The Arbitration Act 1940 did not prohibit the Arbitrator from awarding interest for the

pre-reference, pendente lite or post-award period. On the contrary the 1996 Act under the
provisions contained in Section 31(7)(a) of the 1996 Act specifically provides that "unless
otherwise agreed by the parties", in case of a monetary award, the Arbitral Tribunal may include
in the sum for which the Award is made interest, at such rates as its deem reasonable, on the
whole or any part of the money, for the whole or any part of the period between the date on
which the cause of action arose and the date on which the Award is made.

Therefore, what is significant to note under the 1996 Act is that, if the Agreement bars payment
of interest, the Arbitrator cannot award interest from the date of cause of action till the date of
award. Moreover the difference between pre-reference period and the pendente lite interest has
disappeared in so far as the award of interest by the Arbitrator is concerned. The said provision
recognises only two periods, i.e. pre-award and post-award period.

In the past, the Supreme Court in the cases of Sree Kamatchi Amman Constructions v
Divisional Railway Manager (Works), Palghat and Ors.[7] (while dealing with an identical case
wherein Clause 16 of the GCC of the Railways had required interpretation) and Union of India v
Bright Power Projects (India) Private Limited[8] (while dealing with similar provision prohibiting
award of interest) by referring to and interpreting the provisions of Section 31(7)(a) of the 1996
Act, held that where parties had agreed that interest shall not be payable, the Arbitral Tribunal
could not award interest for the pendente lite period.

under the provisions contained in Section 31(7)(a) of the Arbitration and Conciliation Act, 1996
( 1996 Act) when parties had agreed under the terms of the agreement that pendente
lite interest shall not be payable, the Arbitrator cannot award interest between the date on which
the cause of action arose till the date of the award.