Discretionary interest on motor accident compensation should reflect prevailing bank rates and case circumstances.

Under section 171 of the Motor Vehicles Act, 1988, the Claims Tribunal may award simple interest on compensation at a rate not fixed by statute. The appropriate rate depends on the facts and circumstances of the case and is ordinarily guided by the prevailing bank rate at the relevant time. Applying that principle, the Court treated 7.5% per annum as appropriate in place of 6% per annum, effective from the date of application until payment.

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Issues: Entitlement to enhancement of the rate of interest on the compensation awarded under the Motor Vehicles Act, 1988.

Analysis: Under section 171 of the Motor Vehicles Act, 1988, the Claims Tribunal may award simple interest in addition to compensation, and the rate is not fixed by statute. The rate of interest depends on the facts and circumstances of the case and is ordinarily informed by the bank rate prevailing at the relevant time. Applying that principle, and taking note of the prevailing rate on the date of the award, the Court found 7.5% per annum to be appropriate in place of 6% per annum.

Conclusion: The rate of interest was enhanced to 7.5% per annum from the date of application till the date of payment.

Ratio Decidendi: The rate of interest under section 171 of the Motor Vehicles Act, 1988 is discretionary and should ordinarily reflect the prevailing bank rate and the circumstances of the case.

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