Jammu and Kashmir High Court Reiterated that Interest Cannot be Awarded on the Loss of Future Income

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On 30 June 2020, Hon’ble Justice Sanjay Dhar heard the case of National Insurance Company Ltd. vs Bilal Ahmad Mir and others, via video-conferencing. The Court upheld the Tribunal’s award of compensation but modified the aspect of interest.

Facts of the Case

On 14 July 2004, the claimant traveled in a vehicle from Srinagar to Tral. The said vehicle met with an accident, resulting in him to suffer serious injuries. The injuries led to the amputation of his right arm. He sought a compensation of Rs 29 lakhs from the owner, driver, and the insurer of the offending vehicle. However, the insurance company contended that there was a breach of a policy condition.

The Tribunal held that there was no such breach. It also awarded a compensation of Rs 15,10,000/- to the injured. It directed the insurance company to pay the said amount with 6% interest. The Tribunal added failure of the same would lead to a payment of 9%penal interest. Aggrieved by this Award, the Insurance Company filed an instant appeal in this Court.

Arguments of the Appellant

The appellant company argued that the offending vehicle’s driver booked under Section 3 and Section 181 of the Motor Vehicles Act. This shows that he was not carrying a valid driving license when the accident occurred. Despite that, the Tribunal concluded that there was no policy condition breach. The company contended that the amount of compensation awarded is exorbitant, excessive, and unjust.

The claimant did not prosecute the matter before the Tribunal for two years. Even then, the Tribunal awarded the interest for this period in favor of the claimant. Thus, the Tribunal is neither liable to pay the penal interest nor the interest in the loss of future income. The functional disability of the injured is not 100%. Thus, Tribunal was not justified in computing the compensation based on the same. It is also not necessary to award future attendant charges.

Arguments of the Respondent

The claimant-respondent argued that the company did not prove that the offending driver did not hold a valid driving license when the accident occurred. Thus, the Tribunal’s award of compensation is reasonable.

Court’s Analysis

The copy of the driving license is not on record of the Tribunal. The burden of proof of breach of policy conditions is on the insurer-company. In this case, the company did not produce any evidence about policy condition breach. The company has missed the opportunity to do so.

Hence, the Tribunal’s conclusion that there was no breach of policy the condition cannot interfere with. The appellant argued that Tribunal was not justified in computing the compensation. The doctors’ statement shows that the claimant needs an attendant throughout his life. He cannot even perform his daily chores as he lost his working limb. Thus, the Tribunal is justified in awarding future attendant charges. It is settled law that no interest can be awarded in respect of future income. The Tribunal is not competent to award penal interest on the awarded sum.

Thus, the Tribunal was not justified in either awarding interest on the loss of future income or in awarding the interest of 9% per annum in case of default.

Court’s Decision

The Court upheld the Tribunal’s award of compensation. However, the impugned order stands modified. The awarded sum under the head ‘loss of future income’ will not carry any interest. The direction about payment of penal interest of 9% is also set aside. In view of the same, the Court disposed of the appeal.


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