Supreme Court clarifies calculation of compensation in motor accident cases: Maya Singh vs. Oriental Insurance (2025)

Date of the Judgment: February 07, 2025

Citation: 2025 INSC 161

Judges: J.K. Maheshwari, J., Rajesh Bindal, J.

When a person dies in a motor vehicle accident, how should the compensation to the family be calculated? The Supreme Court addressed the issue of how to calculate compensation in motor accident cases, particularly focusing on whether the High Court was correct in reducing the compensation awarded by the Motor Accident Claims Tribunal. The key question was whether the High Court correctly applied the split multiplier method and if it properly considered future prospects in calculating the compensation.

The Supreme Court heard an appeal against a decision by the High Court of Madhya Pradesh, which had reduced the compensation awarded to the family of a deceased person in a motor accident case. The Supreme Court clarified the principles to be followed in assessing compensation, emphasizing the need to consider future prospects and the impropriety of applying a split multiplier method without specific reasons.

The judgment was delivered by a two-judge bench comprising Justice J.K. Maheshwari and Justice Rajesh Bindal.

Case Background

On March 7, 2014, Laxman Das Mahour was fatally injured when a bus hit him after he alighted from another bus. He was walking on the road with his son, Jugal Kishore, when the accident occurred. Laxman Das Mahour died on the spot due to the injuries sustained.

The appellants, who are the family members of the deceased, filed a claim petition seeking compensation for the death of Laxman Das Mahour.

Timeline:

Course of Proceedings

The First Additional Motor Accidental Claims Tribunal, Dist. Gwalior (M.P.) awarded a compensation of ₹28,66,994 with interest at 7.5% per annum from the date of filing the claim petition until realization.

The Oriental Insurance Co. Ltd. appealed the Tribunal’s award to the High Court of Madhya Pradesh at Gwalior. The High Court partially allowed the appeal and reduced the compensation to ₹19,66,833, citing that the deceased was to remain in service for only another two years and applied a split method for calculating dependency.

Aggrieved by the High Court’s order, the claimants appealed to the Supreme Court.

Legal Framework

The judgment refers to the following legal provisions and principles:

• Principles for calculating compensation in motor accident cases.
• Consideration of future prospects in determining compensation.
• Application of appropriate multiplier based on the age of the deceased as per the guidelines in Sarla Verma v. DTC.
• The impropriety of applying a split multiplier method without specific reasons, as discussed in Sumathi v. M/s. National Insurance Company Ltd.

Arguments

Arguments by the Appellants (Claimants):

• The High Court erred in reducing the compensation by applying a split method of pre- and post-retirement income.
• The appellants are entitled to compensation based on the loss of income as assessed by the Tribunal.
• They are also entitled to a 15% increase in compensation for future prospects, considering the age of the deceased, as per the Constitution bench judgment in National Insurance Company Limited v. Pranay Sethi and Others.
• The Tribunal failed to grant compensation for the loss of estate.

Arguments by the Respondent (Insurance Company):

• The compensation assessed by the High Court is just and fair.
• The deceased was close to 58 years of age and would have retired in the next 2-3 years.
• Post-retirement, he would have received a pension, which would be about 50% of his last drawn salary.
• The compensation should be calculated with reference to the loss to the family post-retirement, based on the pension amount.
• The respondent did not dispute the appellants’ entitlement to an increase for future prospects and specified compensation under other heads, as per Pranay Sethi.

Submissions Table

Issues Framed by the Supreme Court

1. Whether the High Court was justified in reducing the amount of compensation admissible to the appellants under the head of loss of dependency by applying a split method of calculating pre- and post-retirement income.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The court considered the following authorities:

• Sarla Verma v. DTC: This case provides guidelines for calculating compensation, including the appropriate multiplier to be used based on the age of the deceased. The Supreme Court referred to this case to emphasize that courts and tribunals must apply the multiplier as per the guidelines in Sarla Verma, and any deviation warrants special reasons to be recorded.
• Sumathi v. M/s. National Insurance Company Ltd.: This case addressed a similar situation where the High Court applied a split multiplier. The Supreme Court set aside the High Court’s decision, holding that a split multiplier cannot be applied unless specific reasons are recorded.
• National Insurance Company Limited v. Pranay Sethi and Others: This Constitution Bench judgment was cited regarding the entitlement to an increase for future prospects.

Authority Treatment Table

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Sarla Verma v. DTC: The court followed the guidelines established in this case for calculating compensation, emphasizing the use of the appropriate multiplier based on the age of the deceased.
• Sumathi v. M/s. National Insurance Company Ltd.: The court reiterated the principle from this case that a split multiplier cannot be applied unless specific reasons are recorded.
• National Insurance Company Limited v. Pranay Sethi and Others: The court referred to this case regarding the entitlement to an increase for future prospects.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to adhere to established principles of compensation calculation in motor accident cases. The Court emphasized the importance of following the guidelines in Sarla Verma v. DTC regarding the use of appropriate multipliers and the impropriety of applying a split multiplier method without specific reasons. The Court also considered the need to provide fair compensation to the appellants, including future prospects, and the factual aspects of the case, such as the age and income of the deceased.

Fact:Law

The Supreme Court’s decision was influenced by both factual and legal considerations. The factual aspects of the case, such as the age, income, and circumstances of the deceased, were important in determining the appropriate compensation. However, the legal principles and precedents, such as the guidelines in Sarla Verma v. DTC and the ruling in Sumathi v. M/s. National Insurance Company Ltd., played a crucial role in the Court’s reasoning and decision.

Logical Reasoning

ISSUE: Whether the High Court was justified in reducing the amount of compensation admissible to the appellants under the head of loss of dependency by applying a split method of calculating pre- and post-retirement income.

Key Takeaways

• The split multiplier method should not be applied in calculating compensation unless specific reasons are recorded.
• Courts and tribunals must follow the guidelines in Sarla Verma v. DTC for determining the appropriate multiplier based on the age of the deceased.
• Future prospects should be considered when calculating compensation, especially for technically qualified individuals who may continue working after retirement.

Development of Law

The ratio decidendi of the case is that the split multiplier method should not be applied in calculating compensation unless specific reasons are recorded, and courts and tribunals must follow the guidelines in Sarla Verma v. DTC for determining the appropriate multiplier. This clarifies the principles to be followed in assessing compensation in motor accident cases and reinforces the need for a consistent and reasoned approach.

Conclusion

The Supreme Court allowed the appeal, set aside the High Court’s order, and modified the compensation to ₹33,03,300, emphasizing the need to adhere to established principles of compensation calculation and consider future prospects. The Court reiterated that the split multiplier method should not be applied without specific reasons and that the guidelines in Sarla Verma v. DTC must be followed.