly defeats the fundamental principle of minimal judicial intervention and furthermore, shatters the very purpose of this legislation.

Section 34 provides for two recourses if an application is made before a Court, firstly, to set aside the award under the grounds provided in Section 34(2) or secondly, to remand back the arbitral award to the arbitration tribunal to eliminate the grounds for setting aside the award. Therefore, the power of the Court under Section 34 is limited to setting aside award if it qualifies the grounds provided under Section 34(2) or where there exists such scope for correction by the tribunal, then, the Court may remand back the award to the arbitral tribunal to eliminate the grounds for setting aside the award. Hence, any nature of correction, removal of any error or deciding upon any issue discussed in the award by the Section 34 Court itself would be an extended interpretation of Section 34(4) which also defeats the fundamental objective of the Arbitration Act and undermines the principles of minimal judicial intervention and finality of arbitral award. The Arbitration Act does not confer any express power upon the Court to modify an arbitral award. Any such authority must emanate from a legislative mandate enacted by Parliament. It is not within the province of the judiciary to assume such power through an expansive or purposive interpretation of Section 34 or Section 37 of the Act, as doing so would exceed the boundaries of judicial interpretation and encroach upon the legislative domain.

Balasamy Verdict: A Judicial Verdict Too Far

The Balasamy Judgment represents a concerning development. While the Hon'ble Supreme Court sought to strike a balance between remitting and modifying arbitral awards—guided by considerations of judicial economy, efficiency, and minimization of protracted litigation—the decision has nonetheless introduced interpretational ambiguities. These unresolved aspects may potentially result in significant legal uncertainty and adverse procedural consequences. As provided above, the court allows modifications under the following limited circumstances

“……..

1. When the award is severable, by severing the “invalid” portion from the “valid” portion of the award, as held in Part II of our analysis.

2. By correcting any clerical, computational or typographical errors which appears erroneous on the face of the record, as held in Part IV and V of our Analysis;

3. Post award interest may be modified in some circumstances as held in Part IX of our Analysis; and/or

4. Article 142 of the Constitution applies, albeit, the power must be exercised with great care and caution and within the limits of the constitutional power as outlined in Part XII of our analysis.”

It is essential to appreciate that arbitral awards are generally rendered as unified and indivisible instruments. As such, it is often challenging to delineate which portions of the award are capable of standing independently in law and logic, and which are inextricably linked to other findings. Arbitral proceedings frequently involve complex and interrelated issues—such as jurisdiction, liability, and quantum of damages—where the invalidation or severance of one component may compromise the integrity of the award as a whole.

In this context, any attempt to set aside or enforce a purportedly severable segment of an arbitral award gives rise to significant legal ambiguity. This, in turn, provides fertile ground for procedural objections, jurisdictional challenges, and prolonged litigation, thereby frustrating the overarching objective of arbitration: to offer a final, conclusive, and expeditious resolution to disputes. More critically, permitting parties to selectively challenge or enforce discrete elements of an award risks undermining the principle of finality, encouraging opportunistic litigation strategies, and ultimately eroding confidence in the arbitral process.

One of the core principles of arbitration is party autonomy and the finality of the arbitral award, including on matters such as the rate and period of interest. However, when courts undertake to modify the post-award interest granted by the arbitral tribunal—either on the ground of equity, statutory interpretation, or perceived excessiveness—it raises several critical challenges. The arbitral tribunal's determination regarding interest is typically made in the exercise of its discretion, subject to the governing arbitration law or contract. Judicial interference with such determinations dilutes the sanctity of the arbitral award, undermines the tribunal's jurisdiction, and invites unnecessary judicial scrutiny of decisions that are meant to be final and binding.

Also, when parties perceive that courts are willing to revisit or alter the interest component of arbitral awards, they are incentivized to file post-award applications or appeals specifically targeting this aspect. This increases the volume and complexity of litigation, contrary to the purpose of arbitration as a mechanism for speedy dispute resolution.

Dissent with Depth: Restoring Fidelity to Arbitration Law

The dissenting opinion delivered by Hon'ble Justice K.V. Viswanathan warrants serious judicial reflection and, arguably, endorsement. Justice Viswanathan correctly asserted that the powers conferred under Article 142 of the Constitution of India, though broad and intended to ensure the delivery of complete justice, are not unbounded and cannot be exercised to override or supplant substantive statutory law. The Hon'ble Justice emphasized that Article 142 cannot be used to achieve indirectly what is otherwise impermissible under the statutory framework. In particular, Justice Viswanathan underscored that the powers under Article 142 must not contravene the core, non-derogable principles embedded within the relevant legislation—in this case, the Arbitration & Conciliation Act, 1996. His reasoning highlights a vital constitutional principle: judicial powers, even those derived from the highest constitutional source, must respect the boundaries delineated by statutory law and the legislative intent underpinning it.

The Arbitration Act, which is based on the UNCITRAL Model Law, is grounded in key tenets such as party autonomy, finality of awards, and minimal judicial interference. Sections 34 and 37 of the Act lay down a limited and exhaustive framework for challenging arbitral awards, strictly confining the scope of judicial intervention to setting aside an award on specified grounds, including patent illegality, fraud, or violation of public policy. Crucially, the Act does not provide courts with any authority to modify or alter the contents of an arbitral award. This legislative silence on modification is not accidental; rather, it is a deliberate and foundational choice aimed at preserving the autonomy of the arbitral process and insulating it from judicial encroachment.

Justice Viswanathan's dissent rightly cautions that allowing courts to modify arbitral awards under the guise of Article 142 would amount to judicial legislation and a breach of the principle of separation of powers. Such an approach would compromise the integrity of the arbitral regime and frustrate the objectives of efficiency, certainty, and finality that the Act seeks to promote. By suggesting that courts can modify awards through Article 142, the majority judgment risks opening the floodgates to judicial interference, thereby encouraging prolonged litigation and undermining confidence in arbitration as a viable alternative to traditional court litigation.

Furthermore, Justice Viswanathan's view reinforces the doctrine that Article 142 is not a carte blanche. It cannot be invoked in a manner that abrogates the substantive rights and procedural safeguards embedded in statute. The use of such a constitutional provision must be guided by judicial restraint and a strict adherence to statutory limits, especially where the legislation in question has been designed to operate as a self-contained code.

A Setback to Arbitration: Balasamy and the Erosion of Judicial Restraint

The Balasamy Judgment is a tragedy for the Indian arbitration regime. It reflects a judicial approach that, intentionally or otherwise, may be perceived as expressing a lack of confidence in the arbitral process—particularly from the highest echelons of the judiciary. By permitting courts to modify arbitral awards under limited circumstances, including through the invocation of Article 142 of the Constitution, the Supreme Court has introduced a degree of judicial scrutiny that significantly departs from the foundational principles of minimal court intervention, finality of arbitral awards, and party autonomy as enshrined in the Arbitration Act.

Although the objective of saving time, cost, and avoiding unnecessary litigation is laudable, the chosen method—relying on constitutional powers rather than legislative authority—raises serious concerns. The reliance on Article 142 to fill perceived gaps in the Arbitration Act is problematic, as it risks undermining legislative supremacy and the integrity of arbitration as an independent dispute resolution mechanism. The authority to expand or modify the scope of judicial intervention in arbitral proceedings should rest solely with Parliament, through a transparent and consultative legislative process, and not through judicial interpretation of constitutional provisions in a manner that alters the statutory scheme.

Moreover, this judgment risks sending an adverse signal to the global arbitration community regarding India's commitment to arbitration reform and its reliability as an arbitration-friendly jurisdiction. It could potentially deter parties from choosing India as a seat of arbitration, thereby undermining the progress made in recent years to align Indian arbitration law with international best practices.

In light of these implications, the majority opinion in Balasamy Judgment warrants careful reconsideration. A clear legislative response may be necessary to restore clarity, uphold party autonomy, and reaffirm India's commitment to a modern and efficient arbitration framework.

The author is an Advocate at Delhi High Court, views are personal.