The judgment decides only the interest dispute. It does not disturb the arbitral award's substantive findings — that NBCC wrongfully terminated the sub-contract — or the rejection of NBCC's counter-claims.
- Case
- MS Sharma Enterprises v. National Building Construction Corporation Ltd.
- Court
- Supreme Court of India
- Decision
- Citation
- 2026 INSC 1135
- Bench
- Justice Aravind Kumar; Justice Vipul M. Pancholi
- Judgment by
- Vipul M. Pancholi, J.
- Case numbers
- Civil Appeal No. 13782 of 2026 (arising out of SLP (C) No. 17072 of 2026)
- Outcome
- Appeal dismissed: the Division Bench's order dated 20 March 2026 setting aside the arbitral award's pre-reference and pendente lite interest is upheld; the substantive claims and post-award interest stand.
The ruling
On 15 October 2026, the Supreme Court dismissed MS Sharma Enterprises' appeal against the Delhi High Court and held that the words “or otherwise” at the end of a contractual clause bar an arbitral tribunal from awarding pre-reference and pendente lite interest, even where the clause's earlier words only mention delayed payments and withheld deposits.
Writing for the Bench, Justice Vipul M. Pancholi held that the phrase is residuary — words of extension, not limitation — so it covers every other circumstance in which interest could be claimed against NBCC. At the same time, the Court kept the contractor's post-award interest intact, holding that Section 31(7)(b) of the Arbitration and Conciliation Act, 1996 operates independently of party autonomy and cannot be contracted out of.
A thirty-year-old construction dispute
The story begins in 1991: NBCC gave Sharma Enterprises a sub-contract for flooring and cladding at the Vashi Railway Station-cum-Commercial Complex in New Bombay for Rs.9,50,73,603.20, to be finished in two years. The work depended on the civil contractor, Mohinder Singh & Co., which delayed and never finished its part; Sharma managed the priority platform areas in time for the May 1992 inauguration, but NBCC terminated the sub-contract in September 1992 and encashed the contractor's bank guarantees.
After years of litigation over the applicable arbitration law, this Court appointed an arbitrator in 2011. The 2016 award held the termination wrongful and allowed the substantive claims — executed work, extra granite and cladding items, bank-guarantee extension charges, refund of the encashed security deposit and litigation costs — rejected NBCC's counter-claims, and awarded 10% interest per annum on the awarded sums from the termination date until payment, covering the pre-reference, pendente lite and post-award periods.
The High Court's answer
NBCC challenged the interest part of the award under Section 34. A Delhi High Court Single Judge set aside the pre-reference and pendente lite interest on 19 November 2025, holding that Clause 26 of the Special Conditions of Contract operated as an absolute bar, relying on Sayeed Ahmed v. State of U.P. A Division Bench dismissed Sharma's Section 37 appeal on 20 March 2026, holding that Clause 26's concluding “or otherwise” stood on the same footing as “or in any other respect whatsoever” in Sayeed Ahmed, and therefore comprehensively barred pendente lite interest.
Clause 26's key sentence reads: “No claim for interest will be entertained by the corporation in respect of any balance payments or any deposit which may be held up with the corporation due to any dispute between the Corporation and sub-contractor or in respect of any delay on the part of the corporation in making monthly or final payments or otherwise.”
BANTHRY ANALYSISThe doctrine: “or” keeps phrases independent
The contractor argued that “or otherwise” must take colour from what precedes it — withheld balances, deposits, delayed payments — under the maxims of ejusdem generis and noscitur a sociis, so it could not bar interest on substantive claims allowed by the tribunal. The Court rejected that. Ejusdem generis applies only where the preceding words form a single, narrow genus; here Clause 26 lists three separate, disjunctively-joined events, and where a contract joins phrases with “or”, each must be examined independently because of its wide amplitude — the rule this Court applied in Union of India v. Manraj Enterprises and reaffirmed in Union of India v. Larsen & Toubro.
The preceding events are not even a single genus: they span held-up balances, withheld deposits, disputed withholdings and delayed payments. The concluding phrase is therefore genuinely residuary, consciously incorporated with wide amplitude. Reading it down to delayed payments would render the term redundant and amount to rewriting the contract — a point the Court reinforced with the Constitution Bench's holding in Lilavati Bai that “or otherwise” are words of extension, not limitation.
Pre-award versus post-award: the Section 31(7) split
The judgment draws the statute's own line. Section 31(7)(a) empowers the tribunal to award interest from the cause of action to the award, but only “unless otherwise agreed by the parties” — so an express contractual bar binds the tribunal, which is a creature of the contract. The arbitrator here therefore acted beyond jurisdiction in granting pre-reference and pendente lite interest contrary to Clause 26.
Post-award interest is different. Section 31(7)(b) says a sum directed to be paid by an award shall carry interest from the award date to payment “unless the award otherwise directs”. Following R.P. Garg, the Court held this clause is not subject to party autonomy: it cannot be contracted out, and “unless the award otherwise directs” governs only the rate of interest, not its entitlement. The High Court was therefore right to strike down only the pre-award interest while maintaining the substantive claims and the post-award interest in the contractor's favour.
What it does not change
The judgment does not touch the merits of the award: the findings that NBCC wrongfully terminated the contract, the allowed substantive claims and the rejection of NBCC's counter-claims all stand, as does post-award interest. It also distinguishes ONGC v. G&T Beckfield, where the clause merely said no interest on “delayed payment/disputed claim” with no residuary tail — there the Court held such a clause cannot bar pendente lite interest. The lesson is textual: a narrowly-worded interest bar stays narrow; a clause that ends with “or otherwise” shuts the door on every pre-award claim.
BANTHRY ANALYSISFor law students
This case is a masterclass in contractual interpretation applied to arbitration. First, map Section 31(7): clause (a) is defeasible by party agreement (“unless otherwise agreed”), clause (b) is not (“unless the award otherwise directs” governs rate, not entitlement). Second, note when ejusdem generis fails: it needs a genus — a single class of specific words — and disjunctive joining with “or” is the Court's signal that the draftsman meant independent, wide-amplitude categories.
When you draft or parse an interest clause, check two things: (1) does the language expressly cover the period you care about (pre-reference, pendente lite, post-award)? and (2) does it end with a residuary tail like “or otherwise” or “or in any other respect whatsoever”? The tribunal is the creature of the contract — it cannot award what the contract denies — but after the award, the statute takes over.
READING PROMPTSQuestions for a closer reading
- Why did the Supreme Court hold that ejusdem generis does not restrict “or otherwise” in Clause 26 of the Special Conditions of Contract?
- Under Section 31(7) of the Arbitration and Conciliation Act, 1996, why is pre-award interest defeasible by contract while post-award interest is not?
- How did the Court distinguish this clause from the clause in ONGC v. G&T Beckfield Drilling Services?
