05/11/2025
# ⚖️ The Supreme Court’s New Course on Arbitration: Balancing Finality with Fairness
# # # *An analysis of recent landmark judgments by the Apex Court of India (2025)*
**By Adv. Tanuj Talwar Shah, Advocate, Constitutional and Civil Law
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# # 🏛️ Introduction
Arbitration in India has traveled a long journey from the pre-1996 days of heavy court supervision to today’s pro-arbitration era where judicial intervention is the exception, not the norm. The **Arbitration and Conciliation Act, 1996**, modeled on the UNCITRAL Model Law, was intended to promote autonomy, efficiency, and finality.
However, in recent years, the **Supreme Court of India** has had to address recurring tensions — how far can courts go in modifying, reviewing, or setting aside arbitral awards while still preserving their sanctity?
The year **2025 marks a defining moment**: the Apex Court, in a series of rulings, has subtly **recalibrated** India’s arbitration jurisprudence — reaffirming fairness and procedural integrity while retaining a pro-arbitration stance.
This article examines the **three most consequential decisions**:
1. *Gayatri Balasamy v. ISG Novasoft Technologies Ltd.* (2025) – on courts’ power to modify arbitral awards;
2. *Lancor Holdings Ltd. v. Prem Kumar Menon & Ors.* (2025) – on delay in pronouncement of awards as a ground of public policy; and
3. *Disortho S.A.S. v. Meril Life Sciences Pvt. Ltd.* (2025) – on the governing law of arbitration agreements.
Each of these decisions clarifies a distinct dimension of arbitral jurisprudence, collectively moving Indian arbitration toward a more **balanced ecosystem**.
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# # ⚖️ I. Gayatri Balasamy v. ISG Novasoft Technologies Ltd. (2025): The Power to Modify Awards
# # # 🔹 Background
This case arose when a party sought modification of an arbitral award that contained computational and severable errors. The core question before the Supreme Court was whether, under **Section 34** of the Act, a court could *modify* an arbitral award or whether it could only *set it aside*.
# # # 🔹 The Majority View
By a **4:1 majority**, the Court held that **courts do have a limited power to modify arbitral awards**.
Relying on the proviso to Section 34(2)(a)(iv) — which allows a court to sever portions of an award dealing with matters beyond the submission to arbitration — the majority reasoned that this **implies an inherent power to correct, modify, or sever invalid parts** while upholding the rest.
It held that modification is permissible only in **limited circumstances**, such as:
* Correction of clerical or computational mistakes;
* Adjustment of post-award interest; and
* Severance of non-arbitrable or ultra vires portions of the award.
The Court clarified that this does not reopen the merits of the dispute — it is a tool to preserve the valid core of an otherwise partially flawed award.
# # # 🔹 The Dissent
Justice K.V. Viswanathan, in dissent, strongly cautioned against judicial modification. He emphasized that the **legislative intent** of the 1996 Act was *minimal intervention* — that “the court is not an appellate forum over the arbitrator.”
According to him, modification risks transforming Section 34 proceedings into an appellate review, undermining arbitral finality.
# # # 🔹 Practical Implications
* The judgment strikes a pragmatic balance: instead of striking down entire awards for minor or severable defects, courts can now correct limited errors.
* Counsel must anticipate that courts might **partially uphold or tailor** awards rather than setting them aside altogether.
* Drafting arbitration clauses with **precision** and ensuring that awards clearly identify separable claims will gain renewed importance.
# # # 🔹 Analytical Note
While the ruling enhances judicial efficiency, it may also invite misuse if parties attempt to seek “modification in disguise” of substantive findings. Advocates must, therefore, approach Section 34 challenges with restraint, framing them strictly within the permitted scope.
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# # 🕰️ II. Lancor Holdings Ltd. v. Prem Kumar Menon & Ors. (2025): Delay as a Violation of Public Policy
# # # 🔹 Factual Background
In this case, the arbitral tribunal delivered its award **after nearly four years of reserving it**, and the award failed to address several material issues. The aggrieved party challenged it under Section 34, arguing that the **inordinate and unexplained delay** rendered the award contrary to the **public policy of India**.
# # # 🔹 The Supreme Court’s Observations
The Court was *“utterly shocked”* by the delay, noting that such conduct erodes the very credibility of the arbitral process. It held:
> “While mere delay in pronouncement of an award may not per se vitiate it, when such delay results in miscarriage of justice or loss of reasoning integrity, it strikes at the heart of public policy.”
The Court consequently set aside the award, emphasizing that **timeliness and reasoning** are essential to fairness and enforceability.
# # # 🔹 Doctrinal Significance
* The judgment strengthens **procedural due process** in arbitration, recognizing that delay can affect both fairness and finality.
* It broadens the understanding of **“public policy”** under Section 34(2)(b)(ii) to include not only substantive illegality but also egregious procedural lapses.
# # # 🔹 For Practitioners
* Arbitrators must issue awards within a *reasonable timeframe* and provide reasons that reflect due consideration of all claims.
* Counsel should record and document the chronology of hearings and reservations to evidence prejudice in cases of excessive delay.
* Institutional arbitration, with built-in time limits (as under the Delhi International Arbitration Centre or MCIA Rules), is preferable to ad hoc proceedings.
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# # ⚖️ III. Disortho S.A.S. v. Meril Life Sciences Pvt. Ltd. (2025): Law Governing Arbitration Agreements
# # # 🔹 The Issue
This case addressed a recurring problem: where an international contract chooses one law for the substantive contract and another seat for arbitration, **what is the governing law of the arbitration agreement**?
# # # 🔹 The Court’s Ruling
Following the three-step test from earlier precedents, the Supreme Court reaffirmed that:
1. If there is an **express choice** of law for the arbitration agreement, that governs;
2. If not, the **implied choice** inferred from the contract or seat applies;
3. Failing that, the **law with the closest and most real connection** to the arbitration governs.
The Court reiterated India’s adherence to **party autonomy** and **internationally consistent principles** in determining the validity and scope of arbitration agreements.
# # # 🔹 Implications
* Drafters must ensure **consistency** between the governing law, seat, and venue of arbitration.
* The judgment promotes predictability for cross-border transactions, aligning Indian law with global arbitration hubs like Singapore and London.
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# # 🧭 IV. Emerging Themes in the Supreme Court’s 2025 Arbitration Jurisprudence
# # # 🔹 1. From Deference to Accountability
Earlier jurisprudence emphasised *judicial restraint* — courts could interfere only for egregious illegality. The 2025 decisions introduce a subtle shift toward **judicial accountability** — ensuring that arbitrations remain procedurally fair and logically sound.
# # # 🔹 2. Redefining “Public Policy”
The Court’s modern interpretation extends public policy to include *procedural fairness, reasoned decision-making, and timeliness*. This evolution is consistent with India’s maturing arbitration ecosystem.
# # # 🔹 3. Restoring Confidence in Domestic Arbitration
For years, Indian parties preferred foreign seats (Singapore, London) due to perceived unpredictability in Indian courts. These decisions — particularly *Lancor Holdings* and *Gayatri Balasamy* — demonstrate that **Indian courts are now willing to intervene only to uphold fairness, not frustrate finality**.
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# # 🧩 V. Comparative Insights: UK, Singapore, and Indian Trajectory
* **United Kingdom**: Under the *Arbitration Act 1996*, Section 68 permits challenge for “serious irregularity,” similar to India’s public policy ground. UK courts exercise this sparingly — intervention is rare but decisive.
* **Singapore**: The *International Arbitration Act* (Cap. 143A) allows setting aside for procedural defects but prohibits modification. This highlights how India’s recognition of limited “modification power” is a distinct innovation.
* **India’s Distinct Approach**: India now occupies a middle ground — not as rigidly non-interventionist as Singapore, yet not as expansive as pre-1996 judicial review. The result is a *hybrid model* emphasizing fairness without diluting finality.
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# # 🧠 VI. Practical Guidance for Advocates and Corporate Counsel
# # # Drafting Stage
* Specify **seat**, **governing law**, and **arbitral institution** explicitly.
* Include **timelines** for award pronouncement and clarify that delay without justification may amount to procedural misconduct.
* Consider inserting a clause for **severability** of invalid portions of the award — harmonizing with *Gayatri Balasamy*.
# # # During Proceedings
* Promptly object to jurisdictional or procedural irregularities — delay can forfeit later challenges under Section 34.
* Maintain a detailed record of hearings, evidence, and communications for potential judicial scrutiny.
# # # Post-Award Strategy
* Evaluate the award for computational, clerical, or interest-related defects suitable for **modification**, not wholesale setting aside.
* In cases of excessive delay, collect evidence demonstrating prejudice or loss of reasoning integrity to invoke *public policy* grounds.
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# # 🔍 VII. Reform Directions and Open Questions
The 2025 decisions raise new jurisprudential and legislative considerations:
* Should the **power to modify** be explicitly codified in Section 34, or remain a judicial construct?
* How can institutional arbitration bodies impose **accountability for delay** among arbitrators?
* Should “public policy” be statutorily clarified to avoid over-expansion or misuse?
A possible legislative reform could be a new **Section 34A**, expressly allowing limited modification (for clerical/severable defects), codifying the *Gayatri Balasamy* principle and thus preventing interpretational inconsistency.
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# # 🏁 Conclusion: Toward a Mature Arbitration Regime
The Supreme Court’s 2025 arbitration jurisprudence represents an inflection point — **finality with fairness**.
Through *Gayatri Balasamy*, *Lancor Holdings*, and *Disortho*, the Court has reaffirmed that arbitral autonomy does not mean arbitral impunity.
Arbitration in India is no longer seen merely as a substitute for litigation; it is a **complementary mechanism**, guided by efficiency, integrity, and judicial stewardship. The Apex Court’s message is clear — **courts will intervene only to preserve, not to destroy, the arbitral process**.
As India positions itself as a global arbitration hub, these rulings reinforce the country’s commitment to world-class dispute resolution standards — one that is swift, reasoned, and just.
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# # # ✍️ *Author’s Note*
*Adv. Tanuj is a practicing Advocate specialising in Constitutional and Civil Law, with a focus on arbitration, writ jurisdiction, and public law litigation. The author regularly analyses Supreme Court developments impacting civil and commercial jurisprudence.*
