SC mandates direct transfer of motor accident compensation to claimants’ accounts

In a significant ruling aimed at eliminating procedural delays and easing the burden on accident victims and insurance companies alike, the Supreme Court has mandated that compensation awarded in motor accident cases should be directly transferred to claimants’ bank accounts.

The court ruled that the directive, though issued in the context of motor accident claims, could serve as a model for all cases involving monetary awards.

Referring to the necessity of adopting a direct transfer mechanism for compensation, the Bench of Justice J.K. Maheshwari and Justice Rajesh Bindal asserted: “We may add that directions are being issued for bank transfer of the amount of compensation in motor accident cases, but the courts/tribunals can always follow this process in any matter, whenever any amount is to be paid by one party to another, however, ensuring proper compliance.”

The judgment is significant as it seeks to replace the often cumbersome and delay-ridden disbursement process with a more streamlined, transparent, and efficient method, reducing the ordeal faced by accident victims and their families.

Recognising the need for uniform implementation, the Supreme Court asserted: “The Registry is directed to send a copy of this order to the Registrars-General of all the High Courts for placing the same before the Chief Justice of the High Court for further circulation and compliance by the concerned tribunals/courts; and the directors of the National Judicial Academy and the State Judicial Academies.”

Speaking for the Bench, Justice Bindal asserted official data from the Ministry of Road Transport and Highways revealed that over 22 lakh road accidents occurred in India between 2018 and 2022, resulting in more than 7.7 lakh fatalities and nearly 21 lakh injuries and a proportionate number of claim petitions being filed before motor accident claims tribunals. “The figure of filing of claim petitions and disposal thereof is neck to neck,” the court asserted.

Citing an RTI response from the Insurance Regulatory and Development Authority of India (IRDAI), the court noted that over 10.46 lakh motor accident compensation claims were pending before tribunals at the end of 2022-23, marking an increase of approximately 1.37 lakh cases in just three years.

Justice Bindal asserted that the traditional system, where insurance companies deposited compensation with the tribunal and claimants subsequently filed withdrawal applications, typically resulted in an average delay of 15-20 days. It not only resulted in additional expenses but also loss of interest on awarded amounts. Some claimants remained unaware of the deposited funds, leading to prolonged delays. Justice Bindal added technology had revolutionized banking, with artificial intelligence enabling 24x7 transactions from anywhere. Besides this, India had made remarkable strides in digital payments. According to the Finance Ministry, transactions surged from 220 crore in 2013-14 to 18,592 crore in 2023-24, with value rising from Rs 952 lakh crore to Rs 3,658 lakh crore. UPI, an indigenous digital payment system, saw transactions grow from 92 crore in 2017-18 to 13,116 crore in 2023-24. Government schemes now transferred funds directly to beneficiaries, with about 80 per cent of adults holding bank accounts.

Justice Bindal added the courts frequently handled cases requiring payments to litigants, traditionally deposited and withdrawn later. This applied even to small maintenance payments under Section 125 of the CrPC or the Domestic Violence Act, 2005. Withdrawing court-deposited amounts remained time-consuming and costly.

Justice Bindal asserted that the tribunals might require claimants to provide bank account details at the pleading or evidence stage to facilitate this process. In the absence of an account, the claimants must open one and changes must be updated before the final award. Accounts should be solely in the claimant’s name or, for minors, through guardians—never jointly with non-family members. For minor claimants or special cases, tribunals might direct a portion of compensation to be kept in a fixed deposit, with banks ensuring compliance and reporting to the Tribunal, Justice Bindal asserted.