New Delhi, Sept 3 (UNI) The Supreme Court dismissed Oil and Natural Gas Corporation’s (ONGC) appeal and upheld a Gauhati High Court judgment affirming an arbitral award in favour of the respondent.
A bench comprising Justice PS Narasimha and Justice J Manoj held that the arbitral tribunal was well within its powers to grant pendente lite interest at 12 per cent, observing that the rate was reasonable since it was lower than the statutory rate of 18 per cent.
The case arose from unpaid invoices under a drilling contract.
In 2004, the arbitral tribunal awarded the respondent USD 6,56,272.34, along with costs of Rs 5 lakh and interest at 12 per cent per annum from December 12, 1998 (the date of affirmation of the statement of claim) until recovery.
ONGC’s application before the District Judge, Sivasagar succeeded in setting aside the award on the grounds of inadequate reasoning and improper treatment of objections.
However, in 2019, the Gauhati High Court restored the award in full, prompting ONGC to approach the apex court.
At the SLP stage, the court restricted notice to one issue, whether the arbitral tribunal was justified in granting pendente lite interest at 12 per cent despite clause 18.1 of the contract, which barred payment of interest on delayed or disputed claims.
The bench ruled that under Section 31(7) of the Arbitration and Conciliation Act, 1996, tribunals have the power to award interest for pre-reference, pendente lite, and post-award periods unless expressly excluded by the contract.
Referring to precedents including GC Roy (1992), Budharaj (2001), Ambica Construction (2016), Reliance Cellulose (2018), and Ferro Concrete (2025), the Court reiterated that exclusion of interest on delayed payments does not automatically bar pendente lite interest.
Since clause 18.1 excluded only interest on delayed/disputed payments, but not pendente lite interest, the arbitral award was held valid.
Finding the 12 per cent rate reasonable and lawful, the Court dismissed ONGC’s appeal, affirming the Gauhati High Court’s decision.
