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SC upholds pendente lite interest despite contractual bar

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Judgment dated 2.9.2025 of the Supreme Court of India in Civil Appeal No.11324 of 2025 of Oil and Natural Gas Corporation Ltd   Vs. Ms G & T Beckfield Drilling Services Pvt Ltd.

By the Award dated 21.11.2004, the three-members Arbitral Tribunal allowed the claims of the respondent at $6,56,272.34 with 12% interest and rejected preliminary objection of the appellant, to the maintainability of arbitral proceedings.

The interest was granted from 12.12.1998 when the statement of claim was affirmed before the Tribunal.  Thus, the pendente lite interest was granted.

The District Judge allowed section 34 petition and set-aside the Award vide judgment dated 15.11.2007.

However, the High Court allowed section 37 appeal and restored the award.

The Supreme Court issued the notice on SLP to the limited extent of grant of 12% interest.

HELD that the Arbitral Tribunal has jurisdiction to award interest for three distinct periods – pre-reference, pendente lite and future i.e. post-award. Pre-reference and pendente lite interest is subject to the agreement of the parties.  Post-award interest is statutory and is not subject to the agreement.

In this case, the pendente lite interest from 12.11.1998 was granted.  However, Clause 18.1 of the Agreement provides that no interest shall be payable on any delayed payment / disputed claim.

However, a clause merely barring award of interest on delayed payment by itself will not be readily inferred as a bar to award pendente-lite lite interest by the Arbitral Tribunal.

Clause 18.1, when read as a whole, does not expressly or by necessary implication proscribes grant of pendente lite interest by the arbitral tribunal.  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.

Clause 18.1, in our view, therefore, would not limit the statutory power of the arbitral tribunal to award pendente lite interest.

 

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