Synopsis

This Supreme Court judgment arises from a challenge to an arbitral award passed in favor of Larsen & Tubro (L&T) against the Union of India. The core dispute centered on whether the Arbitral Tribunal (AT) could award interest (both pre-award and post-award) despite specific clauses in the General Conditions of Contract (GCC) that barred the payment of interest on amounts payable to the contractor. The Court, after analyzing the contractual clauses and the relevant provisions of the Arbitration and Conciliation Act, 1996, held that the AT had erred in granting pre-award/pendente lite interest, as such interest was expressly prohibited by the contract. However, it upheld the grant of post-award interest, though it modified the rate from 12% to 8% per annum, finding the original rate to be excessive and unjustified.

1. Basic Information of the Judgment

Case Title: Civil Appeal arising out of Special Leave Petition (Civil) No. 14989 of 2023 – Union of India & Ors. vs. Larsen & Tubro Limited (L&T)

Citation: 2026 INSC 203

Court: Supreme Court of India

Jurisdiction: Civil Appellate Jurisdiction (Article 136)

Coram: Justice Sanjay Karol and Justice Vipul M. Pancholi

Nature of Bench: Division Bench

Date of Judgment: February 27, 2026

2. Legal Framework & Key Precedents

The judgment is a significant exposition of the law on interest in arbitration, particularly the distinction between pre-award and post-award interest.

• Primary Legislation:
  Arbitration and Conciliation Act, 1996 (the Act):
  Section 28(3): Mandates that the arbitral tribunal shall decide the dispute in accordance with the terms of the contract.
  Section 31(7): Deals with the power of the arbitral tribunal to award interest.
  Section 31(7)(a): Governs pre-award/pendente lite interest (from the date of cause of action to the date of award). This power is expressly made subject to the phrase "unless otherwise agreed by the parties." This means parties can contract out of pre-award interest.
  Section 31(7)(b): Governs post-award interest&

... Upgrade to a Premium Plan to view the full judgment.