Summary and Analysis of Oil and Natural Gas Corporation Ltd vs Ms G & T Beckfield Drilling Services Pvt Ltd 2025 INSC 1066

1. Heading of the Judgment
Oil and Natural Gas Corporation Ltd. vs. M/s G & T Beckfield Drilling Services Pvt. Ltd.
Civil Appeal No. 11324 of 2025 (Arising out of SLP (C) No. 18331 of 2019)
Supreme Court of India
Decided on September 2, 2025
Bench: Justices Manoj Misra and Pamidighantam Sri Narasimha

Citation: Oil and Natural Gas Corporation Ltd. vs. M/s G & T Beckfield Drilling Services Pvt. Ltd., 2025 INSC 1066 (Supreme Court of India).

2. Related Laws and Sections

• Section 31(7) of the Arbitration and Conciliation Act, 1996 (Award of interest by arbitral tribunal)

• Section 34 of the Arbitration and Conciliation Act, 1996 (Setting aside arbitral award)

• Section 37 of the Arbitration and Conciliation Act, 1996 (Appeal from orders under Section 34)

• Section 28 of the Indian Contract Act, 1872 (Agreements in restraint of legal proceedings void)

• Clause 18.1 of the contract between the parties (Payment terms and interest)

3. Basic Judgment Details
The appellant, ONGC, challenged an arbitral award dated November 21, 2004, which directed ONGC to pay a sum of USD 6,56,272.34 along with interest at 12% per annum from December 12, 1998 (the date of affirmation of the statement of claim) until recovery. The District Judge set aside the award, but the Gauhati High Court restored it. ONGC appealed to the Supreme Court, contending that Clause 18.1 of the contract prohibited the award of interest on delayed payments. The Supreme Court limited its examination to the issue of interest.

4. Explanation of the Judgment

The Supreme Court dismissed the appeal and upheld the arbitral award, including the grant of pendente lite interest (interest during the arbitration proceedings).

Key Points of the Judgment:

• Legal Framework for Award of Interest:
  The Court referred to Section 31(7) of the Arbitration and Conciliation Act, 1996, which allows an arbitral tribunal to award interest for three periods:
  Pre-reference (from cause of action to reference)
  Pendente lite (during arbitration proceedings)
  Post-award (after the award until payment)
  The power to award pre-reference and pendente lite interest is subject to the contract between the parties, while post-award interest is governed by statute.

• Interpretation of Clause 18.1:
  Clause 18.1 of the contract stated:
  "No interest shall be payable by ONGC on any delayed payment / disputed claim."
  ONGC argued that this clause barred the tribunal from awarding any interest, including pendente lite interest. The respondent argued that the clause only restricted interest on delayed payments and not pendente lite interest.

• Court’s Reasoning:
  The Court held that Clause 18.1 did not explicitly or by necessary implication bar the arbitral tribunal from awarding pendente lite interest. The clause merely restricted ONGC’s liability to pay interest on delayed or disputed claims but did not oust the tribunal’s statutory power to award interest during the arbitration proceedings. The Court distinguished this case from precedents where the contract used comprehensive language to bar interest "in any respect whatsoever."

• Precedents Relied Upon:
  The Court referred to several decisions, including:
  Union of India v. Ambica Construction (2016): A bar on interest for delayed payment does not automatically bar pendente lite interest.
  Sayeed Ahmed & Co. v. State of Uttar Pradesh (2009): Where the contract explicitly barred interest "in any respect whatsoever," pendente lite interest was disallowed.
  Reliance Cellulose Products Ltd. v. ONGC (2018): A clause merely barring interest on delayed payment does not restrict the arbitrator’s power to award pendente lite interest.

• Conclusion:
  The Court found that the arbitral tribunal had acted within its authority in awarding pendente lite interest at 12% per annum, which was reasonable. The award was consistent with the statutory framework and the terms of the contract.

5. Conclusion
The Supreme Court held that Clause 18.1 of the contract did not prohibit the arbitral tribunal from awarding pendente lite interest. The appeal was dismissed, and the arbitral award was upheld.