In Brief
Garg Builders contracted with Bharat Heavy Electricals to construct a boundary wall. The contract contained Clause 17, which expressly barred payment of interest on any moneys due to the contractor. When disputes arose and went to arbitration, the arbitrator awarded pendente lite interest despite the clause. The High Court set aside this award. The Supreme Court held that Section 31(7)(a) of the Arbitration and Conciliation Act, 1996 gives primacy to the parties' agreement. When a contract explicitly bars interest, the arbitrator cannot award pendente lite interest. The Court found the interest-barring clause was not ultra vires the Indian Contract Act, 1872, and consistent with Section 3(3) of the Interest Act, 1978. The appeal was dismissed.
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