The Supreme Court has expressed a preference for raising the compensation amount for fatalities in hit-and-run road accidents from the current ₹2 lakh. They emphasized that such accidents are often classified as hit-and-run due to the state's failure to identify the responsible vehicle, and as a result, the victims deserve higher compensation.

"In essence, a hit-and-run accident signifies a breakdown in the state's machinery... When someone loses their life due to the state's failure, and you (the state) are offering a compensation of only ₹2 lakh?" remarked a panel of justices AS Oka and Pankaj Mithal, urging the government to acknowledge the need for increased compensation.

The panel, presiding over a public interest litigation regarding improvements in handling road accidents, has not yet delivered its verdict on an application submitted by KC Jain. This application seeks improved compensation for the families of road accident victims.

During the hearing on October 19, the panel emphasized that it lacks the authority to compel the central government to increase the compensation sum. However, it raised several pertinent questions, such as, "What is the justification for setting the compensation for death at ₹2 lakh?" The bench pointed out that when the state is at fault, individuals can seek recourse through public law remedies and legal action to claim higher compensation. While acknowledging that they cannot issue a mandamus (a direction or order), the bench urged the government to reevaluate the ₹2 lakh compensation amount by utilizing its rule-making authority.

A road accident is categorized as a hit-and-run incident when it is impossible to identify the vehicle that caused the accident.

The Additional Solicitor General (ASG) Vikramjeet Banerjee stated that the ₹2 lakh compensation amount was determined following discussions with stakeholders, including the General Insurance Council, which represents insurance companies responsible for providing compensation in hit-and-run cases. He also highlighted that a case of murder could also be seen as a failure of the state, emphasizing the need for a reconsideration of the compensation amount in hit-and-run cases.

Hit-and-run accidents are addressed under Section 161 of the Motor Vehicles Act. This provision mandates the central government to establish a scheme for compensating victims who have lost their lives or sustained injuries in such accidents. To finance this compensation, a dedicated fund called the Motor Vehicles Accident Fund has been established. This fund is funded by contributions from all insurance companies, and neither the central government nor state governments contribute to this fund.

The scheme underwent its most recent revision in 2022, resulting in an increase in compensation for death cases from ₹25,000 to ₹2 lakh and for injuries from ₹12,500 to ₹50,000.

The court observed that even though Section 161 allows for interim compensation, the Central government did not include it in the 2022 scheme. The bench expressed its intention to recommend that the Central government utilize its rule-making authority to include provisions for interim compensation, emphasizing that the system would be ineffective without this interim relief.

According to Jain's application, compensation was granted to just 1.2% of the total 442,575 victims of hit-and-run incidents that occurred between 2017 and 2021. Official statistics reveal that over the course of five years, compensation was provided to only 4,958 individuals. Out of these, 3,137 cases were related to fatalities, and 1,821 were for injuries sustained. Following the implementation of the 2022 scheme, compensation was disbursed in 78 cases (comprising 72 deaths and 6 injuries) up to February 2023. During this same period, there were approximately 80,000 reported hit-and-run accidents.

Advocate Gaurav Agarwal, serving as amicus curiae to the court, identified three key reasons behind the low number of claims settled in hit-and-run cases. Firstly, he noted a lack of awareness among victims regarding their entitlement to seek compensation for such accidents. Secondly, Agarwal pointed out that the meager compensation amount, coupled with a cumbersome claims process, dissuades many potential claimants from pursuing their rights. Lastly, he highlighted the geographic accessibility challenge, as victims are required to file their claims in the district where the accident occurred, which can be particularly inconvenient for those residing in distant or remote areas. These factors collectively contribute to the limited number of claims being filed and resolved in hit-and-run cases.

Both Jain and Agarwal argued that the ₹2 lakh compensation amount should be increased. Jain suggested that the government could consider linking the compensation to the cost-of-living index to ensure that it remains aligned with the rising living expenses.

Agarwal proposed that the central government should contemplate a periodic increment in the ₹2 lakh compensation amount. He further emphasized that if victims were unable to file claims themselves, the state machinery should take proactive steps to reach out to these victims.

In this context, he urged the court to establish specific timelines within which the police should inform the victims about their right to seek compensation under the hit-and-run compensation scheme.

Agarwal also recommended that the accident report and any relevant documents required for filing a claim should be transmitted by the police to the claims inquiry officer (CIO) within one month of the accident taking place. Furthermore, he proposed that within 60 days of the accident, the CIO should conclude the inquiry and present a report to the claim settlement officer.