A construction contract that says no interest will be paid on delayed money, in terms broad enough to cover every circumstance the drafters could think of, means exactly that, even once the dispute reaches arbitration and even where equity might otherwise favour the contractor who waited years to be paid. That is the point the Supreme Court underlined on 22 September 2026 in a contract dispute involving the North Eastern Electric Power Corporation, a public sector power generation company.
The dispute went back to an arbitral award rendered in June 2015, which attributed project delay to NEEPCO and allowed four of the contractor Astra Construction's claims for a principal sum of roughly ₹3.30 crore. On top of that principal amount, the tribunal awarded twelve per cent annual interest for the pre-reference period, together with nine per cent interest for the period during arbitration and after the award. A Commercial Court subsequently held that Clause 54 of the contract's General Conditions barred interest on the relevant claims and set aside the pre-suit and arbitration-period interest. The Meghalaya High Court, hearing a further appeal, restored the pre-reference interest the Commercial Court had removed, prompting NEEPCO's appeal to the Supreme Court.
Justices P.S. Narasimha and Alok Aradhe sided with NEEPCO and against the contractor on this specific component of the award. Clause 54, the Court found, swept more broadly than the narrower bar on interest the Court had previously considered in Harish Chandra, a precedent the contractor had relied on to argue that the clause should be read restrictively. Clause 54 expressly barred claims for interest or damages in two distinct situations, money withheld by the Corporation on account of a dispute, and delay in periodical or final payments, and then added language extending the bar to any other respect whatsoever. That closing phrase, the Court held, brought the clause within the category of complete interest bars recognised in Sayeed Ahmed and in Jaiprakash Associates v. THDC, both cases in which similarly all-encompassing language was held to oust an arbitrator's power to award interest altogether.
The statutory hook for the Court's ruling is Section 31(7)(a) of the Arbitration and Conciliation Act, 1996, which empowers a tribunal to award interest unless the parties have otherwise agreed. Where the underlying contract contains a clause of the kind Clause 54 represents, that agreement to exclude interest removes the tribunal's power to award it, and an award granting interest in the face of such a clause does not merely get the equities wrong, it exceeds the jurisdiction Section 31(7)(a) confers. That framing matters in a Section 34 or Section 37 challenge, since an award that exceeds the tribunal's jurisdiction is set aside on a narrower and more defensible ground than one that is merely substantively unfair.
Public sector undertakings negotiating construction and EPC contracts will take this as validation of a drafting practice many of them already follow: a broad, catch-all interest bar of the kind Clause 54 embodies, rather than a narrower prohibition confined to specific categories of delay, gives the employer a cleaner defence against pre-reference interest claims that can otherwise balloon a contractor's recovery many years after the underlying principal dispute arose. Interest accrued over a decade or more of litigation, compounding at rates set by an arbitrator rather than negotiated by the parties, has been a significant driver of total exposure in long-running infrastructure and power sector arbitrations, and a properly drafted bar closes off that exposure entirely rather than merely reducing it.
Contractors on the other side of these contracts face a correspondingly sharper drafting incentive going forward. A contractor unwilling to accept a sweeping interest bar of this kind should resist it at the negotiation stage rather than count on a tribunal or court reading it down later, since the Supreme Court has now confirmed that broadly worded bars will be read according to their plain and extensive language rather than narrowed by judicial sympathy for a contractor who has waited years to be paid.
The ruling leaves the contractor's recovery on the underlying ₹3.30 crore principal claims, and the award of interest during and after the arbitration proceedings, undisturbed; only the pre-reference interest component is affected. For a contractor facing years of delay before a dispute is even referred to arbitration, that distinction can represent a substantial share of what would otherwise have been recoverable, underscoring how much weight a single clause governing interest can carry over the life of a long-running infrastructure dispute.