The Honorable Supreme Court of India on September 22, 2026, delivered a significant judgment in the case of North Eastern Electric Power Corporation Limited (NEEPCO) Vs Astra Construction Private Limited. The case involved an appeal against the judgement of the Meghalaya High Court wherein the Court restored an Arbitral Tribunal’s award of pre-reference interest on delayed payments despite of a bar contained in the contractual clause. The question to be determined before the Supreme Court was whether an arbitral tribunal under can award a pre-reference interest when a contractual clause expressly bars claims for interest that arise from delayed periodical or final payments.
The dispute arose out project work in Tripura, which was referred to arbitration. The delay in execution of the project was held by the tribunal as attributable to NEEPCO and thus it allowed four claims and a principal amount was awarded along with pre-reference interest, pendente lite and future interest. This was challenged by NEEPCO wherein it was held by the Commercial Court that the General Conditions of Contract (GCC) barred the grant of all types of interest, including pre-reference and pendente lite interest, and thus the award was modified. Further, when deciding upon the respondent’s appeal Meghalaya High Court restored the interest awarded by the Tribunal by the relying on the Supreme Court’s decision in State of U.P. v. Harish Chandra and Co. (1999). Hence, aggrieved by this NEEPCO approached the Supreme Court.
However, a Bench of Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe found the approach of the High Court to be flawed. The Court observed that Clause 54 of the GCC was decisively different from the clause in Harish Chandra Case as Clause 54 named delay in payment as a separate ground, standing on its own and untied to any dispute, thereby expressly shutting out a claim for interest arising from delayed payment whether or not any dispute existed. Thus, the drafting structure in the present case came closer to the one examined in Sayeed Ahmed & Company v. State of U.P. and Jaiprakash Associates Limited v. Tehri Hydro Development Corporation (THDC-II), where such clauses had been held to constitute a complete bar on the arbitrator’s power to award interest. As per Section 31(7)(a) of the 1996 Act the tribunal’s power to award interest is subject to the agreement of the parties. Thus, the Court held that the Arbitral Tribunal has exceeded the bounds of its jurisdiction in awarding pre-reference interest in the teeth of Clause 54.
In its final order, the Supreme Court by allowing NEEPCO’s appeal and setting aside the judgement of the Meghalaya High Court reiterated that the power of an arbitral tribunal to grant interest under Section 31(7)(a) of the 1996 Act is subject to the contract between the parties and further, clarified that where a contractual clause expressly bars interest on delayed payments, the tribunal is divested of the power to award such interest for the pre-reference period.