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North Eastern Electric Power Corporation Limited (NEEPCO) v. Astra Construction Private Limited

Civil Appeal · 2026 INSC 1036Decided 22 Sept 2026
Civil Appeal arising out of SLP(C) No. 24803 of 2025
Justice Pamidighantam Sri Narasimha · Justice Alok Aradhe

Background

NEEPCO had engaged Astra Construction for civil works on a power project in Tripura in the 1990s; disputes arose and went to arbitration, where the Tribunal found the delay attributable to NEEPCO, awarded the contractor about Rs. 3.30 crore, plus pre-reference interest at 12% and further pendente lite/future interest at 9%. The Commercial Court, relying on Clause 54 of the contract's General Conditions and Supreme Court precedent (Sayeed Ahmed), struck down the pre-reference and pendente lite interest as barred by contract. The High Court of Meghalaya reversed this, holding Clause 54 was worded like the clause in an older case (Harish Chandra) which did not bar interest, and restored the Tribunal's full interest award, leading NEEPCO to appeal to the Supreme Court, challenging only the pre-reference interest portion.

Decision Breakdown

The Supreme Court undertook a close textual comparison of contract clauses across several precedents and held that Clause 54 was materially different from the clause in Harish Chandra: while that older clause barred interest only on money withheld "because of a dispute," Clause 54 separately and independently also barred interest for mere "delay... in making periodical or final payments," irrespective of any dispute. A structure matching the clauses in Sayeed Ahmed and THDC-II, both of which were held to be complete bars on arbitral interest. The Court reaffirmed that under the 1996 Act, unlike the 1940 Act, an express contractual bar on interest (even a general one, not aimed specifically at the arbitrator) is enough to exclude the Tribunal's power under Section 31(7)(a), and pre-reference interest specifically depends on substantive law/agreement, not on Section 31(7)(a) alone. It also rejected the argument that NEEPCO had waived this defence, since the plea was on record from its original written statement before the Tribunal. The Court therefore set aside the High Court's restoration of pre-reference interest and allowed the appeal to that extent.

Lesson Learnt

In government/PSU contracts, the exact wording of a "no interest" clause is decisive. A clause that separately bars interest for mere payment delay (not just disputed amounts) can validly block an arbitrator from awarding pre-reference interest, so contracting parties should read such boilerplate clauses carefully before assuming interest will automatically follow a favourable award.

Official source (sci.gov.in)View Judgment (PDF)

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