Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | C.A. No.-011324-011324 – 2025 |
| Diary Number | 22623/2019 |
| Judge Name | HON’BLE MR. JUSTICE MANOJ MISRA |
| Bench | HON’BLE MR. JUSTICE MANOJ MISRA; HON’BLE MR. JUSTICE JOYMALYA BAGCHI |
| Precedent Value | Affirms and clarifies scope of Section 31(7)(a) regarding pendente lite interest |
| Overrules / Affirms | Affirms |
| Type of Law | Arbitration Law (Arbitration and Conciliation Act, 1996) |
| Questions of Law | Whether clause 18.1 of the parties’ contract precludes the arbitral tribunal from awarding pendente lite interest under Section 31(7)(a) of the Arbitration and Conciliation Act, 1996? |
| Ratio Decidendi | The power to award pre-reference and pendente lite interest under Section 31(7)(a) is subject to the parties’ agreement, and will be ousted only by an express or necessarily implied bar. Clause 18.1 merely stipulates no interest on delayed or disputed payments, but does not expressly or by necessary implication forbid pendente lite interest. The tribunal thus lawfully awarded interest from the date of claim affirmation, and post-award interest is governed by Section 31(7)(b). |
| Judgments Relied Upon |
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| Logic / Jurisprudence / Authorities Relied Upon by the Court | Analysed Section 31(7)(a) & (b) to distinguish pre-reference, pendente lite and post-award interest; reviewed precedent requiring an express or necessarily implied bar to oust pendente lite interest; interpreted clause 18.1 in light of the above; concluded clause 18.1 does not meet the threshold to bar pendente lite interest. |
| Facts as Summarised by the Court | The respondent obtained an arbitral award (21 Nov 2004) for USD 6,56,272.34 plus 12% interest from 12 Dec 1998; appellant ONGC challenged under Section 34 on clause 18.1; district court set aside award; Gauhati HC reinstated award under Section 37; SLP before SC limited to the legality of the pendente lite interest award. |
| Citations | 2025 INSC 1066; Civil Appeal No. 11324 of 2025 |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All subordinate courts |
| Persuasive For | High Courts, arbitration tribunals |
| Distinguishes | Sayeed Ahmed & Co. v. State of U.P. (2009); THDC v. Jai Prakash Associates (2019) |
| Follows | Ambica Construction v. Union of India (2016 & 2017); Reliance Cellulose Products Ltd. v. ONGC (2018) |
What’s New / What Lawyers Should Note
- Clarifies that only an express or necessarily implied contractual bar can preclude pendente lite interest under Section 31(7)(a).
- Emphasises difference between pre-reference/pendente lite interest (subject to party agreement) and post-award interest (statutory under Section 31(7)(b)).
- Confirms Clause 18.1’s phrase “no interest … on any delayed payment/disputed claim” does not amount to a comprehensive bar on pendente lite interest.
- Reinforces drafting tip: to bar pendente lite interest, use clear, comprehensive language covering all periods.
- Provides a ready precedent for petitions under Section 34 challenging pendente lite interest awards in commercial arbitrations.
Summary of Legal Reasoning
- Analyzed Section 31(7):
- (a) interest pre-reference/pendente lite subject to agreement;
- (b) post-award interest statutory, non-contractable.
- Reviewed clause 18.1 text: no interest on delayed/disputed payments, but silent on pendente lite interest in arbitration.
- Surveyed Supreme Court precedents (G.C. Roy; Ambica I & II; Reliance Cellulose; Sayeed; THDC).
- Held that absence of express or necessarily implied bar means arbitrator retained discretion to award pendente lite interest.
- Confirmed the tribunal’s award of interest from date of claim affirmation and statutory post-award interest under Section 31(7)(b).
Arguments by the Parties
Petitioner
- Clause 18.1 prohibits any interest on delayed or disputed payments;
- Section 31(7)(a) power is subject to agreement; award of pendente lite interest violates clause.
Respondent
- Clause 18.1 only bars interest where payment is legitimately disputed, not pendente lite interest;
- Tribunal awarded interest from claim affirmation date, lawful in light of contract silence on pendente lite interest.
Factual Background
The parties entered a drilling-services contract containing clause 18.1. Respondent claimed unpaid invoice balances and obtained an arbitral award on 21 Nov 2004 for USD 6,56,272.34 plus 12% interest from 12 Dec 1998. ONGC set aside the award under Section 34, arguing clause 18.1 bars interest. The Gauhati High Court reinstated the award under Section 37. The Supreme Court’s leave order limited the appeal to the legality of pendente lite interest.
Statutory Analysis
- Section 31(7)(a): Tribunal may award interest pre-reference/pendente lite at reasonable rate, subject to party agreement.
- Section 31(7)(b): Post-award interest at 18% p.a. (then prevailing) unless award directs otherwise; non-contractable.
- Section 28 of Contract Act (waiver of rights) and its non-ultra vires status for interest-waiver clauses.
- Emphasis on three distinct interest periods and contractual control over the first two.
Alert Indicators
- ✔ Precedent Followed – existing jurisprudence on arbitration interest upheld.
Citations
- 2025 INSC 1066 (Reportable); Civil Appeal No. 11324 of 2025
- Paragraphs 12–26 (key holdings)
- SCC / AIR / MANU citations as per precedents listed above.