LegalAware
LegalAware.ai
EMPOWERING LEGAL AWARENESS

Union of India v. Manraj Enterprises

Civil Appeal · 2021 INSC 754Decided 18 Nov 2021
Civil Appeal No. 6592 of 2021
Justice M.R. Shah · Justice B.V. Nagarathna

Background

The Union of India (Railways) and the respondent contractor were in dispute over three work contracts. An arbitrator awarded the contractor a principal sum along with pendente lite (during litigation) and future interest. The contract's General Conditions (Clause 16(2)) stated that "no interest will be payable upon the earnest money or the security deposit or amounts payable to the Contractor under the Contract." The Union's challenge to the interest award failed before a Single Judge and a Division Bench of the Delhi High Court, leading to this appeal.

Decision Breakdown

The Supreme Court held that Clause 16(2)'s bar was widely worded, using the disjunctive "or" to separately cover "amounts payable to the contractor under the contract", not merely earnest money or security deposit, so the narrower "ejusdem generis" reading favoured by the respondent did not apply. Relying on its own precedents (including Garg Builders v. BHEL and the three-judge bench ruling in Bright Power Projects), the Court held that Section 31(7)(a) of the Arbitration Act gives primacy to a contract that expressly excludes interest, and an arbitrator cannot override such a clause. It therefore held the arbitrator had erred in awarding pendente lite and future interest, set aside the High Court's and arbitrator's orders on this point, and allowed the Union's appeal.

Lesson Learnt

If a contract contains a clear clause barring payment of interest on amounts due under it, that bar binds the arbitrator too: parties who sign such a clause cannot later successfully claim interest through arbitration.

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

More rulings in Arbitration & Commercial Law

Arbitration & Commercial LawDelhi High Court

Gaurav Enterprises vs. Commissioner, Transport Department

Despite the Department's objection, the Court allowed the decree holder to withdraw its own petition, with liberty to file it again later if needed, subject to resolving any applicable stamp-duty requirements under the Indian Stamp Act, consistent with the Court's own precedent on that point.

Decided 12 Oct 2026Read case
Arbitration & Commercial LawDelhi High Court

CA Deepak Gupta vs. CA Shubham Jain

The Court sent the matter to the Delhi High Court's Mediation and Conciliation Centre (SAMADHAN) for three weeks, while simultaneously appointing a named Sole Arbitrator to take over if mediation fails, so the arbitration process can begin immediately without a second round of court proceedings, subject to the arbitrator's standard independence disclosures and the Delhi International Arbitration Centre's rules and fees.

Decided 12 Oct 2026Read case
Arbitration & Commercial LawDelhi High Court

Freecharge Payment Technologies Pvt Ltd vs. Frederica Marketing Pvt Ltd

In light of the settlement, the Court allowed the decree holder to withdraw the enforcement petition, but expressly preserved its right to revive the same petition later if Frederica Marketing fails to honour the settlement's terms.

Decided 12 Oct 2026Read case
Arbitration & Commercial LawSupreme Court of India

Arcis Clean Energy Pvt. Ltd. v. Parshva Innovation

The Supreme Court examined the Agreement as a whole to determine which city was the true "juridical seat" of arbitration, as opposed to merely a convenient venue for hearings, and concluded, based on the Agreement's language and structure, that Goa was the juridical seat. Since the juridical seat determines which court has supervisory jurisdiction over the arbitration, the Court held that the Delhi High Court lacked jurisdiction to have entertained the Section 11(6) application in the first place. It set aside the High Court's order and left the parties free to pursue the correct remedy before the appropriate court.

Decided 12 Oct 2026Read case
Arbitration & Commercial LawSupreme Court of India

Hemant D. Shah HUF & Anr. v. Chittaranjan D. Shah HUF & Ors.

The Supreme Court held that whether someone is a "veritable party" to an arbitration, someone whose rights are substantially affected even without having signed the arbitration agreement, depends on the specific facts, and cannot be reduced to a rigid formula. On the facts here, it found the 3rd and 4th respondents to be veritable parties, since the validity of the 2009 partnership deed (and therefore their own rights) depended on whether the appellants' earlier retirement was itself valid. The Court made clear this finding was only a prima facie one for the purpose of deciding who should be part of the arbitration, and that the separate questions of limitation and estoppel raised by those respondents remain fully open for the Arbitral Tribunal itself to decide.

Decided 12 Oct 2026Read case
Arbitration & Commercial LawDelhi High Court

Union of India vs. Swadeshi Civil Infrastructure Pvt. Ltd.

The Court upheld the bonus award, holding that a contractual clause excluding certain delay-extension grounds from bonus eligibility only barred the contractor from claiming "damages" for those delays, not from earning the bonus if the project still finished ahead of schedule. It also declined to interfere with the tribunal's GST-reimbursement direction, since it merely required reimbursement where GST was actually payable. However, it set aside the interest awarded on a separate claim because the contractor had never actually asked for interest on that specific claim, making that part of the award legally invalid and severable from the rest.

Decided 12 Oct 2026Read case