Supreme Court Rejects Split Multiplier in Motor Accident Claims: R. Valli vs. Tamil Nadu State Transport Corporation Ltd. (2022)

Date of the Judgment: 10 February 2022

Citation: R. Valli & Ors. vs. Tamil Nadu State Transport Corporation Ltd., Civil Appeal No. 1269 of 2022 (Arising out of SLP (Civil) No. 20913 of 2018)

Judges: Hemant Gupta, J., V. Ramasubramanian, J.

Can a court use a ‘split multiplier’ approach when calculating compensation in motor accident claims, considering both the remaining years of service and the overall life expectancy of the deceased? The Supreme Court of India addressed this question in a recent case, clarifying the correct method for determining compensation in such cases. The core issue revolved around whether compensation should be calculated using a split multiplier, considering the deceased’s remaining years of service and then their life expectancy, or a single multiplier based on the deceased’s age at the time of death. The Supreme Court bench comprised Justices Hemant Gupta and V. Ramasubramanian, with the majority opinion authored by Justice Hemant Gupta.

Case Background

On February 22, 2011, V. Rajasekaran, aged 54, was riding a two-wheeler when a bus belonging to the Tamil Nadu State Transport Corporation Ltd. collided with his vehicle. Rajasekaran suffered fatal head injuries and died at the scene of the accident. The accident occurred due to the rash and negligent driving of the bus driver. At the time of his death, Rajasekaran was employed at M/s Areva T & D India Limited, earning a monthly salary of Rs. 23,062.30. The legal heirs of the deceased filed a claim for compensation with the Motor Accident Claim Tribunal, Chennai.

Timeline

Course of Proceedings

The Motor Accident Claims Tribunal, Chennai, determined that the accident occurred due to the bus driver’s rash and negligent driving. The Tribunal assessed the deceased’s income at Rs. 23,062 per month. Considering that the deceased was 54 years old at the time of the accident and had a superannuation age of 58 years, the Tribunal calculated the dependency period as 3 years. After deducting 10% for income tax and 1/4th for personal expenses, the Tribunal awarded Rs. 5,60,412 for the employment period. It then applied a multiplier of 8 to 50% of the income for the remaining life expectancy, awarding Rs. 7,47,216. Including compensation for conventional heads, the total award was Rs. 13,82,628. The High Court of Judicature at Madras upheld the Tribunal’s findings regarding the multiplier but enhanced the compensation under conventional heads, resulting in a total compensation of Rs. 15,12,628.

Legal Framework

The core legal issue revolves around the method of calculating compensation in motor accident claims, particularly the application of multipliers. The Supreme Court has previously addressed this issue in cases like Sarla Verma (Smt.) & Ors. v. Delhi Transport Corporation & Anr., Reshma Kumari & Ors. v. Madan Mohan & Anr., and National Insurance Company Limited v. Pranay Sethi & Ors. These cases established that the multiplier should be based on the age of the deceased at the time of death, not the remaining years of service. The court referred to para 42 of Sarla Verma (Smt.) & Ors. v. Delhi Transport Corporation & Anr. which states:

“42. We therefore hold that the multiplier to be used should be as mentioned in Column (4) of the table above (prepared by applying Susamma Thomas [(1994) 2 SCC 176 : 1994 SCC (Cri) 335] , Trilok Chandra [(1996) 4 SCC 362] and Charlie [(2005) 10 SCC 720 : 2005 SCC (Cri) 1657] ), which starts with an operative multiplier of 18 (for the age groups of 15 to 20 and 21 to 25 years), reduced by one unit for every five years, that is M-17 for 26 to 30 years, M-16 for 31 to 35 years, M-15 for 36 to 40 years, M-14 for 41 to 45 years, and M-13 for 46 to 50 years, then reduced by two units for every five years, that is, M-11 for 51 to 55 years, M-9 for 56 to 60 years, M-7 for 61 to 65 years and M-5 for 66 to 70 years.”

The Supreme Court in National Insurance Company Limited v. Pranay Sethi & Ors. reiterated the principle that the age of the deceased should be the basis for applying the multiplier, and also clarified the addition of future prospects to the income of the deceased. The relevant portion of the judgment is:

“59.3. 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.
59.4. In case the deceased was self-employed or on a fixed salary, an addition of 40% of the established income should be the warrant where the deceased was below the age of 40 years. An addition of 25% where the deceased was between the age of 40 to 50 years and 10% 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.
59.7. The age of the deceased should be the basis for applying the multiplier.”

Arguments

Appellant’s Arguments:

• The appellants argued that the Tribunal and the High Court erred in applying a split multiplier. They contended that the multiplier should be based on the age of the deceased at the time of death, not the remaining years of service.
• They relied on the judgment of the Supreme Court in Sarla Verma (Smt.) & Ors. v. Delhi Transport Corporation & Anr., which specifies that the age of the deceased at the time of death should be the basis for choosing the multiplier.
• The appellants argued that the correct multiplier for a 54-year-old deceased should be 11, as per the principles laid down in Sarla Verma and affirmed in Pranay Sethi.

Respondent’s Arguments:

• The respondent, represented by Mr. Amit Anand Tiwari, Additional Advocate General, referred to orders from various High Courts that supported the application of a split multiplier. These cases include Uma Shankar & Ors. v. Revathy Vadivel & Ors., Smt. Kamlesh Devi & Ors. v. Sh. Kitab Singh & Ors., and Union of India & Ors. v. K.S. Lakshmi Kumar & Ors.
• The respondent argued that these cases justify using a multiplier based on the remaining years of service until retirement, followed by another multiplier based on the life expectancy after retirement.

Submissions Table:

Innovativeness of the Argument: The appellant’s argument was based on settled law, while the respondent tried to rely on High Court judgments that were not in line with the Supreme Court’s precedents.

Issues Framed by the Supreme Court

The primary issue before the Supreme Court was:

1. Whether the High Court was correct in applying a split multiplier method for calculating compensation, considering both the remaining years of service and the overall life expectancy of the deceased.

Treatment of the Issue by the Court

Authorities

Cases Relied Upon by the Court:

Cases Referred to by the Respondent and Overruled:

The court specifically stated that the following cases, cited by the respondent, were no longer good law because they were decided prior to Pranay Sethi and supported the split multiplier approach:

• Uma Shankar & Ors. v. Revathy Vadivel & Ors. [2014 SCC OnLine Mad 846] – High Court of Judicature at Madras
• Smt. Kamlesh Devi & Ors. v. Sh. Kitab Singh & Ors. [2011 SCC OnLine Del 2843] – High Court of Delhi
• Union of India & Ors. v. K.S. Lakshmi Kumar & Ors. [2000 SCC OnLine Kar 406] – High Court of Karnataka

Judgment

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

How each authority was viewed by the Court?

• Sarla Verma (Smt.) & Ors. v. Delhi Transport Corporation & Anr. [(2009) 6 SCC 121]:* The court followed this judgment, reiterating that the multiplier should be based on the age of the deceased.
• Reshma Kumari & Ors. v. Madan Mohan & Anr. [(2013) 9 SCC 65]:* The court noted that this case affirmed the principles laid down in Sarla Verma.
• National Insurance Company Limited v. Pranay Sethi & Ors. [(2017) 16 SCC 680]:* The court relied on this Constitution Bench judgment, which affirmed Sarla Verma and clarified the addition of future prospects to the income of the deceased.
• United India Insurance Co. Ltd. v. Satinder Kaur alias Satwinder Kaur & Ors. [(2020) SCC OnLine SC 410]:* The court used this case to support that the multiplier should be based on the age of the deceased even if he was a bachelor.
• Royal Sundaram Alliance Insurance Co. Ltd. v. Mandala Yadagari Goud [(2019) 5 SCC 554]:* The court used this case to support that the compensation is to be computed based on what the deceased would have contributed to support the dependants.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need for consistency and adherence to established legal precedents. The Court emphasized that the principles laid down in Sarla Verma and affirmed in Pranay Sethi must be followed to ensure uniformity in the calculation of compensation in motor accident claims. The Court rejected the split multiplier approach, as it was inconsistent with the settled law. The Court’s reasoning was also based on the principle that the age of the deceased at the time of death is a more reliable factor for determining the multiplier than the remaining years of service, as it reflects the deceased’s overall life expectancy and potential earning capacity.

Fact:Law Ratio

Logical Reasoning:

The court considered alternative interpretations, particularly the split multiplier approach, but rejected it because it was inconsistent with the established legal framework. The court emphasized that the age of the deceased at the time of death is the correct basis for applying the multiplier, as per the precedents. The court’s final decision was to set aside the High Court’s order and to award compensation based on a single multiplier of 11, considering the deceased’s age of 54 years at the time of the accident.

The court reasoned that:

• “The method of determination of compensation applying two multipliers is clearly erroneous and run counter to the judgment of this Court in Pranay Sethi, affirming the judgment in Sarla Verma.”
• “Since the deceased was 54 years of age on the date of incident, therefore, the suitable multiplier would be 11 as per the judgment of this Court in Sarla Verma approved by this Court in Pranay Sethi.”
• “The age of the deceased should be the basis for applying the multiplier.”

The court did not have a dissenting opinion. The decision was unanimous.

Key Takeaways

• The Supreme Court has reaffirmed that the multiplier for calculating compensation in motor accident claims must be based on the age of the deceased at the time of death, not the remaining years of service.
• The split multiplier approach, which considers both the remaining years of service and the overall life expectancy, is not valid.
• The judgments in Sarla Verma and Pranay Sethi are the guiding principles for determining the appropriate multiplier.
• This judgment provides clarity and consistency in the calculation of compensation in motor accident claims.

Directions

The Supreme Court directed that the appellants are entitled to a compensation of Rs. 24,33,064 with interest at 9% from the date of filing of the claim application till realization.

Development of Law

The ratio decidendi of this case is that the multiplier for calculating compensation in motor accident claims must be based on the age of the deceased at the time of death, and the split multiplier approach is not valid. This judgment reinforces the principles laid down in Sarla Verma and Pranay Sethi, and clarifies that previous High Court judgments supporting the split multiplier approach are no longer valid.

Conclusion

In conclusion, the Supreme Court’s judgment in R. Valli & Ors. vs. Tamil Nadu State Transport Corporation Ltd. clarifies that the multiplier for calculating compensation in motor accident claims must be based on the age of the deceased at the time of death. The Court rejected the split multiplier approach, affirming the principles established in Sarla Verma and Pranay Sethi. This decision ensures consistency and uniformity in the calculation of compensation, providing a clear framework for future cases.