National Insurance Co. Ltd. v. Pranay Sethi
Supreme Court of India, 31 October 2017, 5 judges
In motor accident death claims, future prospects must be added to income for deceased persons below 60, including the self-employed and those on fixed salary, at fixed percentages; conventional heads were also fixed.
Facts
A two-Judge Bench in National Insurance Company Limited v. Pushpa noticed a conflict between two three-Judge Bench decisions, Reshma Kumari v. Madan Mohan and Rajesh v. Rajbir Singh, on adding future prospects when computing compensation for death under the Motor Vehicles Act, 1988, and referred the question to a larger Bench. The batch of matters placed before the Constitution Bench required it to examine the approach laid down in Sarla Verma v. Delhi Transport Corporation, the later two-Judge decision in Santosh Devi, and the treatment of deceased persons who were self-employed or on a fixed salary.
Questions before the Court
- Which of the conflicting three-Judge Bench decisions, Reshma Kumari or Rajesh, is binding on future prospects?
- Should future prospects be added to the income of a deceased who was self-employed or on a fixed salary, and at what rates by age?
- What standards apply to deduction for personal expenses, the multiplier and conventional heads of compensation?
What the Court held
- A coordinate Bench cannot take a view contrary to an earlier coordinate Bench; Santosh Devi should have referred the matter to a larger Bench. As Rajesh did not notice the earlier Reshma Kumari, Rajesh is not a binding precedent.
- Just compensation under Section 168 requires future prospects to be included in income. For a permanent job, add 50% of actual salary (less tax) below 40 years, 30% at 40 to 50, and 15% at 50 to 60.
- For the self-employed or those on fixed salary, add 40% of established income (less tax) below 40 years, 25% at 40 to 50, and 10% at 50 to 60. There is no addition beyond 60.
- Deduction for personal and living expenses follows paragraphs 30 to 32 of Sarla Verma, and the multiplier follows its Table, based on the age of the deceased.
- Conventional heads are fixed at Rs. 15,000 for loss of estate, Rs. 40,000 for loss of consortium and Rs. 15,000 for funeral expenses, to be enhanced by 10% every three years.
Why it matters
The five-Judge Bench standardised the computation of compensation in fatal motor accident claims: it extended future prospects to the self-employed and fixed-salary earners, set age-based percentages for all categories, approved Sarla Verma on deduction and multiplier, and fixed the conventional heads with periodic enhancement. It also restates the discipline of precedent between coordinate Benches.
In the Court's words
Copied from the official judgment; each passage links to its page.
“To follow the doctrine of actual income at the time of death and not to add any amount with regard to future prospects to the income for the purpose of determination of multiplicand would be unjust. The determination of income while computing compensation has to include future prospects so that the method will come within the ambit and sweep of just compensation as postulated under Section 168 of the Act.”
“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.”
“While determining the income, an addition of 50% 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%, 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%. Actual salary should be read as actual salary less tax.”
Provisions interpreted
Related judgments
- Follows Sarla Verma v. Delhi Transport Corporation (2009)“shall be guided by paragraphs 30 to 32 of Sarla Verma” (page 48)
Case and bench
- Parties
- National Insurance Company Limited v. Pranay Sethi and Ors.
- Case
- Special Leave Petition (Civil) No. 25590 of 2014, with connected matters
- Decided
- 31 October 2017
- Bench
- Dipak Misra (CJI), A.K. Sikri, A.M. Khanwilkar, D.Y. Chandrachud, Ashok Bhushan
- Opinions
- Unanimous. Single judgment of the five-Judge Bench written by Dipak Misra, CJI and signed by all five Judges.
Questions on this case
11 questions in live Law Maker papers mention this case. Practise them with the landmark judgments questions.