UNITED INDIA INSURANCE CO. LIMITED, REGIONAL OFFICE v. SRI. MALYADRI.M & Ors.

Judgment

1. The present appeal seeks to challenge an award dated

16.02.2018, passed by the XV Additional Small Causes Judge & Member, MACT, Mayo Hall Unit (SCCH-19) in MVC No.7434/2016 (hereinafter referred to as ‘the Impugned Award’). By the Impugned Award, the respondent Nos.1 to 3/claimants were awarded compensation in a sum of Rs.16,57,000/- along with interest at 9% per annum. 2 NC: 2026:KHC:25458 MFA No. 3895 of 2018 HC-KAR

2. Although the Impugned Award was passed in two claim petitions, the present appeal challenges Impugned Award insofar as it concerns MVC No.7434/2016 alone.

3. The brief facts are that on 14.11.2016, at about 7.15

p.m., the deceased Smt. Ravanamma was crossing the Outer Ring Road in front of HDFC Bank, Kasturinagara while on a cycle, when one Tempo Traveller bearing Registration No.KA-41/B 4546 being stated to be driven in a rash and negligent manner, came at a high speed from the opposite direction and hit the deceased. Due to the impact, the deceased fell down and sustained grievous injuries. The deceased was taken to K.R. Puram Government Hospital, wherein the Doctors declared her as ‘brought dead’.

4. A claim petition was filed by the husband and children of the deceased. The petition was contested by the appellant/Insurance Company. However, despite service of notice, the respondent No.4/owner did not appear before the learned Tribunal and were proceeded exparte. The appellant/Insurance Company filed its defence. Based on 3 HC-KAR the pleadings between the parties, the following issues were NC: 2026:KHC:25458 MFA No. 3895 of 2018 framed: 1) Whether the Petitioners prove that they are the legal heirs of deceased Ravanamma? 2) Whether Petitioners prove that, on 14.11.2016 at about 7.15 p.m., when the deceased was crossing Ramamurthynagara Outer Ring Road along with Mallikarjuna, Lakshmikantha and Rajamohana Reddy in front of HDFC Bank, Kasthurinagara at that one Tempo Traveler bearing Registration No.KA-41-B-4546 drove the same in a rash and negligent manner endangering human life without following any traffic rules came at a high speed from Hebbal towards Tin factory and dashed against pedestrians as a result the deceased fell down and sustained grievous injuries? 3) Whether compensation? If so, how much and from whom? the Petitioners are entitled 4) What award / order?”

5. In order to prove the case, the husband of the deceased was examined as PW.1 and 14 documents were marked and exhibited as Exhibits P.1 to P.14. The Insurance Company did not produce any oral or documentary evidence. The learned Tribunal, after examining the evidence between the parties, found that the driver of the offending vehicle was driving in a rash and negligent manner and that nothing has come on record to contradict these allegations. In addition to the finding that the deceased was about 35 years of age and was stated to be 4 NC: 2026:KHC:25458 MFA No. 3895 of 2018 HC-KAR earning money as a coolie doing Mason work, the learned Tribunal took the income of the deceased at Rs.9,000/- per month. After adding future prospects and deducting one- third as personal expenses, took the monthly income of the deceased as Rs.8,400/- p.m, and applying the multiplier of ‘15’, since the deceased was 35 years of age, awarded the following compensation: Sl.No. 1. 2. 3. 4. 5. Particulars Amount (Rs.) Loss of dependency Loss of consortium Towards Love and affection Towards loss of estate Towards funeral and obsequies ceremonies 15,12,000-00 40,000-00 75,000-00 15,000-00 15,000-00 Total 16,57,000-00

6. The learned Tribunal also found that there was no breach in the Insurance Policy issued by the Insurance Company and thus the liability was fastened on the appellant/Insurance Company entirely. The learned Tribunal thus granted compensation of Rs.16,57,000/- along with interest at 9% per annum from the date of filing the petition.

7. This Court, by its order dated 04.07.2018, had directed a stay of the Impugned Award subject to a deposit 5 HC-KAR of a sum of Rs.11,50,000/- along with interest at 6% per NC: 2026:KHC:25458 MFA No. 3895 of 2018 annum.

8. This Court had on 22.01.2026, after recording the contentions of the appellant/Insurance Company that the only challenge in the present appeal is to the award of interest at 9% per annum given by the learned Tribunal, appointed an Amicus Curiae in the matter.

8.1. This Court has heard the learned counsel for the appellant, as well as the learned Amicus Curiae.

9. The issues that have arisen for consideration in the present case are: “i) Whether the amounts awarded are in accordance with law? ii) Whether in a motor accident compensation case, the interest is to be mechanically pegged at the Bank rate at 6% per annum or whether the Court has the discretion to award interest? i iii) Whether the award of interest at 9% per annum can be sustained in a motor accident vehicle case given the current advancement of law? 6 NC: 2026:KHC:25458 MFA No. 3895 of 2018 HC-KAR

10. As stated above, the only challenge by the appellant is on the aspect of interest, which has been awarded at 9% per annum. The learned counsel for the appellant/Insurance Company, has while relying on a judgment of a Division Bench of this Court in Union of India vs. K.S. Lakshmi Kumar1, has submitted that the Division Bench of this Court has found that where there is no delay on either side, the rate of interest was reduced from 9% to 6% p.a. The learned counsel for the appellant further contends that the interest at the rate of 8% per annum would be fair and reasonable in the circumstances of this case.

11. The learned Amicus Curiae on the other hand, contends that the issue of award of interest is no longer res integra. The Courts have examined the same in several judgments and have found that interest at the rate of 9% per annum is consistently being awarded by the Supreme Court.

12. At the outset, this Court has undertaken an examination of compensation awarded. An 1 ILR 2000 KAR 3809 7 NC: 2026:KHC:25458 MFA No. 3895 of 2018 HC-KAR examination of the records shows that the learned Tribunal has awarded compensation towards loss of dependency in a sum of Rs.15,12,000/- based on the income of Rs.8,400/- per month. However, as per the Notional Income Chart, the Notional Income for year 2016 is Rs.9,500/- per month. Thus, the amounts awarded need to be modified. In addition, since the deceased was 35 years of age as on the date of death, the appropriate multiplier applicable would be ‘16’ and not ‘15’ as has been awarded by the learned Tribunal. The deceased is survived by 3 family members being her husband and two sons. It has also given a finding that the husband was not dependent on the deceased. Accordingly, after adding future prospects of 40% in terms of the judgment of the Supreme Court in the case of Sarla Verma vs. Delhi Transport Corporation2 and deducting 1/3rd towards personal income, the loss of dependency would be recalculated as follows: Income of the deceased is taken at Rs.9,500/- (a) (b) Adding future prospectus of 40% to the actual income: Rs.9,500 + 3800 (40%) = 13,300/- (c) Deduction towards personal expenses: 2 (2006) 6 SCC 121 8 NC: 2026:KHC:25458 MFA No. 3895 of 2018 HC-KAR Rs.13,300 – 4,433 (1/3rd) = 8,867/- (d) Therefore, the loss of dependency would be calculated as: Rs.8,867/- x 12 x 16 = 17,02,464/-

13. The learned Tribunal has awarded amounts towards ‘loss of consortium’ as well as towards ‘loss of love and affection’. In terms of the judgment of the Supreme Court in the case of National Insurance Co. Ltd. v. Pranay Sethi3 the ‘loss of consortium’ is to be awarded at Rs.40,000/- per family member. In the present case, the deceased was survived by her husband and two children. Thus, the loss of consortium would be Rs.1,20,000/- (Rs.40,000 x 3).

14. Thus, the compensation awarded by the learned Tribunal is re-assessed in the following manner: Sl.No. Particulars Amount (Rs.) 01 Loss of Dependency 17,02,464/- 02 Loss of Consortium 04 Towards Loss of Estate 05 Towards Funeral and Obsequies Ceremonies 1,20,000/- 15,000/- 15,000/- Total 18,52,464/- 3 (2017) 16 SCC 680 9 HC-KAR NC: 2026:KHC:25458 MFA No. 3895 of 2018

15. The other issue raised is on interest awarded. It is apposite to set out the applicable provision. Section 171 of the Motor Vehicles Act, 1988 [hereinafter referred to as ‘the MV Act’] provides for the award of interest in the following manner: “171. Award of interest where any claim is allowed. - Where any Claims Tribunal allows a claim for compensation made under this Act, such Tribunal may direct that in addition to the amount of compensation simple interest shall also be paid at such rate and from such date not earlier than the date of making the claim as it may specify in this behalf.”

15.1 A plain reading of the said provision shows that Section 171 of the MV Act does not prescribe any rate of interest and gives the discretion to the learned Tribunal to do so. It further sets out that the Tribunal shall award simple interest from the date of filing the claim.

16. Interest is the compensation for the factum of money being held back from the family of a deceased or the injured. The Courts have from time to time while discussing the principles for award of interest, held that the interest is awarded not because of any contractual obligation but 10 NC: 2026:KHC:25458 MFA No. 3895 of 2018 HC-KAR because of the delay in claimants receiving compensation after the occurrence of the accident.

16.1 In Abati Bezbaruah vs. Geological Survey of India4, the Supreme Court has held that the interest rate must be fixed by taking all relevant factors including inflation, change of economy, policy being adopted by RBI from time to time, how long the case is pending, permanent injuries suffered by the victim, enormity of suffering, loss of future income, loss of enjoyment of life etc., into consideration. It was further held that Section 34 of the Code of Civil Procedure,1908 nor Section 4A(3) of Workmen Compensation Act, 1923 are applicable in fixing the rate of interest. The relevant extract is below: “18. Three decisions were cited before us by Mr.A.P. Mohanty, learned counsel appearing on behalf of the appellant, in support of his contentions. No ratio has been laid down in any of the decisions in regard to the rate of interest and the rate of interest was awarded on the amount of compensation as a matter of judicial discretion. The rate of interest must be just and reasonable depending upon the facts and circumstances of each case and taking all relevant factors including inflation, change of economy, policy being adopted by Reserve Bank of India from time to time, how long the case is pending, permanent injuries suffered by the victim, enormity of suffering, loss of enjoyment of life etc., into consideration. No rate loss of income, future 4 (2003) 3 SCC 148 11 HC-KAR NC: 2026:KHC:25458 MFA No. 3895 of 2018 of interest is fixed under Section 171 of the Motor Vehicles Act, 1988. Varying rates of interest are being awarded by Tribunals, High Courts and the Supreme Court. Interest can be granted even if a claimant does not specifically plead for the same as it is consequential in the eye of law. Interest is compensation for forbearance or detention of money and that interest being awarded to a party only for being kept out of the money which ought to have been paid to him. No principle could be deduced nor can any rate of interest be fixed to have a general application in motor accident claim cases having regard to the nature of provision under Section 171 giving discretion to the Tribunal in such matter. In other matters, awarding of interest depends upon the statutory provisions, mercantile usage and doctrine of equity. Neither Section 34 CPC nor Section 4-A(3) the Workmen’s Compensation Act are applicable in the matter of fixing rate of interest in a claim under the Motor Vehicles Act. The Motor Vehicles Act. The courts have awarded the interest at facts and different circumstances of each case. Therefore, in my opinion, there cannot be any hard-and-fast rule in awarding interest and the award of interest is solely on the discretion of the Tribunal or the High Court as indicated above.” rates depending upon [Emphasis Supplied]

17. The Supreme Court in Kaushnuma Begum (Smt) and Others vs. New India Assurance Co. Ltd. And Others5, recognised a shift in economic conditions and reduced the earlier standard interest rate from 12% to 9%, aligning it with prevailing bank rates. It held that interest at 9% per annum is reasonable and should ordinarily be 5 (2001)2 SCC 9 12 NC: 2026:KHC:25458 MFA No. 3895 of 2018 HC-KAR awarded from the date of filing of the claim petition. The relevant extract of the judgment is set out below: “24. Now, we have to fix up the rate of interest. Section 171 of the MV Act empowers the Tribunal to direct that “in addition to the amount of compensation simple interest shall also be paid at such rate and from such date not earlier than the date of making the claim as may be specified in this behalf”. Earlier, 12% was found to be the reasonable rate of simple interest. With a change in economy and the policy of Reserve Bank of India the interest rate has been lowered. The nationalised banks are now granting interest at the rate of 9% on fixed deposits for one year. We, therefore, direct that the compensation amount fixed hereinbefore shall bear interest at the rate of 9% per annum from the date of the claim made by the appellants. The amount of Rs 50,000 paid by the Insurance Company under Section 140 shall be deducted from the principal amount as on the date of its payment, and interest would be recalculated on the balance amount of the principal sum from such date.” [Emphasis Supplied]

18. In National Insurance Co. Ltd. vs. Keshav Bahadur6, it was held by the Supreme Court that the Tribunal cannot impose a penal rate of interest in case of default by the Insurance Company to pay the compensation within stipulated time. Such imposition of penalty is not statutorily prescribed and envisaged under Section 171 of the MV Act. However, interest @ 9% per annum was upheld 6 (2004) 2 SCC 370 13 HC-KAR by the Supreme Court. The relevant extract of the said NC: 2026:KHC:25458 MFA No. 3895 of 2018 judgment reads thus: “8. The inevitable conclusion on the factual background is that the liability of the appellant insurer is limited to Rs.50,000. The residual question is whether there could be any stipulation of penal rate of interest as done by the Tribunal and affirmed by the High Court. So far as the higher rate of interest stipulation is concerned, it is to be noted that grant of interest under Section 110-CC of the Act (corresponding to Section 171 of the Motor Vehicles Act, 1988, in short “the new Act”) is discretionary. The purpose for award of interest is to put pressure on the relevant person not to delay in making the payment; and to compensate the victim or his dependants at least to some extent for such delay as may occur, by way of interest. In determining the quantum of interest awardable under the relevant section, the Tribunal acting under Section 110 of the Act corresponding to Section 166 of the new Act can derive direct guidance from Section 34 of the Code of Civil Procedure, 1908 (in short “CPC”). In fact, the provisions require payment of interest in addition to compensation already determined. Even though the expression “may” is used, a duty is laid on the Tribunal to consider the question of interest separately with due regard to the facts and circumstances of the case. The provision is discretionary and is not and cannot be bound by rules. xxx xxx xxx

13. Though Section 110-CC of the Act (corresponding to Section 171 of the new Act) confers a discretion on the Tribunal to award interest, the same is meant to be exercised in cases where the claimant can claim the same as a matter of right. In the above background, it is to be judged whether a stipulation for higher rate of interest in case of default can be imposed by the Tribunal. Once the discretion has been exercised by the Tribunal to award simple interest on the amount of compensation to be awarded at a particular rate and from a particular date, there is no scope for retrospective enhancement for default in payment of compensation. No express or implied power in this regard can be culled out from Section 110-CC of the Act or Section 171 of the new Act. Such a direction in the award for retrospective 14 NC: 2026:KHC:25458 MFA No. 3895 of 2018 HC-KAR enhancement of interest for default in payment of the compensation together with interest payable thereon virtually amounts to imposition of penalty which is not statutorily envisaged and prescribed. It is, therefore directed that the rate of interest as awarded by the High Court shall alone be applicable till payment, without the stipulation for higher rate of interest being enforced, in the manner directed by the Tribunal.” [Emphasis Supplied]

18.1 A similar view has been taken by the Supreme Court in Dharampal vs. U.P.S.R.T.C.7, wherein it was held that interest is the compensation for the delay in making payment to a claimant. It was further held that given the policy of the RBI, where interest on fixed deposits for one year is at 9% per annum, the award however directed interest at 7.5% per annum, as the interest on bank deposits for the year 2004-05. The relevant extract reads as under: “10. Interest is compensation for forbearance or detention of money, which ought to have been paid to the claimant. No rate of interest is fixed under Section 171 of the Act and the duty has been bestowed upon the court to determine such rate of interest. In order to determine such rate we may refer to the observations made by this Court over the years. In the year 2001 in Kaushnuma Begum v. New India Assurance Co. Ltd.[(2001) 2 SCC 9 : 2001 SCC (Cri) 268] , on the question of the rate of interest to be awarded it was held that earlier, 12% was found to be the reasonable rate of simple interest but with a change in economy and the policy of Reserve Bank of India lowered and the nationalised banks are now granting interest @ 9% interest rate has been 7 (2008) 12 SCC 208 15 HC-KAR NC: 2026:KHC:25458 MFA No. 3895 of 2018 on fixed deposits for one year. Accordingly, interest @ 9% was awarded in the said case…. xxx xxx xxx

11. In the year 2002, in United India Insurance Co. Ltd. vs. Patricia Jain Mahajan, this Court held that the interest is payable on the equitable grounds to the aggrieved person who is deprived of using the money which is due and payable to him following the observations made in Kaushnuma Begum, interest @ 9% was awarded in this case also. It was held as follows: (Mahajan case SCC p.304 para 39): “39….. In our view, the reason indicated in Kashnuma Begum is a valid reason and it may be noticed that the rate of interest is already on the decline. We therefore reduce the rate of interest to 9% in place of 12% as awarded by the High Court.”

12. In the year 2003, in Abati Bezbaruah v. Geological Survey of India [(2003) 3 SCC 148 : 2003 SCC (Cri) 746] it was held that the question as to what should be the rate of interest, in the opinion of this Court, would depend upon the facts and circumstances of each case. Award of interest would normally depend upon the bank rate prevailing at the relevant time. After referring to the aforementioned decisions interest @ 9% was awarded in the said case. In the backdrop of the aforesaid legal position, we 14. may now examine the facts of the present case. The accident in the present case had taken place on 1-9-2004 and the Tribunal had passed the award on 18-5-2005. Rate at which the interest is to be awarded would normally depend upon the bank rate prevailing at the relevant time. Since in T.N. State Transport Corpn. Ltd. [(2005) 6 SCC 236 : 2005 SCC (Cri) 1436] decided in the month of April 2005, the prevailing rate of interest on bank deposits was found and held to be 7.5% per annum, we consider it appropriate to award the same rate of interest, as the same was the prevailing rate of interest on the date of the passing of the award i.e. 18-5-2005 in the present case. Consequently, we hold that the appellants would be entitled to be paid interest at the rate of 7.5% from the date of application till the date of payment.” [Emphasis Supplied] 16 HC-KAR NC: 2026:KHC:25458 MFA No. 3895 of 2018

19. The Supreme Court in Supe Dei (Smt) and Others vs. National Insurance Company Limited and Another8 affirmed that 9% per annum is an appropriate and consistently applied rate of interest in motor accident compensation cases, reinforcing uniformity in such awards. The relevant extract of the judgment is set out below: “11. Coming to the question of interest this Court in Kaushnuma Begum v. New India Assurance Co. Ltd. observed that 9% is the appropriate rate of interest to be awarded and that rate is being applied in motor accident compensation cases.” [Emphasis Supplied]

20. However recently, the Supreme Court in Jagadish vs. Mohan9 awarded interest at 9% per annum on compensation, reaffirming that such rate is appropriate in cases involving death, serious injury and substantial loss. The relevant extract of the judgment is set out below: “15. The Tribunal has noted that the appellant is unable to even eat or to attend to a visit to the toilet without the assistance of an attendant. In this background, it would be a denial of justice to compute the disability at 90%. The disability is indeed total. Having regard to the age of the appellant, the Tribunal applied a multiplier of 18. In circumstances, the compensation payable to the appellant on account of the loss of income, including future ORDER (i) The appeal is disposed of directing that the Impugned Judgment and Award dated

16.02.2018, passed by the XV Additional Small Causes Judge & Member, MACT, Mayo Hall Unit (SCCH-19) in MVC No.7434/2016 is modified to the extent that the claimants are entitled to enhanced compensation of Rs.1,95,464/- 31 HC-KAR NC: 2026:KHC:25458 MFA No. 3895 of 2018 along with interest @ 9% per annum from the date of petition till the date of realization, in addition to Rs.16,57,000/- that has been awarded by the Tribunal. (ii) The remaining portion of the Impugned Award of the Tribunal is undisturbed. (iii) The Insurance Company shall deposit the enhanced compensation with interest at 9% p.a. within a period of eight weeks from the date of receipt of the judgment. (iv) The amount in deposit by the Insurance Company before this Court inclusive of updated interest shall be transmitted to the Tribunal within a week. (v) The Registry is directed to draw the modified Award accordingly. (vi) The Registry is directed to transmit a copy of this judgment to the concerned Tribunal, along with its records. 32 HC-KAR (vii) No order as to costs. All pending applications NC: 2026:KHC:25458 MFA No. 3895 of 2018 stand disposed of. Sd/- (TARA VITASTA GANJU) JUDGE KS/JJ Sl.No.8, List No. I 33