Madras High Court Directs Insurance Companies to Transfer MACT Compensation Directly to Claimants; Modifies Quantum in Bachelor’s Death Case
Facts
The appeal was filed by The Oriental Insurance Company Ltd. challenging the quantum of compensation awarded by the Motor Accident Claims Tribunal (MACT), Chennai, in a claim arising out of the death of Kandipan, who died after being hit by a hydraulic mobile crane on 15 January 2023 near Kovilambakkam Bus Stop, Chennai. His parents, sister and brother filed a claim seeking compensation of ₹35 lakh. The Tribunal awarded ₹39,89,000 under various heads, including ₹37,80,000 towards loss of dependency, applying only 25% deduction towards the deceased’s personal expenses.
The insurer confined the appeal solely to the correctness of the deduction towards personal and living expenses, contending that since the deceased was an unmarried bachelor, the Tribunal ought to have deducted 50% of his income in accordance with settled Supreme Court precedent.
Issues
- Whether the Tribunal erred in deducting only 25% towards the personal and living expenses of an unmarried deceased.
- Whether 50% deduction was mandatory under the law laid down in Sarla Verma.
- Whether the compensation required modification.
- Whether comprehensive directions regarding Direct Bank Transfer (DBT) of MACT compensation should be issued for uniform implementation across Tamil Nadu and Puducherry.
Appellant’s Arguments
The Insurance Company submitted that the deceased was an unmarried bachelor whose surviving dependants consisted of his parents, married sister and adult brother.
Relying upon Sarla Verma v. Delhi Transport Corporation, it was argued that 50% of the income must necessarily be deducted towards personal and living expenses in the case of an unmarried deceased. The Tribunal therefore committed an error in deducting only 25%, resulting in excessive compensation.
Respondents’ Arguments
The claimants did not dispute the legal position advanced by the insurer and fairly conceded that the deduction should be made in accordance with the principle laid down in Sarla Verma.
Analysis of the Law
The Court applied the principles laid down by the Supreme Court in:
- Sarla Verma v. Delhi Transport Corporation governing deduction towards personal expenses;
- Pranay Sethi governing conventional heads such as loss of estate and funeral expenses;
- Magma General Insurance Co. Ltd. v. Nanu Ram and New India Assurance Co. Ltd. v. Somwati governing consortium.
While deciding the appeal, the Court also undertook an extensive review of the law governing electronic disbursement of compensation and analysed earlier decisions including:
- The Divisional Manager, Oriental Insurance Co. Ltd. v. Rajesh (2016),
- Suo Motu W.P. No.12935 of 2021,
- Parminder Singh v. Honey Goyal (2025), and
- Re: Compensation Amounts Deposited with Motor Accident Claims Tribunals and Labour Courts (2025).
The Court observed that the welfare objective of the Motor Vehicles Act is fulfilled only when compensation reaches the claimant promptly, safely and without diversion, making Direct Bank Transfer (DBT) the preferred mechanism.
Precedent Analysis
The Court relied upon:
- Sarla Verma v. Delhi Transport Corporation—holding that where the deceased is an unmarried bachelor, 50% of the income must ordinarily be deducted towards personal and living expenses.
- National Insurance Co. Ltd. v. Pranay Sethi—for conventional compensation under non-pecuniary heads.
- Magma General Insurance Co. Ltd. v. Nanu Ram and New India Assurance Co. Ltd. v. Somwati—for consortium.
- The Divisional Manager, Oriental Insurance Co. Ltd. v. Rajesh (2016)—introducing RTGS/NEFT mode for MACT awards.
- Parminder Singh v. Honey Goyal (2025)—encouraging direct transfer of compensation into claimants’ bank accounts.
- Re: Compensation Amounts Deposited With Motor Accident Claims Tribunals and Labour Courts (2025)—laying down safeguards regarding verification of bank accounts and electronic disbursement.
Court’s Reasoning
The Division Bench found that the only dispute concerned the deduction towards personal expenses.
Since the deceased was admittedly an unmarried bachelor, the Tribunal ought to have deducted 50% of his income instead of 25%. Applying the principle in Sarla Verma, the Court recalculated the loss of dependency and reduced the total compensation from ₹39,89,000 to ₹27,29,000.
The Court then examined the broader issue of delays, misappropriation and procedural hurdles in disbursement of motor accident compensation. Referring to earlier judgments and administrative circulars, it observed that the welfare object of the Motor Vehicles Act requires that compensation should reach victims directly and expeditiously, without unnecessary intermediaries or repeated visits to court.
Accordingly, the Court framed a comprehensive 12-point framework requiring insurance companies and other judgment debtors to deposit compensation directly into verified bank accounts of claimants through NEFT/RTGS, while separately depositing court fees, advocate’s fees and expenses into the Tribunal’s account. It also prescribed detailed safeguards regarding verification of bank accounts, treatment of minors’ compensation, updating of account particulars, reporting of UTR numbers and issuance of administrative circulars by the Registrar General.
Conclusion
The Madras High Court partly allowed the insurer’s appeal by reducing the compensation from ₹39,89,000 to ₹27,29,000 after applying 50% deduction towards the personal and living expenses of the unmarried deceased.
Additionally, the Court issued twelve comprehensive directions mandating uniform implementation of Direct Bank Transfer (DBT) for disbursement of MACT compensation throughout Tamil Nadu and Puducherry, with safeguards for verification, court fees, advocate’s fees, fixed deposits for minors and compliance reporting.
Case Details
Case: The Manager, The Oriental Insurance Co. Ltd. v. D. Salsa & Ors.
Court: High Court of Judicature at Madras
Case Number: CMA No. 2064 of 2026
Judges: Hon’ble Mr. Justice N. Sathish Kumar and Hon’ble Mr. Justice M. Jothiraman
Date: 8 July 2026
Result: Appeal Partly Allowed. The compensation was reduced by applying 50% deduction towards the personal expenses of the unmarried deceased, and comprehensive statewide directions were issued for Direct Bank Transfer of motor accident compensation.
