The Supreme Court has delivered its judgment in the case relating to calculation of future prospects for determining compensation under the Motor Vehicles Act..The judgment was delivered by a Constitution Bench of Chief Justice Dipak Misra and Justices AK Sikri, AM Khanwilkar, DY Chandrachud and Ashok Bhushan..In the instant case, the Motor Accident Claims Tribunal had determined the compensation amount after adding 30% of the income of the deceased towards future prospects by placing reliance on the decision in Santosh Devi v. National Insurance Company Limited and others..The insurer had challenged the same contending that the deceased was not a salaried person but a person engaged in business. The High Court had rejected the appeal of the insurer prompting the insurer to approach the Supreme Court..The case came to be heard by a Constitution bench after the a two-judge Bench noted the cleavage of opinion between Reshma Kumari and others v. Madan Mohan and another and Rajesh and others v. Rajbir Singh and others, both three-judge Bench decisions..Interpreting Section 168 of the Act, the Court held that it deals with ‘just’ compensation and such compensation has to be determined on the foundation of fairness, reasonableness and equitability..“Section 168 of the Act deals with the concept of “just compensation” and the same has to be determined on the foundation of fairness, reasonableness and equitability on acceptable legal standard because such determination can never be in arithmetical exactitude. It can never be perfect. The aim is to achieve an acceptable degree of proximity to arithmetical precision on the basis of materials brought on record in an individual case. The conception of “just compensation” has to be viewed through the prism of fairness, reasonableness and non-violation of the principle of equitability”..Regarding fixation of future prospects, the Court held the following:.“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 Court further held that persons, whether salaried employees or self-employed, should get the benefit of such future prospects..“The purchasing capacity of a salaried person on permanent job when increases because of grant of increments and pay revision or for some other change in service conditions, there is always a competing attitude in the private sector to enhance the salary to get better efficiency from the employees. Similarly, a person who is self-employed is bound to garner his resources and raise his charges/fees so that he can live with same facilities. 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.”.The Court, thus, arrived at the following conclusions:.(i) 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..(ii) As Rajesh has not taken note of the decision in Reshma Kumari, which was delivered at earlier point of time, the decision in Rajesh is not a binding precedent..(iii) 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..(iv) 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..(v) For determination of the multiplicand, the deduction for personal and living expenses, the tribunals and the courts shall be guided by paragraphs 30 to 32 of Sarla Verma which we have reproduced hereinbefore..(vi) The selection of multiplier shall be as indicated in the Table in Sarla Verma read with paragraph 42 of that judgment..(vii) The age of the deceased should be the basis for applying the multiplier..(viii) Reasonable figures on conventional heads, namely, loss of estate, loss of consortium and funeral expenses should be Rs. 15,000/-, Rs. 40,000/- and Rs. 15,000/- respectively. The aforesaid amounts should be enhanced at the rate of 10% in every three years..Read the judgment below..Click here to download the Bar & Bench Android App
The Supreme Court has delivered its judgment in the case relating to calculation of future prospects for determining compensation under the Motor Vehicles Act..The judgment was delivered by a Constitution Bench of Chief Justice Dipak Misra and Justices AK Sikri, AM Khanwilkar, DY Chandrachud and Ashok Bhushan..In the instant case, the Motor Accident Claims Tribunal had determined the compensation amount after adding 30% of the income of the deceased towards future prospects by placing reliance on the decision in Santosh Devi v. National Insurance Company Limited and others..The insurer had challenged the same contending that the deceased was not a salaried person but a person engaged in business. The High Court had rejected the appeal of the insurer prompting the insurer to approach the Supreme Court..The case came to be heard by a Constitution bench after the a two-judge Bench noted the cleavage of opinion between Reshma Kumari and others v. Madan Mohan and another and Rajesh and others v. Rajbir Singh and others, both three-judge Bench decisions..Interpreting Section 168 of the Act, the Court held that it deals with ‘just’ compensation and such compensation has to be determined on the foundation of fairness, reasonableness and equitability..“Section 168 of the Act deals with the concept of “just compensation” and the same has to be determined on the foundation of fairness, reasonableness and equitability on acceptable legal standard because such determination can never be in arithmetical exactitude. It can never be perfect. The aim is to achieve an acceptable degree of proximity to arithmetical precision on the basis of materials brought on record in an individual case. The conception of “just compensation” has to be viewed through the prism of fairness, reasonableness and non-violation of the principle of equitability”..Regarding fixation of future prospects, the Court held the following:.“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 Court further held that persons, whether salaried employees or self-employed, should get the benefit of such future prospects..“The purchasing capacity of a salaried person on permanent job when increases because of grant of increments and pay revision or for some other change in service conditions, there is always a competing attitude in the private sector to enhance the salary to get better efficiency from the employees. Similarly, a person who is self-employed is bound to garner his resources and raise his charges/fees so that he can live with same facilities. 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.”.The Court, thus, arrived at the following conclusions:.(i) 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..(ii) As Rajesh has not taken note of the decision in Reshma Kumari, which was delivered at earlier point of time, the decision in Rajesh is not a binding precedent..(iii) 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..(iv) 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..(v) For determination of the multiplicand, the deduction for personal and living expenses, the tribunals and the courts shall be guided by paragraphs 30 to 32 of Sarla Verma which we have reproduced hereinbefore..(vi) The selection of multiplier shall be as indicated in the Table in Sarla Verma read with paragraph 42 of that judgment..(vii) The age of the deceased should be the basis for applying the multiplier..(viii) Reasonable figures on conventional heads, namely, loss of estate, loss of consortium and funeral expenses should be Rs. 15,000/-, Rs. 40,000/- and Rs. 15,000/- respectively. The aforesaid amounts should be enhanced at the rate of 10% in every three years..Read the judgment below..Click here to download the Bar & Bench Android App
