Holding

Clause 22 does not expressly bar the arbitrator from awarding pendente lite interest, so the arbitrator's power remains and the appeal is allowed with 9% interest.

Summary

M/s Ferro Concrete Construction (India) Pvt. Ltd. entered into a works contract with the State of Rajasthan that contained Clause 22 prohibiting the contractor from claiming any interest on payments, arrears or balances. Disputes led to arbitration under the Arbitration Act, 1940, where the arbitrator awarded the contractor a sum with 15% pendente lite interest. The District Judge and the Rajasthan High Court reduced the interest to 9% simple interest, holding that Clause 22 barred the arbitrator's power to award interest. The Supreme Court examined the interpretation of contractual clauses under the 1940 Act and the 1996 Act, emphasizing that an express bar must be clear and specific to exclude pendente lite interest. It held that Clause 22, being a general prohibition on the contractor's claim, does not expressly bar the arbitrator from granting pendente lite interest. Consequently, the Court set aside the High Court's decision and allowed the appeal, directing that 9% pendente lite interest be awarded from the date of reference to the date of the award. The appeal was allowed and costs were left to the parties.

Issues considered

Whether Clause 22, which bars the contractor from claiming interest on any payment, constitutes an express bar on the arbitrator's power to award pendente lite interest under the Arbitration Act, 1940.
How contractual clauses barring interest are to be interpreted under the Arbitration Act, 1940 versus the Arbitration and Conciliation Act, 1996.

Legislation cited

Subjects

Grant of interest under Arbitration Act, 1940Contractual clausesPayment of interestPendente lite interest on arbitral sumPhraseology of the agreementClauses conferring powers relating to arbitrationPower to award interestExpress contractual bar on payment of pendente lite interest

Judgment

[2025] 4 S.C.R. 529 : 2025 INSC 429

M/s Ferro Concrete Construction (India) Pvt. Ltd.
v.
The State of Rajasthan
(Civil Appeal No. 4723 of 2025)
02 April 2025
[Pamidighantam Sri Narasimha* and Joymalya Bagchi, JJ.]

Issue for Consideration
Whether the contractual clause that bars the appellant/contractor
from claiming any interest on any payment, arrears or balance due
to it amounts to an express bar on the arbitrator’s power to grant
pendente lite interest as per the law under the Arbitration Act, 1940.

Headnotes†
Arbitration Act, 1940 – Appellant was awarded a works
contract by the respondent – A Clause 22 of the agreement
barred the appellant from claiming interest on any payment
or arrears or balance due to him – Disputes arose between
the parties – Arbitration invoked – Arbitral award came out
in favour of appellant – Arbitrator granted 15% pendente lite
interest – However, the District Judge granted 9% simple
interest on the Principal sum – Same was upheld by the High
Court – Correctness:
Held: Both the decisions in Reliance Cellulose and the First
Ambica case emphasise the need for an express contractual bar
on the payment of pendente lite interest to create a bar on the
arbitrator from awarding interest – They also emphasise that a
bar on the arbitrator’s power would depend on the phraseology
of the contractual clause in that case – In the instant case, the
Clause 22 prohibits the appellant (contractor) from claiming interest
on any payment, arrears or balance, which may be found due to
him at any time – Applying the above-stated law, this Court finds
that this clause does not expressly bar the award of pendente lite
interest in the event of disputes, differences, or misunderstandings
between the parties, or on delayed payment, or in any other respect
whatsoever – Under the 1940 Act, this Court has not readily
inferred a bar on the arbitrator from clauses that merely bar the

* Author
530 [2025] 4 S.C.R.

Digital Supreme Court Reports

contractor from claiming interest, and the same will apply to this
case as well – In view thereof, the judgment of the High Court is set
aside – However, considering that the arbitrator entered reference
in 1991 and the award was made in 1995, along with the passage
of time in litigation as well as the amounts already paid by the
respondent including post-award interest @ 9%, this Court deems
it appropriate to grant 9% pendente lite interest, instead of 15%
as granted by the arbitral tribunal, from 18.12.1991 till 07.03.1995
(date of the arbitral award). [Paras 14, 15, 16]
Arbitration Act, 1940 – Arbitration and Conciliation Act, 1996 –
Position of law on the grant of interest – Discussed.

Case Law Cited
Secretary, Irrigation Department, Government of Orissa v. G.C.
Roy [1991] Supp. 3 SCR 417 : (1992) 1 SCC 508; Executive
Engineer, Dhenkanal Minor Irrigation Division v. N.C. Budharaj
[2001] 1 SCR 264 : (2001) 2 SCC 721 – followed.
Reliance Cellulose Products Ltd v. Oil and Natural Gas Corporation
Limited [2018] 6 SCR 618 : (2018) 9 SCC 266; Union of
India v. Ambica Construction [2016] 2 SCR 810 : (2016) 6 SCC
36 – relied on.
Pam Developments Private Limited v. State of West Bengal [2024]
8 SCR 615 : (2024) 10 SCC 715; M.B. Patel & Co. v. ONGC [2008]
8 SCR 35 : (2008) 8 SCC 251; Union of India v. Krafters Engg.
& Leasing (P) Ltd. [2011] 8 SCR 196 : (2011) 7 SCC 279; Board
of Trustees For The Port of Calcutta v. Engineers-De-Space-Age
[1995] Supp. 6 SCR 327 : (1996) 1 SCC 516; Sayeed Ahmed
& Co. v. State of U.P. [2009] 10 SCR 841 : (2009) 12 SCC 26;
Sree Kamatchi Amman Constructions v. Railways [2010] 10 SCR
487 : (2010) 8 SCC 767; Union of India v. Bright Power Projects
(India) (P) Ltd. [2015] 6 SCR 488 : (2015) 9 SCC 695; Chittaranjan
Maity v. Union of India [2017] 11 SCR 722 : (2017) 9 SCC 611;
Garg Builders v. BHEL (2022) 11 SCC 697; Madnani Construction
Corpn. (P) Ltd. v. Union of India [2009] 16 SCR 216 : (2010) 1
SCC 549; Tehri Hydro Development Corpn. Ltd. v. Jai Prakash
Associates Ltd. [2012] 8 SCR 813 : (2012) 12 SCC 10 – referred to.

List of Acts
Arbitration Act, 1940; Arbitration and Conciliation Act, 1996.
[2025] 4 S.C.R. 531

M/s Ferro Concrete Construction (India) Pvt. Ltd. v.
The State of Rajasthan

List of Keywords
Grant of interest under Arbitration Act, 1940; Contractual clauses;
Payment of interest; Pendente lite interest on arbitral sum;
Phraseology of the agreement; Clauses conferring powers relating
to arbitration; Power to award interest; Express contractual bar on
payment of pendente lite interest.

Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4723 of 2025
From the Judgment and Order dated 06.01.2023 of the High Court
of Judicature for Rajasthan at Jaipur in SBCMA No. 3175 of 2006

Appearances for Parties
Advs. for the Appellant:
Vinayak Mehrotra, Ms. Sonali Jain, Ms. Nandini.
Advs. for the Respondent:
Ms. Sansriti Pathak, AAG, Aman Prasad, Milind Kumar.

Judgment / Order of the Supreme Court

Judgment

Pamidighantam Sri Narasimha, J.

1. Leave granted.
2. It is just as necessary to follow a precedent as it is to make a
precedent.
3. The short issue arising for consideration in this appeal is whether the
contractual clause that bars the appellant/contractor from claiming any
interest on any payment, arrears or balance due to it amounts to an
express bar on the arbitrator’s power to grant pendente lite interest
as per the law under the Arbitration Act, 19401. While the arbitrator
granted 15% pendente lite interest, the same was set aside by the
District Judge while deciding objections against the award, and upheld
by the High Court by order dated 06.01.2023, which is impugned

1 Hereinafter “1940 Act”.
532 [2025] 4 S.C.R.

Digital Supreme Court Reports

herein. By relying on settled case-law on the grant of interest under
the 1940 Act and the interpretation of contractual clauses barring
payment of interest, we have allowed the present appeal and have
directed payment of pendente lite interest on the arbitral sum.
4. The relevant facts are that the appellant was awarded a works
contract by the respondent, and they entered into an agreement dated
06.02.1988 that contains the following clause barring the appellant
from claiming interest on any payment or arrears or balance due to
him at any time:
“22. Payments :-
(i) Payments will be made to the contractor within one
month of the issuing of the corresponding bills. The
contractor shall comply with the procedure that may
be prescribed for all operations from the recording
of progress measurements upto payment of bills.
(ii) All materials and work for which payment is made in
part or full shall become the sole property of the Govt,
but this provision shall not relieve the contractor of
his responsibility for the care and protection of the
materials and works at his own cost nor his liability
to make good the damage if any unless and until the
whole work has been deemed to have been completed
and handed over to the Government.
The contractor shall not be entitled to claim any interest
upon any payment, any arrears or upon any balance,
which may be found due to him at any time.”
(emphasis supplied)

5. When disputes arose under the contract, the appellant invoked
arbitration and filed its claim, resulting in arbitral award dated
07.03.1995 for a sum of Rs. 1,78,17,146 in its favour. The arbitrator
also directed payment of 15% interest p.a. on all dues payable from
18.12.1991 (when the arbitrator entered reference) till payment or
the date of decree, whichever is earlier. The respondent filed an
application to set aside the award, which was decided by the District
Judge’s order dated 16.08.2005 that only set aside the interest
awarded by the arbitrator, and instead granted 9% simple interest
[2025] 4 S.C.R. 533

M/s Ferro Concrete Construction (India) Pvt. Ltd. v.
The State of Rajasthan

on the principal sum from that date till the date of payment. The
other objections against the award were rejected and the rest of the
award was upheld. It was held that the arbitrator did not consider
that Clause 22 of the contract is widely worded and prohibits the
appellant from claiming interest at any time. Both parties preferred
appeals against this order, which were dismissed by the High Court
by order dated 06.01.2023, impugned herein.
6. While issuing notice on 24.04.2023 in the present special leave petition
converted to a civil appeal, this Court passed the following order:
“1. Learned counsel appearing on behalf of the petitioner
relies upon paragraph 24 of the decision of this Court in
Reliance Cellulose Products Ltd Vs Oil and Natural
Gas Corporation Limited.2 He urges that Clause 22 of
the agreement does not specifically exclude either the
power of the arbitrator to grant pendente lite interest or
rule out the claimant from claiming interest pendente lite
in the course of arbitration.
2. Issue notice returnable in four weeks.”
7. We have heard Mr. Vinayak Mehrotra, learned counsel for the
appellant, and Ms. Sansriti Pathak, learned Additional Advocate
General for the respondent State on the issue of whether Clause
22 amounts to a bar on the arbitrator from awarding pendente lite
interest under the 1940 Act.
7.1 Mr. Mehrotra submits that the present issue is covered by this
Court’s decision in Reliance Cellulose (supra). He submits that
the contractual clause in the present case does not clearly
and expressly bar the arbitrator from awarding interest on the
arbitral sum. He has also referred to this Court’s decision in
Pam Developments Private Limited v. State of West Bengal3
in support of his argument.
7.2 On the other hand, Ms. Pathak has made detailed submissions
regarding the interpretation of the contractual clause, which are
as follows: First, the interpretation of an ouster clause is the

2 (2018) 9 SCC 266.
3 (2024) 10 SCC 715, para 23.
534 [2025] 4 S.C.R.

Digital Supreme Court Reports

same under the 1940 Act and the Arbitration and Conciliation
Act, 19964. Under both statutes, the arbitrator can award interest
unless the agreement provides otherwise. The key difference
between the statutes is that the 1996 Act contains an express
statutory provision for the grant of interest in Section 31(7), but
this is based on the principle in G.C. Roy 5 that recognised the
arbitrator’s power to award interest under the 1940 Act. Further,
that Section 31(7)(a) of the 1996 Act does not differentiate pre-
reference and pendente lite interest. However, these differences
do not have any bearing on the interpretation of contractual
clauses. Second, by referring to various decisions of this Court,
she submits that narrower contractual clauses have been
treated as ouster clauses that bar the arbitrator from awarding
pendente-lite interest.6 Third, she submits that paragraph 24 of
Reliance Cellulose (supra), which is relied on by the appellant,
is based on this Court’s decision in Board of Trustees For The
Port of Calcutta v. Engineers-De-Space-Age,7 which has been
doubted in several cases. A 3-judge bench of this Court in Union
of India v. Ambica Construction 8 (First Ambica case) held that
the observations in Engineers-De-Space-Age (supra) cannot
be considered as general observations and each contractual
clause barring payment of interest must be interpreted by the
words used therein. Fourth, in the facts of the present case, the
respondent has already paid a sum of Rs. 4.65 crores to the
appellant, of which Rs. 2.83 crores is the interest component.
Hence, a further award of pendente lite interest is not warranted
in the present case.
8. The position of law on the grant of interest under the 1940 Act and
the 1996 Act is well-settled. The constitution bench decisions of this
Court in GC Roy (supra) and NC Budharaj 9 recognised the arbitrator’s
power to grant pre-reference, pendente lite, and post-award interest
on an arbitral award made under the 1940 Act unless there is a

4 Hereinafter “1996 Act”.
5 Secretary, Irrigation Department, Government of Orissa v. G.C. Roy, (1992) 1 SCC 508.
6 Relied on M.B. Patel & Co. v. ONGC, (2008) 8 SCC 251; Union of India v. Krafters Engg. & Leasing (P)
Ltd., (2011) 7 SCC 279 under the 1940 Act.
7 (1996) 1 SCC 516.
8 (2016) 6 SCC 36.
9 Executive Engineer, Dhenkanal Minor Irrigation Division v. N.C. Budharaj, (2001) 2 SCC 721.
[2025] 4 S.C.R. 535

M/s Ferro Concrete Construction (India) Pvt. Ltd. v.
The State of Rajasthan

contractual bar.10 The question that falls for our consideration is
whether the contractual bar in the present case prohibits the arbitrator
from granting pendente lite interest, which necessarily entails an
interpretation of the clause.
9. This Court has, on multiple occasions, noted that a contractual clause
which bars the payment of interest is interpreted differently under
the 1940 Act and the 1996 Act. In fact, while deciding cases under
the 1996 Act, this Court has been slow to rely on the principles laid
down under the 1940 Act, considering the legislative incorporation of
the arbitrator’s power to grant interest through Section 31(7) of the
1996 Act.11 The difference in the interpretative approach has been
expounded by this Court in Reliance Cellulose (supra) as follows:
“24. A conspectus of the decisions that have been
referred to above would show that under the 1940 Act,
an arbitrator has power to grant pre-reference interest
under the Interest Act, 1978 as well as pendente lite and
future interest. However, he is constricted only by the
fact that an agreement between the parties may contain
an express bar to the award of pre-reference and/or
pendente lite interest. Since interest is compensatory in
nature and is parasitic upon a principal sum not having
been paid in time, this Court has frowned upon clauses
that bar the payment of interest. It has therefore evolved
the test of strict construction of such clauses, and has
gone on to state that unless there is a clear and express
bar to the payment of interest that can be awarded by
an arbitrator, clauses which do not refer to claims before
the arbitrators or disputes between parties and clearly
bar payment of interest, cannot stand in the way of an
arbitrator awarding pre-reference or pendente lite interest.
Thus, when one contrasts a clause such as the clause in
Second Ambica Construction case with the clause in Tehri
Hydro Development Corpn. Ltd., it becomes clear that

10 GC Roy (supra), para 45.
11 Sayeed Ahmed & Co. v. State of U.P., (2009) 12 SCC 26, para 24; Sree Kamatchi Amman Constructions v.
Railways, (2010) 8 SCC 767, paras 18-19; Union of India v. Bright Power Projects (India) (P) Ltd.,
(2015) 9 SCC 695, paras 17-19; Chittaranjan Maity v. Union of India, (2017) 9 SCC 611, para 16; Garg
Builders v. BHEL, (2022) 11 SCC 697, para 17.
536 [2025] 4 S.C.R.

Digital Supreme Court Reports

unless a contractor agrees that no claim for interest will
either be entertained or payable by the other party owing
to dispute, difference, or misunderstandings between the
parties or in respect of delay on the part of the engineer
or in any other respect whatsoever, leading the Court to
find an express bar against payment of interest, a clause
which merely states that no interest will be payable upon
amounts payable to the contractor under the contract
would not be sufficient to bar an arbitrator from awarding
pendente lite interest under the 1940 Act. As has been
held in First Ambica Construction case, the grant of
pendente lite interest depends upon the phraseology used
in the agreement, clauses conferring power relating to
arbitration, the nature of claim and dispute referred to the
arbitrator, and on what items the power to award interest
has been taken away and for which period. We hasten
to add that the position as has been explained in some
of the judgments above under Section 31(7) of the 1996
Act, is wholly different, inasmuch as Section 31(7) of the
1996 Act sanctifies agreements between the parties and
states that the moment the agreement says otherwise, no
interest becomes payable right from the date of the cause
of action until the award is delivered.”
(emphasis supplied)

10. The difference in the interpretative approach can be stated as follows.
Under the 1940 Act, a stricter approach is followed that requires a
clear and express clause against the payment of interest in case of
difference, dispute, or misunderstanding, in case of delay of payment,
or any other case whatsoever, to constitute a bar on the arbitrator
from granting interest. A clause that only provides that interest shall
not be granted on amounts payable under the contract would not be
sufficient. On the other hand, under the 1996 Act wherein Section
31(7)(a) sanctifies party autonomy, interest is not payable the moment
the contract provides otherwise. This distinction has been reiterated
by us in a recent decision in Pam Developments (supra), which
summarised the position of law as follows:
“23. The power of the arbitrator to grant pre-reference
interest, pendente lite interest, and post-award interest
[2025] 4 S.C.R. 537

M/s Ferro Concrete Construction (India) Pvt. Ltd. v.
The State of Rajasthan

under Section 31(7) of the Act is fairly well-settled. The
judicial determinations also highlight the difference in
the position of law under the Arbitration Act, 1940. The
following propositions can be summarised from a survey
of these cases:
23.1. Under the Arbitration Act, 1940, there was no specific
provision that empowered an arbitrator to grant interest.
However, through judicial pronouncements, this Court
has affirmed the power of the arbitrator to grant pre-
reference, pendente lite, and post-award interest on the
rationale that a person who has been deprived of the use
of money to which he is legitimately entitled has a right
to be compensated for the same. When the agreement
does not prohibit the grant of interest and a party claims
interest, it is presumed that interest is an implied term of
the agreement, and therefore, the arbitrator has the power
to decide the same.
23.2. Under the 1940 Act, this Court has adopted a strict
construction of contractual clauses that prohibit the grant
of interest and has held that the arbitrator has the power
to award interest unless there is an express, specific
provision that excludes the jurisdiction of the arbitrator.
23.3. Under the 1996 Act, the power of the arbitrator to grant
interest is governed by the statutory provision in Section
31(7). This provision has two parts. Under clause (a), the
arbitrator can award interest for the period between the
date of cause of action to the date of the award, unless
otherwise agreed by the parties. Clause (b) provides that
unless the award directs otherwise, the sum directed to
be paid by an arbitral award shall carry interest @ 2%
higher than the current rate of interest, from the date of
the award to the date of payment.
23.4. The wording of Section 31(7)(a) marks a departure
from the Arbitration Act, 1940 in two ways : first, it does
not make an explicit distinction between pre-reference and
pendente lite interest as both of them are provided for under
this sub-section; second, it sanctifies party autonomy and
restricts the power to grant pre-reference and pendente
538 [2025] 4 S.C.R.

Digital Supreme Court Reports

lite interest the moment the agreement bars payment of
interest, even if it is not a specific bar against the arbitrator.
23.5. The power of the arbitrator to award pre-reference and
pendente lite interest is not restricted when the agreement
is silent on whether interest can be awarded or does not
contain a specific term that prohibits the same.
23.6. While pendente lite interest is a matter of procedural
law, pre-reference interest is governed by substantive law.
Therefore, the grant of pre-reference interest cannot be
sourced solely in Section 31(7)(a) (which is a procedural
law), but must be based on an agreement between the
parties (express or implied), statutory provision (such as
Section 3 of the Interest Act, 1978), or proof of mercantile
usage.”
(emphasis supplied)

11. At this stage, we find it necessary to deal with Ms. Pathak’s submission
that Reliance Cellulose (supra) relies on Engineers-De-Space-Age
(supra), which was later read down and clarified by a 3-judge bench
in the First Ambica case. Upon reading Reliance Cellulose (supra),
it is clear that this Court undertook a comprehensive survey of the
case-law on the issue of payment of interest on arbitral awards,
including a detailed discussion of the First Ambica case,12 before
formulating the legal position extracted hereinabove.
12. In the First Ambica case (supra), the issue before this Court was
whether Engineers-De-Space-Age (supra) and Madnani Construction13
were correctly decided.14 After taking note of the interpretation of
various contractual clauses barring payment of interest in this Court’s
decisions under the 1940 Act and the 1996 Act, it summarised their
rulings as follows:
“28. It is apparent from various decisions referred to above
that in G.C. Roy the Constitution Bench of this Court has
laid down that where the agreement expressly provides

12 Reliance Cellulose (supra), paras 19-21.
13 Madnani Construction Corpn. (P) Ltd. v. Union of India, (2010) 1 SCC 549.
14 First Ambica case (supra), para 1.
[2025] 4 S.C.R. 539

M/s Ferro Concrete Construction (India) Pvt. Ltd. v.
The State of Rajasthan

that no interest pendente lite shall be payable on amount
due, the arbitrator has no power to award interest. In N.C.
Budharaj a Constitution Bench has observed that in case
there is nothing in the arbitration agreement to exclude
jurisdiction of the arbitrator to entertaining claim for interest,
the jurisdiction of the arbitrator to consider and award
interest in respect to all periods is subject to Section 29 of
the Act. In Hindustan Construction Co. Ltd. this Court has
followed the decision in G.C. Roy and laid down that on
the basis of principles of Section 34 the arbitrator would
have the power to award pendente lite interest also. In
B.N. Agarwalla, this Court has again followed G.C. Roy and
Hindustan Construction Co. Ltd. with respect to the power
of the arbitrator to award pendente lite interest and it was
held that the arbitrator has the power to award interest. In
Harish Chandra this Court interpreted Clause 1.9 which
provided that no claim for interest or damages will be
entertained by the Government in respect to any monies
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.
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, which 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 this Court has
emphasised that award of interest would depend upon
nature of the clause in the agreement. In Bright Power
Projects (India) (P) Ltd. this Court has considered the
expression “unless otherwise agreed by parties” employed
in Section 31(7)(a) of the 1996 Act and laid down that in
case contract bars claim of interest the contractor could
not have claimed interest. The provision of Section 31(7)
(a) of the 1996 Act is binding upon the arbitrator. In Sree
Kamatchi Amman Constructions similar view has been
taken.”
540 [2025] 4 S.C.R.

Digital Supreme Court Reports

The Court then took note of the doubts expressed regarding the
correctness of Engineers-De-Space-Age (supra) and Madnani
Construction (supra) in Sayeed Ahmed (supra) and Tehri Hydro
Development Corpn. Ltd. v. Jai Prakash Associates Ltd.15, on the
ground that they allow the arbitrator to grant interest by ignoring an
express bar in the contract.16 In order to resolve the discordant note,
this Court in the First Ambica case (supra) held as follows:
“32. In para 4 in Engineers-De-Space-Age this Court has
observed that bar under the contract will not be applicable
to the arbitrator cannot be said to be observation of general
application. In our opinion, it would depend upon the
stipulation in the contract in each case whether the power
of the arbitrator to grant pendente lite interest is expressly
taken away. If answer is “yes” then the arbitrator would
have no power to award pendente lite interest.
33. The decision in Madnani Construction Corpn. has
followed the decision in Engineers-De-Space-Age. The
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.
34. Thus, our answer to the reference is that if the contract
expressly bars the 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 the 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.”
(emphasis supplied)

15 (2012) 12 SCC 10.
16 First Ambica case (supra), paras 29-31.
[2025] 4 S.C.R. 541

M/s Ferro Concrete Construction (India) Pvt. Ltd. v.
The State of Rajasthan

13. From the above extracted paragraphs, the decision of the 3-judge
bench in the First Ambica case (supra) can be stated as follows. The
arbitrator’s power to grant interest would depend on the contractual
clause in each case, and whether it expressly takes away the
arbitrator’s power to grant pendente lite interest. This would have to
be determined based on the phraseology of the agreement, clauses
conferring powers relating to arbitration, the nature of claim and
dispute referred to the arbitrator, and on what items the power to
award interest is contractually barred and for which period. Further,
a bar on award of interest for delayed payment would not be readily
inferred as an express bar to the award of pendente lite interest by
the arbitrator.
14. We find that the position of law laid down in paragraph 24 of Reliance
Cellulose (supra) is in line with the position of law laid down in
the First Ambica case. Both decisions emphasise the need for an
express contractual bar on the payment of pendente lite interest
to create a bar on the arbitrator from awarding interest. They also
emphasise that a bar on the arbitrator’s power would depend on the
phraseology of the contractual clause in that case. In this light, Ms.
Pathak’s submission regarding the correctness of Reliance Cellulose
(supra) ought to be rejected. We do not find any reason to unsettle
the position of law, when it has been clearly enunciated and followed.
It is not sufficient to lay down a precedent, but it is equally important
to follow and apply them as well.
15. Now that we have stated the law applicable to this case, we will
consider the terms of Clause 22 of the contract to determine whether
it bars the arbitrator from awarding pendente lite interest on the
arbitral award. Clause 22 prohibits the appellant (contractor) from
claiming interest on any payment, arrears or balance, which may be
found due to him at any time. Applying the above-stated law, we find
that this clause does not expressly bar the award of pendente lite
interest in the event of disputes, differences, or misunderstandings
between the parties, or on delayed payment, or in any other respect
whatsoever. Under the 1940 Act, this Court has not readily inferred
a bar on the arbitrator from clauses that merely bar the contractor
from claiming interest, and the same will apply to this case as well.
16. In view of the above discussion, we allow the present appeal and
set aside the impugned judgment of the High Court in SBCMA No.
542 [2025] 4 S.C.R.

Digital Supreme Court Reports

3175/2006 dated 06.01.2023. Considering that the arbitrator entered
reference in 1991 and the award was made in 1995, along with the
passage of time in litigation as well as the amounts already paid
by the respondent including post-award interest @ 9%, we deem
it appropriate to grant 9% pendente lite interest, instead of 15% as
granted by the arbitral tribunal, from 18.12.1991 till 07.03.1995 (date
of the arbitral award) within a period of 60 days.17
17. No order as to costs.
18. Pending applications, if any, stand disposed of.

Result of the case: Appeal allowed.

†
Headnotes prepared by: Ankit Gyan

17 As these proceedings arise under the 1940 Act, the scope and jurisdiction of the Court to modify or vary
the award is larger than that of the court exercising jurisdiction under Section 34 of the 1996 Act.