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Oil and Natural Gas Corporation Ltd. vs M/S G & T Beckfield Drilling Services Pvt. Ltd.

Not available · 2025 INSC 1066Decided 2 Sept 2025
Not available
Justice Pamidighantam Sri Narasimha · Justice Manoj Misra

Background

A three-member arbitral tribunal had awarded G&T Beckfield Drilling Services (a contractor) about USD 6,56,272 against ONGC for unpaid invoices, along with 12% annual interest running from the date the claim was affirmed (1998) until recovery. ONGC challenged the award, and a District Judge set it aside, but the Gauhati High Court restored the award in full. ONGC then appealed to the Supreme Court, but only on the narrow question of whether the 12% pre-award ("pendente lite") interest was validly awarded, given a contract clause (Clause 18.1) stating "no interest shall be payable by ONGC on any delayed payment/disputed claim."

Decision Breakdown

The Supreme Court held that an arbitral tribunal can be stripped of its power to award pendente lite (pre-award) interest only where the contract's wording explicitly or by necessary implication bars it: a clause that merely bars interest on "delayed payment" is not automatically read as also barring pendente lite interest. Surveying a long line of precedent (including G.C. Roy, the two Ambica Construction decisions, Reliance Cellulose, Sayeed Ahmed, and the Tehri Hydro Development Corporation cases), the Court found that Clause 18.1 only barred interest on delayed/disputed payments, not interest during the pendency of arbitration, and did not use the sweeping "in any respect whatsoever" language found in clauses that other judgments had held to be a full bar. Since the 12% rate was also reasonable (lower than the statutory 18% default), the Court upheld the award of pendente lite interest and dismissed ONGC's appeal.

Lesson Learnt

In arbitration contracts, a clause barring "interest on delayed payment" does not automatically bar interest for the period the dispute is pending before the arbitrator: parties who want to exclude pendente lite interest must say so in clear, comprehensive language, or an arbitrator will retain discretion to award it.

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

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