Correcting the Award or Correcting the Court? Judicial Restraint under Section 34 Post-Gayatri Balasamy
This article re-examines the implications of Gayatri Balasamy v. ISG Novasoft Technologies Ltd. for judicial intervention under Section 34 of the Arbitration and Conciliation Act, 1996, focusing on the implications Pre-Gayatri Balasamy judgements with regard to the tension between corrective powers and arbitral finality. It argues that expanded remedial powers must remain subject to strict thresholds of judicial restraint, distinguishing due-process violations from public-policy challenges and preventing merits-based review. The article proposes a prejudice-based threshold and a graduated remedial framework, from remission and severance to modification and, only as a last resort, annulment, to preserve efficiency while maintaining meaningful judicial oversight.
Introduction
The delay in Indian arbitration is no longer the tribunal’s doing. Under Section 29A(1) of the Arbitration and Conciliation Act, 1996 (‘Arbitration Act, 1996’), a domestic award is due within twelve months of the completion of pleadings, and Section 29A(4) enforces that limit by terminating the arbitrator’s mandate if it is exceeded. Section 34(6) sets a matching one-year limit for disposing of a challenge but attaches no consequence to breaching it, which is why the Supreme Court in State of Bihar v. Bihar Rajya Bhumi Vikas Bank Samiti, (2018) 9 SCC 472, treated the companion provision in Section 34(5) as directory. What has changed is the distribution of the burden. The 2015 Amendment compressed the arbitration itself, and the post-award stage absorbed the time saved. As on 1 September 2023, 2,106 Section 34 petitions were pending before the Delhi High Court alone, averaging 1,327 days each, and an empirical study of 2,020 petitions filed there between 2021 and 2024 records a disposal rate of 38.66 per cent.
On 30 April 2025, the Constitution Bench in Gayatri Balasamy v. ISG Novasoft Technologies Ltd. (‘Gayatri Balasamy’) held, by 4:1, that a court under Sections 34 and 37 may modify an arbitral award as well as annul it by severing an invalid portion from a valid one, by correcting manifest errors on the face of the record, by varying post-award interest, and, in the case of the Supreme Court alone, under Article 142. The current view is that finality is preserved by limiting what a court may do with an award; the majority reasoned the other way, since cancelling an award for a severable defect and sending the parties back to arbitration is itself the delay arbitration aims to avoid.
However, even post-Gayatri Balasamy, the restraint of judicial decisions from 2024 remains in force. In Punjab State Civil Supplies Corporation Ltd. v. Sanman Rice Mills, the Supreme Court held that a court cannot reappraise the evidence or substitute its own view merely because another conclusion is possible, while the Supreme Court in OPG Power Generation Pvt. Ltd. v. Enexio Power Cooling Solutions India Pvt. Ltd. (‘OPG Power Generation’) has also held that a legal mistake is not a rationale for cancelling an award and that non-compliance with law does not mean public policy is violated. These rulings establish the point of intervention, whilst Gayatri Balasamy indicates what courts may do thereafter. It is argued here that the limits set at the first stage can disappear at the remedial stage, that due process and public policy are not the same inquiry, and that Section 34 must carry both a threshold of prejudice and a sequence of remedies running from remission under Section 34(4) to cancellation of the award.
Section 34 Is Not Silent
Some believe Indian law includes no rule determining when an arbitral award may be nullified by a court. That is wrong. Section 34(2) enumerates the grounds comprehensively, and Section 5 bars intervention beyond what Part I envisages. Section 34(2)(a) covers incapacity, an invalid arbitration agreement, lack of notice, inability to put forward one’s case, decisions beyond the remit and procedural irregularity; Section 34(2)(b) covers non-arbitrability and conflict with the public policy of India. Explanation 1 limits public policy to fraud and corruption, contravention of the fundamental policy of Indian law, and conflict with the most basic notions of morality or justice; Explanation 2 provides that the fundamental policy test requires no scrutiny of the merits; and Section 34(2A) adds patent illegality for domestic awards, subject to a proviso barring the setting aside of an award merely for an erroneous application of law or a reappreciation of evidence. The grounds are stated and exhaustive; the question is how widely they have been interpreted.
The challenge lies in judicial expansion rather than statutory silence. The Supreme Court in ONGC Ltd. v. Saw Pipes Ltd. (‘Saw Pipes’) held that public policy required a wider meaning and added patent illegality to the three heads recognised in Renusagar Power Co. Ltd. v. General Electric Co., and ONGC Ltd. v. Western Geco International Ltd. (‘Western Geco’) which later read Wednesbury reasonableness into fundamental policy. The Parliament reversed both by definition since Explanation 2 withdrew the merits review that Western Geco permitted, and Section 34(2A) removed patent illegality from public policy and barred its use for an erroneous application of law, which Saw Pipes had allowed. In this regard, the draft Arbitration and Conciliation (Amendment) Bill, 2024, released for consultation in October 2024 and still the most recent legislative proposal, remains a draft; its proposed Section 34(1B) would require the ground of challenge to be formulated precisely, and Section 34A would let parties opt into an appellate arbitral tribunal. That minimising judicial intervention is still an object of reform suggests India is not yet, without exception, a jurisdiction that encourages arbitration.
The comparative position makes the point about method. Section 23(a) of the Revised Uniform Arbitration Act, 2000 lists the grounds for vacatur in the United States and public policy is not among them; it binds only the States that have adopted it, while Section 10(a) of the Federal Arbitration Act, 1925 governs federal proceedings. The ground there is judge-made, and United Paperworkers International Union, AFL-CIO v. Misco, Inc., 484 U.S. 29 (1987), confined it to a policy that is well defined and dominant and ascertained from statutes and decided cases rather than a court’s own perception of the public interest, following W.R. Grace & Co. v. Local Union 759, 461 U.S. 757 (1983) and Muschany v. United States, 324 U.S. 49 (1945).
What Gayatri Balasamy Changed and Why Due Process is not Public Policy
The majority located the power in the structure of the Act rather than in its express words. The proviso to Section 34(2)(a)(iv) lets a court nullify only that part of an award exceeding the submission; severance is therefore partial annulment rather than appellate rewriting. On the same reasoning, the power to annul was held to include the narrower power to correct clear mistakes, and post-award interest under Section 31(7)(b) to be variable. The finding tempers the holding in Project Director, NHAI v. M. Hakeem, while keeping its warning that a Section 34 court does not sit in appeal. Viswanathan J., dissenting, read ‘only’ in Section 34(1) as exhaustive of the remedy and so as excluding modification altogether.
The logic is remedial rather than standard-lowering. Annulment is blunt, and its bluntness has been doing disciplinary work: it forces a court to decide whether a defect is grave enough to destroy the award. Once a proportionate remedy exists, that question can be approached with less care. Restraint at the threshold may therefore be undone at the remedial stage, and nothing in the judgment prevents it. Delhi Metro Rail Corporation Ltd. v. Delhi Airport Metro Express Pvt. Ltd. (‘Delhi Airport Metro Express’), where the Court used its curative jurisdiction to undo its own judgment restoring a patently illegal award, shows how far that instinct can run. India’s difficulty is not a shortage of judicial power over awards but of discipline about using it.
In this context, it is worth considering the relevance of “due process,” which is a constitutional term that does not carry the same weight in Section 34. The Constitution omits the expression, and it was the Supreme Court’s verdict in Maneka Gandhi v. Union of India that read Article 21 as requiring a procedure which is fair, just and reasonable rather than one that merely exists. The arbitral guarantee is statutory and more specific since Section 18 requires equal treatment and a full opportunity to present one’s case, Section 24(3) requires that material before the tribunal be communicated to the parties, and Section 34(2)(a)(iii) makes want of notice and inability to present one’s case a ground of challenge, each of which poses a question capable of an answer.
In Ssangyong Engineering & Construction Co. Ltd. v. NHAI, a circular of the National Highways Authority of India was applied by the majority tribunal to rewrite the agreed price formula with no opportunity to the claimant to address it. The Court held that material taken behind the back of a party attracts Section 34(2)(a)(iii), and held separately that the unilateral substitution of one bargain for another offended the most basic notions of justice under Explanation 1. Public policy asks not whether a party was heard but whether the award is enforceable, and where the two collapse a losing party recasts an evidentiary defeat as a denial of hearing. The Delhi High Court’s distinction between a party unable to put forward its case and a tribunal declining to accept the case presented classifies a complaint without grading it; and in Shriram Pistons & Rings Ltd. v. Usha International Ltd. (‘Shriram Pistons’), the same court dismissed a challenge to the tribunal’s constitution because the petitioner, having participated throughout, showed no actual prejudice. Whether that is due process taken seriously or reduced to a formality depends on the grievance, and Section 34 supplies no rule for telling the two apart.
A Prejudice Threshold and a Remedial Ladder
Section 34(2)(a)(iii) states no express requirement of prejudice, although the word “unable” carries one already. Comparable jurisdictions state it openly. In Singapore, Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd, [2007] 3 SLR(R) 86 (‘Soh Beng Tee’), requires an applicant to identify the rule breached, how it was breached, its connection to the award and the prejudice caused, that prejudice being actual or real as opposed to purely technical; L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd, [2013] 1 SLR 125, asks whether the breach could reasonably have made a difference to the arbitrator. Section 68(2) of the English Arbitration Act 1996 admits a serious irregularity only where it has caused substantial injustice. India, which adopted the Model Law directly, has no equivalent statutory filter, and Shriram Pistons shows the courts supplying one case by case rather than as a settled test.
Introducing such a filter calls for a sequence of steps rather than an amendment: which ground is involved, whether it is made out on the tribunal’s record alone, whether prejudice has been incurred, and which remedy is least invasive. Remedies can be ranked by invasiveness: remission under Section 34(4), severance under the proviso to Section 34(2)(a)(iv), modification within the categories the Court has permitted, and annulment last. Which rung fits which defect can also be stated. A procedural defect should ordinarily be met with remission, since it consists in something not having been heard and only remission allows it to be heard, whereas modification substitutes the court’s opinion for that hearing and so suits defects complete on the face of the record.
The threshold itself is settled. Delhi Airport Metro Express Pvt. Ltd. v. Delhi Metro Rail Corporation (2021) confirms that not every error of law is patent illegality, limiting interference to a view no reasonable person could take, a finding resting on no evidence or ignoring critical evidence, or an arbitrator wandering outside the contract; OPG Power Generation adds that Explanation 1 does not speak of legal justice; and Associate Builders v. Delhi Development Authority makes the arbitrator the sole judge of the quality and quantity of evidence. The caution against excessive intervention, usually mentioned without a source, is the holding in Delhi Airport Metro Express that a Section 34 court does not sit in appeal, together with the majority’s own caution in Gayatri Balasamy against broadening modification into appellate review. What none supplies is a rule matching remedy to defect, which is the gap Gayatri Balasamy has widened.
Conclusion
Gayatri Balasamy has not diminished finality; it has moved the point at which finality is decided. A Section 34 court once questioned whether an award was valid; it now questions what remains of it, and its power to amend part of an award should be applied with stricter standards, since the easier the remedy, the weaker the deterrent. Introducing a standard of prejudice into Section 34(2)(a)(iii), on the Soh Beng Tee model, would supply the discipline that neither the Act nor the draft Bill provides. Without it, the average of 1,327 days becomes the cost of an easy remedy.
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