Arbitration
A “no interest on delayed payment” clause does not bar an arbitrator's pendente lite interest
What the Court held
In Oil and Natural Gas Corporation Ltd v. G & T Beckfield Drilling Services Pvt Ltd (Supreme Court of India, 02.09.2025; 2025 LiveLaw (SC) 868), the Court held that an arbitral tribunal's power to award pendente lite interest under Section 31(7)(a) of the Arbitration and Conciliation Act, 1996 is taken away only where the contract bars it expressly or by necessary implication. A clause merely barring interest on delayed payments will not, by itself, be read as such a bar.
Why it matters
ONGC had relied on a clause stating that no interest was payable on delayed or disputed payments. The Court found that this did not amount to an absolute prohibition on interest in any respect whatsoever, and so it did not curtail the tribunal's statutory power; the award of pendente lite interest was upheld. For parties drafting or disputing construction and supply contracts, the decision is a reminder that to exclude the tribunal's power to award interest, the clause must say so in clear terms.
This note is general information on the law as at the date shown, not legal advice on any specific matter. The law changes; for advice on your facts, please speak to the firm.
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