Between Deference and Correction: The Evolving Judicial Approach to Arbitral Awards under Section 34

Index of Headings:

1.Introduction: Legal Framework for Arbitral Awards in India

2.Section 34 of the Arbitration and Conciliation Act, 1996
2.1.Grounds for Setting Aside an Award
2.2.Limited Scope for Judicial Intervention
2.3.Procedural Aspects under Section 34

3.Key Principles Underlying Section 34
3.1.Minimum Judicial Intervention
3.2.Finality of Arbitral Awards
3.3.Narrow Grounds for Interference

4.Case Law Analysis
4.1.Dakshin Haryana Bijli Vitran Nigam Ltd. v. Navigant Technologies Pvt. Ltd. (2021)
4.2.McDermott International Inc. v. Burn Standard Co. Ltd.
4.3.Project Director, NHAI v. M. Hakeem
4.4.Cybernetics Network Pvt. Ltd. v. Bisquare Technologies Pvt. Ltd.
4.5.Gayatri Balasamy v. ISG Novasoft Technologies Ltd. – Factual Background

5.Doctrinal Conflicts and Interpretive Evolution
5.1.The Perils of Judicial Modification
5.2.Manifest Errors and the Mirage of Objectivity
5.3.A Narrow Exception or a New Avenue?

6.Final Judgement Analysis
6.1.No Power to Modify under Section 34
6.2.Modification and Setting Aside are Distinct
6.3.No Inherent or Implied Powers
6.4.Article 142 Cannot Override Statutory Limits
6.5.Validation of Hindustan Construction v. Hakeem
6.6. Permissibility of Clerical Error Correction
6.7.Kinnari Mullick Partially Overruled
6.8.Suo Moto Power under Section 34(4)

7.Conclusion: Toward a Balanced Arbitral Ecosystem

Introduction

The Arbitration and Conciliation Act, 1996 ("the Act") governs arbitration proceedings in India, providing the framework for resolving disputes through arbitration rather than litigation. A key component of this Act is the review process that allows the courts to intervene in specific circumstances when arbitral awards are challenged. This is primarily governed by Section 34 of the Act.

Section 34 of the Arbitration and Conciliation Act, 1996
Section 34 outlines the grounds under which a court may set aside an arbitral award. It is important to note that Section 34 does not allow for a general appeal of arbitral decisions but limits judicial intervention to specific grounds.

Key elements under Section 34 include:
1.Grounds for Setting Aside an Award:

• Violation of Public Policy: If an arbitral award is contrary to the public policy of India, it can be set aside. The courts have defined "public policy" in a limited manner, focusing on violations of the constitution, laws of the land, and the principles of natural justice.
• Breach of Natural Justice: If the arbitral tribunal violated principles of natural justice, such as not providing adequate opportunity to a party to present its case, the award may be set aside.
• Arbitrator Bias: If there is evidence of bias, lack of independence, or impartiality of the arbitrators, the award can be invalidated.
• Excess of Jurisdiction: If the arbitral tribunal has exceeded its jurisdiction or acted beyond the scope of the arbitration agreement, the court may set aside the award.
• •Inability to Act Due to an Infirmity: If there are fundamental flaws in the arbitral process, such as an arbitrator being unable to act, this can also lead to the award being set aside.

2.Limited Scope for Intervention:

• The Act limits the grounds for interference to maintain the finality of arbitral awards and preserve the integrity of arbitration as a speedy and efficient alternative to litigation.
• Minimum Judicial Intervention: Section 34 emphasizes judicial restraint and discourages courts from delving into the merits of the dispute. Courts can only set aside awards for specific legal reasons and cannot modify the substance of the award.

3.Procedure:

• A party seeking to challenge an award under Section 34 must file an application in the court within three months from the date of receipt of the arbitral award. This period can be extended by another 30 days under exceptional circumstances, but only if the applicant shows sufficient cause for the delay.
• The court, after hearing the application, may either set aside the award or dismiss the challenge. However, the court does not have the power to modify the award under Section 34.

Key Principles:

1.Minimum Judicial Intervention:

The overarching principle in Indian arbitration law is that judicial intervention should be kept to a minimum. This is based on the idea that arbitration is meant to be an alternative dispute resolution mechanism that is quicker, more efficient, and less formal than litigation. Courts are reluctant to interfere unless there are serious legal errors that undermine the fairness of the process.

2.Finality of Arbitral Awards:

Arbitration is designed to provide finality. Once an arbitral award is made, it is intended to be binding on the parties, subject to the limited grounds for setting it aside under Section 34. This ensures that parties cannot endlessly challenge or appeal the same dispute.

3.Limited Grounds for Interference:

The Act provides a narrow set of grounds for intervention by the courts. The idea is to balance the need for a fair process with the desire to ensure that arbitration remains a final, binding, and efficient process for resolving disputes. This ensures that only significant procedural or substantive violations justify judicial intervention.

Dakshin Haryana Bijli Vitran Nigam Limited v. Navigant Technologies Private Limited  (2021)
In Paragraph 44 of the judgement, it was held that - in law, when a court sets aside an arbitral award passed by the majority members of the Tribunal, the underlying disputes must be adjudicated afresh through appropriate proceedings. Under Section 34 of the Arbitration and Conciliation Act, 1996, the court has a limited mandate: it may either reject the objections and uphold the award or set aside the award if the grounds set out in sub-sections (2) and (2-A) are established. However, the court does not possess the power to modify an arbitral award.

This position was clearly articulated by the Supreme Court in McDermott International Inc. v. Burn Standard Co. Ltd. [(2006) 11 SCC 181], wherein the Court observed:
"The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot correct errors of the arbitrators. It can only quash the award, leaving the parties free to begin the arbitration again if it is desired. So, the scheme of the provision aims at keeping the supervisory role of the court at a minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the court's jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it."

Testing the Limits of Judicial Intervention Under Section 34: Project Director, NHAI v. M. Hakeem
The case arose from a decision of the Madras High Court, which held that arbitral awards made under the National Highways Act, 1956, could be modified to enhance compensation, relying on the powers granted to courts under Section 34. The underlying dispute involved compensation awards issued by the Special District Revenue Officer, based on the 'guideline value' of land rather than comparable sale deed values. This method significantly undervalued the acquired lands. Although the arbitrator, appointed by the government, endorsed these inadequate awards, the District and Sessions Judge, while entertaining a Section 34 petition, modified the award and increased the compensation. The Madras High Court upheld this modification, prompting the National Highways Authority of India (NHAI) to appeal the decision before the Supreme Court.

Analysis

In Paragraph 22, the Supreme Court, addressing the issue at hand, held that Section 34 of the Arbitration Act lays down narrowly defined grounds for setting aside an arbitral award, as outlined in sub-sections (2) and (3). Emphasising that this provision is modeled on the UNCITRAL Model Law, the Court reiterated that its legislative intent is to ensure minimal judicial interference in the arbitral process. It underscored that the role of courts under Section 34 is supervisory, not appellate. In support of this interpretation, the Court referred to its earlier rulings in SsangYong Engineering & Construction Co. v. NHAI and Renusagar Power Co. Ltd. v. General Electric Co., which clarified that a challenge under Section 34 does not permit a review of the merits of the dispute.

Furthermore, in Paragraph 26, In this context, the Supreme Court also relied on its earlier decision in McDermott International Inc. v. Burn Standard Co., where it had clearly held that the Arbitration and Conciliation Act, 1996 provides for only a limited supervisory role of courts, aimed at ensuring fairness in the arbitral process. 

The Court observed, “The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like in case of fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot correct errors of the arbitrators.” The bench further cited a recent Supreme Court decision reaffirming that Section 34 does not confer upon courts the power to modify arbitral awards.

The judgment also referred to the Delhi High Court’s ruling in Cybernetics Network Pvt. Ltd. v. Bisquare Technologies Pvt. Ltd., where it was held that the court's power under Section 34 is not equivalent to appellate jurisdiction. As such, it cannot reassess claims that have already been adjudicated by the arbitral tribunal, since doing so would contravene the statutory framework of Section 34.

Referring to the Gayathri Balaswamy case, which had been cited by the respondents in support of a broader reading of Section 34, the Supreme Court clarified that the modifications made in that judgment were pursuant to powers exercised under Article 142 of the Constitution. Consequently, the Court held that it would be incorrect to interpret such exceptional constitutional powers as indicative of a general statutory power to modify, revise, or change arbitral awards under Section 34. Doing so would be contrary to both the structure of the Arbitration and Conciliation Act, 1996 and the weight of precedent that underscores minimal judicial intervention.

Factual Background - Gayatri Balasamy vs M/S Isg Novasoft Technologies Limited

Gayatri Balasamy, an ISG Novasoft Technologies Limited employee, was appointed Vice President (M&A Integration Strategy) in 2006. She resigned in 2006, alleging sexual harassment charges against ISG's CEO, Krishna Srinivasan. Balasamy filed a criminal complaint against Srinivasan and the company's Vice-President for offenses under the Indian Penal Code, 1860, and the Tamil Nadu Prohibition of Harassment of Women Act, 1998. The Supreme Court referred the parties to arbitration, which awarded Balasamy ₹2 crore. Balasamy moved the Madras High Court to set aside the award, which was modified by a single-judge bench in 2014 to award her ₹1.6 crore. A Division Bench in 2019 reduced the additional compensation to ₹50,000. Balasamy then moved the case to the Supreme Court, which ruled that a court can modify an arbitral award under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996.

The Perils of Judicial Modification

Paragraph 35 of the judgment rightly notes that partial setting aside is impermissible when an award's valid and invalid portions are legally and practically inseparable. This principle is straightforward in the context of multi-claim awards, where distinct and unrelated claims are adjudicated separately. However, complications arise in cases where damages are awarded as a single consolidated sum, and only a portion of that sum is later found to be supported by evidence.

Consider a scenario in which an arbitral tribunal awards ₹1 crore for delay damages, but the court determines that only ₹30 lakhs is substantiated by the record. Can the court then “modify” the award to ₹30 lakhs? Doing so would require the court to engage in a merits-based re-evaluation, something Section 34 of the Arbitration and Conciliation Act explicitly prohibits. Yet, if modification is permitted under the guise of severability, courts may begin to assume an appellate role in disguise. This not only undermines the principle of arbitral finality enshrined in the 1996 Act but also opens the door to judicial overreach.

While the judgment seeks to promote efficiency and avoid needless re-arbitration, its interpretive breadth may inadvertently trigger a new wave of litigation—this time focused on the very meaning and limits of “modification.” As the dissenting opinion cautions, allowing modification under Section 34 risks striking at the heart of the arbitration process. Unless tightly constrained by judicial discipline, the window opened by Gayatri Balasamy may well invite the kind of intervention the Act was designed to prevent.

Manifest Errors and the Mirage of Objectivity

The Supreme Court’s articulation of its power to correct clerical or computational mistakes under Section 34 is far from confined to superficial slips. In Paragraph 49 of the Gayatri Balasamy judgment, the Court affirms that:

“We affirm that a court reviewing an award under Section 34 possesses the authority to rectify computational, clerical, or typographical errors, as well as other manifest errors, provided that such modification does not necessitate a merits-based evaluation.”

This theme continues in Paragraph 54, where the Court clarifies that inadvertent errors, including typographical and clerical mistakes, may indeed be modified under Section 34. However, it draws a formal distinction: courts must not assume appellate powers or undertake a substantive review. Importantly, the Court stresses that any such error must be “apparent on the face of the record.” If uncertainty arises, the court is bound to refrain from acting and must direct parties to pursue remedies before the arbitral tribunal under Section 33 or through a remand under Section 34(4).

Despite these constraints, the term “manifest errors” remains undefined and dangerously broad. This ambiguity functions like a Trojan horse. While facially tethered to objective standards, it leaves ample room for courts to reassess factual determinations, reasoning, or even evidentiary sufficiency—provided they do so under the guise of identifying a “manifest” error. The phrase, lacking precision, invites interpretive subjectivity and risks reopening factual findings that arbitration is meant to conclusively resolve.

The danger lies in the interpretive elasticity of “manifest.” What one judge considers a straightforward oversight may appear to another as a substantive flaw. In the absence of tighter doctrinal boundaries, this vagueness risks stretching Section 34’s limited corrective function into an unspoken appeal on facts, eroding the arbitral process's finality and autonomy.

A narrow exception or a new avenue?

In Paragraph 85 of the judgment, the Court delineates the narrow scope for such modification. Judicial intervention is allowed only in limited circumstances: where the award is severable, permitting the invalid portion to be excised without affecting the remainder; to correct clerical, computational, or typographical errors that are apparent on the face of the record; to alter post-award interest in justified situations; and under Article 142 of the Constitution, where the Court may act to ensure complete justice.

These exceptions appear to reinforce the principle of minimal judicial interference, a cornerstone of modern arbitration jurisprudence. However, a closer examination reveals that the judgment may have opened more doors than it closed. By recognizing and elaborating on these exceptions, particularly the invocation of Article 142, the Court may have inadvertently expanded the scope for judicial engagement with arbitral awards. This nuanced departure from the traditionally rigid non-interventionist approach invites further debate on whether the decision aligns with the pro-arbitration stance India has committed to in recent years.

The Hon’ble Supreme Court drew a clear distinction between setting aside an arbitral award and modifying it, noting that these are conceptually and legally distinct actions—while setting aside nullifies the award entirely, modification alters only a specific portion of it. In examining the scope of Section 34 of the Arbitration and Conciliation Act, the Court held that the provision does not expressly prohibit modification and that its silence on this aspect should not be construed as a bar on granting such relief.

Recognising the objective of arbitration as a faster and more cost-effective alternative to litigation, the Court cautioned that a rigid interpretation, disallowing modifications, could lead to undue hardship. In such cases, parties may be compelled to initiate fresh arbitral proceedings simply to correct or reassert findings that a court could have reasonably modified. This would defeat the purpose of arbitration by making it more burdensome and time-consuming than conventional litigation.

Final Judgement Analysis

In Paragraph 156, the Supreme Court firmly outlined the limitations on courts' powers when dealing with arbitral awards under Section 34 of the Arbitration and Conciliation Act, 1996:

1. No Power to Modify under Section 34:Courts exercising jurisdiction under Section 34—and appellate courts reviewing such decisions—do not possess the authority to modify arbitral awards. Their powers are limited to setting aside awards on specific grounds enumerated in the statute.
2. Modification and Setting Aside are Distinct:The power to modify an award is not a lesser or implied subset of the power to set it aside. The two are conceptually and functionally distinct, operating in separate legal spheres.
3. No Inherent or Implied Powers:Courts cannot invoke their inherent powers under Section 151 of the Civil Procedure Code to modify arbitral awards. Doing so would contravene the explicit legislative framework laid down in Section 34. Similarly, the doctrine of implied powers has no application in this context.
4. Article 142: Cannot Override Statutory Limits:Even the Supreme Court’s extraordinary power under Article 142 of the Constitution cannot be exercised to modify an arbitral award. It is a settled principle that Article 142 cannot be used to override or bypass substantive statutory provisions.
5. Validity of Hindustan Construction v. Hakeem Reaffirmed:The ruling in Hakeem (supra) remains good law in holding that a Section 34 Court cannot modify an arbitral award. The only narrow exception permitted now relates to correcting computational, clerical, typographical, or similar errors—based on the principle actus curiae neminem gravabit (an act of court shall prejudice no one).6.Correction of Clerical Errors Permitted:Errors that are computational, typographical, clerical, or of a similar nature, and apparent on the face of the record, can be corrected by the court under Section 34 without engaging in a merits-based review.
6. 7.Kinnari Mullick Partially Overruled:The ruling in Kinnari Mullick that a request under Section 34(4) must be made in writing is incorrect. Even an oral request by a party during proceedings can be considered valid under Section 34(4).
7. 8.Court May Act Suo Moto Under Section 34(4):The Court has the authority to invoke Section 34(4) suo moto (on its motion), provided the circumstances justify such an approach, especially where it serves to avoid setting aside the entire award and furthers the efficiency of arbitration