A ₹2,782 crore award. One word in the law changed everything.

They won a ₹2,782 crore arbitration award. Then a fight over one phrase in the law — 'unless otherwise agreed' — cost them compound interest.

Two lawyers stood before a Supreme Court bench in Delhi. One argued for interest on interest — a compounding effect that would swell an already historic award. The other pointed to a single clause in a contract, signed years before the dispute arose. The difference between winning and losing came down to five words in a statute: unless otherwise agreed by the parties.

The question was simple: When an arbitration tribunal awards you a massive sum, and the contract already specifies an interest rate, can you demand that pre-award interest be added to the principal? Or does the contract's own clause override everything?

When the airport metro stopped running

In 2008, Delhi Airport Metro Express Private Limited (DAMEPL) won a bid. They signed a Concession Agreement with the Delhi Metro Rail Corporation (DMRC) to build and operate the airport metro express line — a high-speed rail link connecting New Delhi station to Indira Gandhi International Airport. By 2012, things had soured. DAMEPL terminated the agreement, citing breaches by DMRC. The dispute went to arbitration.

The arbitral tribunal, in May 2017, delivered a blockbuster award: ₹2,782.33 crores in DAMEPL's favour as termination payment, plus interest at SBI Prime Lending Rate plus 2%. DMRC challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996 (a provision that allows a court to set aside an arbitral award on limited grounds). The Single Judge of the Delhi High Court rejected the challenge. The Division Bench partly allowed DMRC's appeal. Then, in September 2021, the Supreme Court restored the award in full.

DAMEPL had won. But the real fight was just beginning.

The interest question that split the parties

When DAMEPL moved to execute the award — to actually collect the money — a new dispute erupted. The award had granted DAMEPL interest for two periods: pre-award interest (from termination until the award date) and post-award interest (from the award until payment). DAMEPL argued that pre-award interest should be added to the principal, creating a larger 'sum' on which post-award interest would then accrue. They wanted compound interest — interest on interest.

DMRC pushed back. The Concession Agreement contained Article 29.8 — a clause that set a simple interest rate, not a compounding one. The parties had agreed on this, and the tribunal had applied it. You couldn't rewrite the deal through the back door of statutory interpretation.

The Single Judge of the Delhi High Court rejected DAMEPL's argument. DAMEPL appealed to the Supreme Court.

What Section 31(7) actually says

The case turned on two sub-sections of Section 31(7) of the Arbitration and Conciliation Act, 1996. Section 31(7)(a) deals with pre-award interest — the interest that accrues between when the dispute arose and when the tribunal delivers its award. It says that unless the parties have agreed otherwise, the tribunal can award interest at a rate it considers reasonable. Section 31(7)(b) deals with post-award interest — interest from the award date until payment. It says that the 'sum' awarded under clause (a) shall carry interest at 18% per annum, unless the award itself directs otherwise.

DAMEPL's argument leaned on a 2015 Supreme Court judgment: Hyder Consulting (UK) Ltd v. Governor, State of Orissa. In that case, a majority of the court held that the word 'sum' in Section 31(7)(a) includes not just the principal amount but also the interest awarded for the pre-award period. That meant post-award interest would run on the combined total.

But there was a crucial difference. In Hyder Consulting, the parties had no agreement on interest. The tribunal used its discretion. Here, DAMEPL and DMRC had a specific agreement — Article 29.8 — that set the interest rate. The phrase 'unless otherwise agreed by the parties' in Section 31(7)(a) meant the tribunal's discretion was displaced by the contract.

Why the contract trumped the statute

The Supreme Court bench — Justice L. Nageswara Rao and Justice B.R. Gavai — delivered its judgment on May 5, 2022. The reasoning was crisp.

The court held that where parties have agreed on interest — as the phrase 'unless otherwise agreed by the parties' contemplates — the arbitral tribunal loses its discretion. It must be guided entirely by the agreement. The tribunal had correctly applied Article 29.8, which set the interest rate at SBI PLR + 2%. That rate applied to both pre-award and post-award periods.

The court then distinguished Hyder Consulting. That judgment applied only where there was no agreement on interest. Where such an agreement exists, interest — both pre-award and post-award — is governed by the contract, not by the tribunal's discretion under Section 31(7).

Most importantly, the court refused to read the phrase 'unless otherwise agreed by the parties' as meaningless. An interpretation that renders any word or phrase in a statute redundant is impermissible, the bench said. If the court accepted DAMEPL's argument — that 'sum' always includes pre-award interest, even when parties have agreed otherwise — then the phrase 'unless otherwise agreed' would become dead letter. The parties' agreement would be overridden by a default rule they never chose.

The appeal was dismissed. DAMEPL would not get compound interest.

What this means for every arbitration clause

For lawyers drafting arbitration clauses, the message is clear: If you want a specific interest regime, put it in the contract. The phrase 'unless otherwise agreed by the parties' is not a technicality — it is a powerful override. A well-drafted interest clause will bind the tribunal and the courts, even when the statute would otherwise allow a different calculation.

For parties enforcing awards, the lesson is equally sharp: Check your contract before you argue for compound interest. If the agreement specifies a simple rate, that rate governs both pre-award and post-award periods. The Hyder Consulting route to compounding is only available when the contract is silent.

THE PLAY: When drafting commercial contracts, specify the interest rate for both pre-award and post-award periods — the phrase 'unless otherwise agreed' in Section 31(7)(a) makes your clause the final word, not the tribunal's discretion.

The airport metro runs again. But the interest on a ₹2,782 crore award will never compound.