M/s Sharma Enterprises v. National Building Construction Corporation

Background

Background

In Sharma Enterprises v. NBCC, the Supreme Court of India upholds Clause 26’s bar on pre-award interest while preserving the principal award and post-award interest.

A 1991 flooring and cladding subcontract was terminated in 1992. The 2016 award granted substantive sums and ten per cent interest, except on costs, from termination until payment. The High Court preserved the substantive claims and post-award interest but removed pre-reference and pendente lite interest under Clause 26.

Legal questions

Legal questions

Did Clause 26, including its concluding residual expression, prohibit pre-reference and pendente lite interest under section 31(7)(a), and what happened to post-award interest?

Court holding

What the Court decided

Clause 26’s distinct disjunctive categories and residual expression created a broad contractual prohibition on pre-reference and pendente lite interest. Section 31(7)(a) made the tribunal’s discretion subject to that agreement. The separate post-award interest component under section 31(7)(b) survived.

Final outcome

Final outcome

Civil Appeal 13782/2026 dismissed. Delhi High Court’s limited setting aside of pre-reference and pendente lite interest maintained; substantive claims and post-award interest preserved. Pending applications disposed of.

Practical effect

What the decision means in practice

Civil Appeal 13782/2026 dismissed. Delhi High Court’s limited setting aside of pre-reference and pendente lite interest maintained; substantive claims and post-award interest preserved. Pending applications disposed of.

This summary states the immediate effect recorded in the decision. The original judgment and the facts of the particular case remain controlling.

Key legal principles

Key legal principles

• Section 31(7)(a) subjects pre-award interest to the parties’ agreement.
• Clause 26’s separate categories and residual language created a wider prohibition than a narrow payment-delay clause.
• Ejusdem generis requires an appropriate preceding class; it could not restrict this residual category to delayed running bills.
• The narrower ONGC clause was distinguished rather than treated as interchangeable.
• The contractual restriction on pre-award interest did not eliminate the separate post-award component.
• The appeal failed, but the substantive award remained intact.