Interest in Arbitration: When Does It Start if the Contract is Silent?

In the fast-paced world of business contracts and disputes, arbitration has become a preferred method for resolving conflicts efficiently. But what happens when a contract doesn't mention interest on delayed payments? A common question arises: Since when will a person get interest as per the Arbitration Act if the contract is silent about interest? This issue is crucial for businesses, contractors, and parties involved in commercial agreements, as it directly impacts financial recovery in arbitral awards.

This blog post dives deep into the legal principles under the Indian Arbitration and Conciliation Act, 1996 (Arbitration Act), judicial interpretations, and practical implications. We'll explore how tribunals and courts handle interest awards when contracts are silent, drawing from statutory provisions and key case law. Note that this is general information and not specific legal advice—consult a qualified lawyer for your situation.

The Core Principle: Interest from the Date of Cause of Action

Generally, in the absence of specific contractual provisions or statutory prohibitions, a person is entitled to interest from the date when the cause of action arises or the amount becomes due under the Arbitration Act, 1996. This ensures fair compensation for the deprivation of funds, compensating the aggrieved party for the loss of money's use. [