OPINION
R.V. Raveendran, J.
1. This matter is placed before me as per the order of the Hon'ble Chief Justice, under Section 98(2) of the Code of Civil Procedure, 1908 in view of difference of opinion on a point of law (regarding interest to be awarded in Motor Accident Claims) between two learned Judges of a Division Bench of this Court, which heard the appeal. The differing views of the two learned Judges is in the case of Sanjeevini Ananda Awate and Ors. v. The Managing Director, Hiranyakeshi Sahakara Sakkare Karkhane and Ors., ILR 2000 Kar. 4860.
2. This appeal is by the claimants in MVC No. 15 of 1989, on the file of MACT-III, Belgaum. The claimants were respectively widow, father, mother and two minor children of one Ananda Awate, who died on 7-1-1989, as a result of injuries sustained in a motor accident which occurred on 31-12-1988. The Tribunal by judgment and award dated 16-9-1991, allowed the said claim petition in part and awarded a compensation of Rs. 76,000.00 with interest at the rate of 6% p.a. from the date of petition till realization. In this appeal, filed by the claimants, the Division Bench by judgment dated 26-9-2000, has enhanced the compensation to Rs. 2,20,000/-. Both the Judges have concurred in regard to the quantum of compensation, but have differed in regard to the rate of interest to be awarded on the amount of compensation. Tilhari, J. was of the view that the interest should be awarded at the rate of 9% p.a. from the date of petition till date of realization or deposit. Vallinayagam, J. was of the view that the interest should be only at the rate of 6% p.a.
3. In view of said difference of opinion on the point of law, the learned Judges were of the view that the matter be placed before a Full Bench. However, there was no concurrence even in regard to the questions that should be referred to the Full Bench. Tilhari, J. wanted to refer the following six questions of law for opinion:
'(1) Whether in the context of general trend of decisions of their Lordships of the Supreme Court referred to in the judgment of one of us in detail and the gallop of inflation and erosion of the value of the rupee as well as in view of the provisions of law of interest viz., Interest Act, 1978 particularly Sections 2(a), 2(b), 3 and 4 of the Interest Act taking guidance therefrom about the rate of interest the award of interest at the rate of 6% per annum can be said and held to be unsatisfactory and too low as held by the Division Benches of this Court and as held in the case of Dr. (Mrs.) K.R. Tandon v. Om Prakash and Anr., and whether award of interest at 9% p.a. or more can be said to be justified?
(2) Whether the provisions of Section 2(a) of the Interest Act, 1978 can be held to be applicable to the cases under motor accidents claim for award of compensation with respect to the award of interest and any guidance to be taken therefrom. If yes, its effect?
(3) Whether the use of expression 'damages' in Section 3 or 4 of the Interest Act, 1978 and the use of expression 'compensation' or 'amount of compensation' made in Motor Vehicles Act does make any material difference so far as the question of applicability of Interest Act, 1978 is concerned?
(4) Whether the expression 'compensation' or 'amount of compensation' used in the Motor Vehicles Act in the context of dispute and determination of award of 'amount of compensation is 'Synonymous to the expression' damages in the case of Torts' or it is something different than 'damages in Torts' and whether it means something as damages in Torts or in the sense expression damages has been used in Section 3 of the Interest Act, 1978, in the context of the provisions of Section 3(1) and 3(2)(b) of the Interest Act, 1978. If yes, its effect?
(5) Which of the two sets of Division Bench decisions referred to above viz., one in D.M. Gayatri and Ors. v. Divisional Controller, Karnataka State Road Transport Corporation, Bellary and Anr. , and others laying down the law that award of interest at 6% p.a. is too low and unsatisfactory, or the other set of decisions as in Managing Director, Karnataka Power Corporation Limited v. Geetha and Ors., , or in the case of Puttanna and Anr. v. Lakshmana and Ors., , which laid down that award of interest at 6% p.a. is justified and reasonable, lay down the correct law in the context of the Supreme Court decisions referred to in the judgment and the provisions of Interest Act, 1978 if it is applicable to in the motor accidents claims for damages, and amount of compensation?
(6) Whether the galloping inflation and erosion of the value of the rupee can also be taken to be a circumstance for award of higher interest. If yes, its effect?'
Vallinayagam, J. wanted the following two questions of law to be referred for opinion:
(1) Whether Interest Act is applicable to the provisions of the Motor Vehicles Act with reference to accident claims cases?
(2) Whether the view taken by the Division Bench of this Court in Puttanna's case, supra, is correct?
4. In the circumstances, when the matter was placed before the Hon'ble Chief Justice, he has directed that the matter be placed before a third Judge for opinion.
5. The only question that arises for consideration is what should be the rate of interest to be awarded on compensation awarded in Motor accident cases. The questions of law formulated by Tilhari, J. are more in the nature of reasons in support of his view that the interest should be at 9% p.a. Though the questions of law framed by the learned Judges were already considered and answered by a Division Bench of this Court in Union of India and Ors. v. K.S. Lakshmi Kumar and Ors., 2001(1) Kar. L.J. 91 : ILR 2000 Kar. 3809, the said decision was not brought to the notice of the learned Judges. Be that as it may.
6. In K.S. Lakshmi Kumar's case, supra, the Division Bench considered the applicability of Interest Act, and held as follows:
'We may also refer to the provisions of the Interest Act, 1978 (Section 3 read with Section 2(b) of the Act), which provide for award of interest from the date of demand (that is the date on which the claimant puts the person who is liable to pay damages on notice, that interest will be claimed) to date of institution of the proceedings for recovery of damages. Under the Interest Act, the rate of interest that can be awarded shall not exceed the maximum rate of interest payable by Banks on deposits, as per directions issued by Reserve Bank of India under the Banking Regulation Act, 1949. One of the contentions urged is that these provisions show that interest can be more than 6% per annum. But, Interest Act applies only to interest payable for the period prior to the institution of the claim proceedings and not to the period commencing from the date of institution of claim. Section 171 of the Motor Vehicles Act specifically bars award of any inter est prior to the date of making the claim petition. Hence, obviously neither the Interest Act nor the principles underlying the Interest Act, 1978 is of any assistance in deciding any matter relating to award of interest in claim petitions under the M.V. Act'.
7. In regard to the rate of interest, after referring to the decisions of Supreme Court and this Court, awarding different rates of interest in different cases, the Division Bench in K.S. Lakshmi Kumar's case, supra, held that the awarding of interest is in the judicial discretion of the Tribunal having regard to the provisions of Section 171 of the Motor Vehicles Act, 1988.
The Division Bench however held that there is no unbridled power to award interest and there is a need to award interest consistently and uniformly. Therefore, it was held:
'To ensure exercise of judicial discretion in regard to interest in a fair, reasonable and judicious manner, it is necessary for Tribunals to keep in view the following broad guidelines.--
'(a) Interest can be awarded only from the date of claim and not from the date of accident (Section 171 of the Motor Vehicles Act, 1988 and the decision of the Supreme Court in United India Insurance Company Limited v. Narendra Pandurang Kadam, );
(b) Interest should not be awarded on the amount awarded to meet expenditure in future (e.g, compensation awarded for the future surgery or future medical expenses) (vide decision in R.D. Hattangadi v. Pest Control (India) Private Limited and Ors., );
(c) Where compensation awarded consists of only general or non-pecuniary damages, or where the general or non-pecuniary damages constitute the bulk, as in cases of claims relating to death, the rate of interest should normally be 6% p.a.;
(d) Where the compensation awarded is a fair mix of general damages and special damages (as in the case of any personal injuries resulting in permanent disability, leading to loss of earning capacity), the interest should normally be 9% per annum;
(e) Where compensation awarded consists only of special or pecuniary damages or where special or pecuniary damages constitute the bulk of the award (as in cases of damage to vehicles or in cases of personal injury where there is no loss of future earning capacity), interest may be awarded at 12% per annum;
(f) The interest to be awarded may be suitably increased if the claim proceedings were unduly protracted at the instance of owner/insurer (respondents in the claim petition), keeping in view of ceiling of 12% p.a. as interest;
(g) The rate of interest may be decreased suitably, where the claim proceedings were unduly delayed by the claimants'.
In the absence of reasons, interest awarded should be 6% p.a. in fatal accident cases and 9% p.a. in personal injury cases. Any increase beyond those rates should be supported by reasons. The guidelines stated above are neither general rules for all cases, nor inflexible. The Tribunal may, for reasons to be specified, refuse to award interest or award interest at a rate higher than what is normally granted in the interest of justice'.
8. In Karnataka State Road Transport Corporation v. R. Sethuram, , the Supreme Court reduced the interest awarded at 12% per annum by this Court to 6% p.a. on the ground that there was no justification to award interest at 12% p.a. The Supreme Court in Tasnimtaj and Ors. v. Managing Director, Karnataka State Road Transport Corporation and Anr., , also awarded interest at the rate of 6% p.a., without assigning any reasons. The Supreme Court has however awarded interest at varying rates, in several cases, that is at 12% p.a., 9% p.a. and 6% p.a., in exercise of judicial discretion. In Dr. (Mrs.) K.R. Tandon's case, supra, the Supreme Court indicated that galloping inflation and erosion of the value of the rupees justified grant of a higher rate of interest.
9. Recently, the matter has been set at rest by the Supreme Court in S. Kaushnuma Begum v. The New India Assurance Company Limited, . The Supreme Court has indicated a factual and legal basis for granting interest, as follows:
'Now, we have to fix up the rate of interest. Section 171 of the M.V. Act empowers the Tribunal to direct that In addition to the amount of compensation simple interest shall also be paid at such rate and from such date no earlier than the date of making the claim, as may be specified in this behalf. Earlier, 12% was found to be reasonable rate of simple interest. With a change in economy and the policy of the Reserve Bank of India, the interest rate has been lowered. The Nationalised Banks are now granting interest at the rate of 9% p.a. on fixed deposits for one year. We, therefore, direct that the compensation amount fixed hereinbefore shall bear interest at the rate of 9% p.a. from the date of the claim made by the appellants'.
As the Supreme Court has held that the interest payable should be normally linked to the rate of interest paid by Nationalised Banks on fixed deposits for one year, it may be appropriate to adopt the same, as the basis, subject, however, to the discretion to change the rate of interest based'on the facts and circumstances of the case. In view of the decision of the Supreme Court, guidelines (c), (d) and (e) given in K.S. Lakshmi Kumar's case, supra, will no longer operate. In all motor accident claims, irrespective of whether they relate to death, injury or damage, the rate of interest should normally be the rate of interest given by Nationalised Banks on deposits for one year.
10. I should note that the rate of interest on deposits for one year was 9% p.a. when Supreme Court rendered its decision. I am informed that Nationalised Banks have now reduced the rate of interest payable on fixed deposits and the prevailing rate of interest on fixed deposit for a term of one year is 8% per annum.
11. I, therefore, answer the questions of law, as follows:
(a) The provisions of Interest Act, 1978 are inapplicable for awarding compensation under the Motor Vehicles Act, 1988;
(b) Having regard to the provisions of Section 171 of the Motor Vehicles Act, 1988, the rate of interest is a matter within the judicial discretion of the Tribunal. The rate of interest should, therefore, be determined keeping in view the following broad guidelines (subject however to the changes that may be indicated by the Supreme Court or this Court from time to time):
(i) Interest can be awarded from the date of claim petition on the compensation amount awarded (excluding the amount awarded to meet future expenditure);
(ii) The rate of interest to be awarded in all motor accident claims (whether relating to death, injury or damage) shall normally be the rate of interest offered by Nationalised Banks on fixed deposits for one year. At present the rate of such interest is 8% per annum;
(iii) Any variation from the said interest rate of 8% per annum, while awarding interest, if warranted by the special facts or circumstances of the case, should be supported by reasons.
12. The matter may now be placed before the Division Bench expeditiously, for final decision.