Section 31(7)(a) : Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made.

Para 17.: Further, this Court considered an identical clause in the contract in the case of Ambica Constructions v. Union of India7, wherein it observed that the Clause of the GCC did not bar the arbitrator from awarding interest pendente lite and affirmed the award passed by the arbitrator. The three Judge Bench of this Court held that the contention raised by the Union of India based on the Clause of the GCC that the arbitrator could not award interest pendente lite was not a valid contention and the arbitrator was completely justified in granting interest pendente lite.

Relying on the three Judge Bench judgment in Union of India v. Ambica Construction (supra) and in Irrigation Deptt., State of Orissa (supra), this Court held that the bar to award interest on the amounts payable under the contract would not be sufficient to deny the payment of interest pendente lite.

Para 18.:  Thus when a dispute is referred to for adjudication to an arbitrator, a term of such a nature as contained in the Clause 16(3) of GCC, that is binding on the parties cannot be extended to bind an Arbitrator. The Arbitrator has the power to award interest pendente lite (2017) 14 SCC 323 where justified. We, therefore, set aside the judgment of the High Court and restore the award passed by the Arbitral Tribunal in respect of Claim No. 12.


Refer : ms-raveechee-and-co-vs-union-of-india-dt-july-3rd-2018 by honoable Supreme Court of India