A ₹4662 crore interest fight hinged on 3 words in a contract

DAMEPL won a ₹2782 crore arbitration award. Then they asked for interest on interest — and the Supreme Court said no.

The award was everything a company could want. Delhi Airport Metro Express Private Limited (DAMEPL) walked out of the arbitral tribunal with ₹2782.33 crores — a termination payment for a public-private partnership that had soured. But when they went to collect, they walked into a second fight. This one turned on three words in a contract: unless otherwise agreed. Those three words cost them nearly ₹1900 crores.

When the airport metro project derailed

In 2008, DAMEPL won a bid. They signed a Concession Agreement with the Delhi Metro Rail Corporation (DMRC) to build and operate the Delhi Airport Metro Express line — the high-speed link from New Delhi Railway Station to Indira Gandhi International Airport. The contract was detailed. Article 29.8 spelled out what would happen if things went wrong: if the agreement was terminated, DMRC would pay a termination payment plus interest at the State Bank of India Prime Lending Rate plus 2%.

Things went wrong. By 2012, disputes had escalated. DAMEPL terminated the agreement. The matter went to arbitration.

The arbitration room was a sterile space — fluorescent lights, a long table covered in manila folders, the faint hum of an air conditioner struggling against the Delhi heat. The three arbitrators sat at one end, their faces unreadable as lawyers for both sides argued over the terms of a contract that had once promised a seamless ride from the city to the airport. The smell of old paper and ink hung in the air, a reminder of the years of correspondence, notices, and termination letters that had led to this moment.

The ₹2782 crore award — and the question that followed

In May 2017, a three-member Arbitral Tribunal handed down its award. DAMEPL was entitled to ₹2782.33 crores as termination payment. On top of that, the tribunal awarded interest at the contractual rate — SBI PLR + 2% — for the period before the award (pendente lite interest, meaning interest during the pendency of the arbitration). The award also said that post-award interest would run on the principal amount at the same rate until full payment.

DMRC challenged the award. The challenge went all the way up. In September 2021, the Supreme Court finally upheld the award and dismissed DMRC's appeal. DAMEPL had won — or so they thought.

The Supreme Court's courtroom fell silent as the judgment was read out. The bench, Justices L. Nageswara Rao and B.R. Gavai, had reserved their verdict months earlier. When the order came, it was crisp: DMRC's appeal was dismissed. DAMEPL's lawyers allowed themselves a brief moment of relief. The file, thick with years of litigation, was closed — or so it seemed.

The execution fight: what does 'sum' really mean?

When DAMEPL went to the Delhi High Court to execute the award — to actually collect the money — they made an argument that would have dramatically increased what DMRC owed. The principal was ₹2782.33 crores. But the pre-award interest (interest for the period before the award) had pushed the total to ₹4662.59 crores. DAMEPL argued that post-award interest should run on this combined sum — principal plus pre-award interest. They wanted interest on interest.

Their legal basis was Section 31(7) of the Arbitration and Conciliation Act, 1996. Sub-section (a) deals with pre-award interest — the tribunal can award interest on the principal sum for the period between the dispute arising and the award. Sub-section (b) deals with post-award interest — the sum awarded (including any pre-award interest) carries interest from the date of the award until payment. DAMEPL's argument was simple: the word 'sum' in Section 31(7)(a) includes both the principal and the pre-award interest, so post-award interest under Section 31(7)(b) should run on that entire amount.

They had a powerful precedent on their side: the Supreme Court's own decision in Hyder Consulting (UK) Ltd v. Governor, State of Orissa (2015), which had held exactly that — 'sum' includes principal plus pre-award interest for purposes of computing post-award interest.

The Delhi High Court's execution chamber was a different kind of room — smaller, more intimate, the judge's desk piled high with execution petitions. The air was thick with the smell of photocopied documents and the quiet rustle of lawyers flipping through files. DAMEPL's counsel stood before the bench, arguing that Hyder Consulting was binding. The judge listened, then asked a single question: "What does your contract say?"

Why the Delhi High Court said no

The Single Judge of the Delhi High Court rejected DAMEPL's claim. The court pointed to Article 29.8 of the Concession Agreement. That article specified that interest would be paid on the termination payment — and only on the termination payment. It did not say that interest would be paid on interest already accrued. The court held that the parties had agreed on the rate, period, and basis of interest computation. That agreement governed the matter, not the general rule from Hyder Consulting.

DAMEPL appealed to the Supreme Court.

The three words that changed everything

When the appeal reached the Supreme Court in May 2022, the bench — Justices L. Nageswara Rao and B.R. Gavai — focused on the opening words of Section 31(7)(a): "unless otherwise agreed by the parties."

Those three words, the court said, are not decorative. They are the heart of the provision. The Arbitration and Conciliation Act, 1996 is built on the principle of party autonomy — the idea that parties to a contract should be free to decide their own terms, and the law should respect those choices. Section 31(7)(a) gives the arbitral tribunal discretion to award interest, but only if the parties have not already agreed on interest themselves. If they have agreed — on the rate, the period, the basis — then the tribunal must follow that agreement. The tribunal's discretion is displaced.

In this case, Article 29.8 was exactly that kind of agreement. It specified the rate (SBI PLR + 2%), the period (from the date of termination until payment), and the basis (on the termination payment amount). The arbitral tribunal had followed this agreement. The award was consistent with the contract. There was no room to read 'sum' as including pre-award interest because the contract itself did not provide for interest on interest.

The courtroom was tense as the bench delivered its reasoning. Justice Rao's voice was measured, deliberate. "The phrase 'unless otherwise agreed by the parties'," he said, reading from the judgment, "cannot be rendered redundant. It reflects the legislative intent to respect party autonomy. Where parties have agreed on the rate, period, and basis of interest, that agreement governs." The words hung in the air. DAMEPL's counsel knew the argument was lost.

Distinguishing Hyder Consulting

The Supreme Court did not overrule Hyder Consulting. Instead, it drew a careful distinction. In Hyder Consulting, there was no agreement between the parties on interest. The contract was silent. In that situation, the tribunal's discretion under Section 31(7)(a) was unfettered, and the court's interpretation of 'sum' as including pre-award interest made sense. But where parties have agreed on interest — as DAMEPL and DMRC had — the agreement governs, and the Hyder Consulting rule does not apply.

The court also cited its own earlier decision in State of Haryana v. S.L. Arora and Co. (2010), which had held that when parties agree on interest, the tribunal cannot award interest on a different basis. The principle was consistent: party autonomy comes first.

Another precedent, N.S. Nayak & Sons v. State of Goa (2003), reinforced the same point — contractual interest provisions displace the tribunal's discretion. The court also referred to Sree Kamatchi Amman Constructions v. Divisional Railway Manager (Works), Palghat (2010), which held that the phrase "unless otherwise agreed" must be given its full meaning. These cases formed a consistent line of authority: where the contract speaks, the tribunal must listen.

The court also cited Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. (1987) for the principle of interpretation that words in a statute must be read in their context. Hardeep Singh v. State of Punjab (2014) and Union of India v. Dhanwanti Devi (1996) were cited for the rule that a precedent must be understood in the context of its facts. The Regional Manager v. Pawan Kumar Dubey (1976) was cited for the principle that a decision is an authority for what it actually decides, not for every proposition that can be extracted from it.

What the court held

The appeal was dismissed. The Supreme Court held that where parties have agreed on the payment of interest — including the rate, period, and basis of computation — the opening words 'unless otherwise agreed by the parties' in Section 31(7)(a) displace the arbitral tribunal's discretion. The tribunal must be guided by the contractual terms. The Hyder Consulting rule — that 'sum' includes principal plus pre-award interest — applies only where there is no such agreement. An interpretation that renders the phrase 'unless otherwise agreed by the parties' redundant or meaningless is impermissible. The phrase must be given full effect as reflecting the legislative intent to respect party autonomy.

The operative order was brief: "We find no merit in the present appeal. The appeal is accordingly dismissed. Pending application(s), if any, shall stand disposed of. There shall be no order as to costs."

THE PLAY: If your contract specifies how interest is calculated — rate, period, and basis — that agreement governs both pre-award and post-award interest, and you cannot claim interest on interest unless the contract itself provides for it.

The cost of three words

DAMEPL had won a ₹2782 crore award. But by asking for interest on interest — on a total of ₹4662 crores — they lost the chance to collect nearly ₹1900 crores in additional post-award interest. The three words in Section 31(7)(a) — unless otherwise agreed — turned out to be worth more than the principal itself.

The court ended where it began: with a contract, and the words the parties chose to write in it. The file, now closed, sat on a shelf in the Supreme Court registry — a reminder that in arbitration, as in life, the fine print matters.