Supreme Court lays down norms for computation of accident claim

Apex court also fixed the amount to be paid to dependents of road accident victims

In a path-breaking verdict, the Supreme Court (SC) on Tuesday held that 'future prospect' of a person killed in a road accident would be considered while awarding compensation to the dependents and laid down standard criteria for computation of such claims.

A five-judge constitution Bench, headed by Chief Justice Dipak Misra, was faced with a vexatious question whether dependents of a road accident victim, who was either self- employed or working on a fixed salary in private or unorganised sector, can get enhanced compensation after addition of certain percentage of the salary drawn by the deceased under the head of ‘future prospect’. Accepting the principle of standardisation, it said, “while determining the income, an addition of 50 per cent of actual salary to the income of the deceased towards future prospects, where the deceased had a permanent job and was below the age of 40 years, should be made. 

“The addition should be 30 per cent, if the age of the deceased was between 40 to 50 years. In case the deceased was between the age of 50 to 60 years, the addition should be 15 per cent. Actual salary should be read as actual salary less tax."

The Bench, which also comprised Justices A K Sikri, A M Khanwilkar, D Y Chandrachud and Ashok Bhushan, fixed the percentage of salary or income of a self-employed and a person working in private sector which would be computed under the head of ‘future prospect’ for granting compensation to the dependents.

"In case the deceased was self-employed or on a fixed salary, an addition of 40 per cent of the established income should be the warrant where the deceased was below the age of 40 years.

"An addition of 25 per cent where the deceased was between the age of 40 to 50 years and 10 per cent where the deceased was between the age of 50 to 60 years should be regarded as the necessary method of computation. The established income means the income minus the tax component," it said.

The determination of income while computing compensation has to include future prospects so that the method comes within "the ambit and sweep of just compensation" as postulated under the provision of the Motor Vehicle Act.

"We are inclined to think that there can be some degree of difference as regards the percentage that is meant for or applied to in respect of the legal representatives who claim on behalf of the deceased who had a permanent job than a person who is self-employed or on a fixed salary. But not to apply the principle of standardisation on the foundation of perceived lack of certainty would tantamount to remaining oblivious to the marrows of ground reality," it said.

The top court also fixed the amount to be paid to the dependents of road accident victims under heads such as loss of consortium and funeral expense and said that there would be 10 per cent raise in the amount after every three years.

"Reasonable figures on conventional heads, namely, loss of estate, loss of consortium and funeral expenses should be Rs 15,000, Rs 40,000 and Rs 15,000 respectively. The aforesaid amounts should be enhanced at the rate of 10 per cent in every three years," the court, in its 49-page verdict, said.

The judgement came on a batch of 27 petitions, including one filed by the National Insurance Company Ltd against an order of the Punjab and Haryana High Court, which raised a common issue whether a "standard threshold" amount can be fixed under the head of "future prospect" while awarding compensation to the dependents of the accident victims.

CJI Misra, writing the unanimous verdict for the bench, took serious note of the fact a two-judge bench differed with the earlier view of another bench of same strength and referred the matter to a constitution bench.

"The two-Judge Bench in Santosh Devi should have been well advised to refer the matter to a larger bench as it was taking a different view than what has been stated in Sarla Verma, a judgment by a coordinate Bench. It is because a coordinate bench of the same strength cannot take a contrary view than what has been held by another coordinate Bench," the top court said.

"There can be no doubt that an earlier decision of co- equal bench binds the bench of same strength," it said.

The MV Act provides for award of compensation to be paid by the insurance firms to the victim or his or her family in accident cases by using the methodology provided in the statute itself.

In the claim plea, the family members have to establish the age and income of the deceased and the number of dependents.