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Reportable IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

SPECIAL LEAVE PETITION [C] No.11114/2009

Union of India                       … Petitioner

Vs.

M/s. Ambica Construction                       … Respondent

(With SLP [C] No.17219/2009]

JUDGM ENT

ARUN MISHRA,  J.

1.        The issue involved in the reference is in regard to the power of the  

Arbitrator to award pendente lite interest when contract contains bar for  

grant  of  interest  in  a  case  covered  by  the  Arbitration  Act,  1940  

(hereinafter referred to as “the Act”).  A Division  Bench of this Court  

had doubted the correctness of the decisions in Board of Trustees for the   

Port  of  Calcutta  v.  Engineers-De-Space-Age (1996)  1  SCC  516;  and  

Madnani Construction Corporation (P) Ltd. v. Union of India and Others  

(2010) 1 SCC 549. In view of the decision of the Constitution Bench  

judgment in  Secretary, Irrigation Department, Government of Orissa &  

Ors. v. G.C. Roy (1992) 1 SCC 508 and Executive Engineer, Dhenkanal   

Minor Irrigation Division, Orissa & Ors. v. N.C. Budharaj (D) by L.Rs.   

&  Ors. (2001)  2  SCC  721  which  held  that  the  Arbitrator  had  the  

jurisdiction  and  authority  to  award  interest  for  pre-reference  period,  

pendente lite and future period if there was no express bar in the contract

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regarding award of interest. A doubt was expressed about the correctness  

of the decision in  Engineers-De-Space Age (supra) in  Sayeed Ahmed &  

Co. v. State of U.P. & Ors. (2009) 12 SCC 26 and Sree Kamatchi Amman  

Constructions v.  Divisional Railway Manager (Works), Palghat & Ors.  

(2010) 8 SCC 767. Hence the matter had been referred to a larger Bench  

for decision.  

2. The  case  has  a  chequered  history.  The  tender  of  M/s.  Ambica  

Construction for fabrication of tie bars from M.S. Flats in CST-9 sleepers  

was accepted on 8.9.1989. Final agreement was executed on 30.11.1989.  

The  work  was  completed  on  21.11.1990.  With  respect  to  payments,  

certain  differences  and  disputes  arose  between  the  parties.  Thus  M/s.  

Ambica  Construction  prayed  for  appointment  of  an  Arbitrator.  On  

5.3.1991  as  the  petitioner  M/s.  Ambica  Construction  was  in  serious  

financial difficulties, it accepted the amount in full and final settlement.  

Later on, the Union of India informed the petitioner on 11.3.1991 that the  

matter  was  under  consideration.  However  the  Arbitrator  was  not  

appointed. An application under section 20 of the Act was filed before the  

High Court of Calcutta for referring the case to arbitration. On 2.6.1992  

the High Court directed to file the arbitration agreement in the court and  

appointed  two  Arbitrators  in  terms  of  the  arbitration  clause.  Said  

Arbitrators failed to publish the award and as such an application was

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filed for revocation of the authority of joint Arbitrators and another sole  

Arbitrator  was appointed.  The sole  Arbitrator  ultimately published the  

award on 30.12.1997. On an application filed by the Union of India, the  

High Court vide order dated 9.4.1998 remitted the award to the Arbitrator  

to give an item-wise break-up. On 12.5.1998 the sole Arbitrator published  

the  item-wise  award.  Again  the  Union  of  India  questioned  the  same  

before the High Court. The award was set aside on the ground that the  

Arbitrator had not given an intelligible award in terms of clause 64(3)(a)

(iii)  of the agreement and had not taken into effect the supplementary  

agreement  dated 5.3.1991.  The appeal  preferred  by the  petitioner  was  

dismissed   by  the  Division  Bench  of  the  High  Court  on  15.10.2004  

against  which  an  SLP  was  filed   in  which  leave  was  granted  and  

ultimately C.A. No.6621/2005 was allowed and case was remitted vide  

order dated 7.11.2005 passed by this Court to the Arbitrator for assigning  

reasons and to  pass  fresh award.  Thereafter,  Arbitrator  passed a  fresh  

award on 11.2.2006. Again an application was filed by the Union of India  

under sections 30 and 33 of the Act.  The Single Judge dismissed the  

application  vide  order  dated  26.6.2007.  Union  of  India  filed  an  

application for recall. The order dated 26.6.2007 was recalled. Vide order  

dated 22.8.2007 learned Single Judge set aside the award with regard to  

interest  for  pre-reference  period  and  directed  that  interest  would  be  

allowed on the principal  sum of  Rs.9,82,660/-  at  the rate of  10% per

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annum from 1.9.1992 the date from which the original Arbitrator entered  

upon the reference. An appeal was preferred before the Division Bench  

and the same had been partly allowed with regard to claim Nos.6 and 7.  

Aggrieved thereby, M/s. Ambica Construction had preferred S.L.P. [C]  

No.17219/2009 in this Court and Union of India has also assailed the  

judgment and order of the High Court in S.L.P. [C] No.11114/2009.

3. The only question for consideration is whether an Arbitrator has  

the power to award pendente lite interest in case contract bars the same in  

a case covered by Act and decisions of this Court in Engineers De-Space  

Age (supra) and Madnani Construction Corporation (P) Ltd. (supra) have  

been correctly decided.

4. It was submitted on behalf of the Union of India that the Arbitrator  

is bound by the terms of the contract and cannot award interest in case  

the contract bars the same. On the other hand, learned counsel appearing  

on behalf of M/s. Ambica Construction has contended that in view of the  

decision  in  Engineers-De-Space  Age (supra)  followed  in  Madnani  

Construction Corporation (P) Ltd. (supra) notwithstanding the terms in  

the contract agreement barring the award of interest would cover the pre-

reference period and not pendente lite interest.  

5. There  are  certain  provisions  which  are  statutorily  implied  in  

arbitration agreement unless excluded in the agreement. Section 3 of the  

Act of 1940 deals with the provisions which are implied in the arbitration

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agreement. Section 3 is extracted below :

“3. Provisions implied in arbitration agreement.— An  arbitration  agreement,  unless  a  different  intention  is  expressed therein, shall be deemed to include the provisions  set out in the First Schedule in so far as they are applicable  to the reference.”

The provisions of section 3 make it  clear that unless a different  

intention is expressed in the arbitration agreement, the agreement would  

include the provisions contained in the First Schedule so far as they are  

applicable to the reference.  Provisions in the First  Schedule contain 8  

paragraphs. It provides for reference to a sole Arbitrator and in case there  

are even numbers of Arbitrators, appointment of umpire is also provided.  

An Arbitrator is required to pass award within 4 months from the date of  

entering on the reference. In case Arbitrator fails to pass an award within  

the specified time the umpire shall make the award within 2 months. Para  

6 of First Schedule provides that the Arbitrator or umpire shall examine  

the  matters  in  difference  and  the  award  shall  be  final  and  binding.  

Arbitrator  or  umpire  has  the  power  for  examining  the  witnesses  and  

production of relevant documents. Para 8 of Schedule I provides for costs  

of reference and awards shall be in the discretion of the Arbitrator.  

6.          “Court” has been defined in section 2(c) of the Act to mean a  

civil  court  having  jurisdiction  to  decide  the  questions  forming  the  

subject-matter  of  the  reference.   Section  41  of  the  Act  is  extracted  

hereunder:

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“41.  Procedure  and  powers  of  Court.  –  Subject  to  the  provisions of this Act and of rules made thereunder : (a) The provisions of the Code of Civil Procedure, 1908 (5  

of 1908), shall apply to all proceedings before the Court,  and to all appeals, under this Act, and

(b)The Court shall have, for the purpose of, and in relation  to  arbitration  proceedings,  the  same  power  of  making  orders  in  respect  of  any  of  the  matters  set  out  in  the  Second  Schedule  as  it  has  for  the  purpose  of,  and  in  relation to any proceedings before the Court:

Provided that nothing in CI. (b) shall be taken to prejudice  any power which may be vested in an Arbitrator or umpire  for making orders with respect to any of such matters.”  The court can exercise the power specified in Second Schedule of  

the Act.  However, Arbitrator is not a court. Arbitrator is the outcome of  

agreement.  He decides  the  disputes  as  per  the agreement  entered into  

between the parties. Arbitration is an alternative forum for resolution of  

disputes but an Arbitrator  ipso facto does not enjoy or possess all  the  

powers conferred on the courts of  law.  

7. Section 29 of the Act confers on the court power to award interest  

from the date of decree. Section 34 of the C.P.C. confers on the court  

power  to award interest  prior  to the institution of  the suit  and during  

pendency of the suit and post decree.  

8. A  Constitution  Bench  of  this  Court  in  G.C.  Roy (supra)  has  

considered the question of power of the Arbitrator to award pendente lite  

interest and it has been laid down that if the arbitration agreement or the  

contract itself provides for interest, Arbitrator would have the jurisdiction  

to award the interest. Similarly, where the agreement expressly provides

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that  no interest  pendente lite shall  be payable on the amount due,  the  

Arbitrator  has no power to award  pendente lite interest.   In  G.C. Roy  

(supra) this Court has held thus :

“xxx If the arbitration agreement or the contract itself  provides for award of interest on the amount found due from  one party to the other, no question regarding the absence of  Arbitrator’s jurisdiction to award the interest could arise as  in  that  case  the  Arbitrator  has  power  to  award  interest  pendent  lite as  well.  Similarly,  where  the  agreement  expressly  provides  that  no  interest  pendente  lite shall  be  payable on the amount due, the Arbitrator has no power to  award pendente lite interest. But where the agreement does  not  provide  either  for  grant  or  denial  of  interest  on  the  amount found due, the question arises whether in such an  event  the  Arbitrator  has  power  and  authority  to  grant  pendente lite interest.” The question involved in G.C. Roy (supra) was with respect to the  

award of interest for the period commencing from the date of Arbitrator  

entering upon the reference till the date of making the award.  In  G.C.   

Roy (supra), this Court has considered decisions in Raipur Development   

Authority & Ors. v. M/s. Chokhamal Contractors & Ors., (1989) 2 SCC   

721; Executive Engineer (Irrigation) Balimela & Ors. v. Abhaduta Jena   

& Ors., (1988) 1 SCC 418;  Nachiappa Chettiar & Ors, v. Subramaniam   

Chettiar, AIR 1960 SC 307; Satinder Singh v. Amrao Singh & Anr., AIR   

1961 SC 908; Firm Madanlal Roshanlal Mahajan v. Hukumchand Mills   

Ltd., Indore, AIR 1967 SC 1030; Union of India v. Bungo Steel Furniture   

Pvt. Ltd., AIR 1967 SC 1032; Ashok Construction Company v. Union of   

India, (1971) 3 SCC 66; State of M.P. v. M/s. Saith and Skelton Pvt. Ltd.,   

(1972) 1 SCC 702, various foreign courts decisions and decisions of the

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High Court.  This Court has also referred to Halsbury’s Laws of England  

in Paras 36 & 37 thus:-

“36.  “534.  Express and implied clauses.— In general,  the  parties to an arbitration agreement may include in it  such  clauses as they think fit. By statute, however, certain terms  are  implied  in  an  arbitration  agreement  unless  a  contrary  intention  is  expressed  or  implied  therein.  Moreover,  it  is  normally an implied term of an arbitration agreement that  the Arbitrator must decide the dispute in accordance with the  ordinary law. This includes the basic rules as to procedure,  although parties can expressly or impliedly consent to depart  from those rules. The normal principles on which terms are  implied in an agreement have to be considered in the context  that the agreement relates to an arbitration.”

37. At page 303, para 580 (4th edn., Vol. 2) dealing with  the award of interest, it reads:

“580.  Interest.— A Arbitrator  or  umpire  has  power  to  award interest on the amount of any debt or damages for the  whole or any part of the period between the date when the  cause of action arose and the date of the award.”

       Ultimately,  in  G.C.  Roy (supra),  this  Court  has answered the  

question whether Arbitrator has the power to award interest pendent lite.  

Their Lordships have reiterated that they have dealt  with the situation  

where the agreement does not provide for grant of such interest nor does  

it prohibit such grant when the agreement is silent as to award of interest.  

This Court has laid down various principles in para 43 of the report thus:

“43. The question still  remains whether Arbitrator has the  power  to  award  interest  pendente  lite,  and if  so  on  what  principle.  We must  reiterate  that  we  are  dealing  with  the  situation where the agreement does not provide for grant of  such interest nor does it prohibit such grant. In other words,  we are dealing with a case where the agreement is silent as  to  award  of  interest.  On  a  conspectus  of  aforementioned

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decisions, the following principles emerge:

(i)  A person deprived of  the use of  money to which he is  legitimately entitled has a  right  to  be compensated for  the  deprivation, call  it  by any name. It  may be called interest,  compensation  or  damages.  This  basic  consideration  is  as  valid  for  the  period  the  dispute  is  pending  before  the  Arbitrator  as  it  is  for  the  period  prior  to  the  Arbitrator  entering upon the reference. This is the principle of Section  34, Civil Procedure Code and there is no reason or principle  to hold otherwise in the case of Arbitrator.

(ii)  An  Arbitrator  is  an  alternative  form  (sic forum)  for  resolution of disputes arising between the parties.  If so, he  must have the power to decide all the disputes or differences  arising between the parties. If the Arbitrator has no power to  award interest pendente lite, the party claiming it would have  to approach the court for that purpose, even though he may  have obtained satisfaction in respect of other claims from the  Arbitrator. This would lead to multiplicity of proceedings.

(iii) An Arbitrator is the creature of an agreement. It is open to  the parties to confer upon him such powers and prescribe such  procedure for him to follow, as they think fit, so long as they  are  not  opposed  to  law.  (The  proviso  to  Section  41  and  Section 3 of Arbitration Act illustrate this point). All the same,  the agreement must be in conformity with law. The Arbitrator  must  also  act  and  make  his  award  in  accordance  with  the  general law of the land and the agreement.

(iv) Over the years, the English and Indian courts have acted  on the assumption that where the agreement does not prohibit  and a party to the reference makes a claim for interest,  the  Arbitrator  must  have  the power  to  award interest  pendente  lite.  Seth  Thawardas Pherumal v. Union of India, AIR 1955   SC 468 has not been followed in the later decisions of this  Court.  It  has been explained and distinguished on the basis  that  in that  case there was no claim for interest  but  only a  claim for unliquidated damages. It has been said repeatedly  that observations in the said judgment were not intended to  lay down any such absolute or universal rule as they appear  to, on first impression.  Until Executive Engineer (Irrigation)   Balimela & Ors. v.  Abhaduta Jena & Ors., (1988) 1 SCC 418

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almost all the courts in the country had upheld the power of  the Arbitrator to award interest  pendente lite. Continuity and  certainty is a highly desirable feature of law.

(v) Interest pendente lite is not a matter of substantive law, like  interest  for  the  period  anterior  to  reference  (pre-reference  period). For doing complete justice between the parties, such  power has always been inferred.”

“44. Having regard to the above consideration, we think that the  following is the correct principle which should be followed in  this behalf: Where  the  agreement  between  the  parties  does  not  prohibit  grant  of  interest  and where  a  party  claims  interest  and  that  dispute  (along  with  the  claim  for  principal  amount  or  independently) is  referred to the Arbitrator,  he shall  have the  power to award interest pendente lite. This is for the reason that  in such a case it must be presumed that interest was an implied  term of the agreement between the parties and therefore when  the parties refer all their disputes — or refer the dispute as to  interest as such — to the Arbitrator, he shall have the power to  award  interest.  This  does  not  mean  that  in  every  case  the  Arbitrator should necessarily award interest pendente lite. It is a  matter within his discretion to be exercised in the light of all the  facts and circumstances of the case, keeping the ends of justice  in view.”

The Constitution Bench of this Court has laid down that where the  

agreement  between  the  parties  does  not  prohibit  grant  of  interest  and  

where  the  party  claims  interest  and  that  dispute  is  referred  to  the  

Arbitrator, he shall have the power to award interest  pendent lite.  The  

law declared has been held applicable prospectively.

9. Another Constitution Bench of this Court in N.C. Budharaj (supra),  

considered the question of award of interest by the Arbitrator for the pre-

reference period.  In that connection, discussion has been made and it has

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been observed as long as there is nothing in the arbitration agreement to  

exclude the jurisdiction of the Arbitrator entertaining claim for interest on  

the amount due under the contract or any provision to claim interest on  

the amount due, the jurisdiction of the Arbitrator to award interest for  

pre-reference period under section 29 of the Arbitration Act, 1940 has to  

be upheld.  In majority opinion, this Court has held thus:

“25. If that be the position, courts which of late encourage  litigants  to  opt  for  and avail  of  the  alternative method of  resolution of disputes, would be penalising or placing those  who avail of the same in a serious disadvantage. Both logic  and reason should counsel courts to lean more in favour of  the  Arbitrator  holding  to  possess  all  the  powers  as  are  necessary to do complete and full justice between the parties  in the same manner in which the civil court seized of the  same dispute could have done. By agreeing to settle all the  disputes and claims arising out of or relating to the contract  between  the  parties  through  arbitration  instead  of  having  recourse  to  civil  court  to  vindicate  their  rights  the  party  concerned cannot be considered to have frittered away and  given  up  any  claim  which  otherwise  it  could  have  successfully asserted before courts and obtained relief.  By  agreeing to have settlement of disputes through arbitration,  the party concerned must be understood to have only opted  for a different forum of adjudication with less cumbersome  procedure, delay and expense and not to abandon all or any  of  its  substantive  rights  under  the  various  laws  in  force,  according to  which only even the Arbitrator  is  obliged to  adjudicate  the claims referred to him. As long as there is  nothing  in  the  arbitration  agreement  to  exclude  the  jurisdiction of the Arbitrator to entertain a claim for interest  on the amounts due under the contract, or any prohibition to  claim interest on the amounts due and become payable under  the contract, the jurisdiction of the Arbitrator to consider and  award  interest  in  respect  of  all  periods  subject  only  to  Section  29  of  the  Arbitration  Act,  1940  and  that  too  the  powers  of  the  court  thereunder,  has  to  be  upheld.  The  submission  that  the  Arbitrator  cannot  have  jurisdiction  to  award  interest  for  the  period  prior  to  the  date  of  his

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appointment or entering into reference which alone confers  upon  him  power,  is  too  stale  and  technical  to  be  countenanced  in  our  hands,  for  the  simple  reason  that  in  every case the appointment of an Arbitrator or even resort to  court to vindicate rights could be only after disputes have  cropped  up   between  the  parties  and  continue  to  subsist  unresolved, and that if the Arbitrator has the power to deal  with and decide disputes which cropped up at a point of time  and for the period prior to the appointment of an Arbitrator,  it is beyond comprehension as to why and for what reason  and with what justification the Arbitrator should be denied  only the power to award interest for the pre-reference period  when such interest becomes payable and has to be awarded  as an accessory or incidental to the sum awarded as due and  payable,  taking into account the deprivation of  the use of  such sum to the person lawfully entitled to the same.

26. For all the reasons stated above, we answer the reference  by holding that the Arbitrator appointed with or without the  intervention of the court, has jurisdiction to award interest,  on the sums found due and payable,  for the pre-reference  period,  in  the  absence  of  any  specific  stipulation  or  prohibition  in  the  contract  to  claim  or  grant  any  such  interest. The decision in Jena case taking a contraview does  not  lay  down  the  correct  position  and  stands  overruled,  prospectively,  which  means  that  this  decision  shall  not  entitle any party nor shall it empower any court to reopen  proceedings  which  have  already  become  final,  and  apply  only to any pending proceedings. No costs.”

    It has also been observed that G.C. Roy’s case (supra) cannot be said  

to have overruled Executive Engineer (Irrigation) Balimela’s case (supra)  

insofar as it dealt with the power of Arbitrator to award interest for the  

pre-reference period.

10. A 3 Judges Bench of this Court in  Hindustan Construction  Co.   

Ltd. v. State of Jammu & Kashmir (1992) 4 SCC 217 has laid down that  

the Arbitrator has the power to award pendente lite interest on the basis of

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principle of Section 34 of the Code of Civil Procedure though same is not  

applicable.  However, the observation has to be considered in case there  

is no express bar in the agreement for awarding pendente lite interest as it  

has simply followed what has been laid down in G.C. Roy (supra).  This  

Court has laid down thus:

“5. The question of interest can be easily disposed of as it is  covered by recent decisions of this Court. It is sufficient to  refer  to  the  latest  decision  of  a  five  Judge  bench  of  this  Court in  Secretary, Irrigation Department, Govt. of Orissa  & Ors. v. G.C. Roy. Though the said decision deals with the  power of the Arbitrator to award interest  pendente lite, the  principle of the decision makes it clear that the Arbitrator is  competent to award interest for the period commencing with  the date of award to the date of decree or date of realisation,  whichever  is  earlier.  This  is  also  quite  logical  for,  while  award  of  interest  for  the  period  prior  to  an  Arbitrator  entering upon the reference is a matter of substantive law,  the grant of interest for the post-award period is a matter of  procedure. Section 34 of Code of Civil Procedure provides  both for awarding of interest pendente lite as well as for the  post-decree period and the principle of Section 34 has been  held applicable to proceedings before the Arbitrator, though  the section as such may not apply. In this connection, the  decision in Union of India v. Bungo Steel Furniture (P) Ltd.  AIR  1967  SC  1032 may  be  seen  as  also  the  decision  in  Gujarat  Water  Supply  &  Sewerage  Board v.  Unique  Erectors (Gujarat) P. Ltd. 1989 1 532 SCC   which upholds  the said power though on a somewhat  different reasoning.  We, therefore,  think that the award on Item No. 8 should  have been upheld.”

11. In Sayeed Ahmed (supra) various decisions of this Court have been  

referred. In  State of Orissa v. B.N. Agarwalla, (1997) 2 SCC 469,  this  

Court has laid down thus:

“18. In view of the aforesaid decisions there can now be no  doubt  with  regard  to  the  jurisdiction  of  the  Arbitrator  to

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grant interest. The principles which can now be said to be  well-settled  are  that  the  Arbitrator  has  the  jurisdiction  to  award pre-reference interest in cases which arose after the  Interest  Act,  1978 had become applicable.  With regard to  those cases pertaining to the period prior to the applicability  of the Interest Act, 1978, in the absence of any substantive  law, contract or usage, the Arbitrator has no jurisdiction to  award interest. For the period during which the arbitration  proceedings were pending in view of the decision in  G.C.   Roy  case and  Hindustan  Construction  Ltd.  case,  the  Arbitrator has the power to award interest. The power of the  Arbitrator to award interest for the post-award period also  exists and this aspect has been considered in the discussion  relating to Civil Appeal No. 9234 of 1994 in the later part of  this judgment.”

   12. The decision in  B.N. Agarwalla (supra) has been considered and  

distinguished by this Court in Sayeed Ahmed (supra) thus :

“20. The  appellant  next  relied  upon the  judgment  of  this  Court in  State of Orissa v.  B.N. Agarwalla (1997) 2 SCC  469.  In  that  case,  this  Court  held  that  the  Arbitrator  has  jurisdiction  to  award:  (i)  interest  for  pre-reference  period,  (ii) interest for pendente lite, and (iii) future interest. This  Court also held that the following part of Clause (4) of the  contract  dealing with “Rates,  materials and workmanship”  did not bar award of interest by the Arbitrator on the claims  of the contractor: (SCC p. 478, para 22)

No interest is payable on amount withheld under the  item of the agreement.

Interpreting the said clause (which provided that interest was  not payable on the amount which was withheld), this Court  held  that  it  referred  only  to  the  amount  withheld  by  the  employer  State  towards  retention  money  for  the  defect  liability period. This Court in fact clarified the position that  if the terms of contract expressly stipulated that no interest  would  be  payable,  then  the  Arbitrator  would  not  get  the  jurisdiction to award interest. As Clause G1.09 in the present  case contains an express bar and is different from the clause  considered in  B.N.  Agarwalla (supra)  the  said  decision  is  also of no assistance.”

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In B.N. Agarwalla (supra) this Court has observed that Clause 4 of  

the contract dealing with “Rates, materials and workmanship” did not bar  

award of interest by the Arbitrator on the claims of the contractor. The  

stipulation was no interest was payable on amount withheld under the  

agreement.  

13. In  Sayeed Ahmed (supra), this Court has referred the decision in  

State of U.P. v. Harish Chandra & Co. (1999) 1 SCC 63, in which this  

Court  has  interpreted  the  stipulation  contained  in  clause  1.9  of  the  

agreement which came up for consideration before a 3 Judges Bench of  

this Court.  Clause 1.9 is extracted hereunder:

“1.9 No claim for delayed payment due to dispute etc.—No  claim  for  interest  or  damages  will  be  entertained  by  the  Government with respect to any moneys or balances which  may be lying with the Government owing to any dispute,  difference;  or  misunderstanding  between  the  Engineer-in- Charge in marking periodical or  final  payments or  in any  other respect whatsoever.”

This Court has interpreted the clause 1.9 and held that there is no  

provision which could be culled out  against  the respondent-contractor  

that he could not raise claim of interest by way of damages before the  

Arbitrator on the relevant items placed for adjudication.   

This  Court  in  Sayeed Ahmed (supra)  has  also  distinguished the  

decision in  Harish Chandra  (supra) in which clause 1.09 came up for  

consideration thus :

“17.   x x x x x This Court held that the said clause did not  bar award of interest on any claim for damages or for claim

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for payment for work done. We extract below the reasoning  for such decision: (SCC p. 67, para 10)

“10. A mere look at the clause shows that the claim  for  interest  by  way  of  damages  was  not  to  be  entertained  against  the  Government  with  respect  to  only a specified type of amount, namely, any moneys  or balances which may be lying with the Government  owing  to  any  dispute,  difference  between  the  Engineer-in-Charge  and  the  contractor;  or  misunderstanding  between  the  Engineer-in-Charge  and  the  contractor  in  making  periodical  or  final  payments  or  in  any  other  respect  whatsoever.  The  words  ‘or  in  any  other  respect  whatsoever’  also  referred  to  the  dispute  pertaining  to  the  moneys  or  balances  which  may be  lying with  the  Government  pursuant to the agreement meaning thereby security  deposit or retention money or any other amount which  might have been with the Government and refund of  which might have been withheld by the Government.  The claim for damages or claim for payment for the   work  done  and  which  was  not  paid  for  would  not   obviously cover any money which may be said to be   lying  with  the  Government.  Consequently,  on  the  express language of this clause, there is no prohibition  which  could  be  culled  out  against  the  respondent  contractor that he could not raise the claim for interest  by  way  of  damages  before  the  Arbitrator  on  the  relevant  items  placed  for  adjudication.”  (emphasis supplied)

18. In Harish Chandra (1999) 1 SCC 63 a different version  of  Clause  1.09  was  considered.  Having  regard  to  the  restrictive wording of that clause, this Court held that it did  not bar award of interest on a claim for damages or a claim  for payments for work done and which was not paid. This  Court held that the said clause barred award of interest only  on amounts which may be lying with the Government by  way  of  security  deposit/retention  money  or  any  other  amount, refund of which was withheld by the Government.

19. But  in the present  case,  Clause G1.09 is  significantly  different.  It  specifically  provides  that  no  interest  shall  be  payable  in  respect  of  any  money  that  may  become  due  owing  to  any  dispute,  difference  or  misunderstanding

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between  the  Engineer-in-Charge  and  contractor  or with  respect to any delay on the part of the Engineer-in-Charge in  making periodical or final payment or in respect of any other  respect whatsoever. The bar under Clause G1.09 in this case  being absolute, the decision in Harish Chandra (supra) will  not assist the appellant in any manner.”

In  Harish Chandra (supra), this Court has laid down that clause  

1.09 did not bar award of interest for claim of damages for payment for  

work done and which was not paid for would not obviously cover any  

money which may be said to be lying with the Government.

14. In  our  opinion,  it  would  depend  upon  the  nature  of  the  ouster  

clause in each case.  In case there is express stipulation which debars  

pendente lite interest, obviously, it cannot be granted by Arbitrator.  The  

award of  pendente lite interest  inter alia must depend upon the overall  

intention of the agreement and what is expressly excluded.

15. In  Sayeed Ahmed (supra), this Court has referred the decision in  

Superintending  Engineer  v.  B.  Subba  Reddy (1999)  4  SCC  423  and  

observed thus :

“11. Two more decisions dealing with cases arising under  the  Arbitration  Act,  1940  require  to  be  noticed.  In  Superintending Engineer v.  B. Subba Reddy (1999) 4 SCC  423 this Court held that interest for pre-reference period can  be awarded only if there was an agreement to that effect or if  it  was  allowable  under  the  Interest  Act,  1978.  Therefore,  claim for interest for pre-reference period, which is barred as  per the agreement or under the Interest Act, 1978 could not  be allowed. This Court however held that the Arbitrator can  award interest pendente lite and future interest.”

In Sayeed Ahmed (supra) this Court has also referred the decision

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in  State of  Rajasthan & Anr.  v.  Ferro Concrete  Construction (P) Ltd.  

(2009) 12 SCC 1 thus :

“12. The principles relating to interest were summarised by  this  Court  in  State  of  Rajasthan v.  Ferro  Concrete   Construction (P) Ltd. (2009) 12 SCC 1 thus:

  (a) Where a provision for interest is made on any debt or  damages,  in  any  agreement,  interest  shall  be  paid  in  accordance with such agreement.    (b) Where payment of interest on any debt or damages is  barred by express provision in the contract, no interest shall  be awarded.

  (c) Where there is no express bar in the contract and where  there is also no provision for payment of interest then the  principles of  Section 3 of  the Interest  Act  will  apply and  consequently interest will be payable:

  (i) where the proceedings relate to a debt (ascertained sum)  payable by virtue of a written instrument at a certain time,  then from the date when the debt is payable to the date of  institution of the proceedings;    (ii) where the proceedings is for recovery of damages or  for recovery of a debt which is not payable at a certain time,  then from the date mentioned in a written notice given by  the person making a claim to the person liable for the claim  that interest will be claimed.

(d) Payment of interest pendente lite and future interest shall  not be governed by the provisions of the Interest Act, 1978,  but  by the provisions of  Section 34 of  the Code of  Civil  Procedure,  1908  or  the  provisions  of  law  governing  arbitration as the case may be.”

In  Sayeed  Ahmed (supra),  the  provisions  of  Arbitration  &  

Conciliation Act, 1996 were applicable.  

16. A 3-Judge Bench of this Court in Union of India v. Bright Power   

Projects  (India)  Pvt.  Ltd.  (2015)  9  SCC  695  has  considered  the

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provisions  contained  in  section  31(7)(a)  of  the  Arbitration  and  

Conciliation  Act,  1996  and  considered  the  words  “unless  otherwise  

agreed by parties” in the said section and held that the Arbitrator is bound  

by the terms of the contract so far as award of interest from the date of  

execution to the date of award is concerned. This Court considered clause  

13(3) of the contract and came to the conclusion that once agreed that  

contractor would not claim any interest on the amount to be paid under  

the contract, he could not have claimed the interest. The Arbitrator while  

awarding interest failed to consider the provisions of section 31(7)(a) and  

binding nature of clause 13(3) of the terms of agreement.  With respect to  

section 31(7)(a) of the Arbitration & Conciliation Act, 1996 this Court in  

Union of India v. Bright Power Projects  (supra) has observed thus :

“18. Section 31(7)(a) of the Act ought to have been read and  interpreted  by  the  Arbitral  Tribunal  before  taking  any  decision with regard to awarding interest. The said section,  which has been reproduced hereinabove, gives more respect  to  the  agreement  entered  into  between  the  parties.  If  the  parties  to the agreement agree not  to pay interest  to each  other,  the Arbitral  Tribunal  has no right  to  award interest  pendente lite.”

    Section 31(7)(a) of the 1996 Act confers power on Arbitrator to award  

interest  pendente lite, “unless otherwise agreed by parties”.  Thus, it is  

clear from the provisions contained in section 31(7)(a) that the contract  

between the parties  has  been given importance  and is  binding on the  

Arbitrator.  Arbitration  clause  is  also  required  to  be  looked into  while  

deciding  the  power  of  the  Arbitrator  and  in  case  there  is  any  bar

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contained in the contract on award of interest, it operates on which items  

and in the arbitration clause what are the powers conferred on Arbitrator  

and whether bar on award of interest has been confined to certain period  

or it relates to pendency of proceedings before Arbitrator.   

17. In  Sree Kamatchi Amman Constructions  (supra), it was observed  

that the words “unless otherwise agreed by the parties” in section 31 of  

new Act of 1996 clarify that Arbitrator is bound by the terms of contract  

for award of interest pendente lite. It was also held thus :

“19. Section  31(7)  of  the  new  Act  by  using  the  words  “unless  otherwise  agreed  by  the  parties”  categorically  clarifies  that  the  Arbitrator  is  bound  by  the  terms  of  the  contract  insofar  as  the award of  interest  from the date  of   cause of action to the date of award. Therefore, where the  parties  had  agreed  that  no  interest  shall  be  payable,  the  Arbitral  Tribunal  cannot  award  interest  between  the  date  when the cause of action arose to the date of award.

20. We are of the view that the decisions in  Engineers-De- Space-Age (supra) and Madnani  (supra) are inapplicable for  yet another reason. In Engineers-De-Space-Age (supra) and  Madnani  (supra) the Arbitrator had awarded interest for the  pendente lite period. This Court upheld the award of such  interest under the old Act on the ground that the Arbitrator  had  the  discretion  to  decide  whether  interest  should  be  awarded or not during the pendente lite period and he was  not bound by the contractual terms insofar as the interest for  the pendente lite period. But in the instant case the Arbitral  Tribunal has refused to award interest for the pendente lite  period.  Where  the  Arbitral  Tribunal  has  exercised  its  discretion  and  refused  award  of  interest  for  the  period  pendente lite, even if the principles in those two cases were  applicable,  the  award  of  the  Arbitrator  could  not  be  interfered  with.  On  this  ground  also  the  decisions  in  Engineers-De-Space-Age (supra)  and  Madnani (supra)  are  inapplicable. Be that as it may.”

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18. This Court in  Union of India v. Krafters Engineering & Leasing   

Pvt. Ltd. (2011) 7 SCC 279 has held that by a provision in the agreement,  

the jurisdiction of the Arbitrator to award interest can be excluded. This  

Court considered the nature of the claim vis-à-vis the provision contained  

in the relevant clause.

19. It is apparent from various decisions referred to above that in G.C.   

Roy (supra)  Constitution  Bench  of  this  Court  has  laid  down  where  

agreement  expressly  provides  that  no  interest  pendente  lite shall  be  

payable on amount due. The arbitrator has no power to award interest.  In  

N.C. Budharaj (supra) a Constitution Bench has observed that in case  

there is nothing in the arbitration agreement to exclude jurisdiction of  

arbitrator to entertaining claim for interest, the jurisdiction of arbitrator to  

consider and award interest in respect to all periods is subject to section  

29 of the Act.  In Hindustan Construction Co. Ltd. (supra) this Court has  

followed decision in G.C. Roy (supra) and laid down that on the basis of  

principles  of  section  34  arbitrator  would  have  the  power  to  award  

pendente lite interest also. In B.N. Agarwalla (supra), this Court has again  

followed G.C. Roy (supra) and Hindustan Construction Co. Ltd. (supra)  

with respect to power of arbitrator to award pendente lite interest and it  

was held that arbitrator has power to award interest.  In Harish Chandra  

(supra) this Court interpreted the clause 1.9 which provided that no claim  

for interest or damages will be entertained by the Government in respect

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to any moneys or balances which may be lying with the Government. It  

was held that there was no provision which could be culled out against  

the  contractor  not  to  claim  interest  by  way  of  damages  before  the  

arbitrator  on  the  relevant  items  placed  for  adjudication.  In  Ferro  

Concrete  Construction (P) Ltd.  (supra)  this  Court  considered clause 4  

containing a stipulation that no interest was payable on amount withheld  

under the agreement. It was held that clause 4 dealt with rates, material  

and workmanship did not bar award of interest by the arbitrator on claims  

of the contractor made in the said case. In  Sayeed Ahmed (supra) this  

Court has emphasized that award of interest would depend upon nature of  

the clause in the agreement. In  Bright Power Projects (India) Pvt. Ltd.  

(supra) this Court has considered the expression “unless otherwise agreed  

by parties”  employed in section 31(7)(a)  of  the  Act  of  1996 and laid  

down that in case contract bars claim of interest contractor could not have  

claimed interest. The provision of section 31(7)(a) of the Act of 1996 is  

binding  upon  the  arbitrator.  In  Sree  Kamatchi  Amman  Constructions  

(supra) similar view has been taken.        

20. Now we come to the question of correctness of decision of this  

Court rendered by a Bench of two Judges in  Engineers-De-Space-Age  

(supra) which has been referred for our consideration in which this Court  

after consideration of G.C. Roy’s case has observed thus :

“3…..  It  will  appear  from  what  the  Constitution  Bench  stated to be the legal position, that ordinarily a person who is

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deprived of his money to which he is legitimately entitled as  of right is entitled to be compensated in deprivation thereof,  call  it  by  whatever  name.  This  would  be in  terms of  the  principle  laid  down  in  Section  34  of  the  Code  of  Civil  Procedure.  Their  Lordships  pointed  out  that  there  was no  reason  or  principle  to  hold  otherwise  in  the  case  of  an  Arbitrator.  Pointing  out  that  Arbitrator  is  an  alternative  forum for resolution of disputes arising between the parties,  it said that he must have the power to decide all disputes and  differences arising between the parties and if he were to be  denied the power to award interest  pendente lite, the party  entitled thereto would be required to go to a  court  which  would result in multiplicity of proceedings, a situation which  the court should endeavour to avoid. Reliance was, however,  placed  on  the  observation  in  sub-para  (iii)  wherein  it  is  pointed out that an Arbitrator is a creature of an agreement  and  if  the  agreement  between  the  parties  prohibits  the  payment of interest  pendente lite the Arbitrator must act in  accordance  therewith.  In  other  words,  according  to  their  Lordships  the  Arbitrator  is  expected  to  act  and  make  his  award in accordance with the general law of the land but  subject  to  an agreement,  provided,  the agreement  is  valid  and legal. Lastly, it was pointed out that interest  pendente   lite is not a matter of substantive law, like interest for the  period anterior to reference. Their Lordships concluded that  where the agreement between the parties does not prohibit  grant of interest and where a party claims interest and that  dispute is referred to the Arbitrator, he shall have the power  to award interest  pendente lite for the simple reason that in  such a case it is presumed that interest was an implied term  of the agreement between the parties; it is then a matter of  exercise of discretion by the Arbitrator. The position in law  has, therefore, been clearly stated in the aforesaid decision  of the Constitution Bench”.

4. We are  not  dealing  with  a  case  in  regard  to  award of  interest for the period prior to the reference. We are dealing  with a case in regard to award of interest by the Arbitrator  post reference. The short question, therefore, is whether in  view of sub-clause (g) of clause 13 of the contract extracted  earlier the Arbitrator was prohibited from granting interest  under the contract. Now the term in sub-clause (g) merely  prohibits the Commissioner from entertaining any claim for  interest and does not prohibit the Arbitrator from awarding

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interest.  The opening words “no claim for interest will  be  entertained  by  the  Commissioner”  clearly  establishes  that  the  intention  was  to  prohibit  the  Commissioner  from  granting  interest  on  account  of  delayed  payment  to  the  contractor. Clause has to be strictly construed for the simple  reason  that  as  pointed  out  by  the  Constitution  Bench,  ordinarily, a person who has a legitimate claim is entitled to  payment within a reasonable time and if  the payment has  been  delayed  beyond  reasonable  time he  can  legitimately  claim  to  be  compensated  for  that  delay  whatever  nomenclature one may give to his claim in that behalf.”

21.      In Sayeed Ahmed (supra) the decision in Engineers-De-Space-Age  

(supra) has been considered and it was observed that it cannot be used to  

support  an  outlandish  argument  that  bar  on  the  Government  or  

department  paying  interest  is  not  a  bar  on  the  Arbitrator  awarding  

interest.  This  Court  expressed  doubt  as  to  the  correctness  of  certain  

observations made in Engineers-De-Space-Age (supra) to the extent that  

the Arbitrator could award interest pendente lite ignoring the express bar  

in the contract. But this Court did not consider the question further as the  

case  in  Sayeed  Ahmed (supra)  arose  under  the  Arbitration  and  

Conciliation Act of 1996, and there was a specific provision under new  

Act regarding award of interest by the Arbitrator. From the discussion  

made  in  Sayeed  Ahmed (supra)  it  is  apparent  that  this  Court  has  

emphasized that it would depend upon the nature of clause and claim etc.  

and it  is  required to be found on consideration of  stipulation whether  

interest is barred, if yes, on what amounts interest is barred under the  

contract.

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22. A three-Judge Bench of this Court in Tehri  Hydro Development   

Corporation  Limited  and  Another  v.  Jai  Prakash  Associates  Limited,  

(2012) 12 SCC 10, has considered the question which has been referred  

in the instant case and it has been laid down in the context of clauses  

1.2.14 and 1.2.15 imposed  a clear bar on either entertainment or payment  

of interest in any situation of non-payment or delayed payment of either  

the amounts due for work done or lying in security deposit.  Thus, the  

arbitrator had no power to grant  pendente lite interest.   This Court has  

also doubted the correctness of the decisions in Engineers-De-Space Age  

(supra)  and  Madnani Construction Corporation (P) Ltd. (supra).  This  

court has considered the aforesaid clauses and various decisions in Tehri   

Hydro Development  Corporation  (supra)  in which one of  us Ranjan  

Gogoi, J. spoke for  the Court.  This Court has laid down thus :–

“14. This will lead the court to a consideration of what is  the principal bone of contention between the parties in the  present  case, namely, the issue with regard to payment of  interest.  Clauses  1.2.14  and  1.2.15  on  which  much  arguments have been advanced by Learned Counsel for both  sides may now be extracted below:

PART - II CONDITIONS OF CONTRACT

1.2.14. No claim for delayed payment due to dispute,   etc.  -  The  contractor  agrees  that  no  claim for  interest  of  damages will be entertained or payable by the Government  in respect  of  any money or balances which may be lying  with the Government owing to any disputes, differences or  misunderstandings between the parties or in respect of any  delay or omission on the part of the engineer-in-charge in  making immediate or final payments or in any other respect  whatsoever. 1.2.15. Interest on money due to the contractor.  - No

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omission on the part  of  the engineer-in-charge to pay the  amount due upon measurement or otherwise shall vitiate or  make void the contract, nor shall the contractor be entitled to  interest upon any guarantee or payments in arrears nor upon  any  balance  which  may  on  the  final  settlement  of  his  accounts be due to him. A reading  of  the  aforesaid  two  clauses  of  the  contract  agreement  between  the  parties  clearly  reveal  that  despite  some overlapping of the circumstances contemplated by the  two clauses, no interest is payable to the contractor for delay  in payment, either, interim or final, for the works done or on  any  amount  lying  in  deposit  by  way  of  guarantee.  The  aforesaid  contemplated  consequence  would  be  applicable  both  to  a  situation  where  withholding  of  payment  is  on  account of some dispute or difference between the parties or  even otherwise. 15. Of the several decisions of this Court referred to by  the learned counsel for the appellant the judgments of the  Constitution Bench of this Court in Irrigation Deptt., Govt.   of Orissa v. G.C. Roy, (1992) 1 SCC 508 and  Dhenkanal   Minor Irrigation Division v. N.C. Budharaj,  (2001) 2 SCC  721 will require specific notice. The true ratio laid down in  the  aforesaid  two  judgments  have  been  elaborately  considered in a more recent pronouncement of this Court in  the case of Union of India v. Krafters Engg. and Leasing (P)   Ltd., (2011) 7 SCC 279. In Krafters Engineers's case (supra)  the  ratio  of  the  decision  in  G.C.  Roy's  case (supra)  was  identified to mean that if the agreement between the parties  does not prohibit grant of interest and the claim of a party to  interest is referred to the arbitrator, the arbitrator would have  the power to award the interest. This is on the basis that in  such a case of silence (where the agreement is silent) it must  be  presumed  that  interest  was  an  implied  term  of  the  agreement and,  therefore, whether such a claim is tenable  can be examined by the arbitrator in the reference made to  him.  The  aforesaid  view,  specifically,  is  with  regard  to  pendente  lite interest.  In  the  subsequent  decision  of  the  Constitution Bench in N.C. Budharaj's case (supra) a similar  view  has  been  taken  with  regard  to  interest  for  the  pre- reference period. 16.  In  Krafters  Engineers'  case  (supra), the  somewhat  discordant note struck by the decisions of this Court  in Port   of  Calcutta  v.  Engineers-De-Space-Age  (supra)  and  Madnani  Construction  Corporation  Private  Limited  v.  

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Union of India and Ors.  (supra), were also taken note of.  Thereafter,  it  was  also  noticed  that  the  decision  in  Engineers-De-Space-Age's  case (supra)  was  considered  in  Sayeed Ahmed & Co. v. State of U.P. (supra) and the decision  in  Madnani  Construction  case (supra)  was  considered  in  Sree Kamatchi Amman Constructions v. Railways  (2010) 8  SCC 767. In Sayeed Ahmed's case (supra) (SCC para 24) it  was held that in the light of the decision of the Constitution  Bench  in  G.C.  Roy's  case (1992)  1  SCC  508  and  N.C.  Budharaj case (2001) 2 SCC 721 it is doubtful whether the  observations  in  Engineers-de-Space-Age's  case (supra)  to  the effect that the Arbitrator could award interest  pendente  lite, ignoring the express bar in the contract, is good law. In  Sree  Kamatchi  Amman Construction's  case  (Supra)  while  considering Madnani's case (supra) this Court noted that the  decision in  Madnani case  (supra) follows the decision in  Engineers-de-Space-Age's case (supra). 17.  From  the  above  discussions,  it  is  crystal  clear  that  insofar  as  pendente  lite interest  is  concerned,  the  observations contained in Para 43 and 44 of the judgment in  G.C. Roy case (supra) will hold the field. Though the gist of  the said principle has been noticed earlier it would still be  appropriate to set out para 44 of the judgment in G.C. Roy's   case (supra) which is in the following terms: 44. Having regard to the above consideration, we think that  the  following  is  the  correct  principle  which  should  be  followed in this behalf. Where the agreement between the parties does not prohibit  grant of interest and where a party claims interest and that  dispute  (along  with  the  claim  for  principal  amount  or  independently) is referred to the arbitrator, he shall have the  power to award interest pendente lite. This is for the reason  that in such a case it must be presumed that interest was an  implied  term  of  the  agreement  between  the  parties  and  therefore when the parties refer all their disputes - or refer  the dispute as to interest as such - to the arbitrator, he shall  have the power to award interest. This does not mean that in  every case the arbitrator  should necessarily award interest  pendente  lite.  It  is  a  matter  within  his  discretion  to  be  exercised in the light of all the facts and circumstances of  the case, keeping the ends of justice in view. 18.  The  provisions  of  the  U.P.  Civil  Laws  (Reforms  and  Amendment)  Act  amending  the  First  Schedule  to  the  Arbitration  Act,  1940  does  not  assist  the  respondent

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contractor in any manner to sustain the claim of award of  interest  pendente  lite,  inasmuch,  as  Para  7-A of  the  First  Schedule, as amended, is only an enabling provision which  will  have  no  application  to  a  situation  where  there  is  an  express bar to the entertainment or payment of interest on  the delayed payment either of an amount due for the work  done  or  of  an  amount  lying  in  deposit  as  security.  The  decision in  B.N. Agarwalla case (supra) on which reliance  has been placed by the learned counsel for the respondent,  once again, does not assist the claim of the respondent to  interest  pendente lite inasmuch as in  B.N. Agarwalla case  (supra)  the  views of  the  Constitution  Bench in  G.C.  Roy  case (supra) with regard to interest  pendente lite could not  have been and, in fact, were not even remotely doubted. The  observation  of  the  Bench  in  B.N.  Agarwalla  case that  in  G.C. Roy case (supra) the decision in Deptt. of Irrigation v.   Abhaduta Jena (1988) 1 SCC 418 was not  overruled was  only in the context of the issue of award of interest for the  pre- reference period. The decision in  Asian Techs Limited   case (supra) also relied on by the respondent takes note of  the  decision  in  Engineers-De-Space-Age  case (supra)  to  come  to  the  conclusion  the  prohibition  on  payment  of  interest contained in Clause 11 of the agreement between the  parties was qua the department and did not bar the arbitrator  from entertaining the claim. It has already been noticed that  the correctness of the propositions laid down in Engineers- De-Space-Age  case (supra)  have  been  doubted  in  the  subsequent decisions of this Court, reference to which has  already been made. 19.  Clauses  1.2.14  and  1.2.15,  already  extracted  and  analysed,  imposed  a  clear  bar  on  either  entertainment  or  payment  of  interest  in  any  situation  of  non-payment  or  delayed payment of either the amounts due for work done or  lying in security deposit. On the basis of the discussions that  have preceded we, therefore, take the view that the grant of  pendente lite interest on the claim of Rs. 10,17,461/- is not  justified. The award as well as the orders of the courts below  are accordingly modified to the aforesaid extent.”

In  para  4  in  Engineers-De-Space-Age (supra)  this  Court  has  

observed that bar under the contract will not be applicable to Arbitrator  

cannot be said to be observation of general application.  In our opinion, it

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would depend upon the stipulation in the contract in each case whether  

power  of  Arbitrator  to  grant  pendente  lite interest  is  expressly  taken  

away.  If answer is ‘yes’ then Arbitrator would have no power to award  

pendente lite interest.

23. The  decision  in  Madnani  Construction  Corporation (supra) has  

followed  decision  in  Engineers-De-Space-Age (supra).   Same  is  also  

required to be diluted to the extent that express stipulation under contract  

may debar the Arbitrator from awarding interest pendente lite.  Grant of  

pendente  lite interest  may  depend  upon  several  factors  such  as  

phraseology used in the agreement, clauses conferring power relating to  

arbitration, nature of claim and dispute referred to Arbitrator and on what  

items power to award interest has been taken away and for which period.  

24.   Thus, our answer to the reference is that if contract expressly bars  

award  of  interest  pendente  lite,  the  same  cannot  be  awarded  by  the  

Arbitrator.  We also make it clear that the bar to award interest on delayed  

payment by itself will  not be readily inferred as express bar to award  

interest  pendente  lite by  the  Arbitral  Tribunal,  as  ouster  of  power  of  

Arbitrator has to be considered on various relevant aspects referred to in  

the decisions of this Court, it would be for the Division Bench to consider  

the case on merits.

                                                                                ………………………J. (Ranjan Gogoi)

………………………J.

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(Arun Mishra)

New Delhi; ……………………….J. March 16, 2016. (Prafulla C. Pant)