Editing Justice? The Perils of Judicial Redrafting in Arbitration

 Anubhuti Raje is a fifth-year B.A. LL.B. (Hons.) student at Gujarat National Law University with a keen interest in arbitration and dispute resolution.

I.               Introduction

Over the past decade, India’s arbitration regime has undergone a series of legislative and institutional reforms aimes at positioning the country as a credible hub for commercial dispute resolution. The amendments of 2015 and 2019 to the Arbitration and Conciliation Act, 1996 (“the Act”) alongside the establishment of institutions such as the New Delhi International Arbitration Centre, were intended to align Indian arbitration practice with global standards. Yet, beneath this reformist surface lies a subtle but growing judicial tendency that threatens to undermine these very reforms.

In recent years, Indian courts have increasingly relied on the doctrine of severability under Section 34 of the Act to partially invalidate arbitral awards. Originally conceived as a mechanism of judicial restraint, allowing courts to strike down only the unlawful portion of an award, severability has now evolved into a tool for revisiting the reasoning of arbitral tribunals. Courts now excise portions they deem unconvincing, citing 'patent illegality' and 'perversity', both of which are meant to be narrowly construed exceptions.

Against this backdrop, this piece critically examines the Bombay High Court’s decision in Hindustan Petroleum Corporation Ltd. v. G.R. Engineering Pvt. Ltd. (hereinafter “HPCL”), where the Court struck down the liquidated damages component of a arbitral award without applying the established test of factual and legel separability. Read in conjunction with Gayatri Balasamy v. ISG Novasoft Technologies Ltd. (hereinafter “Gayatri Balasamy”), and State of Rajasthan v. Sanwariya Infrastructure Pvt. Ltd. (hereinafter “Sanwariya Infrastructure”), HPCL marks a doctrinal drift from restraint to revisionism, one that risks eroding arbitral finality, party autonomy, and the principle of minimal judicial interference.

As India aspires to become a preferred seat of arbitration, the judicial inclination toward redrafting arbitral awards demands scrutiny, for it strikes at the very foundation of the arbitral process itself.

Keywords- Severability, Arbitration, Judicial Overreach.

II.            From Preserver to Modifier

To understand the present judicial drift, it is essential to return to the origins of the doctrine of severability and the purpose it served in India's arbitration framework. At its core, severability addressed a practical concern under Section 34 of the Act, it enabled courts to annul only the defective portion of an arbitral award while preserving the rest. The intent was to safeguard arbitral finality and prevent total annulment when limited judicial correction would suffice.

The Supreme Court endorsed this restrained approach early on in McDermott International Inc. v. Burn Standard Co. Ltd., holding that courts are not appellate forums and must refrain from re-evaluating evidence or re-interpreting contract terms. This philosophy of minimal interference was reaffirmed in Associate Builders v. Delhi Development Authority (hereinafter “Associate Builders”), where the Court narrowly defined “patent illegality,” as the cornerstone of Section 34 review, In Ssangyong Engineering & Construction Co. Ltd. v. NHAI (hereinafter “Ssangyong Engineering”), the Court further clarified that an award can be set aside for patent illegality only when the error destroys the very foundation of the award or results in a manifest injustice that shocks the judicial conscience.

Yet, recent developments indicate an erosion of these boundaries. Courts increasingly invoke severability not merely to excise unlawful portions of an award but to alter the tribunal’s substantive conclusions. Under the guise of curing “illegality,” judicial scrutiny has extended the merits of arbitral reasoning, thereby broadening the scope of Section 34 beyond its intended limits.

This expanded use of severability undermines its original purpose. A doctrine once designed as a shield for restraint has become a judicial scalpel, used to dissect awards based on subjective notions of fairness or logic. Courts now revisit evidence, reinterpret contractual clauses, and recalibrate damages, not because the tribunal acted unlawfully, but because its reasoning fails to align with judicial preference.

Such intervention carries two doctrinal risks- firstly, it collapses the distinction between “setting aside” and “modifying” an award, the latter being explicitly prohibited under Section 34. Secondly, it weakens the finality of arbitration, rendering awards perpetually vulnerable to judicial revision.

III.          HPCL and the Doctrinal Drift Towards Judicial Editing

The HPCL decision (¶¶42–48) marks a tunring point in how Indian courts have begun to reinterpret the doctrine of severability to justify substantive judicial intervention. The dispute arose out of a construction contract where the arbitral tribunal had awarded liquidated damages for delay in project execution. HPCL challenged the award under Section 34, contending that the tribunal’s computation of damages were unsupported by evidenceand legally untenable.

The Bombay High Court partially upheld the challenge and struck down the liquidated damages component, branding the tribunal’s conclusion as “perverse”, while leaving the rest of the award as it is (¶49). At first glance, this may appear as a measured exercise of judicial restraint. Yet, a closer examination reveals that the intervention was neither doctrinally sound nor legally sustainable. The court failed to apply the established test of factual and legal separability. As clarified in Gayatri Balasamy (¶17), partial annulment is permissible only if the impugned portion of the award is truly independent of the rest. In HPCL, however, the findings on delay, causation, and contractual obligations were interdependent with the damages component, rendering any severance artificial and legally sound.

More critically, the Court’s reliance on “perversity” stretches the doctrine beyond its judicially accepted contours. In Associate Builders (¶31), the Supreme Court held that perversity arises only when findings are based on “no evidence” or when vital material is ignored. The tribunal in HPCL had considered delay reports, contractual correspondence, and performance certificates in arriving therefore, reflected little more than judicial disagreement with the tribunal’s reasoning, not a genuine illegality warranting intervention.

This also raises a deeper issue concerning the commercial rationale of liquidated damages clauses. Such clauses embody the parties’ pre-estimated assessment of loss, designed to ensure certainty and risk allocation in commercial contracts. By invalidating the tribunal’s assessment without identifying any violation of public policy or statutory prohibition, the Court effectively replaced the parties’ contractual autonomy with the judicial discretion. This undermines a core tenet of arbitration—that parties, not judges, define the parameters of commercial risk.

Furthermore, while Section 34 permits courts to set aside awards either wholly or partly, it does not empower them to rewrite the award. By surgically redacting a part of the award and upholding the rest, the Court in effect modified the tribunal’s findings, a power explicitly excluded under the statutory framework. A similar pattern can be discerned in Sanwariya Infrastructure (¶28), where the court struck down delay penalties as “excessive,” thereby reassessing evidence and quantum- functions reserved exclusively for arbitral tribunal.

Collectively, these cases signal a troubling doctrinal drift. Severability, originally a doctrine of restraint, is now being invoked as a means to circumvent the statutory prohibition on modifying awards. In doing so, courts risk diluting the safeguards articulated in Gayatri Balasamy, and transforming standards like “perversity” into broad tools of judicial preference, blurring the line between review and revision.

IV.           Reining in Judicial Overreach- The Need for Doctrinal Discipline

This increasing tendency of Indian courts to invoke severability as a ground for partial annulment calls for urgent jurisprudential correction. While the doctrine was originally conceived as a doctrine of judicial restraint, severability was meant to preserve as much of the arbitral award as possible, intervening only where an identifiable portion was legally defective. Recent judicial practice, however, reveals a drift from restraint to intervention Courts are no longer merely policing borders of legality; they have intruded on the substantive content of arbitral determinations. To preserve arbitration’s integrity, a more disciplined and doctrinally coherent approach is imperative.

The application of severability must be guided by a strict factual and legal separability test. The Supreme Court in Gayatri Balasamy, held unequivocally that partial setting aside is permitted only when the impugned portion of the award is “independent, severable, and does not affect the substratum of the award” (¶17). In other words, this is not a mere procedural requirement; it is the doctrinal foundation on which rests any latter-day intervention by courts. In HPCL, the Bombay High Court excised the liquidated damages component without undertaking any analysis of whether that component was legally or factually severable from the tribunal’s findings on delay, breach, and performance. Severability applied without this inquirt transforms from a doctrine of restraint into a mechanism for judicial modification.

Equally, the standards of “perversity” and “patent illegality” must be re-anchored within their intended judicial contours. In Associate Builders, the Court held that perversity applies only when a finding is arrived at based on no evidence or by ignoring vital material (¶31). Ssangyong Engineering, further clarified that patent illegality must “go to the root of the matter” and not merely involve interpretive disagreements (¶34). Yet, High Courts increasingly deploy these terms as doctrinal shortcuts, masking disagreement with arbitral reasoning as legal error.

The principle of “minimum judicial intervention”, embedded in both the Model Law and international practice, must be internalised more rigorously. Under the UK’s Arbitration Act, 1996 and Singapore’s International Arbitration Act, 1994 (viz. Model Law-based), courts rarely engage with the merits of the arbitral reasoning unless the award is infected by serious procedural or jurisdictional infirmity. In contrast, Indian courts, often engage with the content and structure of awards, delaying enforcement and eroding confidence in arbitration as a final, binding mechanism of dispute resolution.

Most importantly, a doctrinal restatement by the Supreme Court has become essential to restore conceptual discipline under Section 34 of the Act. Such a restatement should- (i) clearly delineate the permissible scope of judicial interference under Section 34; (ii) establish a structured multi-pronged test for severability encompassing factual separability, legal independence, and lack of structural interdependence; (iii) confine the meaning of “perversity” and “public policy” within their narrow constitutional bounds; and (iv) categorically prohibit the use of severability to redraft or modify the reasoning of arbitral awards.

Until such clarity is achieved, arbitral finality will remain susceptible to piecemeal judicial disruption and courts risk positioning themselves as co-authors rather than supervisors of arbitral awards, a role fundamentally incompatible with the legislative vision of arbitration.

V.             Conclusion

India’s aspiration to emerge as an international arbitration hub depends less on legislative reforms and more on judicial restraint. Although the Arbitration and Conciliation Act, 1996, envisages courts as limited supervisors, recent rulings show an unsettling drift toward re-adjudication. The Bombay High Court’s decision in HPCL v. G.R. Engineering exemplifies this trend, where severability was used not as a limited corrective tool but as a means to rewrite the tribunal’s conclusion, Similar decisions reflect a jurisprudential shift that threatens arbitration’s defining attributes- speed, finality, autonomy, and certainty. If this trajectory continues, India's credibility as an arbitration seat could be compromised. What is required is not cosmetic reform but a doctrinal reset- Section 34 must remain a narrow door of intervention, firmly closed to judicial revision of arbitral reasoning. Only through disciplined restraint can India translate its legislative ambition into arbitral credibility and transform reformist rhetoric into commercial realities.