Pre-Reference Interest Liability in Arbitral Proceedings and Construction of Clauses

Pre-Reference Interest Liability in Arbitral Proceedings and Construction of Clauses

In Reliance Cellulose Products Limited v. Oil And Natural Gas Corporation [2018] GCtR 6379 (SC) it was held that under the Arbitration Act, 1940, an arbitrator has power to grant pre-reference interest under the Interest Act, 1978 as well as pendente lite and future interest.

In that case, a 2-Judge Bench in the context of an award under the Arbitration Act, 1940 was called upon to consider whether pendente lite interest was barred in view of clause 16 in the contract between the parties. Clause 16 was in the following terms: “16. Our standard terms of payment are within 30 days of receipt of stores and inspection at site. But any delay in payment will not make the Commission liable for any interest.” Construing the said clause, it was held: “15. …Clause 16 of the General Conditions of Contract only speaks of any delay in payment not making ONGC liable for interest. There is nothing in this clause which refers even obliquely to the arbitrator’s power to grant interest. …”