Summary
In arbitration governed by the 1940 Act, the Supreme Court held that a clause excluding interest for delayed payment did not bar the arbitrator’s pre-reference and pendente lite interest awards. Its scope and the actual price dispute did not support ONGC’s objection. The Court restored eighteen per cent interest up to the respective deposits and separately specified six per cent on the unpaid differential thereafter.
Issues
- Whether clause 16 barred pre-reference and pendente lite interest under the 1940 arbitration regime.
- Whether ONGC’s public-sector status justified reducing the awarded interest and how the unpaid differential should be calculated.
Provisions considered
- Section 3, Interest Act, 1978The Court considered the statutory basis for pre-reference interest and the effect of an express contractual exclusion, construing the clause by its language and subject matter. (¶¶ 11, 19, 20, 21, 22, 23, 24)
- Section 31(7)(a), Arbitration and Conciliation Act, 1996Distinguished: the contractual restriction on interest under the 1996 Act differs from the governing 1940 Act regime. (¶¶ 18, 22)
Held
- Under the 1940 Act, whether an agreement bars pendente lite interest depends on its phraseology, arbitration provisions, referred dispute, and the items and periods excluded. A general exclusion concerning contractual payments does not necessarily bar the arbitrator’s power. (¶¶ 19, 20, 21, 22)
- Clause 16 addressed only delayed payment and did not refer to the arbitrator’s power. Moreover, the original price had been paid on time; the disputed higher price became payable on the award. Neither pre-reference nor pendente lite interest was barred on these facts. (¶¶ 23, 24)
- Public-sector status alone did not justify reducing eighteen per cent to ten per cent. There was no finding of perverse exercise of the arbitrator’s discretion in light of rates when the awards were made. (¶ 25)
- ONGC must pay the eight-percentage-point differential for pre-reference, pendente lite and future interest up to the respective deposits of 21 January 1999 and 30 April 2003 within eight weeks. Each outstanding differential interest sum bears six per cent annually from its respective deposit date until payment. (¶ 25)
Result
ONGC’s appeal dismissed; Reliance’s appeal allowed. Eighteen per cent interest restored until the respective deposits; the 8% differential is payable within eight weeks, with 6% annual interest on each unpaid differential from its deposit date until payment.