Courts Can (Sparingly) Modify Arbitral Awards: Constitution Bench Settles the Section 34 Debate, 4:1

Can a court that may set aside an arbitral award also trim or fix it? NHAI v. M. Hakeem (2021) said no — Section 34 is annulment, not appeal — yet benches kept severing findings, adjusting interest and correcting slips, and a three-judge bench referred the contradiction to five judges in the employment-dispute appeal of Gayatri Balasamy against ISG Novasoft Technologies.

On 30 April 2025, the Constitution Bench answered, with the Chief Justice writing for the majority.

The Key Question Before the Court

Do Sections 34 and 37 of the Arbitration Act include a power to modify an arbitral award — and if so, how far does it go?

A Limited Power, Carefully Fenced

The majority located a narrow modification power within the setting-aside jurisdiction itself: the greater power to annul includes the lesser power to prune. Courts may (i) sever the invalid portion of an award where it is separable from the rest, (ii) correct clerical, computational or typographical errors apparent on the face of the record, and (iii) modify post-award interest in compelling circumstances. What courts may not do is re-appreciate the merits — the power is surgical, not appellate. Beyond these categories, only the Supreme Court may act, under Article 142, and even that power is to be exercised with great care and caution, never to rewrite the award.

The Dissent: Annul or Remit, Nothing Else

Justice Viswanathan's dissent read Section 34 as the legislature wrote it: a court may set aside the award or remit it to the tribunal under Section 34(4), and nothing in the scheme — or in the UNCITRAL Model Law it follows — sustains judicial modification. He cautioned that Article 142 cannot supply what the statute withholds, and that an award modified by a national court risks resistance at the enforcement stage abroad under the New York Convention, since what would be enforced is no longer the tribunal's award alone.

What the Court Actually Held

• By 4:1, courts under Sections 34/37 have a limited power to modify awards: severance of invalid severable portions; correction of clerical, computational or typographical errors apparent on the record; and revision of post-award interest in compelling circumstances.
• The power does not extend to reviewing or rewriting the merits of the award.
• The Supreme Court alone may modify further under Article 142, sparingly.
• Justice Viswanathan, dissenting, held Section 34 permits only setting aside or remission, and flagged New York Convention enforcement risks.

Why This Judgment Matters

• It ends the post-Hakeem uncertainty that forced parties into full re-arbitration over severable or clerical defects.
• It saves time and cost in enforcement-stage litigation — a pruned award survives where the whole would earlier have fallen.
• The dissent's Convention warning gives foreign-seated and cross-border parties a ready objection script — drafting and strategy must account for it.
• It recalibrates India's minimal-intervention promise: intervention stays minimal, but is no longer all-or-nothing.

What Should Advocates Take Away From the Judgment?

For Award-Holders

• Resist Section 34 challenges by offering severance or interest-modification as the proportionate remedy — annulment is now the last resort, not the only one.

For Challengers and Cross-Border Parties

• Frame modification requests strictly within the three categories; anything resembling merits review invites dismissal — and for awards headed to foreign enforcement, weigh the dissent's Convention risk before seeking modification at all.

Key Takeaways

Frequently Asked Questions

Its core — that Section 34 is not an appellate power — survives, but its absolute bar on modification does not: the Constitution Bench recognised the three limited modification powers by majority.

No. Modification is confined to severance, clerical or computational corrections and post-award interest; altering the merits remains impermissible.

Justice Viswanathan held that courts may only set aside or remit an award, that Article 142 cannot be used to modify one, and that court-modified awards risk enforcement objections under the New York Convention.

Conclusion