No ‘clamp formula’ for award of compensation interest in road accident cases: Karnataka High Court

High Court of Karnataka

There is no “straightjacket formula” in determining the rate of interest on the compensation amount awarded in motor vehicle accident cases, the Karnataka High Court said while rejecting an insurance company’s plea to reduce the interest rate to 8% from the 9% awarded by the Road Accident Claims Tribunal in case of death due to road accident.

“There can be no strait-jacket formula in determining the rate of interest and it must depend on the facts and circumstances of each case. The main principle remains that the rate must be neither punitive nor non-punitive but must strike a balance between fairness to the claimant and reasonableness to the insurer,” the court said.

Appeal dismissed

Justice Tara Vitasta Ganju passed the order while dismissing the appeal filed by United India Insurance Co. Limited., challenging the interest-only rate awarded by the tribunal in 2018 on the liquidation amount in a suit filed by a man and two children over the death of his wife, a coolie, who died when she was hit by a van while crossing the Bengaluru 206 road.

The insurance company argued that the court should have imposed the prevailing bank interest rate or a maximum of 8% of the compensation amount of ₹16.57 lakh.

No fixed interest rate

The court said that the Motor Vehicles Act does not prescribe a fixed rate of interest but leaves it to the discretion of the Tribunal, requiring simple interest from the date of suit, and courts have from time to time fixed a rate of interest to compensate for late payment of compensation.

Analyzing the rate of interest awarded in various accident cases upheld by the Supreme Court over the last 5-10, Justice Ganju pointed out that tribunals and courts have consistently awarded interest at the rate of 9% from the date of accident on the compensation amount.

“Though bank rates may serve as a guide, they are not determinative and the discretion of the court remains paramount. Moreover, the Supreme Court has awarded/confirmed an award of 9% per annum even in cases of grievous hurt/death,” the High Court observed.

An interest rate of 9% is more appropriate in cases of death and serious injury, particularly where there is a long delay between claimants receiving compensation, the high court said, noting that the award of interest is usually determined on a case-by-case basis and at a rate that is just, fair and reasonable.

Published – 11 Jun 2026 23:54 IST