The High Court of Madhya Pradesh has definitively clarified that victims of motor accidents are not legally mandated to open new bank accounts with the Union Bank of India to receive their compensation. Justice Vinay Saraf ruled that claimants may utilize their existing, valid bank accounts maintained with any nationalized bank for both direct monetary disbursements and the creation of fixed deposit receipts. This decision follows a petition filed by Smt. Shahin and others, who contested a restrictive order passed by the Motor Accident Claims Tribunal in Neemuch that had effectively barred the use of other banking institutions for settlement purposes.

The dispute originated from an order dated July 31, 2026, where the tribunal recalled a previous decision to mandate that all compensation amounts and fixed deposit investments be processed exclusively through the Union Bank of India. The tribunal cited an interpretation of the Supreme Court’s Suo Motu Writ Petition (C) No. 7/2024 and internal directives from the High Court’s Registry as the basis for this requirement. Consequently, claimants were forced to navigate administrative hurdles to open new accounts, a move that the petitioners argued lacked a basis in law or binding administrative practice.

Upon reviewing the matter, the High Court determined that the confusion stemmed from a misinterpretation of the digitization efforts intended to streamline claims processing. Justice Saraf, after consulting with the Registrar (Judicial) and the Registrar (IT), confirmed that the High Court and the Supreme Court never intended to restrict the banking choices of claimants. The objective of the recent digital initiatives was to ensure secure and direct transfers rather than to tether the entire legal process to a single financial institution.

"It appears that there is no such direction that for disbursement of the awarded amount or creation of the Fixed Term Deposit , the account is required to be opened in Union Bank of India ," the Court observed in its order. The bench emphasized that the primary duty of the tribunal is to facilitate the transfer of funds, provided the account details are verifiable and belong to the legitimate claimant.

Streamlining the Disbursement Mechanism

The court acknowledged that while the current digital "dashboard" system—designed for the efficient disbursement of motor accident claims—is currently integrated exclusively with the Union Bank of India for the automated creation of fixed deposits, this technical limitation does not constitute a legal mandate for claimants to switch banks. The High Court clarified that for the purpose of receiving direct cash transfers, a claimant’s account in any nationalized bank remains perfectly valid.

Furthermore, the judiciary clarified that the integration of other nationalized banks into the digital dashboard is an ongoing process. As these systems expand, the technological convenience currently limited to a single bank will be extended across a broader range of institutions. Until that integration is complete, tribunals are tasked with ensuring that funds are transferred to the specific bank account provided by the claimant, provided it is held with a nationalized bank.

Regarding the technical requirement for fixed deposits, the court provided a pragmatic roadmap: if the disbursement is processed through the digital dashboard, the tribunal may issue necessary instructions for the deposit. "In case of investing the compensation amount in FDRs through Dashboard, as on today only Union Bank of India is integrated and therefore the FDRs can be opened only in any branch of Union Bank of India , however, there will be no requirement of opening of any account in the Union Bank of India for the purpose of FDR by the claimant," the court stated.

Tribunal Oversight and Compliance

The ruling serves as a corrective measure for lower tribunals that may have over-read the administrative circulars regarding the digital dashboard. The High Court emphasized that the procedural directions were meant to expedite payments, not to burden litigants with unnecessary banking formalities. The court underscored that the tribunals are under a clear obligation to transfer compensation directly to the claimant's account as furnished, provided the identity and account details are corroborated.

"The claimant may open the account in any branch of any Nationalized Bank and upon submission of the details by the claimant of his bank account maintained with the Nationalized Bank, the Tribunals are under obligation to transfer the amount directly to the account of the claimant," Justice Saraf noted. This directive removes the ambiguity that previously compelled litigants to comply with the tribunal's narrow interpretation of the banking rules.

By setting aside the challenged orders dated July 31, 2026, and August 5, 2026, the High Court has ordered the Motor Accident Claims Tribunal in Neemuch to reconsider the underlying applications. The tribunal must now facilitate the disbursement in accordance with the High Court’s guidelines, ensuring that the claimants are not forced to open extraneous bank accounts. This decision reinforces the principle that procedural digitalization must remain a service to the litigant, enhancing accessibility rather than creating new barriers to justice. The High Court’s focus remains on ensuring that claimants receive their rightful compensation with minimal administrative friction, confirming that the choice of banking remains a matter of the claimant's preference.