S. 37(1)(a) Arbitration Act | Clause Restricting Interest On Delayed Payments By Itself Won't Bar Pendente Lite Interest : Supreme Court

The Supreme Court on Tuesday (Sep.2) observed that an Arbitral Tribunal can grant pendente lite interest unless expressly or impliedly barred in the contract. It added that a contractual clause barring interest on delayed payments does not prevent an arbitral tribunal from awarding pendente lite interest, i.e., the interest for the period during which the arbitration is pending.

“…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 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.”, the court observed.

A bench of Justices PS Narasimha and Manoj Misra dismissed the ONGC's appeal, affirming the Gauhati High Court's decision, which justified the grant of pendente lite interest as there was no clause barring the award of pendente lite interest.

The core of the dispute was Clause 18.1 of the contract, which stated: “No interest shall be payable by ONGC on any delayed payment/disputed claim.” The clause, however, has not barred payment of pendente lite interest.

The judgment authored by Justice Misra observed that the clause merely barred ONGC from paying contractual interest on delayed invoices but did not expressly or by implication take away the tribunal's statutory discretion under Section 31(7)(a) of the Arbitration & Conciliation Act, 1996 to award pendente lite interest.

“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.”, the court said.

Accordingly, the appeal was dismissed.

Cause Title: OIL AND NATURAL GAS CORPORATION LTD. VERSUS M/S G & T BECKFIELD DRILLING SERVICES PVT. LTD.

Citation : 2025 LiveLaw (SC) 868

Click here to read/download the judgment

Appearance:

For Petitioner(s) Mr. Tushar Mehta, Solicitor General (NP) Mr. Akshay Amritanshu, AOR Ms. Drishti Saraf, Adv. Ms. Pragya Upadhyay, Adv. Ms. Swati Mishra, Adv.

For Respondent(s) Ms. Bhargavi Kannan, Adv. Ms. Shivani Karmakar, Adv. Ms. Kavya Sarin, Adv. Ms. S. Ambica, Adv. Mr. Hardeep Singh Anand, AOR