Gayatri Balasamy ruling reveals Supreme Court’s implied powers in arbitration law, going beyond award modification. | The Legal Observer

The landmark ruling has implications far beyond award modification — it signals a subtle judicial assertion of implied powers in arbitration jurisprudence.

In Gayatri Balasamy v. ISG Novasoft Technologies Ltd., the Supreme Court of India delivered what many hailed as the “modification judgment” — a ruling that now allows Indian courts to modify arbitral awards under Section 34 of the Arbitration and Conciliation Act, 1996, rather than merely setting them aside. But beyond the obvious headlines lies something more jurisprudentially significant: the Supreme Court’s strategic invocation of implied powers in expanding the scope of judicial intervention in arbitration.

For legal professionals and scholars tracking India’s evolving arbitration regime, this hidden doctrine could have far-reaching consequences.

🧑‍⚖️ A Brief Recap: What the Court Held

In the case, Gayatri Balasamy, the former employee of ISG Novasoft, challenged an arbitral award that ordered her to pay INR 1.5 crore in damages for alleged breach of employment obligations. The Madras High Court had set aside the award under Section 34 but declined to modify it, citing lack of statutory authority.

However, the Supreme Court took a different view. Citing principles of “complete justice” and noting “the absurdity of setting aside an otherwise correct award merely due to an error in quantification,” the bench ruled that courts can modify arbitral awards in narrowly defined situations.

“In appropriate cases, where the facts demand and justice so requires, the court is not powerless to mould relief under Section 34,” the Court observed.

📜 The Implied Power Doctrine

While the power to set aside or remit awards is well-established under Section 34, the modification of arbitral awards finds no explicit mention in the statute. This is where the Supreme Court ventured into uncharted territory.

Legal scholars note that the Court invoked a kind of “inherent” or “implied” power, drawing analogies from civil procedure and constitutional law, where courts have historically wielded non-enumerated powers in service of justice and equity.

“The Court’s reasoning draws from Article 142 of the Constitution, though not cited directly — the idea being that a procedural statute should not thwart substantial justice,” says Ananya Khurana, arbitration counsel at a Delhi-based law firm.

⚖️ Is This a Judicial Overreach?

Not all reactions have been welcoming. Critics argue that the ruling could disturb the finality of arbitration awards — one of the core reasons arbitration is preferred over litigation.

“The beauty of arbitration lies in minimal judicial interference. By opening the door to modification, the Court has created a pathway that could be overused,” warns Rakesh Menon, Partner at Lex & Co.

Others point to the risk that this “implied powers” approach could dilute the legislature’s intent — particularly given the 2015 and 2019 amendments, which aimed to curtail excessive court intervention.

📈 Trend: Growing Judicial Assertiveness in Arbitration

The ruling continues a subtle trend where Indian courts have begun to reclaim ground in the arbitration process. From judgments like DMRC v. Delhi Airport Metro Express, to Perkins Eastman Architects v. HSCC, courts are becoming more willing to engage with arbitration proceedings, especially when public policy or substantial injustice is at stake.

The Gayatri Balasamy case now adds “implied modification” to this growing judicial toolkit.

🔍 What Practitioners Should Watch

• Scope Creep in Section 34: Watch for whether lower courts interpret this judgment narrowly (exception-based) or broadly (precedent for all modifications).
• Judicial Discretion vs Legislative Intent: There’s now a live tension between judicial innovation and legislative clarity.
• Delays in Enforcement: With courts now modifying awards instead of remitting or setting them aside, enforcement timelines may improve — but challenges to modification orders could offset the gains.

🧩 The Missing Puzzle Piece: A Call for Legislative Reform?

The Court itself hinted at the need for legislative clarity. The Law Commission or Parliament may now consider codifying modification powers, particularly to curb misuse or inconsistency.

“A statutory provision explicitly allowing for modification — within strict boundaries — could prevent overreach while promoting efficiency,” Khurana adds.