The High Court of Karnataka has ruled that an interest rate of 9% is more appropriate in cases involving death and serious injury, particularly when there is a significant delay in the claimant receiving compensation. Justice Tara Vitasta Ganju, while upholding the decision of the Motor Accident Claims Tribunal in Bengaluru in a decade-old accident case, observed that there cannot be a 'straitjacket formula' for determining the rate of interest. The rate must depend on the facts and circumstances of each case, balancing fairness to the claimant and reasonableness to the insurer.
Background of the Case
In November 2016, Ravanamma, who was riding a bicycle, was hit by a speeding van while crossing the Outer Ring Road at Kasturinagar in east Bengaluru. She was taken to KR Pura Government Hospital, where doctors declared her 'brought dead'. Her husband and two children filed a claim before the tribunal, stating that the deceased worked as a mason and supported the family with a monthly income of Rs 9,000. In February 2018, the tribunal awarded Rs 16.5 lakh in compensation along with 9% interest.
Insurance Company's Challenge
United India Insurance Company, the insurer of the van, challenged the award, arguing that the interest rate was too high and should be reduced to 8%. The insurer claimed there was no delay on its part. However, Justice Ganju noted that interest is compensation for the money being withheld from the family of the deceased or the injured person. Courts have consistently held that interest is awarded not due to contractual obligation but because of the delay in claimants receiving compensation after the accident.
The Supreme Court has held that the award of interest is intended to recompense the claimant for being deprived of the use of money that ought to have been paid at the time of the accident. Therefore, the rate of interest must be just, fair, and reasonable, considering prevailing economic conditions and bank rates. In this case, the accident occurred in 2016, and the award was passed in 2018. The tribunal deemed 9% interest appropriate, which is not punitive and is fair given the economic conditions. Moreover, it has been 10 years since the accident, the judge observed while directing the insurer to pay an additional Rs 1.9 lakh compensation along with 9% interest.
