OG (Appellant) entered into a contract with GT Private Limited (Respondent). Disputes arose regarding payment of outstanding amounts under various invoices. The matter was referred to a three-member Arbitral Tribunal. Ar
CS Professional · Arbitration, Mediation and Conciliation · PYQS · June 2026
OG (Appellant) entered into a contract with GT Private Limited (Respondent). Disputes arose regarding payment of outstanding amounts under various invoices. The matter was referred to a three-member Arbitral Tribunal. Arbitral Award dated 21st November 2004. The Arbitral Tribunal : Allowed claims totalling USD 6,56,272.34 in favour of the respondent Rejected claims for interest on individual invoices However, awarded interest at 12% per annum on the total sum from 12th December, 1998 (the date when the statement of claim was affirmed) till recovery. Awarded costs of ₹ 5 lakhs. Subsequent Proceedings : OG filed a Special Leave Petition before the Supreme Court, which was limited to the issue of whether interest on the total awarded amount at the rate of 12% could be awarded or not; OG's Argument before Supreme Court was : Section 31(7) of the Arbitration and Conciliation Act, 1996, clearly provides that the power of the Arbitral Tribunal to award interest for the period between the dates the cause of action arose up to the date of the Award is subject to the agreement between the parties. Therefore, in view of specific Clause in the Agreement (Clause 18.1 of the Agreement executed between the Parties), no interest could have been awarded. The Arbitral Award is liable to be set aside to the extent it awards interest. GT Private Limited's Argument before the Apex Court was : Clause 18.1, if read as a whole, indicates that payment is not to be withheld if the amount is not in dispute. Interest is not payable only when there is a dispute. The Arbitral Tribunal did not award interest on the pre-reference period but awarded interest from the date the claim was affirmed before the tribunal. Once it was found that the balance amount on the invoices was unjustifiably withheld, payment of interest is lawful. Referring to the judicial pronouncement, decide on the matter.
Answer & Explanation:
The facts of the given situation are similar to the case of Oil and Natural Gas Corporation Ltd. v. M/s G & T Beckfield Drilling Services Pvt. Ltd. decided by Supreme Court on 2nd September, 2025. In this case, the apex court clarified the scope of an arbitral tribunal's authority to grant interest during the pendency of proceedings. The Court ruled that arbitrators retain their statutory power to award pendente lite interest unless the parties' agreement contains language that either explicitly or through necessary inference removes this authority. A provision simply stating that no interest shall accrue on delayed or disputed payments does not, standing alone, amount to such a restriction. Examining Clause 18.1 of the contract in question, the Court found no express prohibition against pendente lite interest. The clause merely specified that the Corporation would not pay interest on delayed payments or contested amounts. Critically, it neither restricted the tribunal's authority to grant such interest nor declared that interest would be unavailable under all circumstances. The Court therefore concluded that Clause 18.1 left intact the tribunal's statutory discretion to award interest pending resolution of the dispute. The Supreme Court dismissed the appeal and upheld the award of pendente lite interest. The Court held: No error was found in the award of pendente lite interest warranting interference; The rate of 12% per annum was reasonable, being lower than the statutorily prescribed rate of 18% under Section 31(7)(b) as it existed then; Post-award interest was in line with the statutory provision of Section 31(7)(b) as it then existed. In view of the decision of this case, it may be said that the arguments of GT Private Limited seems appropriate and it can succeed in the matter.
Topics: Arbitral Award
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