The Madras High Court has held that compensation awarded in motor accident cases should, as a rule, be disbursed through a verified direct bank transfer mechanism rather than delayed, diverted, or exposed to misuse through avoidable procedural handling. The Court treated timely and secure disbursement as an integral part of delivering “just compensation” under the Motor Vehicles Act. The Court directed that, as a general rule, all insurers and transport corporations held liable to pay compensation must deposit the awarded or enhanced compensation by direct bank transfer through NEFT/RTGS straight into the claimant’s bank account as verified and recorded in the award itself, unless the Tribunal records reasons for adopting a different course.
The Court further directed that the bank account must be a pre-existing account prior to the claim and located within the claimant’s own place of ordinary residence. If no such account exists, a new account may be opened only in the claimant’s place of residence, and not at the instance or convenience of counsel or any practitioner. It was also directed that the account should stand in the individual name of the claimant, or in the case of a minor, through a guardian, and cannot be a joint account with a non-family member. For minors, the Tribunal must ensure fixed deposit or other protective arrangements as directed in the award, and the concerned bank must comply with such retention directions.
The party making the deposit must furnish the UTR number and deposit particulars to the Tribunal by e-mail within 48 hours, followed by physical proof of deposit. Any later change in the claimant’s bank details must be promptly updated before the Tribunal and verified before the final award is passed. Finally, the Registrar General of the Madras High Court was directed to issue a circular to all Motor Accident Claims Tribunals in Tamil Nadu and Puducherry for strict compliance with these directions.
The Division Bench comprising Justice N. Sathish Kumar and Justice M. Jothiraman accepted the law laid down in Sarla Verma vs. Delhi Transport Corporation [2009 (2) TNMAC 1], and observed that where the deceased is a bachelor, the proper deduction towards personal and living expenses is 50%. Since the Tribunal had deducted only 25%, the compensation under the head of loss of dependency required correction. On that basis, the Court recalculated the annual contribution to the dependants at Rs. 1.68 lakhs after 50% deduction from the annual income of Rs. 3.36 lakhs, applied the multiplier of 15, and reduced the loss of dependency to Rs. 25.20 lakhs. The other heads of compensation were left unchanged.
As a result, the total compensation was reduced from Rs. 39.89 lakhs to Rs. 27.29 lakhs. The Court modified the Tribunal’s award, and directed the insurer to deposit the modified amount within four weeks, with apportionment to remain in the same ratio already fixed by the Tribunal.
During arguments, the insurer’s counsel drew attention to recurring concerns relating to disbursement of compensation in motor accident claims, particularly the need for direct bank transfer and a uniform mechanism for payment to claimants. The Court therefore referred to the earlier Madras High Court ruling in The Divisional Manager, The Oriental Insurance Company Ltd. v. Rajesh [2016 SCC Online 1913], which had introduced NEFT/RTGS mode of payment in motor accident claims and recognised that “just compensation” is meaningful only when the awarded sum reaches the claimant without delay or diversion.
The Court further relied on the Supreme Court’s decision in Parminder Singh v. Honey Goyal [(2025) 9 SCC 539], which recognised that compensation can be directly transferred into the bank accounts of claimants instead of first being routed through the Tribunal, provided the bank details are furnished and verified at the claim stage. On that basis, the High Court observed that the mechanism for disbursement of compensation under the Motor Vehicles Act, being a welfare legislation, required uniform and effective implementation so that the real object of awarding compensation is achieved.
Briefly, the appeal was filed by Oriental Insurance Company against the award passed by the Motor Accident Claims Tribunal, but only on the issue of quantum of compensation. The underlying accident occurred on Jan 15, 2023, when Kandipan was standing near Kovilambakkam Bus Stop on Medavakkam Main Road, Chennai, and a hydraulic mobile crane, driven rashly and negligently, hit him, causing his death on the spot. His parents, sister and brother filed the claim petition seeking compensation of Rs. 35 lakhs.
After considering the evidence and applying the principles in Sarla Verma vs. Delhi Transport Corporation [2009 (2) TNMAC 1] and New India Assurance Company v. Somwati [Civil Appeal No.3093/2020], the Tribunal awarded a total compensation of Rs. 39.89 lakhs including Rs. 37.80 lakhs towards loss of dependency, Rs. 1.76 lakhs towards consortium, and Rs. 16,500 each towards loss of estate and funeral expenses.
The insurer’s challenge was narrow. It argued that since the deceased was an unmarried bachelor, and the dependants included both parents, a married sister, and an adult brother, the Tribunal should have deducted 50% towards the deceased’s personal and living expenses, instead of deducting only one-fourth.
