Judgment Interest refers to the rate of interest awarded by a court on a sum of money that is due as part of a legal judgment. It compensates the winning party for the time value of money lost between the date of the claim and the actual payment. This concept ensures fairness in financial and contractual disputes, where delays in payment can cause financial disadvantage to the claimant.

In India, the Code of Civil Procedure (CPC), 1908 governs judgment interest under Section 34. Courts may award interest for three stages ó pre-suit (before filing of the case), pendente lite (during the pendency of the case), and post-judgment (after the decree until payment). The rate of interest is determined based on the nature of the transaction, prevailing market rates, and judicial discretion. For commercial transactions, the rate may align with the current lending rate of scheduled banks.

Judgment interest plays a crucial role in financial and contractual law as it discourages unnecessary delays in settlements. For instance, in cases involving loans, unpaid invoices, or damages, the interest ensures that the creditor receives compensation for the period during which the funds were withheld. Courts balance equity by ensuring the rate is neither punitive nor excessively low.

From an investorís or business perspective, understanding judgment interest is essential when dealing with litigation, arbitration, or recovery proceedings. It can significantly impact the total liability or receivable amount in a dispute. While the courts retain discretion in fixing rates, parties can minimize risk through clear contract clauses specifying the applicable interest in case of default or delay. Hence, judgment interest serves as both a deterrent to delayed payments and a tool for equitable financial redress.