Supreme Court Enhances Compensation for Engineering Student’s Death in Motor Accident Claim (18 November 2021)

Introduction

Date of the Judgment: 18 November 2021

Citation: Civil Appeal No. 6724 of 2021

Judges: M. R. Shah, J., Sanjiv Khanna, J.

How should courts determine compensation for the loss of a young, non-earning student with a promising future? The Supreme Court of India recently tackled this issue, increasing the compensation awarded to the family of a 21-year-old engineering student who died in a motor accident. The court’s decision highlights the importance of considering future prospects when calculating compensation, even for those not currently employed. This case clarifies how to assess income and apply multipliers in such tragic circumstances.

Case Background

On September 12, 2012, Mr. Prashant, a 21-year-old bachelor and a third-year engineering student, tragically died in a motor vehicle accident. His parents, brother, and sister filed a claim petition before the Motor Accident Claims Tribunal (MACT), seeking Rs. 25 lakhs in compensation. The claimants argued that Prashant was earning Rs. 8,000 per month by tutoring students. The MACT, however, assessed his monthly income at Rs. 15,000, considering his potential future earnings, and awarded a total compensation of Rs. 12,85,000.

Both the claimants and the Union of India appealed this decision. The High Court of Madhya Pradesh reduced the compensation to Rs. 6,10,000, reassessing the deceased’s monthly income at Rs. 5,000. The High Court also applied a multiplier of 18 based on the deceased’s age. This reduction in compensation led the original claimants to appeal to the Supreme Court.

Timeline:

Legal Framework

The primary legal provision at the heart of this case is Section 168 of the Motor Vehicles Act, which deals with the concept of “just compensation.” The Supreme Court emphasized that this compensation must be fair, reasonable, and equitable. The court also referred to the principle of standardization in determining future prospects, as established in the case of National Insurance Company Limited vs. Pranay Sethi and Others (2017) 16 SCC 680.

The relevant portion of Section 168 of the Motor Vehicles Act is not mentioned in the source.

Arguments

The appellants, the original claimants, argued that the High Court erred in assessing the deceased’s income at only Rs. 5,000 per month, given his educational qualifications and bright future. They contended that even unskilled laborers were earning that much in 2012 under the Minimum Wages Act. They also argued that the High Court failed to consider the future rise in income while calculating the future loss of income.

The Union of India, while not fully supporting the High Court’s assessment, argued that since the deceased was not earning at the time of the accident, no future rise in income should be considered. They also claimed that the claimants had accepted the High Court’s award as full and final settlement in execution proceedings and therefore, the appeal should not be entertained.

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration:

1. Whether the High Court was justified in determining the income of the deceased at Rs. 5,000 per month for the purpose of awarding compensation under the head of future economic loss.
2. Whether any further amount is required to be added towards the future rise in income.

Treatment of the Issue by the Court

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

Authorities

Judgment

The Supreme Court addressed the submissions made by both parties as follows:

The Supreme Court viewed the authorities as follows:

✓ National Insurance Company Limited vs. Pranay Sethi and Others (2017) 16 SCC 680*: The Court followed the principles laid down in this case regarding the addition of future prospects to the income of the deceased while determining compensation. The court held that the principles apply to both salaried and self-employed individuals, as well as those who were not earning at the time of death.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to provide just compensation, considering the deceased’s potential and the economic realities of the time. The court emphasized that a young engineering student’s future prospects should not be ignored simply because he was not earning at the time of his death. The court also highlighted the importance of applying the principles of standardization and fairness in determining compensation.

The court considered the argument that the claimants accepted the High Court’s award as a full and final settlement, but rejected it. The court emphasized that the Motor Vehicles Act is a benevolent act and the claimants are entitled to just compensation. The court held that accepting a lower amount in execution proceedings does not preclude them from claiming enhanced compensation.

The Supreme Court’s reasoning was based on the principle of “just compensation” as outlined in Section 168 of the Motor Vehicles Act. The court emphasized that compensation should not be a pittance but should reflect the actual loss suffered by the claimants. The court also relied on the principle of standardization to ensure uniformity in compensation awards.

The Supreme Court quoted from National Insurance Company Limited vs. Pranay Sethi and Others (2017) 16 SCC 680:

“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.”

“To have the perception that he is likely to remain static and his income to remain stagnant is contrary to the fundamental concept of human attitude which always intends to live with dynamism and move and change with the time.”

“…an addition of 40% of the established income of the deceased towards future prospects and where the deceased was below 40 years an addition of 25% where the deceased was between the age of 40 to 50 years would be reasonable.”

Key Takeaways

• The Supreme Court enhanced the compensation amount to Rs. 15,82,000, along with 7% interest from the date of the claim petition.
• The court emphasized that future prospects must be considered even for non-earning individuals, particularly young students with promising futures.
• The court applied a 40% increase to the assessed income to account for future prospects, following the precedent set in Pranay Sethi.
• Accepting a lower compensation amount in execution proceedings does not preclude claimants from seeking enhanced compensation.

Directions

The Supreme Court directed the appellants to deposit the balance enhanced amount of compensation with the learned Tribunal within six weeks. The Tribunal was directed to invest the enhanced amount in the name of the parents in a fixed deposit in any Nationalized Bank for a period of 3 years, with the parents entitled to the periodical interest. The court also directed the appellants to pay a token cost of Rs. 10,000 to the original claimants.

Development of Law

The ratio decidendi of this case is that when determining compensation in motor accident claims, particularly for deceased individuals who were not earning at the time of the accident, courts must consider their potential future income and apply the principle of future prospects. This judgment reinforces the principles laid down in Pranay Sethi and extends its application to non-earning individuals, ensuring that they are not disadvantaged in compensation awards. This clarifies that the principle of future prospects applies to all, irrespective of their employment status at the time of the accident.

Conclusion

In conclusion, the Supreme Court partly allowed the appeal, modifying the High Court’s judgment and enhancing the compensation awarded to the claimants. The court’s decision underscores the importance of considering future prospects when determining compensation in motor accident claims, even for those who were not earning at the time of death. This judgment ensures that the principle of “just compensation” is applied fairly and equitably, reflecting the potential loss suffered by the claimants.