Contractual bar on interest excludes pendente lite interest in arbitration and remains valid under the statutory framework.

An express contractual bar on interest on "any moneys due" was held wide enough to include the arbitral award amount, so pendente lite interest could not be granted under Section 31(7)(a) of the Arbitration and Conciliation Act, 1996 where the parties had agreed otherwise. The clause was also held not to be ultra vires Section 28 of the Indian Contract Act, 1872, because it did not extinguish the right to pursue arbitration; it only excluded interest as part of recoverable relief. The contractual exclusion of interest therefore prevailed.

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Issues: (i) whether pendente lite interest could be awarded by the arbitral tribunal despite a contractual clause barring interest on any moneys due to the contractor; (ii) whether the contractual clause barring interest was ultra vires Section 28 of the Indian Contract Act, 1872.

Issue (i): Whether pendente lite interest could be awarded by the arbitral tribunal despite a contractual clause barring interest on any moneys due to the contractor.

Analysis: Section 31(7)(a) of the Arbitration and Conciliation Act, 1996 makes the power to award pre-award interest subject to a contrary agreement between the parties. The contractual language barring interest on "any moneys due to the contractor" was held to be wide enough to include the award amount. The statutory scheme and the express contractual term therefore excluded an award of pendente lite interest.

Conclusion: The claim for pendente lite interest was not sustainable and was rightly rejected.

Issue (ii): Whether the contractual clause barring interest was ultra vires Section 28 of the Indian Contract Act, 1872.

Analysis: Section 28 of the Indian Contract Act, 1872 does not invalidate a lawful agreement to refer disputes to arbitration, and the Interest Act, 1978 also recognises that parties may, by express agreement, waive interest. The impugned clause did not extinguish the right to enforce the claim through arbitration; it only regulated the recoverable amount by excluding interest. It was therefore consistent with the statutory framework.

Conclusion: The interest-barring clause was not ultra vires Section 28 of the Indian Contract Act, 1872.

Final Conclusion: The contractual exclusion of interest prevailed, the arbitral award could not sustain pendente lite interest, and the challenge to the clause itself failed.

Ratio Decidendi: Where the governing contract expressly bars interest on sums due, an arbitral tribunal cannot award pre-award or pendente lite interest under Section 31(7)(a) of the Arbitration and Conciliation Act, 1996, and such a clause is not invalid merely because it restricts recovery of interest.

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