Correction is Not Revision

Supreme Court Upholds Limit on Altering Arbitral Awards

The message is clear that arbitration decisions stand as is. Courts can fix the typos, not the terms of the deal.

The Supreme Court’s judgment of 26 May 2026 in Gujarat Water Supply and Sewerage Board vs. Saryu Plastics Pvt. Ltd. is a landmark ruling that clarifies the limits of arbitral mandates, judicial review of awards, and the scope of interest modifications. For business owners, it highlights the importance of timely participation in arbitration, careful drafting of agreements, and vigilance against excessive liabilities arising from judicial interventions.

The case arose from disputes over PVC pipe supply contracts awarded between 1998 and 2002. Following allegations of excess payments, the Board blacklisted the supplier, leading to arbitration in 2012. The arbitration process dragged on for years, with repeated extensions sought by the arbitrator and delays caused largely by the Board’s failure to file replies and attend hearings.

Ultimately, in October 2015, the arbitrator passed an award granting the company ₹1.01 crore with interest, but the Board challenged the award on grounds that the arbitrator’s mandate had expired and that natural justice was violated.

The Commercial Court later modified the award, substituting simple interest with compound interest for the pendente lite period, which escalated the Board’s liability from about ₹30 crore to nearly ₹145 crore.

The Supreme Court examined whether such unilateral extensions of mandate were valid, whether the award was delivered after expiry of authority, whether principles of natural justice were breached, and whether courts could modify awards under Section 33 of the Arbitration Act.

The Court held that the Board, by its conduct, had acquiesced to the arbitrator’s extensions and could not later claim expiry of mandate.

It found that the arbitrator had dispatched the award before the Board’s objection and that the Board had been given ample opportunity to present its case but failed to do so, meaning natural justice was not violated.

However, the Court decisively ruled that the Commercial Court had exceeded its jurisdiction by modifying the award to grant compound interest for the pendente lite period. Section 33 permits only correction of clerical or typographical errors, not substantive changes to the award.

The substitution of simple interest with compound interest was a material alteration beyond the scope of review powers. Accordingly, the Supreme Court restored the award to its original form, limiting liability to the amount consciously determined by the arbitrator.

For business owners, this judgment underscores several lessons. First, arbitration timelines must be respected, and parties should actively participate to avoid adverse findings.

Second, contractual disputes must be supported with clear documentation and prompt responses, as dilatory tactics can weaken defenses.

Third, while courts may intervene to ensure fairness, they cannot rewrite arbitral awards under the guise of corrections.

Finally, the ruling demonstrates the risks of prolonged disputes, where liabilities can balloon due to interest calculations, making early resolution and precise contract drafting essential.

In essence, the decision reinforces the principle of party autonomy in arbitration while curbing judicial overreach, offering clarity and predictability for businesses engaged in commercial contracts.