TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 617
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....s rejected. 2 (i) Claim No.2 relating to the 2nd invoice for dollar 20,729.17 being the outstanding balance is allowed rejecting the claim for interest thereon. 2 (ii) Claim No.3 in respect of invoice No.3 for dollar 1,26,536.44 being unpaid balance is allowed without interest. 2 (iii) Claim No.4 in respect of invoice No.4 for dollar 30,1401.05 being outstanding balance is allowed. Claim for interest is, however, rejected. 2 (iv) Claim No.5 in respect of invoice No.5 for dollar 14,321.68 being the outstanding balance is allowed without interest. 2 (v) Claim No.6 in respect of invoice No.6 of dollar 1,67,960.43 being outstanding balance is allowed but no interest is allowed. 2 (vi) Claim No.7 in relation to invoice No.7 for dollar 87,523.37 being the unpaid balance is allowed and the claim for interest on the said amount is disallowed. 2 (vii) Claim No.8 refers to invoice No.8 for dollar 60,000 is allowed without interest. 2 (viii) Claim No.9 in respect of invoice No.9 for dollar 78,750 being 75% of the tools lost in hole is allowed without any interest. 2 (ix) Claim No.10 vide invoice No.10 for dollar 15,000 in respect of charges for demobilization is allowed with....
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....xecution proceedings shall remain stayed." 7. In view of the limited notice learned counsel for the parties have confined their submissions to the award of interest. SUBMISSIONS 8. The learned counsel for the appellant relied on clause 18.1 of the agreement and submitted that Section 31 (7) [Section 31. Form and contents of arbitral award. ---(1) to (6) ...(7) (a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for thepayment of money, the arbitral tribunal may include in the sum for which the award is madeinterest, at such rate as it deems reasonable, on the whole or any part of the money, for thewhole or any part of the period between the date on which the cause of action arose and thedate on which the award is made.(b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of 18% per centum per annum from the date of the award to the date of payment.] of 1996 Act, clearly provides that power of arbitral tribunal to award interest for the period between the date the cause of action arose up to the date of the award is subject to the agreement between the parties, therefore, in vie....
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....rary to the terms of the contract would be vulnerable to a challenge under Section 34 of 1996 Act. [See: Union of India v. Bright Power Projects (India) Private Limited, (2015) 9 SCC 695, paragraph 13; Sayeed Ahmed and Company v. State of Uttar Pradesh and others, (2009) 12 SCC 26, paragraphs 15 and 16; Sree Kamatchi Amman Constructions v. Divisional Railway Manager (Works), Palghat and others, (2010) 8 SCC 767, paragraph 19] Moreover, such an agreement to waive interest is not ultra vires in terms of Section 28 of the Contract Act, 1872 [See: Garg Builders v. Bharat Heavy Electricals Limited, (2022) 11 SCC 697, paragraphs 20 to 23]. However, if the agreement is silent on award of interest, the arbitral tribunal can award interest in terms of clause (a) of sub-section (7) of Section 31 [See: Jaiprakash Associates Limited (JAL) through its Director v. Tehri Hydro Development Corporation (India) Ltd. (THDC), (2019) 17 SCC 786, paragraph 13.2; Pam Developments Private Limited v. State of West Bengal and another, (2024) 10 SCC 715.]. As far as clause (b) of subsection (7) of Section 31 is concerned, it deals with postaward interest. Prior to 2015 amendment, clause (b) mandated payment ....
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....poration. Should corporation question any item or items of an invoice, it may withhold payment of the amount in dispute until such matter is resolved between the parties, but the amount not in dispute is to be paid within above period. No interest shall be payable by ONGC on any delayed payment /disputed claim." (Emphasis supplied) 15. Relying on the underscored portion of clause 18.1 reproduced above, the learned counsel for the appellant contended that the agreement proscribed payment of interest on any delayed payment including disputed claim, therefore, the award of interest for any period before making of the award is illegal. On the contrary, submission on behalf of the respondent is that the clause does not proscribe payment of pendente lite interest, therefore, the arbitral tribunal has discretion to award interest from the date the statement of claim is affirmed before it. Clause 18.1 does not bar award of interest pendente lite 16. To properly appreciate the import of clause 18.1 (supra) in the agreement, particularly, in the context of submissions made, it would be useful to consider few decisions of this Court on the issue as to when the bar on award of interest can....
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....he agreement expressly provides that no interest pendente lite shall be payable on the amount due, the arbitrator has no power to award pendente lite interest; (v) the bar to award interest on delayed payment by itself will not be readily inferred as express bar to award pendente-lite interest by the arbitral tribunal, as ouster of power of the arbitrator has to be considered on various relevant aspects; (vi) grant of pendente lite interest may depend upon several factors such as phraseology used in the agreement, clauses conferring power relating to arbitration, nature of claim and dispute referred to arbitrator and on what items power to award interest been taken away and for which period. 19. In Ambica Construction v. Union of India- (2017) 14 SCC 323 (for short Ambica Second), a question arose before a two- Judge Bench of this Court whether clause (2) in the agreement barred award of pendente lite interest. Clause (2) under consideration there was in the following terms: "(2) Interest on amounts.- No interest will be payable upon the earnest money or the security deposit or amounts payable to the contractor under the contract, but government securities deposited in terms of su....
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.... due owing to any dispute, difference or misunderstanding between the Engineer-in-Charge on the one hand and the contractor on the other hand; (iii) any delay on the part of the Engineer-in-Charge in making periodical or final payment; or (iv) any other respect whatsoever. The clause is comprehensive and bars interest under any head in clear and categorical terms. 16. In view of clause (a) of sub-section (7) of Section 31 of the Act, it is clear that the arbitrator could not have awarded interest up to the date of the award, as the agreement between the parties barred payment of interest. The bar against award of interest would operate not only during the pre- reference period, that is, up to 13.3.1997 but also during the pendente lite, that is, from 14.3.1997 to 31.7.2001." 22. In THDC First (supra), the interest proscribing clauses in the contract were in the following terms: "1.2.14. No claim for delayed payment due to dispute, etc.-- The contractor agrees that no claim for interest on damages will be entertained or payable by the Government in respect of any money or balances which may be lying with the Government owing to any disputes, differences or misunderstandin....
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.... "13. From the above extracted paragraphs, the decision of the three-Judge Bench in the First Ambika case (supra) can be stated as follows. The arbitrator's power to grant interest would depend on contractual clause in each case, and whether it expressly takes away the arbitrator's power to grant pendente lite interest. This would have to be determined based on the phraseology of the agreement, clauses conferring powers relating to arbitration, nature of claim and dispute referred to the arbitrator, and on what items the power to award interest is contractually barred and for which period. Further, a bar on award of interest for delayed payment would not be readily inferred as an express bar to the award of pendente lite interest by the arbitrator." 25. On a careful analysis of the decisions discussed above, we are of the view that arbitral tribunal can be denuded of its power to award pendente lite interest only if the agreement/ contract between the parties is so worded that the award of pendente lite interest is either explicitly or by necessary implication (such as in the case of Sayeed & Co. (supra) and THDC First (supra)) barred. A clause merely barring award of interes....