Two recurring battlegrounds of award challenges meet in one judgment: what a party concedes during the arbitration, and what the contract says — or does not say — about interest. In Ircon International Ltd v. Kanchanjunga Construction Co Pvt Ltd, O.M.P. (COMM) 132/2020, decided on 29 September 2026, the Delhi High Court dismissed a public-sector employer’s petition under Section 34 of the Arbitration and Conciliation Act, 1996, sustaining both an award of idling-cost compensation grounded in the employer’s own stance during the proceedings and an award of 10% annual compound interest for the pre-award period despite the contract’s silence on interest.
A subcontract battered by circumstance
The 2006 agreement put roughly seventy kilometres of Nepali highway in the contractor’s hands for NRs 14.10 crore, to be completed within twelve months. Reality intervened: equipment installation ran late, material supply faltered, and repeated bandhs — political shutdowns — paralysed movement. The contractor’s machinery and establishment stood idle, and it claimed compensation for 702 days of idling. The sole arbitrator, after sifting the delay events, awarded compensation for 248 days and added pre-award interest at 10% per annum, compounded annually. Ircon challenged both components under Section 34.
The admission that decided the merits
The most instructive part of the judgment concerns party conduct. In the arbitration, Ircon had itself pursued — successfully — a corresponding claim against the Government of Nepal for the same disruptions, and had accepted that the subcontractor’s claim would be met on the same basis. Justice Subramonium Prasad held the arbitrator entitled, indeed bound, to take Ircon at its word: a stand taken before the tribunal operates as an admission, and the Section 34 court will not permit a party to disown at the challenge stage the very basis on which it invited the tribunal to proceed.
Practice pointer: statements of case, written submissions and concessions recorded in procedural orders are all material a tribunal may treat as admissions. Draft them in arbitration with the same care as pleadings in court — the Section 34 court will read them against you.
Interest: the difference between silence and prohibition
On interest, the employer’s argument was that the contract made no provision for interest, so none could be awarded. Section 31(7)(a) of the Arbitration and Conciliation Act, 1996 says the opposite: unless otherwise agreed by the parties, the tribunal may include in the sum awarded interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between cause of action and award. The Court held that contractual silence is not an agreement “otherwise”, and that the breadth of the provision is wide enough to sustain compounding for the pre-award period where the tribunal finds it reasonable.
A term that specifically bars interest on delayed payments excludes the tribunal’s power — pre-reference and pendente lite interest cannot be awarded in its teeth.
Section 31(7)(a) applies by default — the tribunal may award simple or compound interest at a reasonable rate for the pre-award period.
The narrow lane of Section 34
The judgment also illustrates the standard a challenger must meet. The Section 34 court does not reappraise evidence or substitute its view of delay analysis; it asks whether the award is vitiated by patent illegality, a conflict with the public policy of India, or a decision beyond the submission. An award that rests on the challenger’s own admissions and a statutory default rule on interest sits comfortably within the tribunal’s province.
| Ground urged | Outcome |
|---|---|
| Idling compensation unjustified | Rejected — award grounded in Ircon’s accepted basis of settlement and the delay record |
| No contractual provision for interest | Rejected — silence does not displace Section 31(7)(a) |
| Compounding impermissible | Rejected — rate and rests within the tribunal’s discretion where reasonable |
Takeaways for contract drafting
For employers, the lesson is textual: if the commercial intent is that no interest should run on delayed payments or claims, the contract must say so in terms — a specific exclusion, not silence. For contractors, the judgment confirms that idling and prolongation claims are strengthened immeasurably by a documented parity argument: where the employer has advanced the same claim up the chain, that stance can become the measure of the claim down the chain.
This article is for general information only and is not legal advice or a solicitation.
Frequently Asked Questions
What was the underlying dispute?
Ircon, a government enterprise, subcontracted about 70 km of highway work in Nepal to Kanchanjunga under a 2006 agreement worth NRs 14.10 crore, with a 12-month completion period. The works were disrupted by delayed equipment installation, failures of material supply and prolonged political disturbances (Nepal bandhs). The contractor claimed idling costs for 702 days; the sole arbitrator awarded compensation for 248 days together with pre-award compound interest at 10% per annum.
Why did the idling-cost award survive?
Because during the arbitration Ircon had accepted that the contractor's claim would be dealt with on the same basis as Ircon's own, successful, corresponding claim against the Government of Nepal. The Court treated that stand as binding conduct — a party cannot resile at the Section 34 stage from the basis it offered before the tribunal.
Can an arbitrator award interest when the contract says nothing about it?
Yes. Under Section 31(7)(a) of the 1996 Act, unless the parties have agreed otherwise, the tribunal may include interest at such rate as it deems reasonable for the pre-award period. Silence is not an agreement to the contrary — only a clause actually excluding or restricting interest displaces the power. On that footing the 10% compound pre-award interest was sustained.
How does this sit with cases where interest clauses barred the award?
The dividing line is the contract's text. Where a clause specifically prohibits interest on delayed payments, the tribunal cannot award pre-reference interest; where the contract is merely silent, Section 31(7)(a) fills the space. The two lines of authority answer different questions and do not conflict.