Arbitrator's power to award interest upheld where contract lacked a clear bar; reduction of the arbitral rate was rejected.

Under the Arbitration Act, 1940, an arbitrator may award pre-reference, pendente lite and future interest unless the contract contains a clear and express bar; a clause merely stating that delayed payment will not make the employer liable for interest does not, by itself, exclude that power. On the facts, the clause was not wide enough to prohibit interest in arbitration, so the award of pre-reference and pendente lite interest was upheld. The reduction of the arbitral rate from 18% to 10% was also found unjustified because it rested only on the employer's public sector status, without any finding that the original rate was perverse or unreasonable; the higher rate was restored.

---

---

Issues: (i) Whether clause 16 of the General Conditions of Contract barred the award of pre-reference and pendente lite interest under the Arbitration Act, 1940; (ii) Whether the reduction of interest from 18% to 10% per annum was justified.

Issue (i): Whether clause 16 of the General Conditions of Contract barred the award of pre-reference and pendente lite interest under the Arbitration Act, 1940.

Analysis: Under the Arbitration Act, 1940, an arbitrator may award pre-reference, pendente lite and future interest unless the agreement contains an express bar. Such ouster clauses are construed strictly, and the bar must clearly extend to the arbitrator's power. Clause 16 only stated that delay in payment would not make ONGC liable for interest; it did not expressly prohibit the arbitrator from awarding interest, nor was it couched in language wide enough to exclude claims arising in arbitration. On the facts, payment of the contractual price of Rs. 14,999 per MT had already been made, and the higher amount became payable only on the award, so the clause was not attracted as a bar in any event.

Conclusion: Clause 16 did not bar pre-reference or pendente lite interest, and the award of such interest was valid.

Issue (ii): Whether the reduction of interest from 18% to 10% per annum was justified.

Analysis: The reduction was made only on the ground that ONGC was a public sector undertaking. No finding was recorded that the arbitrator had exercised discretion perversely or unreasonably in fixing 18% having regard to the prevailing interest rates and the circumstances of the case. The contractual and arbitral basis for the higher rate remained unshaken.

Conclusion: The reduction of interest to 10% per annum was unjustified, and the award of 18% per annum was restored.

Final Conclusion: The contractual clause did not operate as an effective bar to interest under the 1940 Act, and the arbitral rate of interest was upheld, with consequential differential interest payable as directed.

Ratio Decidendi: Under the Arbitration Act, 1940, an arbitrator's power to award pre-reference and pendente lite interest is excluded only by a clear and express contractual bar; a clause merely negating liability for delayed payment does not, by itself, oust that power.

---