TaxTMI 
TaxTMI 
2025 (9) TMI 617
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....ceeding raised on behalf of the respondent ONGC, is 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. ....
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....the amount is concerned, the petitioner is willing to pay back to the respondent within a period of four weeks. Subject to payment of the aforesaid amount, the execution 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 tri....
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.... the agreement between the parties. Therefore, if the agreement stipulates that no interest is payable, the arbitral tribunal cannot award interest for the aforesaid period and an award contrary 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 Benga....
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....ct always to Corporation's right to require contractor to furnish it with satisfactory evidence of the validity and prior payment by Contractor of all labor and material incurred by Contractor and charged to Corporation. 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 appreciat....
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....agreement entered into between parties; (iii) arbitration is an alternative forum for resolution of disputes but an arbitrator ipso facto does not enjoy or possess all the powers conferred on the courts of law; (iv) where the 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 f....
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....uing the said clause, this Court held: "15. Clause G 1.09 makes it clear that no interest or damages will be paid by the government, in regard to: (i) any money or balance which may be lying with the Government; (ii) any money which may become 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: ....
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....dentical interest proscribing clauses, the Court held that interest cannot be awarded by the arbitrator. 24. In Ferro Concrete Construction (India) Pvt. Ltd. v. State of Rajasthan- 2025 SCC OnLine SC 708, a two-Judge Bench of this Court, of which one of us (P.S. Narasimha, J) was a member, after considering several decisions held: "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 arbit....