Arbitrator possesses inherent power to award post-award interest even if the contract agreement is silent.

The petitioner-firm was allotted a contract in 1995 for providing external water lubricant pumps at Nagrota.

Due to disputes regarding the specifications of the pumps and delays in execution, the contract was eventually cancelled by the respondent.

The matter was referred to a Sole Arbitrator, who passed an award on 10.08.2005 granting the petitioner ₹5,20,000/- but specifically disallowed the claim for interest.

The petitioner moved an application under Section 33 of the Act for correction/interpretation, but the Arbitrator maintained the non-grant of interest in a communication dated 04.10.2005.

The petitioner approached the High Court under Section 34 of the J&K Arbitration & Conciliation Act seeking to set aside the award to the extent of non-payment of interest.

Whether a contractor is entitled to interest on the awarded arbitral amount in terms of Section 31(7)(a) of the J&K Arbitration and Conciliation Act when the agreement is silent on the matter.

Whether the Arbitrator committed misconduct or an error of law by refusing to grant pendente lite or future interest despite the statutory provisions and judicial precedents.

The court primarily applied Section 31(7)(a) of the J&K Arbitration and Conciliation Act, which empowers an arbitral tribunal to include interest at a reasonable rate for the period between the cause of action and the date of the award, unless otherwise agreed by the parties.

The court relied on the Five-Judge Bench decision in Secretary, Irrigation Department, Government of Orissa v. G.C. Roy (1992), which established that where an agreement is silent on interest, the arbitrator has the power to award interest pendente lite as an implied term for doing complete justice.

It further referenced Gayatri Balasamy v. M/S ISG Novasoft Technologies Limited (2025) regarding the court's power to modify interest components in an award.

The court observed that while the petitioner had indeed delayed the execution of the contract and supplied pumps that did not meet exact specifications—which justified the Arbitrator’s decision to decline pre-reference or pendente lite interest.

The Arbitrator failed to account for the deprivation of the use of money post-award.

The court reasoned that since the arbitration agreement did not expressly prohibit the grant of interest, the power to award interest is inherent in the tribunal to compensate the party legitimately entitled to the funds.

The court found that the Arbitrator fell into error by refusing future interest, as Section 31(7) intended for awarded sums to carry interest to ensure the finality and efficacy of the payment.

The petition was allowed, and the impugned award was modified to the effect that the awarded amount of ₹5,20,000/- shall carry future simple interest @ 10% per annum from the date of the award (10.08.2005) until the date of actual payment.

The court directed the respondent to pay the interest after adjusting any amounts already paid to the petitioner.