No Illegality In Awarding Interest On Future Prospects In Motor Accident Claims : Supreme Court

The Supreme Court today (July 14) observed that there's no illegality in awarding interest on future prospects in motor accident compensation claim cases.

The Court advised the insurance companies to settle the claim on a computation proactively, on receipt of intimation of the accident, at least provisionally, to avoid interest on future prospects and driving into protracted litigation.

"When the matter is pending before the Tribunal or in appeal before the higher forums, the claimants are deprived of the compensation for future prospects. If they are paid in time, it could be utilized by the claimants and on failure, the loss of dependency would force the claimants to source their livelihood from elsewhere. This is sought to be compensated at least minimally by award of interest, which oftener them ever is nominal also since only simple interest is awarded. If the amounts were disbursed to the claimants on a rough calculation, on intimation of the accident to the Insurance Company, subject to the award of the Tribunal, necessarily there would not have been any interest liability atleast to the extent of the disbursement made.", the court observed.

The bench comprising Justices Sudhanshu Dhulia and K. Vinod Chandran heard the case where the Appellant-Oriental Insurance was aggrieved by the High Court's decision of awarding 9% interest on future prospects to the Respondent-Claimant because the multiplier of 13 was applied in the present case and the case was pending for 12 years, and the only amount received by the claimants was Rs. 50,000/-.

Challenging the High Court's decision, the Appellant moved to the Supreme Court, contending that future prospects constitute an advance payment and thus do not attract interest.

Upholding the impugned decision, the judgment authored by Justice Chandran noted that future prospects form part of the compensation for loss of dependency, and when there is a delay in awarding such compensation, the insured is entitled to interest for the period during which they were unjustly deprived of their rightful dues.

Further, the Court observed that awarding interest on future prospects is justified because the amount of compensation being awarded to the claimant is to be received only after the period for which the multiplier is adopted.

“A very relevant issue agitated by the Insurance Company is the illegality in awarding interest for future prospects, which in any event is an amount received in advance, normally inuring to the benefit of the claimants only in future…We find absolutely no reason to accept this argument.”, the court observed.

“We uphold the order of the High Court in both cases and find no reason to interfere with the same. The amounts awarded, if not paid, shall be paid within a period of 3 months and if defaulted shall carry 12% interest on the total amount of award with interest from the date of default.”, the court ordered.

Accordingly, the appeal was dismissed.

Cause Title: THE ORIENTAL INSURANCE CO. LTD. VERSUS NIRU @ NIHARIKA & ORS.

Citation : 2025 LiveLaw (SC) 693

Click here to read/download the judgment

Appearance:

For Petitioner(s) : Mr. Aditya Kumar, Adv. Ms. Ila Nath, Adv. Mr. C. George Thomas, AOR Mr. Abhishek Gola, Adv. Mr. Viresh B. Saharya, AOR Mr. Anshul Mehral, Adv. Mr. Akshat Agarwal, Adv. Mr. Rishabh Sahai Mathur, Adv. Mr. Nishant, Adv.

For Respondent(s) : Mr. Mohit D. Ram, AOR Ms. Sthavi Asthana, Adv. Dr. Linto K.b., AOR Mr. Sanjib Khandayatray, Adv. Mr. Duvvada Ramesh, Adv.