Arbitral Tribunal Cannot Grant Pre-Award Interest if Contract Prohibits it: Supreme Court

The Supreme Court ruled that an arbitral tribunal cannot grant pre-award or pendente lite interest, even if framed as "compensation," when the contract expressly prohibits it.

The Bench set aside an Allahabad High Court order that had upheld such interest. The Court emphasized that under Section 31(7)(a) of the Arbitration & Conciliation Act, the parties' agreement prevails.

Since the contract (GCC) barred interest on payments until the date of the award, the tribunal’s grant of financing charges was legally erroneous.

However, the Court upheld post-award interest, modifying the rate from 12% to 8%.

[UOI & Ors. v. Larsen & Toubro Ltd.]