Section 34 Powers: Modify, Set Aside, or Confuse?

Kedar Manoj Ammanji & Chiranth Mukunda*

Introduction

In April 2025, a five-judge constitution bench of the Supreme Court (SC) in  Gayatri Balasamy v. ISG Novasoft Technologies, delivered its much-anticipated judgment on the courts’ powers to modify arbitral awards under section 34 of the Arbitration and Conciliation Act 1996 (“the Act”). As previously covered here, the case stemming from a reference by a two-judge bench, was expected to settle the two-decade long series of conflicting interpretations on section 34 of the Act, which on its face only empowers the courts to “set aside” the award and not to vary/modify the award. The majority opinion authored by Khanna CJ purports to give the courts a ‘limited power to modify’ the award, correct inadvertent errors in the award and modify post-award interest under section 34. Per contra, the separate opinion authored by Vishwanathan J rejects any power to modify the award, while allowing only for correction of inadvertent errors by the courts. Nevertheless, instead of laying down a clear path on modification powers, the court has laid a maze.  

In this piece, we examine the reasoning of the majority opinion in allowing a “limited power of modification” under section 34. First, we argue that the conclusions of the court reflect a confusion between the powers of ‘modification/variation’ of the award and the concept of ‘partially setting aside’ an award and the related concept of ‘severability’. As a result, the majority judgement raises more questions than answers about (a) permissibility of modification; and (b) extent of modifications under section 34 of the Act. Second, we examine the powers of the court to correct inadvertent or clerical errors in the award. Third, we analyse the scope and contours of modification powers available to the courts when there is already a power of remission to the tribunal under Section 34(4) of the Act. Fourth, we critique the majority’s recognition of the power to modify post-award interest. Lastly, we highlight concerns with respect to the use of Article 142 powers by the SC.

Analysis Of The Power To Modify And The Power To Set Aside

The Reference And The Judgment  

The reference was made to a larger bench to determine the correctness of the two-judge bench decision in National Highways Authority of India v. M. Hakeem (2021). In M. Hakeem, The SC after considering conflicting line of decisions, unequivocally held that courts exercising powers under section 34 of the Act could not modify/vary the arbitral award. The Court gave several reasons for this conclusion: first, the legislative framework of the Act and section 34 do not provide for an appellate mechanism or review of the award on merits; second, section 34 is modelled on the UNCITRAL Model Law which does not give courts the power to modify awards; and third, unlike the old Indian Arbitration Act of 1940 and the arbitration laws of England and Singapore, the current Indian Act does not contain any provision allowing courts to vary or modify the award – reflecting a clear legislative intention to keep judicial interference with arbitral awards to a minimum.  

In this context, the referral required a larger bench to consider the following questions: (1) whether a court has the power to modify the award under section 34, (2) if such a power exists, whether it can only be used when the award is severable and part of it can be modified; and (3) & (4) whether, by applying the doctrine of omne majus continet in se minus (meaning “the greater power includes the lesser”), the court’s power to set aside an award could also be interpreted to include the power to modify it.   

An important part of this analysis is to show that the second question in the reference is framed incorrectly. It is submitted that the power to modify an award does not, as a matter of principle, require that the part being modified must be separate or severable from the rest of the award. The requirement of severability applies only when the court is considering partially setting aside an award. It is settled law that for a court to partially set aside an award, the invalid portion must be severable i.e, it must not be inextricably linked to the valid portion of the award. (see, SC in J.G. Engineers v. UOI (2011), most recently, Delhi HC in NHAI v. Trichy Thanjavur Expressway (2023)). 

However, as will be further explained in the next section, there is a clear conceptual difference between setting aside an award and modifying an award. Both the majority opinion (at para 38) and the separate opinion of Viswanathan J (at para 8) - more strongly - recognise and emphasise this distinction. Once this difference is understood, the issue of severability has no relevance to the question of modifying an award. To modify means “to change, vary, qualify, or reduce” the award. Modification in principle involves the court altering or varying the award on merits of a claim that has already been adjudicated by the tribunal (see, M. Hakeem, NHAI v. Trichy, UOI vs. Alcon Builders & Engineer (P) Ltd.22 (para 23). In other words, modifying an award means the court substitutes its own decision for the arbitrator’s decision on a particular claim. [see CLVC v. Arab Petroleum, Para 93(ii)]. Such substitution does not require the artificial ‘severance’ of a divisible part of the award. Even where claims are inextricably linked, and the award is therefore non-severable, any legal infirmity still affects the entire award and would justify setting it aside in full under section 34. If the majority recognises modification precisely to cure such infirmities, the same logic applies irrespective of severability. Severability, therefore, is irrelevant to the existence or exercise of the modification power. Hence, the reference question clearly seems to create confusion.  

The majority judgement repeats the same conceptual error. It holds that section 34 allows the court to alter an arbitral award only in three circumstances: (i) “if the award can be split, the court may remove the invalid part and leave the valid part intact” (ii) the court may correct clerical, computational, or typographical errors that appear on the face of the record (iii) the court may modify post-award interest. 

The next section exposes tensions in the majority’s view of a court’s power to modify an award. The judgment leaves it unclear whether modification is simply another form of partially setting aside—anchored to severability—or a distinct power; if the latter, the majority offers no guidance beyond the severability test. It likewise never clarifies whether “modification” extends beyond correcting inadvertent errors or post-award interest. While the Conclusion of the judgement may provide some guidance, the analysis and ratio are far too open-ended to conclusively argue that modification is only limited to the three conditions outlined.

What Does This Limited Power To Modify Mean? 

The majority opinion relies on Mustill and Boyd’s Commercial Arbitration (2nd ed., 2011, p. 617) to state that the court’s limited power to modify an award can only be used when the modification follows inevitably from the tribunal’s decision on a question of law (para 46). According to the majority, this standard does not involve any fact-finding or require giving the parties another chance to present their case (para 56).  However, the majority also concludes that exercising this modification power does not involve examining the merits of the dispute (para 39) (emphasis supplied). However, this reasoning is problematic. This is because any power to modify an award will, to some degree, require the court to review the merits, even if that review is limited.  

Merits Review And Modification  

Modification involves correcting, amending, or changing the findings on the merits of an arbitral award as recognised in M. Hakeem and NHAI v. Trichy. This was the reason that the SC in M. Hakeem rejected that section 34 includes the power to modify an award. The court in M. Hakeem noted that a long line of its earlier decisions including Ssangyong Engineering & Construction Co. Ltd. v. NHAI (2016), MMTC Ltd. v. Vedanta Ltd. (2019), and Maharashtra State Electricity Distribution Co. Ltd. v. Datar Switchgear Ltd (2018) which had established that framework of section 34, which follows the  UNCITRAL Model law,  did not allow for a merits-based reconsideration of the award. Viswanathan J, in his separate opinion, also made it clear that any modification would necessarily involve reviewing the merits of the award (paras 89 and 93), which made him reject that section 34 allowed courts to modify the award.  

As Mustill and Boyd explains, when a court modifies or varies an arbitral award, it must do so based on the findings on fact or questions of law already made by the arbitral tribunal. This is correct because the court’s role is limited to ‘modifying’ the award, not ‘rewriting’ it. The Supreme Court followed a similar approach in ONGC v Western GECO (2014), where the court held that if the arbitrators failed to draw an inference that they should have drawn, or made a clearly incorrect inference from the facts, the court could modify the award. However, it cannot be denied, as the majority opinion does in absolute terms, that modification can involve a limited appellate-mechanism type review of the award on merits. Unfortunately, the judgment misinterprets Mustill and Boyd to suggest that modification does not involve any form of merits-review (para 46). 

The majority’s refusal to acknowledge that the ‘limited power of modification’ they provide involves even a limited review on merits can have two implications. First, what they mean by modification is nothing but a ‘partial setting aside’, in which case it can be reconciled that it does not indeed involve a merits-based reconsideration of the award. Second, though less plausible, the majority’s conclusion on powers to modify is limited only to inadvertent or clerical errors and post-award interest. Each of these possible implications is considered in turn.  

Blurring The Difference Between ‘Partial Setting Aside’ & ‘Modification’  

It is noteworthy that the Court was unanimous in affirming that the power to “set aside” an arbitral award under Section 34 of the Act encompasses the authority to partially set aside an award, provided that the invalid portion is severable. This pronouncement may be regarded as settling the issue conclusively. As the majority opinion correctly observed, the doctrine of omne majus continet in se minus is applicable, such that the broader power to set aside necessarily includes the narrower power to partially set aside. However, this reasoning cannot be extended to equate the powers of setting aside and modifying an award. As Justice Viswanathan aptly noted (para 91), the powers to set aside and to modify an award do not derive from a common genus. They are distinct and autonomous powers, and do not exist in a hierarchical relationship where one may be viewed as a subset of the other. This distinction is further underscored by comparative statutory frameworks. For instance, the Singapore Arbitration Act (s.49(8)) and the English Arbitration Act 1996 (s.67(3), S.68(3), 69(3)) explicitly treat the powers of setting aside and varying an award as separate and independent remedies. 

The distinction, though frequently underscored in the judgment, was not extensively elaborated upon. For the sake of clarity and at the cost of repetition, modification entails altering the substantive terms of the arbitral award. Such alteration, while potentially constrained to variations that necessarily arise from the tribunal’s decisions on specific questions of law or fact, nonetheless involves at least a limited form of review of the merits. In contrast, partial setting aside merely excises the invalid portions of the award without engaging in a merits review of the tribunal’s determinations or substituting the court’s assessment for that of the arbitral tribunal. 

However, the majority opinion states that “the section 34 court can apply the doctrine of severability and modify a portion of the award while retaining the rest” (para 45). This proposition is reiterated in the court’s conclusions (Conclusion I). If this statement is interpreted to suggest that the severability of the award constitutes a pre-condition or standard for the exercise of the power to modify, such a standard is effectively illusory, as modification does not inherently require severance. Alternatively, the observation might be read as implying that limited modification is merely a form of partial setting aside—a doctrinal ambiguity that has historically caused confusion in the Indian courts. However, this interpretation is untenable, as the majority opinion expressly acknowledges that the power to modify is distinct from the power to set aside (Paras 38 and 39). 

Furthermore, the majority’s rationale for acknowledging the courts’ limited power to modify arbitral awards is grounded in considerations of efficiency and economy, specifically to obviate the need for parties to recommence arbitration proceedings and thereby avoid incurring substantial additional costs and delays (para 42). It is pertinent to note that the act of setting aside an award, whether wholly or partially, necessitates the parties engaging in de novo arbitration to resolve the underlying dispute—unless the award is annulled on the basis that no valid arbitration agreement exists (see, McDermott International Inc v. Burn Standard Co. Ltd. (2006); AKN v. ALC (2015) SGCA). In such a case, the outcome sought by the majority—namely, the avoidance of protracted and costly arbitral proceedings—cannot be achieved even through partially setting aside the award, but rather requires judicial modification of the award. 

If the majority opinion had intended to limit the power of modification to only three things—(i) partially setting aside the award, (ii) correcting inadvertent or clerical errors, and (iii) varying the rate of post-award interest—then it would not be introducing any new principle, despite appearing to suggest otherwise. In that case, the only real point of disagreement between the majority and the separate opinion of Viswanathan J would be on whether the court can modify the post-award interest rate. The other two powers—of partially setting aside the award and correcting inadvertent errors were accepted by both opinions as being well established. However, it is clear that both the majority and Viswanathan J (who expressly states that he has read the majority opinion) appear to proceed on the assumption that the power to modify recognised by the majority is an independent and open-ended power—something more than just partially setting aside the award or correcting clerical errors.

Therefore, we argue that the most plausible inference that can be drawn from the majority’s opinion is the following: the courts have the power to modify; this limited power to modify is distinct from partially setting aside the award (though the court wrongly imports the standard of ‘severability’ as precondition for modification); this limited power to modify includes correction of clerical errors,  modifying post-award interest and other instances of modification subject to the condition that it must invariably flow from the tribunals determinations of facts and law.  

What Emerges From The Decision 

As discussed above, the conclusions of the majority opinion are less clear than intended. The major drawback is the court’s refusal to acknowledge that modification will necessarily mean a merits-based reconsideration of the award, even if in a limited and truncated form. This can lead to reasonable doubts as to whether the court subsumed their recognition of modifying powers within powers to ‘partially set aside’ or correct inadvertent/clerical errors, both of which would not involve merits-based review of the award. However, as can be seen from the above analysis, the majority opinion’s reasoning militates against this limited reading of the outcome they intended. What is also peculiar about this judgement is that it is difficult to characterise Vishwanathan J’s separate opinion as either a complete dissent or a partial dissent or a concurring opinion as the majority’s position is itself left unclear and left to inferences of the reader.  Drawing on the present analysis, the next post focuses on courts’ conclusions on the power to correct inadvertent/clerical errors, powers to remand under section 34(4), modifying post-award interest, and doctrine of merger relating to the modified award.  

Power To Correct Inadvertent Or Clerical Errors

Both the majority opinion and Justice Vishwanathan agree that courts, while exercising their powers under Section 34 of the Act, can correct clerical, typographical, or other obvious errors in an arbitral award. This is true even though Section 33 allows the arbitral tribunal itself to make such corrections. The majority bases this view on the doctrine of implied powers, which holds that courts and tribunals have certain incidental powers necessary to carry out their functions effectively and fairly. Justice Vishwanathan supports this position by invoking the principle that no one should suffer due to a court’s mistake (actus curiae neminem gravabit), and by drawing an analogy with the court’s power under Section 152 of the Civil Procedure Code to correct similar errors. Importantly, both opinions make it clear that this power is limited to correcting manifest errors and does not extend to reviewing the substance or merits of the arbitral award.

The majority opinion limits the court’s power to correct an arbitral award under Section 34 to cases where the correction is clear and leaves no room for doubt. If the mistake is not obvious or involves interpretation or debate, the appropriate remedy lies with the arbitral tribunal under Section 33. This limited corrective power does not contradict the Supreme Court’s earlier ruling in M. Hakeem or Justice Vishwanathan’s view that courts cannot modify arbitral awards under Section 34. Both M. Hakeem and Vishwanathan J prohibit courts from engaging in a merits-based review of the award or acting as if they were appellate courts. In contrast, correcting inadvertent or clerical errors does not involve evaluating the merits of the case. Therefore, this narrow power of correction is not an exception to their interpretation but is in fact consistent with the principle that Section 34 does not permit courts to alter the substance of an award. 

Power To Modify v. Power To Remand

Analysis Of The Majority

While the majority opinion acknowledges that the powers of modification and remission under Section 34 of the Act remain conceptually distinct, it fails to articulate a clear standard for when either recourse should be employed. It emphasises that remission permits the arbitral tribunal to reconsider only specific aspects of the award rather than undertaking a de novo review or rewriting the award (para 56, 58). Upon remission, the tribunal may admit additional evidence and allow the parties to present further arguments, while this flexibility is not allowed to the court exercising the limited power of modification. However, it noted that the scope of Section 34(4) cannot be confined to a rigid formula but depends on the facts and circumstances of each case and terms of the order of remission.  

Importantly, even though section 34(4) is an enabling provision as seen from the word “may” contained in section 34(4), the courts’ discretion to remit is limited to only “curable defects” by the tribunal. Where the award is afflicted by serious illegality or injustice, remission is deemed inappropriate. For instance, in I-Pay Clearing Services Private Limited v. ICICI Bank Limited, which is affirmed by both the majority and minority opinions, the court clarified that Section 34(4) does not permit the review or reconsideration of findings or conclusions already made by the arbitral tribunal. It only allows for the tribunal to give reasons or to fill up the gaps in the reasoning in support of a finding/conclusion already made.  

By contrast, when exercising the power to modify an award, courts are not vested with similar flexibility to revisit the merits of the case, even to a limited extent according to the majority judgement. As seen previously, the majority views that the court’s power to modify drawing on Mustill and Boyd is justified where the modifications sought flow inevitably from the tribunal’s determination on a question of law and no fact-finding is required. The majority further holds that powers to modify must be exercised sparingly, and only where remission is either impracticable or would entail disproportionate time and cost. Resultantly, it noted that while the tribunals’ powers post-remission are confined to the court's identification of the curable defect, it is nevertheless ‘substantial’ and the tribunal can “vary, correct, review, add to, or modify the award.” This is more flexible than the narrow role envisaged by the courts under section 34.  

Despite affirming that the power to modify is inherent in Section 34 and does not constitute an impermissible exercise of jurisdiction to conduct a merits review of the award, the majority stops short of providing a comprehensive delineation of its scope vis-à-vis powers of remission. It nevertheless suggests that permissible modifications include (a) the adjustment of post-award interest rates and (b) the correction of inadvertent errors, provided that these do not require a merits-based evaluation.  

Further, the court clarifies that where the appropriateness of a proposed modification is debatable or the error is not apparent on the face of the record, modification will be impermissible. This reflects the majority’s intent to confine the power of modification to instances where: (a) the change does not implicate a reconsideration of the merits; and (b) the modification flows directly from the tribunal’s determination of a questions of law without substituting the court’s interpretation for that of the tribunal and requires no fact-finding exercise by the court; and (c) the modification can be implemented with precision and without controversy. In other circumstances, the appropriate course would be to pursue remedies under Section 33 or Section 34(4). 

It must be noted that while the majority refrains from expressly limiting permissible modifications to inadvertent/clerical errors and post-award interest alone, it implicitly signals that courts may also modify other aspects—such as interests, costs, or other matters. Provided such modifications satisfy the above criteria vis-à-vis powers under section 33 and section 34(4), and do not amount to the merits-examination or substitution of the tribunal’s reasoning with the court’s own. However, modification of the award in these unenumerated situations will inevitably and necessarily involve a merits-based review, though limited by the tribunal’s determination on questions of law and facts.  By rejecting that modification does not involve a merits review, the majority opinion muddles the waters about the true scope of modification powers allowed.  

Section 34(4) Available Only For ‘Curable Defects’ 

This raises the question – when does the court practically remit the matter back to the tribunal? The Singapore Court of Appeal in AKN & Ors v. ALC & Ors (2015) discussed in detail the scope of section 34(4), based on the model UNCITRAL Law, and held that the power to remit could only be exercised as an ‘alternative’ to setting aside the award. This allowed the tribunal to correct certain curable defects – so that the award does not have to be set aside entirely. In this way, remission serves as a curative tool to save the award, but only in appropriate cases.

The majority opinion also makes it clear that if an error in the arbitral award is fundamentally beyond repair, the court cannot send the award back to the tribunal under Section 34(4). This is because the tribunal does not have the power to rewrite the entire award. This view aligns with how other jurisdictions approach the issue. Usually, once an award is delivered, the tribunal’s role ends (it becomes functus officio). Its authority can only be revived if the court permits it through a limited order of remission, and even then, the tribunal can only address the specific issues the court allows—it cannot reopen the entire case (see, L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd (2013), AKN & Ors v. ALC (2014)).  

According to the majority opinion, if an arbitral award contains errors that are not curable, the court may either set aside the award or, in some cases, modify it. A key question is whether courts will use their power to modify even when remission is technically possible, especially in cases where urgency or high costs make remission impractical. The majority permits modification on equitable grounds in such cases but insists that modification must not involve any re-evaluation of the award’s merits. This creates a tension: in many urgent cases, meaningful correction may require engaging with the substance of the award, which courts are not allowed to do. If neither modification nor remission is appropriate, the only option left is setting aside the award, which defeats the aim of using modification to avoid delay and expense. Ultimately, there is considerable uncertainty about when and how courts will exercise their power to modify instead of remitting an award.

Effect of Allowing Modification of Post-Award Interest

The majority view permits the court to change the post-award interest rate if awarded by the tribunal.  It proceeds to reason that if such a power were not allowed, then the award will have to be set aside, requiring the whole exercise to be undertaken again. On the contrary, the majority notes that if the pendente lite interest awarded is contrary to the contractual provision, the recourse is to set aside the interest rate or remit back to the tribunal under section 34(4).  

However, even with regard to post-award interest rates, section 34(4) is precisely empowered to counter such contingencies by allowing the matter to be remitted to the tribunal for its consideration on aspects that it thinks would remove the grounds for setting aside. Moreover, higher or lower interest awarded by itself is not grounds to set-aside an award as it is not covered by any of the grounds under section 34(2) of the act, unless it amounts to ‘patent illegality’ (if the interest rate is contrary to statute or contract) (see Morgan Securities and Credits Pvt. Ltd. v Videocon Industries Ltd. – held that Arbitrator has wide discretion to grant post-award interest – including determining the sum on which interest is granted and the rate of such interest). On the contrary, the judgement does not ground this power to modify interest rates within section 34 to eliminate the grounds for setting aside. Rather, it explicitly states that –“for the post award interest in terms of Section 31(7)(b), the courts will retain the power to modify the interest where the facts justify such modification” – clearly indicating that this power is broader than the confines of section 34. This undermines the claim that such a power is not an appellate power involving a merits review.

Section 31(7) of the Indian Arbitration Act provides that if an award doesn't specify post-award interest, it will carry 2% more than the previous rate to account for enforcement delays. Section 31(7) is absent in the UNCITRAL Model Law and is a creation of the Indian Act. The majority notes that tribunals may have sometimes overlooked the statutory standard for post-award interest. Despite the tribunals being conferred the discretion to award post-award interest, the majority holds that the tribunal may not have predicted future events. This is used as the justification to allow court to modify post-award interest, despite contrarily also holding that such power is narrow and must only be used when faced with compelling reasons.

Section 31(7)(b) provides a default post-award interest rate when the arbitral award does not mention one. However, if the tribunal has specified a post-award interest rate, the statute respects that determination, reflecting legislative intent to give deference to the tribunal’s decision. In situations where the interest rate needs to be reconsidered due to changed circumstances, the appropriate and legislatively consistent response—under both Section 31(7)(b) and Section 34(4)—would be to remit the matter back to the tribunal rather than modifying it directly.

A further concern with allowing courts to modify the post-award interest rate is the potential for unequal treatment between private and government entities. In several cases, courts have reduced the interest amounts payable by public sector entities to private parties based on broad notions of fairness and reasonableness, even when the arbitral tribunal had already provided a justified basis for awarding such interest. This raises the risk of undermining the tribunal’s decision and disproportionately favouring state-owned entities. (see, General Electric Canada Inc & Anr. V. National Hydroelectric Power Corporation Limited)

Article 142 Powers 

The Supreme Court’s use of Article 142—which allows it to do “complete justice”—as a basis to modify arbitral awards is problematic. Past decisions have made it clear that Article 142 cannot be used to override or bypass statutory provisions. (See SCBA v. Union of India) Under the Arbitration Act, the court’s power to modify an award is now traced and grounded in Section 34, whose grounds are meant to be exhaustive. Moreover, Section 5 of the Act explicitly bars judicial intervention unless specifically provided for in the Act. If the power to modify is implied under Section 34 with clear limits, then any other form of intervention would contradict Section 5. While some may argue that extenuating circumstances may merit the use Article 142, it has led to uncertainty and backlash from commercial parties and scholars across the world. It allows the Supreme Court to sit in appellate capacity and entirely change the substance of the award, falling foul of the legislative intent, text and purpose of the Arbitration Act. [for instance, see DMRC v. DAMEPL Curative Petition; and Ssanngyong Engineering v. NHAI (majority award was substituted with minority award under Art. 142 after holding that there is no power to modify)]. Therefore, using Article 142 to modify an award outside the limits of Section 34 would violate the statutory framework and bypass the constraints that the majority judgment itself sets out. Given these legal uncertainties, it would be more appropriate for Parliament to legislate on this.

Conclusions

The exact scope of the court’s power to modify arbitral awards remains unclear. The majority judgment rightly highlights practical concerns—such as avoiding a fresh round of arbitration and minimising delays and costs—as justification for allowing limited modification. This gap in the law stems from the fact that the Indian Arbitration Act, which is based on the UNCITRAL Model Law, does not permit courts to conduct a merits-based review of awards. However, since the Act contains no express provision allowing modification, the court faces inherent difficulties in reading such a power into the statute by implication. This approach carries the risk of inconsistency and legal uncertainty. In this context, Justice Viswanathan’s view—that the matter should be left to Parliament to resolve through legislation—is a sensible and structured way forward. 

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*Kedar Manoj Ammanji & Chiranth Mukunda are B.A., LL.B. (Hons.) students at the National Law School of India University (NLSIU), Bengaluru