Holding

The Supreme Court held that the Supreme Court’s guidelines in Muljibhai (approved in Union Carbide and General Manager) are binding and the Gujarat High Court Full Bench guidelines are disapproved.

Summary

The Supreme Court examined the validity of the Gujarat High Court Full Bench's guidelines in Kamlaben v. Oriental Insurance, which required a ten‑year waiting period and periodic payments by the insurer for motor accident compensation. The Court held that these guidelines conflicted with the Supreme Court’s earlier directives in Muljibhai, Union Carbide and General Manager, Kerala cases, which mandate that compensation be deposited in fixed deposits with restrictions on loans and that the Motor Accident Claims Tribunal, not the insurer, should control disbursement. The ten‑year waiting period was deemed arbitrary and violative of Articles 14 and 300A of the Constitution. Consequently, the High Court’s guidelines were disapproved, the Supreme Court’s guidelines were reaffirmed, and the appeals were allowed. The Court also directed that all tribunals follow the Supreme Court’s guidelines and that fixed deposits carry a note prohibiting advances without court permission.

Issues considered

Whether the Gujarat High Court Full Bench guidelines on a ten‑year waiting period and insurer‑directed periodic payments are constitutionally valid.
Whether there is a conflict between the Supreme Court’s guidelines (Muljibhai, Union Carbide, General Manager) and the High Court’s guidelines, and which set of guidelines should prevail.
Whether the High Court exceeded its jurisdiction by framing the question of disbursement of compensation.
Whether the High Court guidelines violate fundamental rights under Article 14 and Article 300A of the Constitution.

Legislation cited

Motor Vehicles Act, 1939s. 140, s. 166, s. 168, s. 168(3), s. 92, s. 95(2)
Motor Vehicles Act, 1988s. 168(3)

Subjects

Motor accident compensationDisbursement guidelinesFixed depositAnnuityMotor Vehicles ActFundamental rightsArticle 14Article 300ASupreme Court precedentGujarat High CourtMinor claimantsInsurance company liability

Judgment

i
\
I

A LILABEN UDESING GOHEL ETC. ETC.
v.
THE ORIENTAL INSURANCE CO. LTD. AND ORS. ETC. ETC.

MARCH 15, 1996

B (A.M. AHMADI, CJ! AND N.P. SINGH, J.]

Motor Vehicles Act, 1939 :

Ss. 166, 168---Motor accident claims-Compensation amount-
C Guidelines laid down by Supreme Court for proper utilisation of-Reiterated.

A Full Bench of the Gujarat High Court in the case of New India
Assurance Co. Ltd. v. Kamlaben Sultansinh Hakumsinh Jadav & Or.», aris-
ing out of an award of the Motor Accident Claims Tribunal, observed that
inspite of the guidelines given to the Claims Tribunals to follow while
D disposing of the claim applications arising under the Motor Vehicles Act,
1949, a large number of complaints of mis-application of compensation
money were being filed. The Full Bench while dealing with the proper
utilisation of the compensation money paid to the claimants observed that
Insurance Companies were since nationalised, the necessity for awarding
E lump sum payment to secure the interest of the dependents was no longer
there; instead regular monthly payments could be made through
nationalised bank. It inter alia held that the Claims Tribunal should direct
the Insurance Company to pay the amount of compensation periodically
by quarterly instalments by calculating interest at the rate of 15% per
annum on the total amount of compensation determined by it and to pay
F the principle amount, at the end of 10 to 20 years, having regard to the
facts of each case; in the case of minor claimants, the Tribunal would order
that the amount of compensation would be kept with the Insurance Com-
pany till the minor attained the age of 21 years hut in any case not before
expiry of 10 years from the date of the award; in case the Insurance
G Company concerned or the General Insurance Corporation of India was
not ready and willing to pay the amonnt in the manner directed, the
compensation amount should be deposited with the Life Insurance Cor-
poration of India, which would provide for payment by an appropriate
annuity to the claimants.

H The claimants in different cases, filed the present appeals challeng-
450
LILABEN UDESJNG GOHELv. ORIENTAL INSURANCE CO. LTD. 451

ing the judgment of the Full Bench of the High Court. A writ petition was A
r' also filed by way of public interest litigation on behalf of the victims of
" various accidents for quashing the judgment of the Full Bench of the
Gujarat High Court.

It was contended for the appellants that the minimum waiting period
for 10 years as prescribed by the High Court, before the claimant could be B
entitled to receive the compensation money awarded would deprive the
claimant of his right to compensation. Such a procedure would be ar-
bitrary and unreasonable and as such violative of fundamental rights
under Article 14 and right to property under Article 300-A of the Constitu-
tion. Likewise entrusting the capital amount to the Insurance Company c
would also not be in the interest of the claimants.

Meanwhile, a Division Bench of the Gujarat High Court took note
of the conflict between the guidelines laid down in Muljibhai's case as
approved by this Court in Union Carbide case and the judgment of the Full
Bench of the Gnjarat High Court in New India Assurance Co. Ltd. v. D
Kamlaben & Ors., and referred the matter to a five Judge Bench. The five
Judge Bench while deciding the matter in Jayantilal Ambalal Pannar v.
Gujarat State Road Transp01t Corporation, notice that there was conflict
between the guidelines in relation to disbursement and investment of the
amount of compensation as laid down by this Court in the case of Genqal E
Manager, Kera/a State Road Transport C01poration v. Susamma Tho91'ils &
Ors., and those laid down by the full bench of the Gujarat High Court in
New India Assurance Co. Ltd. v. Kamlaben & Ors., and held that the
guidelines laid down by the Supreme Court had to he followed by all the
Motor Accident Claims Tribunals. ·
F
Allo"ing the appeals and disposing of the writ petition, this Court

HELD : 1. With tile five Judge Bench decision of the Gujarat High
Court in Jayantilal Ambalal Pannar v. Gujarat State Road Transport Car-
poration, the position in law as it stood before the decision rendered by the
G
three Judge Bench in Kamlaben's case stands restored.
!"'A
1. New India Assurance Co. Ltd. v. Kamlaben Sultansinh Hakumsinh
Jadav & Ors., (1993) 1 Guj. L.R. 779, disapproved.

2. Muljibhai v. United India Insurance Co. Ltd., (1982) 23 1 Guj. L.R. H
451
452 SUPREME COURT REPORTS [1996] 3 S.C.R.

A 756, and Jayantila/ v. Ambala/ Pannar v. Gujarat State Road Transport
Corporation & Anr., (1994) 35 2 Guj. L.R. 1308, approved. [463-C] ~ '

2. In addition to the guidelines laid down in Muljibhai's case as
approved by this Court in Union Carbide case and reiterated in General
Manager, Kera/a State Road Transport Corporation v. Susamma 17tomas &
B Ors., it is directed that when the amount is vested in a fixed deposit the
banks would invariably be directed to affix a note on the fixed deposit
receipt that no loan or advance should be granted on the strength cf the
said FDR without the express permission of the Court/Tribunal, which
ordered the deposit. In all cases in which compensation is awarded for
C injury caused in a motor ·accident, whether by way of adjudication or
agreement between the parties, the Court/ Tribunal must apply the said
guidelines. (464-A; 464-C, D-E]

3. Union Carbide Cmporatio11 v. Union of India, (1991] 4 SCC 584
686, followed.
D
4. General Manager, Kera/a State Road Transport Co1poration v. -I
Susamma 17tomas & Ors., (1994) ACJ 1 = (1994] 2 SCC 176, and Bishan
Devi v. Sirbaksh Singh, AIR (1979) SC 1862, relied on.

4. It is hoped that the Courts(fribunals in the country will not sue·
E
comb to the temptation of permitting huge withdrawals in the hope of
disposing of the claim and they will realise their duty towards the victims of
the accident so that a large part of the compensation amount is not lost to
them. The very purpose of laying down the guidelines was to ensure the
safety of the amount so that the claimants do not become victims of un-
F scrupulous persons and unethical agreements or arrangements. [464-E-F]

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 4466-67
of 1996 Etc. Etc.

From the Judgment and Order dated 26.4.93 & 21.6.93 of the Gujarat
G High Court in F.A. No. 61/79 and C.A. No. 1127/93 in F.A. No. 2153 of
1993. "' '

Harish N. Salve, AP. Madh, Mrs. Maya Rao, Mrs. P.S. Shroff, for
S.A. Shroff & Co., Pramod Swarup, Kailash Vasdev, Pramod Dayal and
H Mukul Mudgal for the appearing parties.
!

Lil.ABEN UDESING GOHEL,, ORIENTAL INSURANCE DO. L1D. (AHMADI, J.) 453

The Judgment of the Court was delivered by A
AHMADI, CJI. Special leave granted.

The principal judgment that has been impugned in the 8 matters
grouped together is the one dated 26.4.1993 in the case of New India
Assurance Co. Ltd. v. Kamlaben Sultansinh Hakumsinh Jadav & Others, in B
first appeal No. 61 of 1979 of the High Court of Gujarat 1993 (1) Gujarat
Law Reporter 779. The full Bench, in that case, was called upon to decide
the following questions referred by the Division Bench :

"(i) What would be the extent of liability of the insurer under
Section 95(2) (of the Motor Vehicles Act, 1939) in respect of death C
or bodily injury to the passengers carried for hire or reward in a
truck?

(ii) Which clause amongst (a), (b) or (c) will apply?

(iii) Whether the judgment of the Division Bench in Oriental Fire D
& General Insurance Co. Ltd. v. Husseinbhai Abdulbhai Sheikh &
Ors., First Appeal No. 851 of 1977, decided on 26th July 1983, is
correctly decided and is correctly followed in some other cases ?"

The full Bench reframed the questions and at the end of the ad- E
judication on these points the Court posed to itself the following question:

"Whether compensation amount should be paid in lump sum or by
periodical instalments. 11

The High Court took note of the contention that where lost earnings are F
still to be anticipated, or where the action is brought by dependants of
someone killed in an accident, a large part of the award is for future loss
of earning, and it is hard to see how it is appropriate to compensate these
by a lump sum payment. A lump sum could be invested, according to this
contention, to provide an income or used to purchase an annuity. Another
important factor to be considered was that the recipient of the lump sum G
'- -"· compensation could be quite inexperienced in the handling of large sums
of money, and they may dissipate the money, or fall a prey to confidence
tricksters or invest it in reckless and hopeless enterprises. The judgment
then goes on refer to the Supreme Court decision in the case of Bishan
Devi v. Sirbaksh Singh, AIR (1979) SC 1862 and quotes paragraph 21 of H
454 SUPREME COURT REPORTS [1996)3 S.C.R.

A that judgment, which is as under :
"The insurance companies are now nationalised and the necessity
for awarding lump sum payment to secure the interest of the
dependants is no longer there. Regular monthly payments could
be made through one of the nationalised banks nearest to the place
B of residence of the dependants. Payment of monthly instalments
and avoidance of lump sum payment would reduce substantially
the burden on the insurer and consequently of the insured. Or-
dinarily in arriving at the lump sum payable, the Court takes the
figure at about 12 years payment. Thus, in the case of monthly
c compensation of Rs. 250 payable, the lump sum arrived at would
be between 30,000 and 35,000. Regular monthly payment of Rs.
250 can be made from the interest of the lump sum alone and the
payment will be restricted only for the period of dependency of
the several dependants. In most cases it is seen that a fump sum
payment is not to the advantage of the dependants as large part of
D it is frittered away dwing litigation and by payment to peiwns
assisting in the litigation .. It may also be provided that if the
dependants are not satisfied with the minimum compensation
payable they will be at liberty to pursue their remedies before the
Motor Accidents Claims Tribunal.
E
(Emphasis supplied)"

The High Court then proceeds to refer to its own judgment in the
case of Muljibhai v. United India Insurance Co. Ltd., (1982) 23 (1) Guj L
R 756, and places reliance on the following part of that judgment :
F
"We are distressed to note that Claims Tribunals do not realise
that it is not sufficient to award compensation to the victim of the
accident or his legal representatives, as the case may be, but it is
also its -i:luly to ensure that th'e amount awarded is not frittered
away. It must be remembered that lump sum compensation is paid
G to the claimants who are either the victims of the accident or their
legal representatives by applying an appropriate multiplier with a
view to providing for his or their future. In other words, instead
of spreading out the amount of compensation over a number of
years having regard to the estimated future life span, as a measure
H of convenience, lump sum payment is ordered. If the whole or
LILABEN UDEsING GOHEL.. ORIENTAL INSURANCE CO. LTD. (AHMADI, J.( 455

substantial part of the compensation money is paid to claimants A
who have never handled such huge amounts in their lives there is
the danger of their frittering away the amount for want of fiscal
discipline in their lives. If the amount is squandered away, which
,
in all probability may happen, the socio-economic objective in-
.tended to be achieved by the award of compensation will be wholly B
defeated. We are, therefore, of the opinion that in such cases it is
imperative on the Claims Tribunal to protect such claimants, no
matter they are adults, by directing the investment of lump sum
compensation awarded to them".

The impugned judgment goes on to say that the court in Muljibhai's C
case (supra) had indicated broad guidelines which the Claims Tribunal
should follow while disposing of the claim application arising under the
Motor Vehicles Act, 1939 to scotch complaints of misapplication of com-
pensation money and that as per those guidelines the compensation money
should be invested in a nationalised bank as a fixed deposit and the interest
thereon should be paid directly to the claimant or his guardian, as the case D
may be. The court observed that despite the compensation amount being
deposited in banks unscrupulous persons by various means could get the
money released from the bank thereby frustrating the intention of the
Court to protect the interest of the accident victim or the heirs of a
deceased in case of a fatal accident. The High Court pointed out that it E
was necessary to see :

(i) that the major part of the compensation amount reaches the
victims or their dependants;

(ii) large part of the compensation amount is not frittered away; F

(iii) victims or lheir dependants are not again left at the mercy of the
Society; and

(iv) the amount, which is paid by the nationalised Insurance Com-
panies, serves its purpose and the socio-economic object of the legislation G
is not defeated.

In the concluding paragraph of the judgment, the Court gave the
following general directions :

(i) Normally, the Claims Tribunal should direct the Insurance Com- H
456 SUPREME COURT REPORTS [1996] 3 S.C.R.

A pany to pay the amount of compensation periodically by quarterly instal-
ments by calculating interest at the rate of 15% per annum on the total
amount of compensation determined by it and to pay the principal amount
at the end of 10 to 20 years having regard to the facts of each case.
'
(ii) A further provision be made in case where the compensation
B amount is large or in case the claimants are illiterate and/or poor to pay
the corpus after the prescribed period by 2 or 3 instalments depending
upon the circumstances in each case.

(ii-a) It would be open to the Insurance Company to make the
C necessary arrangement through the General Insurance Corporation of
India for making payment of annuity or periodical instalments as per the
direction of the Motor Accidents Claims Tribunal.

(iii) If the concerned Insurance Company or the General Insurance
Corporation of India is not ready and willing to pay the amount in the
D aforesaid manner, it may be directed to deposit the amount of compensa-
tion with the Life Insurance Corporation of India. The Life Insurance
Corporation of India may be directed, on receiving the said deposit, to
provide for payment by an appropriate annuity to the claimants. Learned
advocate Mr. B.R. Shah, after obtaining instructions from the concerned
E authority has stated that the Life Insurance Corporation of India is having
a large net-work and would pay the amount with interest by appropriate
scheme of annuity.

(vi) In the case of MINOR claimants, the Tribunal shall order that
the amount of compensation shall be kept with the Insurance Company till
F the minor attains the age of 21 years but in any case not before expiry of
10 years from the date of the award.

(v) In person injury cases if treatment is necessary the Claims
Tribunal on being satisfied about the same may after recording reasons for
G such satisfaction direct the Insurance Company to pay such amount to the
claimant as is necessary for incurring the expenses for such treatment. This
permission should be granted strictly after verifying the necessity of medi-
cal expenses.

(vi) These directions would also apply in the case of liability arising
H under Section 92 of the Act or under Section 140 of the Motor Vehicles
(

LILABEN UDESING GOHE1'. ORIENTALINSURANCECO. LTD. (AHMADI, J.( 457

Act, 1988 - that is to say, in case of 'no fault liability'. A
The High Court added by way of clarification :

"These guidelines for keeping the amount with the Insurance Com-
panies or depositing it with the Life Insurance Corporation of India are
not exhaustive 11 • B
At the end of the judgment the learned judges directed to circulate the
judgment to all the Claims Tribunal so that the amount of compensation
is disbursed as stated above.

Alt the appeals challenge the judgment in Kamlaben's case as in the C
respectil<e cases of the appellants orders were passed by the High Court
or some Motor Accident Claims Tribunal on the basis of the guidelines
laid down regarding the mode of disbursement of the compensation
awarded. The writ petition No. 716/93 seeking a writ of certiorari for
quashing the judgment is filed by way of a public interest litigation for the D
benefit of the victims of the accidents.

Notices were issue~ to the Chairman; General Insurance Corpora-
tion, in view of the statement having been made on its behalf before the
full bench of the High Court. Notice was also issued to the Supreme Court
Legal Aid Committee. A stay against the impugned judgment was declined. E
However, a limited stay was granted by order dated.1.10.1993 to the effect
that the impugned order will not deter payment to which the victim/legal
heir of the victim becomes entitled under the statutory provisions of no-
fault liability.

Before proceeding to enumerate the various grounds on which the F
impugned judgment is challenged, it would be proper to have a look at the
guidelines laid down in the case of Muljibhai (supra). The following part
of that judgment needs to be quoted for the purpose :

"6. Having regard to the fact that day in and day out thousands of
rupees are paid by way of compensation to various categories of G
claimants, we think that before we part, we may indicate a few
broad guidelines which the Claims Tribunals may follow while
disposing of claim applications ari,ing under the Motor Vehicles
Act, 1939, to scotch complaints of misapplication of compensation
money_: H
458 SUPREME COURT REPORTS [1996] 3 S.C.R.

A (i) The Claims Trib11nal should, in the case of minors, invariably
order the amount of compensation awarded to the minor invested
in long term fixed deposits at least till the date of the minor
attaining majority. The eiqienses incurred by the guardian or next
friend may however be allowed to be withdrawn;

B (ii) In the case of illiterate claimants also the claims Tribunal
should follow the procedure set out in (i) above, but if lump sum
payment is required for effecting purchases of any movable or
immovable property, such as agricultural implements, rickshaw,
etc., to earn a living, the Tribunal may consider such a request
c after making sure that the amount is actually spent for the purpose
and the demand is not a rouge to withdraw money;

(iii) In the case of semi-literate persons the Tribunal should or-
dinarily resort to the procedure set out at (i) above unless it is
satisfied, for reasons to be stated in writing, that the whole or part
D of the amount is required for expanding and existing business or
for purchasing some property as mentioned in (ii) above for
earning his livelihood, in which case the Tribunal will ensure that
the amount is invested for the purpose for which it is demanded
and paid;
E
(iv) In the case of literate persons also the Tribunal may resort to
the procedure indicated in (i) above, subject to the relaxation set
out in (ii) and (iii) above, if having regard to the age, fiscal
background and strata of society to which the claimant belongs
and such other considerations, the Tribunal in the larger interest
F of the claimant and with a view to ensuring the safety of the
COmJJensation awarded to him thinks it necessary to do order;

(v) In the case of widows the Claims Tribunal should invariably
follow the procedure set out in (i) above;
G
(vi) In personal injury cases if further treatment is necessary the
Claims Tribunal on being satisfied about the same, which shall be • •

recorded in writing, permit withdrawal of such amount as is neces-
sary for incurring the expenses for such treatment;

H (vii) In all cases in which investment in long term fixed deposits is
)
t
i
LIIABEN UDESINGGOHEL '· ORIENTAL INSURANCE CO. LID. (AHMADI, J.] 459

made it should be on condition that the Bank will not permit any A
loan or advance on the fixed deposit and interest on the amount
)I
invested is paid monthly directly to the claimant or his guardian,
as the case may be;

(viii) In call cases Tribunal should grant to the claimants liberty to B
apply for withdrawal in case of an emergency, To meet with such
a contingency, if the amount awarded is substantial, the Claims
Tribunal may invest it in more than one fixed deposit so that if
need be one such F.D.R. can be liquidated."

This court in the case of Union Carbide Corporation v. Union of India, c
[1991) 4 SCC 584 (686) referred to the guidelines laid down in Muljibhai's
case in laying down guidelines for disbursement of compensation to the gas
victims of the well known Bhopal disaster. The guidelines laid down in
Union Carbide's case were in spirit quite similar to those laid down in
Muljibhai's case. The Court, however, did not include the clause regarding D
literate persons' compensation also to be given the same treatment in case
the court found it necessary to do so to protect the compensation awarded
to them.

One can easily notice the major shift in ideas in the impugned E
judgment. The thrust in the impugned judgment is on the concept of
annuity so as to ensure periodic payment of a fixed amount and to prevent
the awarded sum in lump sum falling into the hands of the claimant as long
as possible. In order to ensure the periodic payment, which according to
the judgment should be quarterly interest calculated at the rate of 15% on F
the total compensation amount, the insurance company itself has been
made liable to make the necessary investment either in its own business or
in the business of the General Insurance Corporation or that of the Life
Insurance Corporation.The impugned judgment has .shown further caution
for minors who should wait till they are at least 21 and in any case for 10
years form thedate of the award. It can be seen that the periodic payment G
is insisted uion for all claimants irrespective of their capacity to take care
> _. of large sums of money. Further, the arrangement described above was
insisted upon also for payment of the small amount that is generally
available on no-fault liability primarily to meet the immediate needs of the
victims/heirs. H
460 SUPREME COURT REPORTS [1996] 3 S.C.R.

A The minimum waiting period for 10 years before the claimant could
be entitled to receive the compensation money awarded has been cha!-
lenged as having the effect of depriving the claimant of his right to
~
compensation. Such a procedure is said to be arbitrary and unreasonable
and hence violative of fundamental rights under Article 14 and right to
B property under Article 300(A) of the Constitution. Entrusting the capital
amount to the insurance company has also been opposed. In the first place
insurance companies having already contested the claim petition tooth and
nail are likely to have lost the confidence of the claimants. In the second
place, the nationalised status of the insurance company may or may not
continue in future when it may become difficult to assume that the corpus
c can be safely left with them. The inflexibility of the rule, it is said, is likely
to cause hardship in individual case particularly when the claimant would
be needing the amount for reimbursement of the medical expenses as well
as other expenses incidental thereto. It is further said that those who are
literate and wise should be given the charge of the compensation amount
D at the very outset because they may invest the amount in a more profitable
way than what is suggested by the court. The payment of lump sum is also
favoured by the appellants as the amount may help the victim/injured or
the heir of the deceased in making arrangement for a self-employing
..
establishment which may be a better ar;angement than receiving a fixed
E annuity periodically. So far as the minors are concerned detaining the
payment till the claimant reaches the age of 21 years or at least for a
minimum period of 10 years would amount, in particular cases, to detain
the money till the claimant reaches the age of nearly 30 years. This again
is challenged as unreasonable. Further they say that compensation amount
F is calculated on the basis of the multiplier method in which one-third of
the expected loss of estate is deducted and therefore unless the compon-
sation so awarded is paid in lump sum the interest alone will be illusory.
Further, according to them the amount of time lost in litigation will never
be compensated if the victims are to receive only the interest amount.

G
The claimants have further said that the guidelines laid down in
Muljibhai's case (supra) having been approved by the Supreme Court in ,J. •
the Union COJ'bide case (supra), there was no necessity to Jay down the
directives in the impugned judgment. and further that the questions
H referred to the Full Bench by the Division Bench of the High Court did
Lil.ABEN UDESING GOHE1'. ORIENTALINSURANCECO. LTD. (AHMADI,J.( 461

not include the question of disbursement of the awarded amount and hence A
the determination of the guidelines itself is beyond the jurisdiction of the
High Court.

Over and above the general challenges to the impugned judgment,
each appellant has attempted to show why in his/her individual case the B
guidelines operate in a harsh and unjust manner.

Sometime after the arguments in the matters were closed a Division
Bench of the Gujarat High Court took note of the conflict between the
guidelines laid down in Muljibhai's case (supra) as approved by this Court
in Union Carbide case (supra) and referred the question to a five-Judge C
Bench. The five-Judge Bench also took note of the observation of this
Court in the case of General Manager, Kera/a State Road Transport Cor-
poration v. Susamma Thomas & Ors., reported in 1994 ACJ 1 = [1994] 2
SCC 176 in which its guidelines in the Union Carbide case were reiterated.
The five-Judge Bench inJayaantilal Amba/a/ Pannar v. Gujarat State Road D
Transp01t Corporation & Anr., (1994) 35 (2) Gujarat Law Reporter 1308,
observed that the reference was to resolve the following questions :

(1) Is there conflict between the guidelines laid down by the
Hon'ble Supreme Court in relation to disbursement and invest-
ment of the amount of compensation awarded in motor accident E
claim cases in the case of General Manager, Kera/a State Road
Transport Corpn. v. Susamma Thumas & Ors., reported in 1994 AC!
1 (decided on January 6, 1993) and the guidelines laid down by a
Full Bench consisting of three Hon'ble Judges of this High Court in
the case of New India Assurance Co. Ltd. v. Kam/aben & Ors., F
reported in (1993) 1 GLR 779 ?

(2) If there is conflict, is it reconcilable ? If not reconcilable,
which guidelines are required to be followed by the High Court
and the Motor Accident Claims Tribunals in the State ?"
G
The five-Judge Bench came to the conclusion that the decision of
this Court in Union Carbide case (supra) wherein the guidelines laid down
in Mu/jibhai's case were approved had not been brought to the notice of
the three-Judge Bench which passed the impugned judgment i.e. the one
in Kamlaben's case. It also noticed that the fact that the same guidelines H
462 SUPREME COURT REPORTS [1996] 3 S.C.R.

A had been reiterated in the Kerala State Road Transport Corporation case
had also not been brought to that notice of the three-Judge Bench. The
five-Judge Bench of the High Court concluded that there was a conflict in
the guidelines laid down by this Court and those laid down by the three-
Judge Bench. It observed :
B
"21. In the guidelines laid down by the Hon'ble Supreme Court
and the guidelines laid down by Full Bench of this Court, there is
conflict. It is not possible to reconcile the same. As per the
guidelines laid down by the Full Bench of this Court, the Insurance
Company which may have become liable to pay the amount of
c compensation is required to retain the amount with it. It is obliged
to pay the same to the claimants periodically with interest at the
rate of 15%. This is not the case in the guidelines laid down by
the Hon'ble Supreme Court. The guidelines laid down by the
Hon'ble Supreme Court requires that the amount of compensation
D should be deposited in the Tribunal. Therefore, it is for the
Tribunal to regulate disbursement and investment of the amount.
Moreover, the guidelines laid down by the Hon'ble Supreme Court
take care of all types of cases, wherein even the insurance company
may not have been held liable to make payment of the compensa-
E tion; while, in the case cf the guidelines laid down by Full Bench
of this Court, the guidelines are silent in. cases where the Insurance
Company is not made liable to make payment of the amount of
compensation and only the owner of the vehicle or the driver is
made liable to pay the compensation.
F
22. The guideline issued by the Hon'ble Supreme Court take care
of the provisions of Section 168(3) of the Motor Vehicles Act,
1988; while, as indicated hereinabove, attention of the Full Bench
has not been drawn to the provisions of Section 168(3) of the Act,
G which requires a person liable to make payment of the amount of
compensation to deposit the amount of compensation with the
Tribunal within thirty days from the date of announcement of the
award.

H 23. In the guidelines laid down by the Hon'ble Supreme Court
I

t
LllABEN UDESING GOHEL v. ORIENTAL INSURANCE CO. LTD. [AHMADI, J.) 463

emphasis is to protect the interests of minor claimants and the A
interest of illiterate and semi-literate, as well as poor claimants.
The guidelines laid down by the Hon'ble Supreme Court also apply
to literate and other claimants. But in such cases discretion is left
with the Tribunal, indicating the circumstances and the manner in
which the discretion may be exercised. While in the guidelines laid B
down by the Full Bench, it is difficult to read that any such
discretion is left with the Tribunal. For the aforesaid reasons there
is conflict between the guidelines laid ·down by the Hon'ble
Supreme Court in the case of Union Carbide Corporation (snpra)
and again in the case of General Manager, Kerala State Road C
Transport Corporation (supra). Moreover, this conflict is irrecon-
cilable inasmuch as it would be impossible to implement both the
guidelines simultaneously."

(See Jayantila/ Amba/a/ Pannar v. Gujarat State Road Transport
Cmporation & Anr., (1994) 35 (2) Gujarat Law Report 1308). D

The five-Judge Bench concluded saying that the guidelines laid down
by the Supreme Court as indicated above have to be followed by all the
Motor Accident Claims Tribunals. Thus, the position in law as it stood
before the decision rendered by the there-Judge Bench of the High Court E
stands restored.

It may also be mentioned that before us both the General Insurance
Corporation and the Life Insurance Corporation eXpressed their inability
to work out and operate the annuity scheme proposed by the three-Judge
Bench of the High Court and further eXpressed their inability".to grant the F
proposed interest rate as it may conflict which Reserve Bank of India
directives that may ensue from time to time. They too, therefore, expressed
their inability to operate the scheme. Counsel for the Life Insurance
Corporation clarified that when its counsel gave the con;ent before the
three-Judge Bench, it did not visualise the various operational difficulties G
likely to arise in the implementation of the scheme proposed by the _
three-judge Bench of the High Court. Thus, both the General Insurance
Corporation and the Life Insurance Corporation feel that the said scheme
is unworkable and fraught with several insurmountable difficulties. We too
are of the view that the scheme may throw up many ope1ational difficulties. H
464 SUPREME COURT REPORTS [1996] 3 S.C.R ..

A However, now that the larger bench of the High Court has restored the
original position, nothing more is required to be done. If any loopholes
appear in the implementation of the guidelines laid down in Muljibhai's •
case, they can always be plugged consistently with the guidelines.

Before we part we must observe that even though the guidelines laid
B
down in Mu/jibhai's case have been approved and applied by this Court in
the aforementioned two cases, many Motor Accidents Claims Tribunals
and even some of the High Courts in other parts of the country do not
follow them. We are also told that in claims that are settled in or outside
the Court or Tribunal, including Lok-Abalats or Lok Nyayalayas, these
C guidelines are overlooked. We would like to make it absolutely clear that
in all cases in which compensation is awarded for injury caused in a motor
accident, whether by way of adjudication or agreement between the parties,
the Court!fribunal must apply these guidelines. We must add one further
guideline to the effect that when the amount is invested in a fixed deposit,
D the bank should invariably be directed to affJX a note on the fixed Deposit
Receipt that no loan or advance should be granted on the strength of the
said FDR without the express permission of the Court!fribunal which
ordered the deposit. This .will eliminate the practise of taking loans which
may be upto 80% of the amount invested and thereby defeating the very
E purpose of the order. We do hope that the Courts!fribunals in the country
will not succumb to the temptation of permitting huge withdrawals in the.
hope of disposing of the claim. We are sure that the Courts!fribunals will
realise their duty towards the victims of the accident so that a large part
of the compensation amount is not lost to them. The very purpose of laying
down the guidelines was to ensure the safety of the amount so that the
F
claimants do not become victims of unscrupulous persons and unethical
agreements or arrangements. We do hope our anxiety to protect the
claimants from exploitation by such elements will be equally shared by the
Courtsffribunals.

G There is no need for any further discussion in the matter. The Writ
Petition (Civil) No. 716/93 filed by the Motor Vahan Durghatana San-
gathan, Nadiad and others has become infructuous and is, therefore, so ".
disposed of. The appeals arising out of special leave petitions are allowed
accordingly. Further orders regarding disbursement etc. to be obtained
H from the concern?d Tribunals/High Courts. No costs.
I
~
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LILA BEN UDESING GOH Eb. ORIENTAL!NSURANCE CO. LTD. (AHMADI, J.] 465

In view of the judgment in Civil Appeals Nos. 4466-67 of 1996 A
(Arising out of SLP (C) Nos. 16530-31 of 1993 & allied matters), Lilaben
Udesing Gohe4 etc. v , The Oriental Insurance Company Ltd & Others, etc.,
it is now not necessary to grant permission to file the special leave petition
against ihe order proposed to be challenged. The Interlocutory Application
will, therefore, stand disposed of. However, appropriate orders may by B
obtained from the Tribunal/High Court in the light of the decision in the
aforesaid case.

R.P. Appeals allowed and petition disposed of.

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