[Motor Accident Death] No Interest Can Be Awarded On Compensation For 'Future Prospects': Jammu & Kashmir High Court

The Jammu & Kashmir High Court has ruled that there is no need to award interest on compensation ordered under the head of 'future prospects' in a motor accident death case.

Justice M.A Chowdhary explained that 'future prospects' are linked to potential income to be received in the future and thus interest cannot be granted on a future income.

“The reason for awarding interest on the compensation amount, minus the future prospects, is due to the fact that, though the loss of dependency starts from the date of the accident, the compensation amount is computed on the date of the award of the Tribunal, interest is awarded to compensate the loss of money value on account of lapse of time, such as the time taken for the legal proceedings and for the denial of right to utilize the money when due’, the bench observed.

The bench was hearing an appeal filed by an insurance company against the award passed by Motor Accident Claims Tribunal granting compensation amounting to Rs. 23,84,800/- along with interest at to the claimants.

The insurance company contended that the compensation was excessive and challenged the inclusion of interest on the component of compensation attributed to future prospects. Future prospects, relate to potential income that the claimants would have received in the future had the accident not occurred and therefore, at the time of awarding the compensation, the claimants had not suffered any actual loss in terms of the future prospects component, it was argued.

Mr Shabir Ahmad Dar, the Counsel appearing for espondents, argued that the Tribunal has assessed the income of the deceased on an approximationw hich is usually done in the case of compensation by the Tribunals, as has been held by the Hon’ble Apex Court in a catena of Judgments. 

Adjudicating upon the matter Justice Chowdhary said interest is typically granted to compensate for the loss of money value over time, arising from the delay in receiving the compensation amount due to legal proceedings or other factors. However, in the context of future prospects, Justice Chowdhary observed that the claimants had not yet incurred any loss since the future prospects component is tied to potential future income. The compensation amount awarded for future prospects was essentially an estimation of the claimants' potential earnings, and as such, they were not entitled to receive it at the time of the accident, the bench underscored.

The court emphasized that future prospects are contingent on events yet to occur and should not be treated in the same way as the loss of dependency component

“Further, future prospects are given for the entire future and, as such, the claimant is getting compensation in a lumpsum under future prospects prior to the occurrence of future event(s). Thus, with regard to future prospects, this Court is of the view that there cannot be any interest on future prospects, as the same relates to an income to be given in the future”, the court maintained.

Based on this reasoning, the Court recomputed the compensation and exempted the future prospects component from interest.

Case Title: National Insurance Company Limited Vs Mst. Aisha Bano & Ors.

Citation: 2023 LiveLaw (JKL) 185

Counsel For Petitioner: Mr Areeb Javed Kawoosa

Counsel For Respondent: Mr Shabir Ahmad Dar

Click Here To Read/Download Judgment