Union of India & Ors. v. Larsen & Toubro Limited (L&T) 2026 INSC 203 - S.31 Arbitration Act - Post/Pre Award Interest
Arbitration and Conciliation Act, 1996 - Section 31 - Post/Pre Award Interest
Arbitration and Conciliation Act, 1996 - Section 31 - With regard to the post-award interest, Section 31(7)(b) of the Act provides that unless the award otherwise directs, the sum awarded shall carry interest from the date of the award till payment. The legislative intent underlying this provision is twofold: first, to compensate the successful party for delayed realization of the award, and second, to ensure prompt compliance with the award by the judgment-debtor- post-award interest flows as a matter of law under Section 31(7)(b), unless the parties have unequivocally agreed to exclude it. Pre-award and post-award interest operate in distinct fields and a contractual bar applicable to the former cannot, by implication, be extended to the latter, and thus, any exclusion of post-award interest must be explicit and unambiguous. (Para 47-57)
Case Info
Case name: Union of India & Ors. v. Larsen & Toubro Limited (L&T)
Neutral citation: 2026 INSC 203
Coram: Sanjay Karol, J. and Vipul M. Pancholi, J.
Judgment date: 27 February 2026
Caselaws and citations referred:
- Sree Kamatchi Amman Constructions v. Railway Administration, (2010) 8 SCC 767
- Union of India v. Bright Power Projects (India) (P) Limited, (2015) 9 SCC 695
- Union of India v. Manraj Enterprises, (2022) 2 SCC 331
- Raveechee and Company v. Union of India, (2018) 7 SCC 664
- Ambica Construction v. Union of India, (2017) 14 SCC 323
- Sayeed Ahmed & Co. v. State of U.P., (2009) 12 SCC 26
- BHEL v. Globe Hi-Fabs Ltd., (2015) 5 SCC 718
- Chittaranjan Maity v. Union of India, (2017) 9 SCC 611
- Irrigation Deptt., State of Orissa v. G.C. Roy, (1992) 1 SCC 508
- Garg Builders v. BHEL, (2022) 11 SCC 697 (referred via discussion on Garg Builders case)
- Morgan Securities & Credits (P) Ltd. v. Videocon Industries Ltd. (citation referred in RP Garg extract)
- Gayatri Balasamy v. ISG Novasoft Technologies Limited, (2025) 7 SCC 1
- RP Garg v. Chief General Manager, Telecom Department & Ors., 2024 SCC OnLine SC 2928
Statutes / laws referred:
- Arbitration and Conciliation Act, 1996: Sections 28(3), 31(7)(a), 31(7)(b), 34, 37
- Indian Contract Act, 1872: Section 73
- Interest Act, 1978: Section 2(b) (through the definition of “current rate of interest”)
- General Conditions of Contract (Railways): Clause 16(3), Clause 64(5), and Clause 7.35 of SCC (mentioned)
Brief summary (three sentences):This appeal arose from an arbitral award in favour of L&T concerning a railway modernization contract, where the Arbitral Tribunal had granted substantial sums including components characterized as interest/compensation, along with post-award interest at 12% per annum. The Supreme Court held that in light of Clause 16(3) and Clause 64(5) of the GCC and Section 31(7)(a) of the Arbitration and Conciliation Act, the arbitrator had no jurisdiction to award pre-award/pendente lite interest or amounts in the nature of interest on sums payable under the contract, and therefore set aside the award to that extent. However, the Court upheld the grant of post-award interest as permissible under Section 31(7)(b), but reduced the rate from 12% to 8% per annum from the date of the award until realization.
