This Supreme Court judgment clarifies that a contractual clause merely barring interest on delayed or disputed payments does not, by itself, expressly or by necessary implication prohibit an arbitral tribunal from awarding pendente lite interest. The power to award such interest under Section 31(7)(a) of the Arbitration and Conciliation Act, 1996, is only denuded if the agreement contains a clear and comprehensive bar.
Facts Of The Case:
The dispute arose from an arbitral award dated 21.11.2004, which directed the appellant, Oil and Natural Gas Corporation Ltd. (ONGC), to pay a total sum of USD 6,56,272.34 to the respondent, M/s G & T Beckfield Drilling Services Pvt. Ltd., for outstanding invoices and other claims. The arbitral tribunal rejected ONGC’s preliminary objection to the maintainability of the proceedings and allowed several monetary claims but denied interest on those individual amounts. However, the tribunal awarded interest at 12% per annum on the total awarded sum from 12.12.1998, the date the statement of claim was affirmed, until recovery, along with costs. ONGC challenged this award under Section 34 of the Arbitration and Conciliation Act, 1996, before the District Judge, who set it aside, inter alia, on the ground that it was a non-reasoned award. The respondent successfully appealed this decision to the Gauhati High Court, which reinstated the arbitral award. ONGC then filed a Special Leave Petition before the Supreme Court, which granted leave limited to the singular legal issue of whether the award of pendente lite interest was permissible in light of Clause 18.1 of the agreement, which stated that “No interest shall be payable by ONGC on any delayed payment /disputed claim.”
Procedural History:
The procedural history of this case commenced with the respondent, M/s G & T Beckfield Drilling Services Pvt. Ltd., obtaining a favorable arbitral award on November 21, 2004. The appellant, ONGC, challenged this award by filing an application under Section 34 of the Arbitration and Conciliation Act, 1996, before the District Judge in Sivasagar, which was allowed, leading to the award being set aside on November 15, 2007. Aggrieved by this, the respondent filed an appeal under Section 37 of the Act before the Gauhati High Court, which, in its judgment dated March 8, 2019, allowed the appeal, set aside the District Judge’s order, and reinstated the arbitral award. ONGC then approached the Supreme Court by filing a Special Leave Petition (SLP). The Supreme Court, while issuing notice on the SLP on November 25, 2019, limited its scope exclusively to the question of whether the award of pendente lite interest was legally permissible. The appeal, arising from this limited leave, was ultimately dismissed by the Supreme Court on September 2, 2025.
READ ALSO :Witness Protection vs. Bail Cancellation: Supreme Court Explains the Crucial Difference
Court Observation:
The Supreme Court observed that the arbitral tribunal’s power to award pendente lite interest under Section 31(7)(a) of the Arbitration and Conciliation Act, 1996, is subject to the agreement between the parties. It emphasized that for a contractual clause to denude the tribunal of this power, it must expressly or by necessary implication bar the award of such interest. Upon construing Clause 18.1 of the agreement, which stated “No interest shall be payable by ONGC on any delayed payment /disputed claim,” the Court found that this wording merely prevented ONGC from being liable for interest on delayed payments but did not constitute a comprehensive bar that expressly or implicitly restricted the arbitral tribunal’s statutory authority to award pendente lite interest. The clause was distinct from those in precedents where comprehensive language like “in any respect whatsoever” had created an absolute bar. Consequently, the award of interest from the date the statement of claim was affirmed was held to be legally permissible.
Final Decision & Judgement:
The Supreme Court dismissed the appeal, upholding the arbitral award’s grant of pendente lite interest. The Court concluded that Clause 18.1 of the agreement, which stated “No interest shall be payable by ONGC on any delayed payment /disputed claim,” only limited ONGC’s liability for interest on delayed payments and did not expressly or by necessary implication strip the arbitral tribunal of its statutory power to award interest for the period between the affirmation of the statement of claim and the date of the award. Finding no error in the tribunal’s exercise of its discretion, the Court affirmed the impugned judgment of the High Court, thereby allowing the interest awarded by the arbitral tribunal to stand.
Case Details:
Case Title: Oil And Natural Gas Corporation Ltd vs M/S G And T Beckfield Drilling Services Pvt. Ltd. Citation: 2025 INSC 1066 Appeal Number: Civil Appeal No. 11324 of 2025 Date of Judgement: September 02, 2025 Judges/Justice Name: Justice Pamidighantam Sri Narasimha and Justice Manoj Misra
Download The Judgement Here