The appeal from an arbitral award has always involved a structural awkwardness that practitioners have learned to live with but never quite solved. The Arbitration and Conciliation Act, 1996 gives courts two options when they find something wrong with an award: affirm it or set it aside. Neither fits neatly when the problem is surgical — a single miscalculated head of damages, an interest rate on the wrong base, a discrete finding that sits badly alongside an otherwise sound decision. Set the whole award aside and you send parties back to re-arbitration, spending time and money to relitigate what nobody disputes. Affirm it and you leave in place a conclusion the court has already identified as wrong.

For over a decade, different Supreme Court benches disagreed on whether Section 34 carried any implied power to modify what it could not simply affirm or annul. The question was argued, reserved, and handed upward until it reached a Constitution Bench. On 30 April 2025, that bench answered it.

The Word the Statute Did Not Use

Sections 34 and 37 of the 1996 Act are, on their face, unambiguous in what they omit. Section 34 allows a court to "set aside" an award on specified grounds. Section 37 extends appellate jurisdiction on the same terms. Neither provision uses the word "modify." The argument against any modification power began and ended there: Parliament chose its words, and those words do not include the power the court was asked to exercise.

The Constitution Bench did not find this argument frivolous. The majority — four of five justices — accepted that modification cannot be read into the statute broadly. A court reviewing an award under Section 34 is not sitting in appeal. It cannot substitute its own assessment for the arbitrator's, redetermine liability, or disaggregate a composite finding and reassemble it on different terms.

But the majority drew a further distinction. "Setting aside" is not the same as "setting aside the entire award." The power to set aside part of an award — where that part is genuinely severable — is an exercise of the same setting-aside power. The statute's silence on "modification" is not a prohibition on the partial exercise of a power the statute expressly grants.

The Four Circumstances

The majority reduced the modification power to four defined circumstances, drawn carefully to limit the risk that courts would use the opening to conduct disguised merits review.

The first is severability. Where a discrete portion of an award is defective and can be isolated — its removal leaving the remainder coherent and complete — the court may set aside that portion alone. This is not modification in the ordinary sense; it is the precise and limited exercise of the setting-aside power.

The second covers errors on the face of the award: clerical mistakes, computational errors, typographical defects that are evident from the document itself. These have never required the elaborate machinery of a fresh arbitration; the majority confirms that they do not require it now.

The third concerns post-award interest. Where an arbitrator has specified a rate of interest that is arbitrary, excessive, or unreasonable in the circumstances, the reviewing court may correct it. This is one of the areas where the all-or-nothing rule produced outcomes that were difficult to defend — parties facing disproportionate interest charges while disputing only the rate rather than the underlying award.

The fourth is the most limited and the most powerful: Article 142 of the Constitution, the Supreme Court's inherent jurisdiction to do complete justice. The majority accepts that this provision authorises the Supreme Court — and only the Supreme Court — to go further in an appropriate case. It is not available to High Courts under Section 34. It is not a general licence for merits review. It is a carefully preserved residual power.

The Case That Produced the Question

Gayatri Balasamy had secured an arbitral award as an employee claimant. ISG Novasoft challenged it in the Madras High Court under Section 34. What the High Court then did — adjust some heads of compensation upward, strike others, and effectively reconstruct the economic outcome — was precisely the kind of intervention the 1996 Act had never explicitly authorised. The Constitution Bench's task was partly to resolve whether that intervention was valid and partly to establish the principle for every similar case thereafter.

Justice Viswanathan, the lone dissenter, accepted severability but drew his line there. Modification, once recognised, creates an incentive to characterise almost any challenge as a request for partial rather than total relief — a sufficiently creative petition might shade from permitted severability into prohibited merits review.

The majority's answer is the definiteness of the four categories. The list is not open-ended.

The Takeaway

For parties challenging awards, the change in practice is immediate. A petition under Section 34 no longer has to be framed as all-or-nothing. Where the defect is confined to a single head of damages, an interest calculation, or a typographical error in the operative portion, a prayer for partial modification on that discrete head is now available and ought to be pleaded specifically.

For arbitrators, the ruling carries a drafting signal. An award that ring-fences each head of claim with its own reasoning — making explicit the logical independence of each conclusion — is an award that lends itself to surgical correction if one part is later found wanting. An award in which everything is interwoven is one that forces a court choosing to intervene toward the more drastic remedy. The architecture of the decision, in other words, affects what happens to it afterward.