Pendente Lite Interest - The Legal Chamber

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 ma...

The Supreme Court ruled that arbitral tribunals have the power to award compound interest (interest on interest) under Section 31(7) of the Arbitration Act, 1996. It clarified that the "sum awarded" includes both principal and pre-award interest, and post-award interest can be calculated on this total amount. The judgment overruled earlier contrary interpretations, affirming arbitrators' discretion in interest calculations unless expressly barred by contract. The Court emphasized this aligns with the compensatory purpose of arbitration awards for delayed payments. Facts Of The Case: The case involved a contractual dispute between M/s Interstate Construction (appellant) and National Projects Construction Corporation Ltd. (respondent) regarding construction work for Ramagundam Super Therma...

Tag: Pendente Lite Interest

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