ONGC Loses Arbitration Battle as SC Confirms US$656,000 Award to G&T Beckfield Drilling Services

Moneylife Digital Team 03 September 2025

Investor Interest

The Supreme Court has upheld an arbitral award in favour of G&T Beckfield Drilling Services Pvt Ltd, rejecting Oil and Natural Gas Corporation’s (ONGC) appeal against the grant of 12% pendente lite interest.

A bench of justice PS Narasimha and justice Manoj Misra dismissed ONGC’s challenge to the Gauhati High Court’s 2019 judgement which had restored the arbitral award originally passed in 2004. "In our view, Clause 18.1 would not limit the statutory power of the arbitral tribunal to award pendente lite interest. Consequently, we find no such error in the award of pendente lite interest as may warrant interference with the award. Since post-award interest is in line with the statutory provision of clause (b) of sub-section (7) of Section 31 as was in vogue then, we find no merit in the appeal, and the same is, accordingly, dismissed."

The award directed ONGC to pay US$656,272.34 along with costs of Rs500,000, and interest at 12%pa (per annum) from 12 December 1998, the date when the statement of claim was filed—until recovery.

The dispute arose under a drilling contract after ONGC withheld payments on several invoices. While the arbitral tribunal allowed the contractor’s claims, it rejected ONGC’s objections and granted pendente lite interest at 12%. The award was initially set aside by the district judge at Sivasagar in 2007, but later reinstated by the Gauhati High Court in 2019, leading to ONGC’s appeal before the Supreme Court.

At the special leave petition stage, the apex court limited the issue to whether clause 18.1 of the contract, which excluded ONGC’s liability to pay interest on delayed or disputed claims, barred the arbitral tribunal from awarding pendente lite interest.

The Court held that Section 31(7) of the Arbitration and Conciliation Act, 1996 empowers arbitral tribunals to award interest for pre-reference, pendente lite and post-award periods, unless expressly prohibited by contract. Relying on earlier rulings including GC Roy (1992), Budharaj (2001), Ambica Construction (2016), Reliance Cellulose (2018), and Ferro Concrete (2025), the bench clarified that a contractual clause excluding interest on delayed payments cannot automatically be interpreted as barring pendente lite interest.

The judges found that clause 18.1 did not expressly prohibit pendente lite interest and therefore did not restrict the tribunal’s statutory discretion. On the rate of 12%, the SC observed it was reasonable, being lower than the statutory 18% applicable to post-award interest at that time.

Concluding that 'no error' had been committed by the arbitral tribunal, the Supreme Court dismissed ONGC’s appeal and upheld the award in its entirety. The ruling brings finality to a contractual dispute that has spanned more than two decades.

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