Contract disputes between public-sector corporations and their contractors routinely take decades to resolve — and the arithmetic of interest is often what decides who actually wins. On 22 September 2026, the Supreme Court delivered a judgment in North Eastern Electric Power Corporation Limited v. Astra Construction Private Limited (2026 INSC 1036) that turns entirely on four words buried in a 1996 construction contract: “in any other respect whatsoever.” The Court’s answer — that an arbitral tribunal cannot award pre-reference interest once the parties have contractually barred it, however the bar is worded — closes off a route contractors have used for years to recover interest an arbitrator was never empowered to grant.

The ruling matters well beyond this one power-project dispute. Government and public-sector contracts across India routinely carry near-identical “no interest” clauses copied from standard General Conditions of Contract (GCC) templates. Every arbitral tribunal hearing a claim under one of those templates now has a fresh, authoritative statement of exactly how far Section 31(7)(a) of the Arbitration and Conciliation Act, 1996 lets it go.

The Dispute: A Three-Decade-Old Power Project Contract

North Eastern Electric Power Corporation Limited (NEEPCO) invited tenders on 12 June 1995 for civil works on the main plant and auxiliary building of a Gas Turbine Power Project at Ram Chandra Nagar, Tripura. Astra Construction Private Limited’s bid was accepted, and the parties signed their agreement on 23 May 1996. Execution ran into delays, disputes followed, and the matter went to arbitration under the contract’s arbitration clause, as reported by Verdictum.

By an award dated 5 June 2015, the Arbitral Tribunal held NEEPCO responsible for the delay and allowed four of Astra’s claims, totalling roughly ₹3.30 crore as principal. On top of that principal sum, the tribunal added 12% annual pre-reference interest (interest for the period before arbitration was even invoked), 9% pendente lite interest (for the period the arbitration was pending), and future interest until payment.

The Clause That Decided the Case

The entire dispute turned on Clause 54 of the contract’s General Conditions of Contract, titled “No Claim for Delayed Payment due to Dispute Etc.” As quoted in the judgment on Indian Kanoon, it reads:

“No claims for interest or damages will be entertained by the Corporation with respect to any money or balance which may be lying with the Corporation owing to any dispute, difference or misunderstanding between the Engineer-in-Charge on the one hand and contractor on the other or with respect to any delay on the part of the Engineer-in-Charge making periodical or final payments or in any other respect whatsoever.”

Two Bars, Not One

The Supreme Court read Clause 54 as containing two independent prohibitions, not a single one. The first bars interest on money withheld because of a dispute. The second — triggered by the words “or with respect to any delay… in making periodical or final payments or in any other respect whatsoever” — separately and unconditionally bars interest for delayed payments, irrespective of whether a dispute exists at all. This distinction is what ultimately decided the appeal, because Astra’s claims were for delayed payments, not merely money held up pending a dispute.

The Litigation Journey

The case travelled through three layers of judicial scrutiny before reaching the Supreme Court:

  1. Commercial Court (Section 34 petition): Set aside both the pre-reference and pendente lite interest components of the award, holding that Clause 54 barred them.
  2. High Court of Meghalaya (Section 37 appeal): Reversed course and restored the pre-reference interest, reasoning that Clause 54 only covered money withheld because of a dispute — and that delayed payments without an active dispute fell outside the clause.
  3. Supreme Court: Set aside the High Court’s judgment to the extent it restored pre-reference interest, holding that the High Court had collapsed Clause 54’s two separate limbs into one.

The Supreme Court’s Reasoning

Justice Alok Aradhe, writing for a bench that also included Justice Pamidighantam Sri Narasimha, anchored the analysis in Section 31(7)(a) of the Act, which permits an arbitral tribunal to award interest for the period between the accrual of the cause of action and the date of the award — but only “unless otherwise agreed by the parties.” That qualifying phrase, the Court held, subordinates the tribunal’s statutory power entirely to the parties’ contract. Where the contract expressly and unconditionally bars interest, the tribunal has no residual discretion to grant it under the guise of Section 31(7)(a).

Pre-Reference Interest Stands on Different Footing

A significant part of the judgment addresses a doctrinal point that arbitration practitioners have long debated: whether pre-reference interest (interest for the period before arbitration was invoked) is governed by the same rules as pendente lite interest (interest while arbitration is pending). The Court held that pre-reference interest is “referable to substantive law” — meaning it must find its source in the underlying contract, a statute, or established mercantile usage — and cannot be sourced in Section 31(7)(a) alone. Where a contract like NEEPCO’s expressly forecloses that substantive entitlement, the tribunal’s statutory interest-awarding power under Section 31(7)(a) has nothing to operate on.

Distinguishing Harish Chandra

Astra had relied on Harish Chandra v. State of U.P. (1999) 1 SCC 63 to argue that a general bar on interest does not necessarily extend to delayed-payment interest. The Supreme Court distinguished that precedent on facts, holding that Clause 54’s second limb — barring interest for delay “in any other respect whatsoever” — was drafted precisely to cover the situation Harish Chandra had left open. It read that conclusion alongside Sayeed Ahmed & Co. v. State of U.P. (2009) 12 SCC 26 and Sree Kamatchi Amman Constructions v. Divisional Railway Manager (2010) 8 SCC 767, both of which enforced express, unconditional interest bars against the tribunal, and Union of India v. Bright Power Projects (India) (P) Ltd. (2015) 9 SCC 695, which held that where a contract bars interest outright, an arbitrator has no power to award it under any label. It also engaged with Reliance Cellulose Products Ltd. v. ONGC Ltd. (2018) 9 SCC 266, a case on the opposite end of the spectrum, where a clause tied specifically to payment delay was held not to reach the arbitrator’s power to award pendente lite interest — illustrating that the outcome in every such case turns on the precise wording of the clause, not on a blanket rule against interest.

This body of precedent, explained in detail in a Bar & Bench analysis of prohibitory interest clauses and an SCC Online Blog piece on pre-award, pendente lite, and post-award interest, shows that “unless otherwise agreed by the parties” is not boilerplate — it is the operative limitation on a tribunal’s power, and courts read the exact words of the bar clause closely before applying it.

What This Means for Contract Drafting and Arbitration Practice

For public-sector employers, the judgment is a validation of the standard-form “no interest” clauses embedded in decades of GCC templates used by NEEPCO, NHAI, Indian Railways, and other government bodies — provided the clause is drafted broadly enough to reach delayed payments independent of any dispute, as legal commentary on the ruling has noted. For contractors, it is a caution: claims for interest on delayed payments must be pleaded and proved as substantive entitlements — under the contract, a specific statute, or mercantile custom — rather than assumed to flow automatically from Section 31(7)(a) merely because the tribunal has general power to award interest. As one case analysis of the ruling observed, the ₹3.30 crore principal award itself was left entirely undisturbed — only the pre-reference interest component fell away, and the pendente lite and future interest awarded by the tribunal were not part of what the Supreme Court set aside.

Practically, this means Indian companies and public bodies negotiating construction, supply, and works contracts should review their “no interest” or “no claim” clauses now, rather than discovering their scope only after years of arbitration. A clause that bars interest only “in case of dispute” leaves pre-reference interest on delayed payments open; a clause that separately and unconditionally bars interest for payment delay, as Clause 54 did, forecloses it entirely — a distinction worth precisely drafting for, not litigating over a decade later.

Frequently Asked Questions

What is pre-reference interest, and how is it different from pendente lite interest?

Pre-reference interest is interest for the period before a dispute is referred to arbitration — essentially, interest that accrued while the money was simply owed and unpaid. Pendente lite interest covers the period the arbitration itself is pending. The Supreme Court held these two categories are governed by different legal foundations: pre-reference interest must be rooted in substantive law (the contract, a statute, or mercantile usage), while pendente lite and post-award interest fall more directly within the tribunal’s procedural discretion under Section 31(7).

Can a contract completely bar an arbitrator from awarding any interest?

Yes. Section 31(7)(a) of the Arbitration and Conciliation Act, 1996 begins with the words “unless otherwise agreed by the parties,” which the Supreme Court has repeatedly held (including in this judgment) means an express, unconditional contractual bar on interest overrides the tribunal’s general statutory power to award it.

Does this judgment affect the ₹3.30 crore principal amount awarded to the contractor?

No. The Supreme Court’s appeal was confined to the interest component. The principal award of approximately ₹3.30 crore across Astra Construction’s four claims remains undisturbed; only the pre-reference interest portion was set aside.

Why did the Supreme Court disagree with the Meghalaya High Court?

The High Court read Clause 54 as a single prohibition limited to money withheld because of an active dispute. The Supreme Court held the clause actually contains two independent bars — one for disputed money, and a separate, broader one for any delay in payment “in any other respect whatsoever” — and that the second bar applied regardless of whether a dispute existed.

Does this ruling apply only to government or public-sector contracts?

The principle is of general application to any contract governed by the Arbitration and Conciliation Act, 1996, but it is especially significant for public-sector works and supply contracts, which commonly use standard-form GCC clauses of exactly this kind across departments and corporations.

What should contractors bidding on government projects do differently now?

Contractors should read “no interest” or “no claim” clauses carefully before signing, understand that broadly worded bars will very likely be enforced against pre-reference interest claims, and, where possible, negotiate express carve-outs for interest on delayed payments rather than relying on Section 31(7)(a) to fill the gap later.

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