Full Judgment Text
2025 INSC 1066
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 11324 OF 2025
Arising out SLP (C) No. 18331 of 2019
OIL AND NATURAL GAS CORPORATION
LTD. …APPELLANT(S)
VERSUS
M/S G & T BECKFIELD DRILLING SERVICES PVT. LTD.
…RESPONDENT (S)
J U D G M E N T
MANOJ MISRA, J.
1. Leave granted. This appeal arises from a
1
judgment and order of the Gauhati High Court dated
08.03.2019, whereby the appeal (i.e., Arb. A 3/2007) of
the respondent, under Section 37 of the Arbitration and
2
Conciliation Act, 1996 , was allowed, the judgment and
order of the District Judge, Sivasagar, dated 15.11.2007,
in Misc. Arb Case No.26 of 2005, under Section 34 of
1996 Act, was set aside and the arbitral award dated
21.11.2004 was affirmed.
Signature Not Verified
Digitally signed by
babita pandey
Date: 2025.09.02
16:36:27 IST
Reason:
1
The High Court
2
1996 Act
SLP (C) No. 18331 of 2019 Page 1 of 18
FACTS
2. Facts relevant for deciding this appeal are that the
appellant suffered an arbitral award, dated 21.11.2004,
passed by a three member arbitral tribunal, which
directed as follows:
“1. Preliminary objection as to maintainability of
the present arbitration proceeding raised on behalf
of the respondent ONGC, is rejected.
nd
2(i) Claim No.2 relating to the 2 invoice for dollar
20,729.17 being the outstanding balance is allowed
rejecting the claim for interest thereon.
2(ii) Claim No.3 in respect of invoice No.3 for dollar
1,26,536.44 being unpaid balance is allowed
without interest.
2(iii) Claim No.4 in respect of invoice No.4 for dollar
30,1401.05 being outstanding balance is allowed.
Claim for interest is, however, rejected.
2(iv) Claim No.5 in respect of invoice No.5 for dollar
14,321.68 being the outstanding balance is allowed
without interest.
2(v) Claim No.6 in respect of invoice No.6 of dollar
1,67,960.43 being outstanding balance is allowed
but no interest is allowed.
2(vi) Claim No.7 in relation to invoice No.7 for dollar
87,523.37 being the unpaid balance is allowed and
the claim for interest on the said amount is
disallowed.
2(vii) Claim No.8 refers to invoice No.8 for dollar
60,000 is allowed without interest.
2(viii) Claim No.9 in respect of invoice No.9 for
dollar 78,750 being 75% of the tools lost in hole is
allowed without any interest.
2(ix) Claim No.10 vide invoice No.10 for dollar
15,000 in respect of charges for demobilization is
allowed without any interest.
2(x) Claim for performance-bond amount of dollar
55,050 is allowed as the said sum was deducted
improperly without any justification.
Page 2 of 18
SLP (C) No. 18331 of 2019
3. Accordingly, an award for the total amount of
dollar 6,56,272.34 is passed in favour of the
Claimant G & T BecField Drilling Services (P) Ltd
against the Respondent, Oil & Natural Gas
Corporation Ltd..
4. The said sum will carry interest at the rate of 12%
per annum on and from 12/12/1998, the date
when the statement of claim was affirmed, till
recovery of the said amount and an Award for
interest on the said amount is made accordingly.
5. The claimant will be entitled to Costs of the
Proceeding assessed at Rs.5 (five) lakhs only from
the Respondent, ONGC, and an Award for Rs.5
(five) lakhs for Costs is accordingly passed.
Counter-Claims are dismissed.
Sd/- 1. …. ; 2. ….; 3. …. Dt/- 21.11.2004”
3. Aggrieved by the award, the appellant filed an
application (i.e., Misc. (Arbitration) Case no.26 of 2005),
under Section 34 of 1996 Act, for setting aside the award
by taking various pleas including the one that clause
18.1 of the agreement does not allow payment of interest
on the claim.
4. The District Judge allowed the application and set
aside the award, vide order dated 15.11.2007, inter alia ,
on two grounds: (a) the award is non-reasoned, therefore,
violates the mandate of Section 31(3) of 1996 Act; and (b)
objection under Section 16(2) was neither rejected prior
to proceeding further, nor considered by the arbitral
tribunal at the time of making final award.
5. Aggrieved therewith, respondent filed an appeal
before the High Court under Section 37(1)(c) of 1996 Act,
Page 3 of 18
SLP (C) No. 18331 of 2019
which was allowed by the impugned judgment and order
thereby affirming the arbitral award in toto.
6. When notices were issued on the Special Leave
Petition, seeking leave to appeal against the impugned
order, it was limited to the extent as to whether interest
on the total amount at the rate of 12 per cent could be
awarded or not. The order dated 25.11.2019, issuing
notice, is reproduced below:
“Issue notice limited to the extent whether the
interest on total awarded amount dated 12.12.1998
at the rate of 12 per cent can be awarded or not. So
far as the rest of the amount is concerned, the
petitioner is willing to pay back to the respondent
within a period of four weeks.
Subject to payment of the aforesaid amount, the
execution proceedings shall remain stayed.”
7. In view of the limited notice learned counsel for the
parties have confined their submissions to the award of
interest.
SUBMISSIONS
8. The learned counsel for the appellant relied on
clause 18.1 of the agreement and submitted that Section
3
31 (7) of 1996 Act, clearly provides that power of arbitral
3
Section 31. Form and contents of arbitral award. ---
(1) to (6) …
(7) (a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the
payment of money, the arbitral tribunal may include in the sum for which the award is made
interest, at such rate as it deems reasonable, on the whole or any part of the money, for the
whole or any part of the period between the date on which the cause of action arose and the
date on which the award is made.
(b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry
interest at the rate of 18% per centum per annum from the date of the award to the date of
payment.
Page 4 of 18
SLP (C) No. 18331 of 2019
tribunal to award interest for the period between the date
the cause of action arose up to the date of the award is
subject to the agreement between the parties, therefore,
in view of clause 18.1 no interest could have been
awarded. Hence, the arbitral award is liable to be set
aside to the extent it awards interest on the amount
awarded from the date of the claim up to the date of the
award.
9. Per contra, the learned counsel for the respondent
submitted that clause 18.1, if read as a whole, would
indicate that payment is not to be withheld if the amount
is not in dispute. It is only when there is a dispute,
interest is not payable on delayed payment. However,
here, the arbitral tribunal has not awarded interest on
pre-reference period. It awarded interest not from the
date the cause of action arose, but from the date the
claim was affirmed before the arbitral tribunal. In such
circumstances, once it was found that balance amount
on the invoices was unjustifiably withheld, payment of
interest is lawful.
DISCUSSION
10. We have considered the submissions and have
perused the materials on record.
ISSUE
11. Upon consideration of the submissions, in our view,
the short issue which falls for our consideration is
Page 5 of 18
SLP (C) No. 18331 of 2019
whether clause 18.1 proscribes payment of even
pendente lite interest on the sum awarded. This we say
so, because, admittedly, arbitral tribunal has declined
interest on the balance amount payable under the
invoices from the date the cause of action arose up to the
date when the statement of claim was affirmed before the
arbitral tribunal.
Law regarding payment of interest by arbitral tribunal
12. Sub-section (7) of Section 31 of 1996 Act deals with
award of interest when the arbitral award is for the
payment of money. Sub-section (7) has two clauses.
Clause (a) deals with interest for the period between the
date on which the cause of action arose and the date on
which the award is made. Clause (a) says that when the
arbitral award is for the payment of money, the arbitral
tribunal may include in the sum for which the award is
made, interest, at such rate as it deems reasonable, on
the whole or any part of the money, for the whole or any
part of the period between the date on which the cause
of action arose and the date on which the award is made.
However, arbitral tribunal’s power to award interest for
the aforesaid period is subject to the agreement between
the parties. Therefore, if the agreement stipulates that
no interest is payable, the arbitral tribunal cannot award
interest for the aforesaid period and an award contrary
to the terms of the contract would be vulnerable to a
Page 6 of 18
SLP (C) No. 18331 of 2019
4
challenge under Section 34 of 1996 Act. Moreover,
such an agreement to waive interest is not ultra vires in
5
terms of Section 28 of the Contract Act, 1872 . However,
if the agreement is silent on award of interest, the arbitral
tribunal can award interest in terms of clause (a) of sub-
6
section (7) of Section 31 . As far as clause (b) of sub-
section (7) of Section 31 is concerned, it deals with post-
award interest. Prior to 2015 amendment, clause (b)
mandated payment of interest on the sum awarded at the
rate of 18% per annum from the date of the award to the
date of payment, unless the award directed otherwise.
Interestingly, clause (b) is not subject to an agreement
between the parties and, therefore, if the arbitral award
is with regard to payment of money, it would carry
interest at such rate as the arbitral award directs and if
it is not so directed, it would carry statutorily prescribed
rate of interest from the date of the award till the date of
payment. In a nutshell, the arbitral tribunal has
jurisdiction to award interest for three distinct periods,
namely, pre-reference, pendente lite, and future i.e.,
post-award. Award of pre-reference and pendente-lite
4
See: Union of India v. Bright Power Projects (India) Private Limited, (2015) 9 SCC 695, paragraph 13;
Sayeed Ahmed and Company v. State of Uttar Pradesh and others, (2009) 12 SCC 26, paragraphs 15 and
16; Sree Kamatchi Amman Constructions v. Divisional Railway Manager (Works), Palghat and others,
(2010) 8 SCC 767, paragraph 19
5
See: Garg Builders v. Bharat Heavy Electricals Limited, (2022) 11 SCC 697, paragraphs 20 to 23.
6
See: Jaiprakash Associates Limited (JAL) through its Director v. Tehri Hydro Development Corporation
(India) Ltd. (THDC), (2019) 17 SCC 786, paragraph 13.2; Pam Developments Private Limited v. State of
West Bengal and another, (2024) 10 SCC 715.
Page 7 of 18
SLP (C) No. 18331 of 2019
interest is subject to the agreement between the parties
whereas post award interest is statutorily governed and
is not subject to the agreement between the parties. In
other words, clause (b) does not give the parties the right
7
to ‘contract out’ interest for the post award period.
Rate of interest is reasonable
13. In the instant case, the rate of interest awarded is
12% per annum. This appears reasonable being lower
than the statutorily prescribed rate then prevalent under
clause (b) of sub-section (7) of Section 31.
Crux of the issue
14. However, the arbitral tribunal has awarded interest
not from the date of the award (i.e., 21.11.2004), but
from 12.12.1998 (i.e., the date when the statement of
claim was affirmed before the arbitral tribunal). Thus,
what is in issue is the award of interest pendente lite on
the sum awarded. We would therefore consider whether
the agreement proscribed payment of interest on the sum
awarded between the date on which the cause of action
arose and the date on which the award is made. In this
context, the appellant has relied on clause 18.1 of the
agreement.
Clause 18.1 of the agreement reads thus :
“Corporation agrees to arrange remittance of payment
under this contract within 30 days from the date of
7
R.P. Garg v. Chief General Manager, Telecom Department and Others, 2024 SCC OnLine SC 2928,
paragraph 11.
Page 8 of 18
SLP (C) No. 18331 of 2019
receipt of invoice from contractor duly certified by the
authorized representative of the Corporation subject
always to Corporation’s right to require contractor to
furnish it with satisfactory evidence of the validity
and prior payment by Contractor of all labor and
material incurred by Contractor and charged to
Corporation. Should corporation question any item or
items of an invoice, it may withhold payment of the
amount in dispute until such matter is resolved
between the parties, but the amount not in dispute is
to be paid within above period. No interest shall be
payable by ONGC on any delayed payment /disputed
claim.”
(Emphasis supplied)
15. Relying on the underscored portion of clause 18.1
reproduced above, the learned counsel for the appellant
contended that the agreement proscribed payment of
interest on any delayed payment including disputed
claim, therefore, the award of interest for any period
before making of the award is illegal. On the contrary,
submission on behalf of the respondent is that the clause
does not proscribe payment of pendente lite interest,
therefore, the arbitral tribunal has discretion to award
interest from the date the statement of claim is affirmed
before it.
Clause 18.1 does not bar award of interest pendente
lite
16. To properly appreciate the import of clause 18.1
(supra) in the agreement, particularly, in the context of
submissions made, it would be useful to consider few
decisions of this Court on the issue as to when the bar
Page 9 of 18
SLP (C) No. 18331 of 2019
on award of interest can be inferred from the terms of the
agreement between the parties.
8
17. In Irrigation Deptt., State of Orissa v. G.C. Roy
in the context of Arbitration Act 1940 (for short 1940
Act), a Constitution Bench of this Court observed that if
the arbitration agreement or the contract itself provides
for award of interest on the amount found due from one
party to the other, no question regarding the absence of
arbitrator’s jurisdiction to award the interest could arise
as in that case the arbitrator has power to award interest
pendente lite as well. Similarly, where the agreement
expressly provides that no interest pendente lite shall be
payable on the amount due, the arbitrator has no power
to award pendente lite interest. However, where the
agreement between the parties does not prohibit grant of
interest and where a party claims interest and that
dispute along with the claim for principal amount or
independently is referred to the arbitrator, he shall have
the power to award interest pendente lite. This is so,
because it must be presumed that interest was an
implied term of the agreement between the parties and
therefore when the parties refer all the disputes - or refer
the dispute as to interest as such - to the arbitrator, he
shall have the power to award interest. This does not
mean that in every case the arbitrator should necessarily
8
(1992) 1 SCC 508
Page 10 of 18
SLP (C) No. 18331 of 2019
award interest pendente lite. It is a matter within his
discretion to be exercised in the light of all the facts and
circumstances of the case, keeping the ends of justice in
view.
9
18. In Union of India v. Ambica Construction (for
short Ambica First)
, a three-Judge Bench of this Court
was called upon to consider, in the context of the
provisions of Arbitration Act, 1940, the power of the
arbitrator to award pendente lite interest when contract
contains a bar for grant of interest. After considering
several decisions including Constitution Bench decisions
G.C. Roy (supra) Dhenkanal Minor
of this Court in and
10
Irrigation Division v. N.C. Budharaj , it was, inter alia ,
held: (i) the arbitrator is not a court; (ii) the arbitrator
decides the disputes as per the agreement entered into
between parties; (iii) arbitration is an alternative forum
for resolution of disputes but an arbitrator ipso facto does
not enjoy or possess all the powers conferred on the
courts of law; (iv) where the agreement expressly provides
that no interest pendente lite shall be payable on the
amount due, the arbitrator has no power to award
pendente lite interest; (v) the bar to award interest on
delayed payment by itself will not be readily inferred as
express bar to award pendente-lite interest by the
9
(2016) 6 SCC 36
10
(2001) 2 SCC 721
Page 11 of 18
SLP (C) No. 18331 of 2019
arbitral tribunal, as ouster of power of the arbitrator has
to be considered on various relevant aspects; (vi) grant of
pendente lite interest may depend upon several factors
such as phraseology used in the agreement, clauses
conferring power relating to arbitration, nature of claim
and dispute referred to arbitrator and on what items
power to award interest been taken away and for which
period.
11
19. In Ambica Construction v. Union of India (for
short Ambica Second) , a question arose before a two-
Judge Bench of this Court whether clause (2) in the
agreement barred award of pendente lite interest. Clause
(2) under consideration there was in the following terms:
“ (2) Interest on amounts.- No interest will be payable upon
the earnest money or the security deposit or amounts
payable to the contractor under the contract, but
government securities deposited in terms of sub-clause (1)
of this clause will be repayable with interest accrued
thereon .” Following three-Judge Bench decision of this
Court in First Ambica (supra) , where it was held that
the bar to award interest on the amounts payable under
the contract, would not be sufficient to deny payment of
pendente lite interest, this Court held that the said
clause did not bar award of pendente lite interest.
11
(2017) 14 SCC 323
Page 12 of 18
SLP (C) No. 18331 of 2019
20. In Reliance Cellulose Products Limited v. Oil And
12
Natural Gas Corporation a two-Judge Bench of this
Court, in the context of an award under the 1940 Act,
was called upon to consider whether pendente lite
interest was barred in view of clause 16 in the contract
between the parties. Clause 16 was in the following
terms: “ 16. Our standard terms of payment are within 30
days of receipt of stores and inspection at site. But any
delay in payment will not make the Commission liable for
any interest.” Construing the said clause, it was held:
“15. …Clause 16 of the General Conditions of
Contract only speaks of any delay in payment not
making ONGC liable for interest. There is nothing in
this clause which refers even obliquely to the
arbitrator’s power to grant interest. …”
While holding so, decisions of this Court, inter alia, in
Ambica First (supra) and Ambica Second (supra) were
considered and relied, and the interest proscribing
13
clauses in Sayeed Ahmed & Co. (supra) and Tehri
Hydro Development Corpn. Ltd. v. Jai Prakash
14
Associates Ltd. (for short THDC first) were contrasted
with Clause 15 reproduced above.
21. In Sayeed Ahmed & Co. (supra) , the interest
proscribing clause was in following terms:
“Clause G. I.09. No claim for interest or damages will
be entertained by the Government with respect to any
12
(2018) 9 SCC 266
13
See Footnote 6
14
(2012) 12 SCC 10
Page 13 of 18
SLP (C) No. 18331 of 2019
money or balance which may be lying with the
Government or any becoming due owing to any
dispute, difference or misunderstanding between the
Engineer-in-Charge on the one hand and the
contractor on the other hand or with respect to any
delay on the part of the Engineer-in-Charge in
making periodical or final payment or any other
respect whatsoever.”
(Emphasis supplied)
Construing the said clause, this Court held:
“15. Clause G 1.09 makes it clear that no
interest or damages will be paid by the government,
in regard to:
(i) any money or balance which may be
lying with the Government;
(ii) any money which may become due owing
to any dispute, difference or
misunderstanding between the
Engineer-in-Charge on the one hand and
the contractor on the other hand;
(iii) any delay on the part of the Engineer-in-
Charge in making periodical or final
payment; or
(iv) any other respect whatsoever.
The clause is comprehensive and bars interest under
any head in clear and categorical terms.
16. In view of clause (a) of sub-section (7) of
Section 31 of the Act, it is clear that the arbitrator
could not have awarded interest up to the date of the
award, as the agreement between the parties barred
payment of interest. The bar against award of interest
would operate not only during the pre- reference
period, that is, up to 13.3.1997 but also during the
pendente lite, that is, from 14.3.1997 to 31.7.2001.”
22. In THDC First (supra) , the interest proscribing
clauses in the contract were in the following terms:
“1.2.14. No claim for delayed payment due to dispute,
etc. -- The contractor agrees that no claim for interest
on damages will be entertained or payable by the
Government in respect of any money or balances
Page 14 of 18
SLP (C) No. 18331 of 2019
which may be lying with the Government owing to any
disputes, differences or misunderstandings between
the parties or in respect of any delay or omission on
the part of the Engineer-in-Charge in making
immediate or final payments or in any respect
whatsoever.
1.2.15. Interest on money due to the contractor. -- No
omission on the part of the engineer in charge to pay
the amount due upon measurement or otherwise
shall vitiate or make void the contract, nor shall the
contractor be entitled to interest upon any guarantee
or payments in arrears nor upon any balance which
may on the final settlement of his accounts be due to
him.”
(Emphasis supplied)
Construing the aforesaid clause, this Court held:
“14. … A reading of the aforesaid two clauses of the
contract agreement between the parties clearly reveal
that despite some overlapping of the circumstances
contemplated by the two clauses, no interest is
payable to the contractor for delay in payment, either,
interim or final, for the works done or on any amount
lying in deposit by way of guarantee. The aforesaid
contemplated consequence would be applicable both
to a situation where withholding of payment is on
account of some dispute or difference between the
parties or even otherwise.
19. Clauses 1.2.14 and 1.2.15 already extracted and
analyzed, imposed a clear bar on either
entertainment or payment of interest in any situation
of non-payment or delayed payment of either the
amounts due for work done or lying in security
deposit. On the basis of the discussions that have
preceded we, therefore, take the view that the grant
of pendente lite interest on the claim of Rs.10,17,461
lakhs is not justified. The award as well as the orders
of the courts below are accordingly modified to the
aforesaid extent.”
Page 15 of 18
SLP (C) No. 18331 of 2019
23. In Jaiprakash Associates Ltd. v. Tehri Hydro
15
Development Corporation (India) Ltd. (for short
THDC Second) , interpreting identical interest
proscribing clauses, the Court held that interest cannot
be awarded by the arbitrator.
Ferro Concrete Construction (India) Pvt. Ltd.
24. In
16
v. State of Rajasthan , a two-Judge Bench of this
Court, of which one of us (P.S. Narasimha, J) was a
member, after considering several decisions held:
“13. From the above extracted paragraphs, the
decision of the three-Judge Bench in the First Ambika
case (supra) can be stated as follows. The arbitrator’s
power to grant interest would depend on contractual
clause in each case, and whether it expressly takes
away the arbitrator's power to grant pendente lite
interest. This would have to be determined based on
the phraseology of the agreement, clauses conferring
powers relating to arbitration, nature of claim and
dispute referred to the arbitrator, and on what items
the power to award interest is contractually barred
and for which period. Further, a bar on award of
interest for delayed payment would not be readily
inferred as an express bar to the award of pendente
lite interest by the arbitrator.”
25. On a careful analysis of the decisions discussed
above, we are of the view that arbitral tribunal can be
denuded of its power to award pendente lite interest only
if the agreement/ contract between the parties is so
worded that the award of pendente lite interest is either
15
See Footnote 6
16
2025 SCC OnLine SC 708
Page 16 of 18
SLP (C) No. 18331 of 2019
explicitly or by necessary implication (such as in the case
of Sayeed & Co. (supra) and THDC First (supra) ) barred.
A clause merely barring award of interest on delayed
payment by itself will not be readily inferred as a bar to
award pendente-lite interest by the arbitral tribunal.
26. Seen in light of the discussion above, Clause 18.1,
which appellant relies upon to canvass that the
agreement between the parties proscribes grant of
pendente-lite interest, when read as a whole, does not
expressly or by necessary implication proscribes grant of
pendente lite interest by the arbitral tribunal. The clause
merely says that there would be no interest payable by
the Corporation on any delayed payment / disputed
claim. Neither it bars the arbitral tribunal from awarding
pendente lite interest nor it says that interest would not
be payable in any respect whatsoever as was the
phraseology of the interest proscribing clause in Sayeed
Ahmed & Co. (supra) and THDC First (supra). In our
view, therefore, Clause 18.1 would not limit the statutory
power of the arbitral tribunal to award pendente-lite
interest. Consequently, we find no such error in the
award of pendente lite interest as may warrant
interference with the award. Since post-award interest
is in line with the statutory provision of clause (b) of sub-
section (7) of Section 31 as was in vogue then, we find no
Page 17 of 18
SLP (C) No. 18331 of 2019
merit in the appeal, and the same is, accordingly,
dismissed.
27. Pending applications, if any, stand disposed of.
….………….......................................J.
(PAMIDIGHANTAM SRI NARASIMHA)
……………......................................J.
(MANOJ MISRA )
New Delhi;
September 02, 2025
Page 18 of 18
SLP (C) No. 18331 of 2019
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 11324 OF 2025
Arising out SLP (C) No. 18331 of 2019
OIL AND NATURAL GAS CORPORATION
LTD. …APPELLANT(S)
VERSUS
M/S G & T BECKFIELD DRILLING SERVICES PVT. LTD.
…RESPONDENT (S)
J U D G M E N T
MANOJ MISRA, J.
1. Leave granted. This appeal arises from a
1
judgment and order of the Gauhati High Court dated
08.03.2019, whereby the appeal (i.e., Arb. A 3/2007) of
the respondent, under Section 37 of the Arbitration and
2
Conciliation Act, 1996 , was allowed, the judgment and
order of the District Judge, Sivasagar, dated 15.11.2007,
in Misc. Arb Case No.26 of 2005, under Section 34 of
1996 Act, was set aside and the arbitral award dated
21.11.2004 was affirmed.
Signature Not Verified
Digitally signed by
babita pandey
Date: 2025.09.02
16:36:27 IST
Reason:
1
The High Court
2
1996 Act
SLP (C) No. 18331 of 2019 Page 1 of 18
FACTS
2. Facts relevant for deciding this appeal are that the
appellant suffered an arbitral award, dated 21.11.2004,
passed by a three member arbitral tribunal, which
directed as follows:
“1. Preliminary objection as to maintainability of
the present arbitration proceeding raised on behalf
of the respondent ONGC, is rejected.
nd
2(i) Claim No.2 relating to the 2 invoice for dollar
20,729.17 being the outstanding balance is allowed
rejecting the claim for interest thereon.
2(ii) Claim No.3 in respect of invoice No.3 for dollar
1,26,536.44 being unpaid balance is allowed
without interest.
2(iii) Claim No.4 in respect of invoice No.4 for dollar
30,1401.05 being outstanding balance is allowed.
Claim for interest is, however, rejected.
2(iv) Claim No.5 in respect of invoice No.5 for dollar
14,321.68 being the outstanding balance is allowed
without interest.
2(v) Claim No.6 in respect of invoice No.6 of dollar
1,67,960.43 being outstanding balance is allowed
but no interest is allowed.
2(vi) Claim No.7 in relation to invoice No.7 for dollar
87,523.37 being the unpaid balance is allowed and
the claim for interest on the said amount is
disallowed.
2(vii) Claim No.8 refers to invoice No.8 for dollar
60,000 is allowed without interest.
2(viii) Claim No.9 in respect of invoice No.9 for
dollar 78,750 being 75% of the tools lost in hole is
allowed without any interest.
2(ix) Claim No.10 vide invoice No.10 for dollar
15,000 in respect of charges for demobilization is
allowed without any interest.
2(x) Claim for performance-bond amount of dollar
55,050 is allowed as the said sum was deducted
improperly without any justification.
Page 2 of 18
SLP (C) No. 18331 of 2019
3. Accordingly, an award for the total amount of
dollar 6,56,272.34 is passed in favour of the
Claimant G & T BecField Drilling Services (P) Ltd
against the Respondent, Oil & Natural Gas
Corporation Ltd..
4. The said sum will carry interest at the rate of 12%
per annum on and from 12/12/1998, the date
when the statement of claim was affirmed, till
recovery of the said amount and an Award for
interest on the said amount is made accordingly.
5. The claimant will be entitled to Costs of the
Proceeding assessed at Rs.5 (five) lakhs only from
the Respondent, ONGC, and an Award for Rs.5
(five) lakhs for Costs is accordingly passed.
Counter-Claims are dismissed.
Sd/- 1. …. ; 2. ….; 3. …. Dt/- 21.11.2004”
3. Aggrieved by the award, the appellant filed an
application (i.e., Misc. (Arbitration) Case no.26 of 2005),
under Section 34 of 1996 Act, for setting aside the award
by taking various pleas including the one that clause
18.1 of the agreement does not allow payment of interest
on the claim.
4. The District Judge allowed the application and set
aside the award, vide order dated 15.11.2007, inter alia ,
on two grounds: (a) the award is non-reasoned, therefore,
violates the mandate of Section 31(3) of 1996 Act; and (b)
objection under Section 16(2) was neither rejected prior
to proceeding further, nor considered by the arbitral
tribunal at the time of making final award.
5. Aggrieved therewith, respondent filed an appeal
before the High Court under Section 37(1)(c) of 1996 Act,
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SLP (C) No. 18331 of 2019
which was allowed by the impugned judgment and order
thereby affirming the arbitral award in toto.
6. When notices were issued on the Special Leave
Petition, seeking leave to appeal against the impugned
order, it was limited to the extent as to whether interest
on the total amount at the rate of 12 per cent could be
awarded or not. The order dated 25.11.2019, issuing
notice, is reproduced below:
“Issue notice limited to the extent whether the
interest on total awarded amount dated 12.12.1998
at the rate of 12 per cent can be awarded or not. So
far as the rest of the amount is concerned, the
petitioner is willing to pay back to the respondent
within a period of four weeks.
Subject to payment of the aforesaid amount, the
execution proceedings shall remain stayed.”
7. In view of the limited notice learned counsel for the
parties have confined their submissions to the award of
interest.
SUBMISSIONS
8. The learned counsel for the appellant relied on
clause 18.1 of the agreement and submitted that Section
3
31 (7) of 1996 Act, clearly provides that power of arbitral
3
Section 31. Form and contents of arbitral award. ---
(1) to (6) …
(7) (a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the
payment of money, the arbitral tribunal may include in the sum for which the award is made
interest, at such rate as it deems reasonable, on the whole or any part of the money, for the
whole or any part of the period between the date on which the cause of action arose and the
date on which the award is made.
(b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry
interest at the rate of 18% per centum per annum from the date of the award to the date of
payment.
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SLP (C) No. 18331 of 2019
tribunal to award interest for the period between the date
the cause of action arose up to the date of the award is
subject to the agreement between the parties, therefore,
in view of clause 18.1 no interest could have been
awarded. Hence, the arbitral award is liable to be set
aside to the extent it awards interest on the amount
awarded from the date of the claim up to the date of the
award.
9. Per contra, the learned counsel for the respondent
submitted that clause 18.1, if read as a whole, would
indicate that payment is not to be withheld if the amount
is not in dispute. It is only when there is a dispute,
interest is not payable on delayed payment. However,
here, the arbitral tribunal has not awarded interest on
pre-reference period. It awarded interest not from the
date the cause of action arose, but from the date the
claim was affirmed before the arbitral tribunal. In such
circumstances, once it was found that balance amount
on the invoices was unjustifiably withheld, payment of
interest is lawful.
DISCUSSION
10. We have considered the submissions and have
perused the materials on record.
ISSUE
11. Upon consideration of the submissions, in our view,
the short issue which falls for our consideration is
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whether clause 18.1 proscribes payment of even
pendente lite interest on the sum awarded. This we say
so, because, admittedly, arbitral tribunal has declined
interest on the balance amount payable under the
invoices from the date the cause of action arose up to the
date when the statement of claim was affirmed before the
arbitral tribunal.
Law regarding payment of interest by arbitral tribunal
12. Sub-section (7) of Section 31 of 1996 Act deals with
award of interest when the arbitral award is for the
payment of money. Sub-section (7) has two clauses.
Clause (a) deals with interest for the period between the
date on which the cause of action arose and the date on
which the award is made. Clause (a) says that when the
arbitral award is for the payment of money, the arbitral
tribunal may include in the sum for which the award is
made, interest, at such rate as it deems reasonable, on
the whole or any part of the money, for the whole or any
part of the period between the date on which the cause
of action arose and the date on which the award is made.
However, arbitral tribunal’s power to award interest for
the aforesaid period is subject to the agreement between
the parties. Therefore, if the agreement stipulates that
no interest is payable, the arbitral tribunal cannot award
interest for the aforesaid period and an award contrary
to the terms of the contract would be vulnerable to a
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SLP (C) No. 18331 of 2019
4
challenge under Section 34 of 1996 Act. Moreover,
such an agreement to waive interest is not ultra vires in
5
terms of Section 28 of the Contract Act, 1872 . However,
if the agreement is silent on award of interest, the arbitral
tribunal can award interest in terms of clause (a) of sub-
6
section (7) of Section 31 . As far as clause (b) of sub-
section (7) of Section 31 is concerned, it deals with post-
award interest. Prior to 2015 amendment, clause (b)
mandated payment of interest on the sum awarded at the
rate of 18% per annum from the date of the award to the
date of payment, unless the award directed otherwise.
Interestingly, clause (b) is not subject to an agreement
between the parties and, therefore, if the arbitral award
is with regard to payment of money, it would carry
interest at such rate as the arbitral award directs and if
it is not so directed, it would carry statutorily prescribed
rate of interest from the date of the award till the date of
payment. In a nutshell, the arbitral tribunal has
jurisdiction to award interest for three distinct periods,
namely, pre-reference, pendente lite, and future i.e.,
post-award. Award of pre-reference and pendente-lite
4
See: Union of India v. Bright Power Projects (India) Private Limited, (2015) 9 SCC 695, paragraph 13;
Sayeed Ahmed and Company v. State of Uttar Pradesh and others, (2009) 12 SCC 26, paragraphs 15 and
16; Sree Kamatchi Amman Constructions v. Divisional Railway Manager (Works), Palghat and others,
(2010) 8 SCC 767, paragraph 19
5
See: Garg Builders v. Bharat Heavy Electricals Limited, (2022) 11 SCC 697, paragraphs 20 to 23.
6
See: Jaiprakash Associates Limited (JAL) through its Director v. Tehri Hydro Development Corporation
(India) Ltd. (THDC), (2019) 17 SCC 786, paragraph 13.2; Pam Developments Private Limited v. State of
West Bengal and another, (2024) 10 SCC 715.
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SLP (C) No. 18331 of 2019
interest is subject to the agreement between the parties
whereas post award interest is statutorily governed and
is not subject to the agreement between the parties. In
other words, clause (b) does not give the parties the right
7
to ‘contract out’ interest for the post award period.
Rate of interest is reasonable
13. In the instant case, the rate of interest awarded is
12% per annum. This appears reasonable being lower
than the statutorily prescribed rate then prevalent under
clause (b) of sub-section (7) of Section 31.
Crux of the issue
14. However, the arbitral tribunal has awarded interest
not from the date of the award (i.e., 21.11.2004), but
from 12.12.1998 (i.e., the date when the statement of
claim was affirmed before the arbitral tribunal). Thus,
what is in issue is the award of interest pendente lite on
the sum awarded. We would therefore consider whether
the agreement proscribed payment of interest on the sum
awarded between the date on which the cause of action
arose and the date on which the award is made. In this
context, the appellant has relied on clause 18.1 of the
agreement.
Clause 18.1 of the agreement reads thus :
“Corporation agrees to arrange remittance of payment
under this contract within 30 days from the date of
7
R.P. Garg v. Chief General Manager, Telecom Department and Others, 2024 SCC OnLine SC 2928,
paragraph 11.
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SLP (C) No. 18331 of 2019
receipt of invoice from contractor duly certified by the
authorized representative of the Corporation subject
always to Corporation’s right to require contractor to
furnish it with satisfactory evidence of the validity
and prior payment by Contractor of all labor and
material incurred by Contractor and charged to
Corporation. Should corporation question any item or
items of an invoice, it may withhold payment of the
amount in dispute until such matter is resolved
between the parties, but the amount not in dispute is
to be paid within above period. No interest shall be
payable by ONGC on any delayed payment /disputed
claim.”
(Emphasis supplied)
15. Relying on the underscored portion of clause 18.1
reproduced above, the learned counsel for the appellant
contended that the agreement proscribed payment of
interest on any delayed payment including disputed
claim, therefore, the award of interest for any period
before making of the award is illegal. On the contrary,
submission on behalf of the respondent is that the clause
does not proscribe payment of pendente lite interest,
therefore, the arbitral tribunal has discretion to award
interest from the date the statement of claim is affirmed
before it.
Clause 18.1 does not bar award of interest pendente
lite
16. To properly appreciate the import of clause 18.1
(supra) in the agreement, particularly, in the context of
submissions made, it would be useful to consider few
decisions of this Court on the issue as to when the bar
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SLP (C) No. 18331 of 2019
on award of interest can be inferred from the terms of the
agreement between the parties.
8
17. In Irrigation Deptt., State of Orissa v. G.C. Roy
in the context of Arbitration Act 1940 (for short 1940
Act), a Constitution Bench of this Court observed that if
the arbitration agreement or the contract itself provides
for award of interest on the amount found due from one
party to the other, no question regarding the absence of
arbitrator’s jurisdiction to award the interest could arise
as in that case the arbitrator has power to award interest
pendente lite as well. Similarly, where the agreement
expressly provides that no interest pendente lite shall be
payable on the amount due, the arbitrator has no power
to award pendente lite interest. However, where the
agreement between the parties does not prohibit grant of
interest and where a party claims interest and that
dispute along with the claim for principal amount or
independently is referred to the arbitrator, he shall have
the power to award interest pendente lite. This is so,
because it must be presumed that interest was an
implied term of the agreement between the parties and
therefore when the parties refer all the disputes - or refer
the dispute as to interest as such - to the arbitrator, he
shall have the power to award interest. This does not
mean that in every case the arbitrator should necessarily
8
(1992) 1 SCC 508
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SLP (C) No. 18331 of 2019
award interest pendente lite. It is a matter within his
discretion to be exercised in the light of all the facts and
circumstances of the case, keeping the ends of justice in
view.
9
18. In Union of India v. Ambica Construction (for
short Ambica First)
, a three-Judge Bench of this Court
was called upon to consider, in the context of the
provisions of Arbitration Act, 1940, the power of the
arbitrator to award pendente lite interest when contract
contains a bar for grant of interest. After considering
several decisions including Constitution Bench decisions
G.C. Roy (supra) Dhenkanal Minor
of this Court in and
10
Irrigation Division v. N.C. Budharaj , it was, inter alia ,
held: (i) the arbitrator is not a court; (ii) the arbitrator
decides the disputes as per the agreement entered into
between parties; (iii) arbitration is an alternative forum
for resolution of disputes but an arbitrator ipso facto does
not enjoy or possess all the powers conferred on the
courts of law; (iv) where the agreement expressly provides
that no interest pendente lite shall be payable on the
amount due, the arbitrator has no power to award
pendente lite interest; (v) the bar to award interest on
delayed payment by itself will not be readily inferred as
express bar to award pendente-lite interest by the
9
(2016) 6 SCC 36
10
(2001) 2 SCC 721
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SLP (C) No. 18331 of 2019
arbitral tribunal, as ouster of power of the arbitrator has
to be considered on various relevant aspects; (vi) grant of
pendente lite interest may depend upon several factors
such as phraseology used in the agreement, clauses
conferring power relating to arbitration, nature of claim
and dispute referred to arbitrator and on what items
power to award interest been taken away and for which
period.
11
19. In Ambica Construction v. Union of India (for
short Ambica Second) , a question arose before a two-
Judge Bench of this Court whether clause (2) in the
agreement barred award of pendente lite interest. Clause
(2) under consideration there was in the following terms:
“ (2) Interest on amounts.- No interest will be payable upon
the earnest money or the security deposit or amounts
payable to the contractor under the contract, but
government securities deposited in terms of sub-clause (1)
of this clause will be repayable with interest accrued
thereon .” Following three-Judge Bench decision of this
Court in First Ambica (supra) , where it was held that
the bar to award interest on the amounts payable under
the contract, would not be sufficient to deny payment of
pendente lite interest, this Court held that the said
clause did not bar award of pendente lite interest.
11
(2017) 14 SCC 323
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20. In Reliance Cellulose Products Limited v. Oil And
12
Natural Gas Corporation a two-Judge Bench of this
Court, in the context of an award under the 1940 Act,
was called upon to consider whether pendente lite
interest was barred in view of clause 16 in the contract
between the parties. Clause 16 was in the following
terms: “ 16. Our standard terms of payment are within 30
days of receipt of stores and inspection at site. But any
delay in payment will not make the Commission liable for
any interest.” Construing the said clause, it was held:
“15. …Clause 16 of the General Conditions of
Contract only speaks of any delay in payment not
making ONGC liable for interest. There is nothing in
this clause which refers even obliquely to the
arbitrator’s power to grant interest. …”
While holding so, decisions of this Court, inter alia, in
Ambica First (supra) and Ambica Second (supra) were
considered and relied, and the interest proscribing
13
clauses in Sayeed Ahmed & Co. (supra) and Tehri
Hydro Development Corpn. Ltd. v. Jai Prakash
14
Associates Ltd. (for short THDC first) were contrasted
with Clause 15 reproduced above.
21. In Sayeed Ahmed & Co. (supra) , the interest
proscribing clause was in following terms:
“Clause G. I.09. No claim for interest or damages will
be entertained by the Government with respect to any
12
(2018) 9 SCC 266
13
See Footnote 6
14
(2012) 12 SCC 10
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SLP (C) No. 18331 of 2019
money or balance which may be lying with the
Government or any becoming due owing to any
dispute, difference or misunderstanding between the
Engineer-in-Charge on the one hand and the
contractor on the other hand or with respect to any
delay on the part of the Engineer-in-Charge in
making periodical or final payment or any other
respect whatsoever.”
(Emphasis supplied)
Construing the said clause, this Court held:
“15. Clause G 1.09 makes it clear that no
interest or damages will be paid by the government,
in regard to:
(i) any money or balance which may be
lying with the Government;
(ii) any money which may become due owing
to any dispute, difference or
misunderstanding between the
Engineer-in-Charge on the one hand and
the contractor on the other hand;
(iii) any delay on the part of the Engineer-in-
Charge in making periodical or final
payment; or
(iv) any other respect whatsoever.
The clause is comprehensive and bars interest under
any head in clear and categorical terms.
16. In view of clause (a) of sub-section (7) of
Section 31 of the Act, it is clear that the arbitrator
could not have awarded interest up to the date of the
award, as the agreement between the parties barred
payment of interest. The bar against award of interest
would operate not only during the pre- reference
period, that is, up to 13.3.1997 but also during the
pendente lite, that is, from 14.3.1997 to 31.7.2001.”
22. In THDC First (supra) , the interest proscribing
clauses in the contract were in the following terms:
“1.2.14. No claim for delayed payment due to dispute,
etc. -- The contractor agrees that no claim for interest
on damages will be entertained or payable by the
Government in respect of any money or balances
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SLP (C) No. 18331 of 2019
which may be lying with the Government owing to any
disputes, differences or misunderstandings between
the parties or in respect of any delay or omission on
the part of the Engineer-in-Charge in making
immediate or final payments or in any respect
whatsoever.
1.2.15. Interest on money due to the contractor. -- No
omission on the part of the engineer in charge to pay
the amount due upon measurement or otherwise
shall vitiate or make void the contract, nor shall the
contractor be entitled to interest upon any guarantee
or payments in arrears nor upon any balance which
may on the final settlement of his accounts be due to
him.”
(Emphasis supplied)
Construing the aforesaid clause, this Court held:
“14. … A reading of the aforesaid two clauses of the
contract agreement between the parties clearly reveal
that despite some overlapping of the circumstances
contemplated by the two clauses, no interest is
payable to the contractor for delay in payment, either,
interim or final, for the works done or on any amount
lying in deposit by way of guarantee. The aforesaid
contemplated consequence would be applicable both
to a situation where withholding of payment is on
account of some dispute or difference between the
parties or even otherwise.
19. Clauses 1.2.14 and 1.2.15 already extracted and
analyzed, imposed a clear bar on either
entertainment or payment of interest in any situation
of non-payment or delayed payment of either the
amounts due for work done or lying in security
deposit. On the basis of the discussions that have
preceded we, therefore, take the view that the grant
of pendente lite interest on the claim of Rs.10,17,461
lakhs is not justified. The award as well as the orders
of the courts below are accordingly modified to the
aforesaid extent.”
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SLP (C) No. 18331 of 2019
23. In Jaiprakash Associates Ltd. v. Tehri Hydro
15
Development Corporation (India) Ltd. (for short
THDC Second) , interpreting identical interest
proscribing clauses, the Court held that interest cannot
be awarded by the arbitrator.
Ferro Concrete Construction (India) Pvt. Ltd.
24. In
16
v. State of Rajasthan , a two-Judge Bench of this
Court, of which one of us (P.S. Narasimha, J) was a
member, after considering several decisions held:
“13. From the above extracted paragraphs, the
decision of the three-Judge Bench in the First Ambika
case (supra) can be stated as follows. The arbitrator’s
power to grant interest would depend on contractual
clause in each case, and whether it expressly takes
away the arbitrator's power to grant pendente lite
interest. This would have to be determined based on
the phraseology of the agreement, clauses conferring
powers relating to arbitration, nature of claim and
dispute referred to the arbitrator, and on what items
the power to award interest is contractually barred
and for which period. Further, a bar on award of
interest for delayed payment would not be readily
inferred as an express bar to the award of pendente
lite interest by the arbitrator.”
25. On a careful analysis of the decisions discussed
above, we are of the view that arbitral tribunal can be
denuded of its power to award pendente lite interest only
if the agreement/ contract between the parties is so
worded that the award of pendente lite interest is either
15
See Footnote 6
16
2025 SCC OnLine SC 708
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SLP (C) No. 18331 of 2019
explicitly or by necessary implication (such as in the case
of Sayeed & Co. (supra) and THDC First (supra) ) barred.
A clause merely barring award of interest on delayed
payment by itself will not be readily inferred as a bar to
award pendente-lite interest by the arbitral tribunal.
26. Seen in light of the discussion above, Clause 18.1,
which appellant relies upon to canvass that the
agreement between the parties proscribes grant of
pendente-lite interest, when read as a whole, does not
expressly or by necessary implication proscribes grant of
pendente lite interest by the arbitral tribunal. The clause
merely says that there would be no interest payable by
the Corporation on any delayed payment / disputed
claim. Neither it bars the arbitral tribunal from awarding
pendente lite interest nor it says that interest would not
be payable in any respect whatsoever as was the
phraseology of the interest proscribing clause in Sayeed
Ahmed & Co. (supra) and THDC First (supra). In our
view, therefore, Clause 18.1 would not limit the statutory
power of the arbitral tribunal to award pendente-lite
interest. Consequently, we find no such error in the
award of pendente lite interest as may warrant
interference with the award. Since post-award interest
is in line with the statutory provision of clause (b) of sub-
section (7) of Section 31 as was in vogue then, we find no
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SLP (C) No. 18331 of 2019
merit in the appeal, and the same is, accordingly,
dismissed.
27. Pending applications, if any, stand disposed of.
….………….......................................J.
(PAMIDIGHANTAM SRI NARASIMHA)
……………......................................J.
(MANOJ MISRA )
New Delhi;
September 02, 2025
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