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Union of India v. M/s Ambica Construction

Special Leave Petition (Civil) · Neutral citation not assigned (Special Leave Petition (Civil) No.17219 of 2009)Decided 16 Mar 2016
Special Leave Petition (Civil) No.17219 of 2009
Justice Ranjan Gogoi · Justice Arun Mishra · Justice Prafulla C. Pant

Background

This judgment answers a question of law; it does not decide the case itself. The dispute arose from a 1989 construction contract and had been through several rounds of arbitration and litigation. A two-judge Bench doubted two precedents, Engineers-De-Space-Age and Madnani Construction, on whether an arbitrator may award interest for the period of the arbitration despite a contractual bar, and referred the question to a three-judge Bench.

Decision Breakdown

This is not a final judgment in the case itself. On 16 March 2016 the three-judge Bench held that if the contract expressly bars the award of interest pendente lite, the arbitrator cannot award it. It clarified that a bare bar on interest for delayed payment will not automatically be read as an express bar on pendente lite interest; that depends on the specific contract clause. It left it to the Division Bench to consider the case on merits.

Lesson Learnt

An express contractual bar on pendente lite interest binds the arbitrator, but an ordinary delayed-payment clause is not automatically read that widely. There is no final ruling yet on the contractor's own interest claim.

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

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