Supreme Court enhances compensation in motor accident case: Sureshchandra Bagmal Doshi vs. New India Assurance (2018)

Date of the Judgment: April 18, 2018

Citation: (2018) INSC 297

Judges: J. Chelameswar, J., Sanjay Kishan Kaul, J.

Can a standardized percentage for future income prospects in motor accident claims be increased based on evidence? The Supreme Court addressed this question in a case involving the tragic death of a young woman. The core issue revolved around the appropriate calculation of compensation, specifically the addition for future income prospects and the deduction for personal expenses. The judgment was delivered by a two-judge bench comprising Justice J. Chelameswar and Justice Sanjay Kishan Kaul, with the opinion authored by Justice Sanjay Kishan Kaul.

Case Background

The case involves a claim for compensation by the parents of a young woman who died in a vehicular accident on August 16, 1998. The deceased was an International Internal Sales Engineer earning Rs. 6,273 per month. She had a B.E. (Civil) qualification and was living with her parents after the death of her husband in 1996. The parents claimed that her prospective earnings would have been more than Rs. 25,000 per month, given her career progression.

The accident involved a truck and a Tata Sierra, with contributory negligence apportioned as 80% to the truck driver and 20% to the Tata Sierra driver. However, this apportionment did not affect the parents’ claim.

Timeline:

Course of Proceedings

The Motor Accident Claims Tribunal initially awarded Rs. 15,71,000, including Rs. 15,36,000 for loss of dependency, Rs. 15,000 for loss of estate, Rs. 15,000 for loss of love and affection, and Rs. 5,000 for funeral expenses. The Tribunal added 100% to the deceased’s income for future prospects and deducted 1/3rd for personal expenses.

Both parties appealed to the High Court. The High Court reduced the future income rise to 50% based on the judgment in Sarla Verma & Ors. v. Delhi Transport Corporation & Anr. [(2009) 6 SCC 121] and increased the deduction for personal expenses to 50%, considering the claimants were the parents. However, the High Court increased the multiplier from 16 to 18. It also enhanced the amounts for loss of estate and loss of love and affection to Rs. 50,000 each, totaling the compensation to Rs. 10,72,360.

The claimants then appealed to the Supreme Court.

Legal Framework

The case primarily deals with the principles of calculating compensation in motor accident claims. The key legal principles revolve around:

• Determining the actual income of the deceased at the time of the accident.
• Adding a percentage to the actual income to account for future prospects.
• Deducting a percentage for personal and living expenses of the deceased.
• Applying an appropriate multiplier based on the age of the deceased.
• Awarding compensation under conventional heads like loss of estate, loss of consortium/love and affection, and funeral expenses.

The Supreme Court referred to the Constitution Bench judgment in National Insurance Company Limited v. Pranay Sethi & Ors. [AIR 2017 SC 5157], which provided guidelines for calculating future prospects and deductions for personal expenses. The court also considered the judgment in Sarla Verma & Ors. v. Delhi Transport Corporation & Anr. [(2009) 6 SCC 121], which laid down the principle of standardizing the addition for future prospects. The Court also considered its recent order in SLP (C) No.22134/2016, which clarified that the standardized percentage for future rise in income can be varied if there is evidence to support a higher percentage.

Arguments

Arguments of the Appellants (Claimants):

• The Tribunal was correct in adding 100% towards future rise in income, considering the evidence presented.
• The two certificates dated 16.10.1998 and 8.7.2005 proved that the deceased’s future prospects would have entitled her to a gross salary in the range of Rs. 14,000 to Rs. 17,000 per month.
• The standardized percentage for calculating future rise in income is not a bar to future prospects being taken at a higher level where the assessment is based on actual evidence.
• The award for loss of estate and loss of love and affection was inadequate.

Arguments of the Respondents (Insurance Company):

• The High Court was correct in reducing the future income rise to 50% as per the judgment in Sarla Verma & Ors. v. Delhi Transport Corporation & Anr. [(2009) 6 SCC 121].
• The High Court was correct in deducting 50% towards personal expenses since the claimants are the parents of the deceased.

Issues Framed by the Supreme Court

The Supreme Court framed the following issues:

1. Whether the Tribunal was right in increasing the amount for future rise in income by 100 per cent, or the High Court was within its right to reduce the said amount to 50 per cent.
2. Whether the High Court was justified in increasing the percentage of personal expenses to the extent of 50 per cent and not 1/3rd as held by the Tribunal.
3. Whether the amount awarded under the conventional heads was adequate.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

How each authority was viewed by the Court?

• Sarla Verma & Ors. v. Delhi Transport Corporation & Anr. [(2009) 6 SCC 121]: The Court acknowledged the standardized approach for calculating future income prospects but clarified that it is not a rigid rule and can be varied based on evidence.
• National Insurance Company Limited v. Pranay Sethi & Ors. [AIR 2017 SC 5157]: The Court relied on this Constitution Bench judgment for guidelines on future prospects, deductions for personal expenses, and conventional heads.
• Order in SLP (C) No.22134/2016: The Court used this order to support its decision that the standardized percentage for future rise in income can be varied if there is evidence to support a higher percentage.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the evidence presented by the claimants regarding the deceased’s future income prospects. The Court emphasized that while standardized percentages are helpful, they are not absolute and can be adjusted based on concrete evidence. The Court also considered the fact that the deceased was unmarried/widowed and survived by her parents, which justified the 50% deduction for personal expenses. The Court also followed the guidelines set in National Insurance Company Limited v. Pranay Sethi & Ors. [AIR 2017 SC 5157] for the conventional heads.

Logical Reasoning:

The Court considered alternative interpretations of the standardized approach to future income prospects but rejected them in favor of a more evidence-based approach. The Court emphasized that the standardized approach is not a rigid rule and can be varied based on evidence. The final decision was reached by considering the specific facts of the case, the evidence presented, and the relevant legal principles.

The Supreme Court held that the Tribunal was justified in giving a 100% increase for future prospects, taking the future income at Rs. 12,000 per month. The Court also upheld the High Court’s decision to deduct 50% for personal expenses. The Court enhanced the compensation under conventional heads to Rs. 70,000.

“…the percentage for calculating future rise in income is no bar to future prospects being taken at a higher level where the assessment is based on actual evidence led to the satisfaction of the Tribunal/the Court that the future prospects were higher than the standard percentage.”

“…considering that the deceased is survived by the two parents, 50 per cent amount be deducted as personal and living expenses of the deceased when the deceased is unmarried or widowed…”

“…it has been standardized at Rs.15,000 for loss of estate; Rs.40,000 towards loss of consortium (in the present case loss of love and affection) and Rs.15,000 towards funeral expenses.”

The Court’s decision was unanimous, with both judges concurring in the final judgment.

The decision clarifies that while standardized approaches are helpful, they are not absolute and can be adjusted based on concrete evidence. This has implications for future cases, where claimants can rely on evidence to justify higher compensation for future prospects.

The Court did not introduce any new doctrines or legal principles but rather clarified the application of existing principles in the context of motor accident claims.

Key Takeaways

• Standardized percentages for future income prospects are not rigid and can be varied based on evidence.
• In cases where the deceased is unmarried or widowed and survived by parents, a 50% deduction for personal expenses is appropriate.
• The compensation under conventional heads is standardized at Rs. 70,000, subject to enhancement every three years.
• Claimants should present concrete evidence to support their claims for higher compensation for future prospects.

The judgment emphasizes the importance of evidence-based assessments in motor accident claims and provides clarity on the application of standardized approaches.

Directions

The Supreme Court directed that the appellants were entitled to costs throughout the proceedings, assessed at Rs. 25,000.

Development of Law

The ratio decidendi of the case is that the standardized percentage for calculating future rise in income is not a rigid rule and can be varied if there is evidence to support a higher percentage. The Court clarified that the standardized approach is not a bar to future prospects being taken at a higher level where the assessment is based on actual evidence. This is a change from the previous position where standardized percentages were often applied without considering specific evidence.

Conclusion

The Supreme Court allowed the appeal, enhancing the compensation awarded to the parents of the deceased. The Court emphasized the importance of considering evidence when assessing future income prospects and clarified the application of standardized approaches in motor accident claims. The final compensation was set at Rs. 14,25,000, with interest at 12% per annum and costs of Rs. 25,000.