LexM/S FERRO CONCRETE CONSTRUCTION (INDIA) PVT. LTD. versus THE STATE OF RAJASTHAN
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[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
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