Compensation Must Not Lie in Dormancy: Supreme Court Issues Nationwide Directions for Disbursal of ₹1000+ Crores Stuck in MACTs and Labour Courts

“Disturbing That So Many Successful Claimants Have Been Deprived of Compensation” – In a landmark step to address the systemic inaction surrounding unclaimed compensation, the Supreme Court of India on April 22, 2025, in Suo Motu Writ Petition (C) No. 7 of 2024, issued comprehensive, pan-India directions to ensure timely disbursal of funds lying dormant with Motor Accident Claims Tribunals (MACTs) and Labour Courts. The suo motu action was initiated based on an email by a retired District Judge from Gujarat, Mr. B.B. Pathak, highlighting staggering amounts of unclaimed compensations under the Motor Vehicles Act, 1988 and the Workmen’s Compensation Act, 1923.

The Court declared the situation “very disturbing” and sought immediate systemic reform, directing High Courts, Legal Services Authorities, and State Governments to collaborate in tracing and disbursing dues to rightful claimants.

The trigger for this judicial intervention was a May 2024 email, alerting the Supreme Court to vast sums of undistributed compensation in cases already adjudicated. The Chief Justice of India directed the registration of a suo motu writ petition, and notices were issued to several High Courts including Gujarat, Allahabad, Bombay, Calcutta, Delhi, and Madras.

The figures revealed in the affidavit shocked the bench:

• Gujarat: ₹282 crores (MACT) + ₹6.61 crores (Labour Courts)

• Bombay: ₹459 crores

• Allahabad: ₹239 crores (MACT) + ₹92.39 crores (Labour Courts)

• Goa: ₹3.61 crores

• Calcutta: ₹2.53 crores

“The fact that so many successful claimants have been deprived of compensation is very disturbing. It is necessary to find a solution,” the bench observed.

The Court considered provisions under:

• Section 166 of the Motor Vehicles Act, 1988 – for filing compensation claims, and

• Section 176 – empowering State Governments to frame procedural rules for tribunals.

The Court noted with concern that many States had not exercised these rule-making powers. Consequently, High Courts and Tribunals were left without uniform procedures to ensure claimants' bank and identification details were collected, resulting in funds remaining undisbursed.

Issuing a slew of mandatory guidelines under its constitutional powers, the Court directed:

“Till the rules are not framed, the High Courts shall either issue practice directions or formulate rules of procedure by incorporating the following provisions.”

Key directions include:

• Mandatory collection of claimants' details: Aadhar, PAN, email, and full address of all legal heirs in fatal accident cases must be provided in claim petitions.

• Bank details verification: Before any disbursal, tribunals must demand a banker’s certificate or cancelled cheque to verify the authenticity of the recipient’s account.

• Digital dashboards: State e-Court coordinators are directed to create dashboards listing undisbursed compensation with full case and beneficiary details.

• Direct transfers of compensation: Tribunals must mandate direct bank transfers rather than manual withdrawals.

• Consent awards: If parties settle, tribunals should ensure settlement orders include complete account details of all recipients.

• Long-pending deposits: All MACTs and Commissioners under the 1923 Act must invest undisbursed sums in renewable fixed deposits until claimed.

• Massive tracing drive: All High Courts are to launch coordinated drives, with help from Legal Services Authorities, para-legal volunteers, and police, to locate and inform rightful beneficiaries.

“It shall be the duty of the learned Judges presiding over the MAC Tribunal to verify… whether the account is of the persons held entitled to receive compensation.”

Monitoring and Compliance

The Court fixed July 30, 2025 as the date for submission of compliance reports by all High Courts and Legal Services Authorities, specifically listing:

• Total unclaimed compensation still pending,

• Steps taken to trace and notify claimants,

• Rules or practice directions already in force.

The Court stressed: “These directions shall continue to bind the MAC Tribunals and the Commissioners under the 1923 Act till rule-making power is properly exercised by the Government.”

High Courts were also empowered to take additional measures beyond the Court's directions.

This unprecedented judicial intervention may catalyze a long-overdue reform in the administration of compensation under welfare legislation. By combining judicial directives with technological tracking and inter-agency cooperation, the Supreme Court seeks to prevent welfare entitlements from being trapped in bureaucratic paralysis.

“It is a matter of grave concern that the claimants, though held entitled to compensation, are unable to access what is rightfully theirs.”

Date of Decision: April 22, 2025