National Insurance Co. Ltd. v. Pranay Sethi

Three-Judge Benches of the Supreme Court had given different answers on how to work out compensation for a person killed in a road accident. A two-Judge Bench referred the conflict to a larger Bench. A five-Judge Bench settled three points. It fixed how to add future prospects (the likely rise in the dead person's income). It fixed how to choose the multiplier (the number applied to the yearly loss). It fixed what to award under the fixed heads.

Quick Revision

Read the full judgment: Supreme Court of India (sci.gov.in)

Parties

National Insurance Company Limited — petitioner in Special Leave Petition (Civil) No. 25590 of 2014. The judgment does not state its role beyond this.

Pranay Sethi and Ors. — respondents in the lead petition. Their role is not stated in the judgment.

Other parties — many other petitions and appeals were heard with the lead petition. The cause title lists them. The judgment names no other party.

Procedural History

The judgment gives the history of the reference. It does not record the orders of the courts below in the individual matters.

1. The claims tribunals and courts were applying different methods to compute compensation. The Court notes a lack of uniformity and consistency in awards (para 31).
2. Sarla Verma v. Delhi Transport Corporation, (2009) 6 SCC 121, was decided by a two-Judge Bench. It set parameters to simplify claims (para 2).
3. A two-Judge Bench in Reshma Kumari v. Madan Mohan, (2009) 13 SCC 422, saw divergent opinion on computation under Sections 163-A and 166. It sent the matter to the Chief Justice for a larger Bench (paras 3, 6).
4. The three-Judge Bench decision in Reshma Kumari v. Madan Mohan, (2013) 9 SCC 65, answered that reference. It approved Sarla Verma (paras 7-13, 40-45).
5. While that reference was pending, a two-Judge Bench decided Santosh Devi v. National Insurance Company Limited, (2012) 6 SCC 421. It commented on Sarla Verma (para 14).
6. On 12.04.2013, a three-Judge Bench decided Rajesh v. Rajbir Singh, (2013) 9 SCC 54. This was after Reshma Kumari (para 26).
7. A three-Judge Bench later decided Munna Lal Jain v. Vipin Kumar Sharma, (2015) 6 SCC 347. It followed Rajesh (paras 27-28).
8. A two-Judge Bench in National Insurance Company Limited v. Pushpa, (2015) 9 SCC 166, noted the split between Reshma Kumari and Rajesh. It referred the matter to a larger Bench (para 1).
9. The matters were placed before this Bench. Special Leave Petition (Civil) No. 25590 of 2014 and the connected matters were decided together (para 1).

Facts

This is a reference. The judgment does not set out the facts of the accident in any one claim. The facts are the history of the conflict.

1. Reshma Kumari and Rajesh were both three-Judge Bench decisions. The Court notes a difference of opinion between them (para 1).
2. A two-Judge Bench in Pushpa thought a larger Bench should give an authoritative answer (para 1).
3. The controversy centres on Sarla Verma, where a two-Judge Bench tried to simplify the determination of claims (para 2).
4. The Reshma Kumari reference judgment noted divergence on computation under Sections 163-A and 166 of the Motor Vehicles Act, 1988 (the Act). It also noted divergence on the method of computing future prospects (para 3).
5. The Reshma Kumari reference judgment framed two common questions (para 4):
   • Should the multiplier in the Second Schedule to the Act be scrupulously applied in all cases?
   • Does the Act give any criterion for the multiplicand (the net yearly loss to dependants), particularly for future prospects?
6. The Court noted the Statement of Objects and Reasons to Act 54 of 1994, which introduced Section 163-A. The reference judgment asked why a claimant under Section 166 should get less than the Second Schedule amount (para 5).
7. Parliament gave no clarification despite recommendations from this Court. The matter was sent to the Chief Justice for a larger Bench (para 6).
8. The three-Judge Bench answered the first question. It approved the Sarla Verma Table of multipliers for death claims under Section 166 (paras 11-12).
9. On future prospects, it approved additions of 50% below 40 years and 30% for 40 to 50 years. It allowed no addition above 50 years. It kept actual income only for the self-employed or those on a fixed salary (para 13).
10. Santosh Devi then said it was extremely difficult to see any rationale for that last rule in Sarla Verma. It applied a 30% increase to the self-employed or those on fixed wages (para 14).
11. Rajesh, decided on 12.04.2013, tried to explain Santosh Devi. It added 50%, 30% and 15% for the self-employed by age band (para 26).
12. Munna Lal Jain followed Rajesh (paras 27-28).
13. Awards on the fixed heads differed across cases (para 48):
    • Santosh Devi: Rs. 5,000 for transport of the body, Rs. 10,000 for funeral expenses and Rs. 10,000 for loss of consortium (a spouse's right to company and care).
    • Sarla Verma: Rs. 5,000 for loss of estate, Rs. 5,000 for funeral expenses and Rs. 10,000 for loss of consortium.
    • Rajesh: Rs. 1,00,000 for loss of consortium, Rs. 25,000 for funeral expenses and Rs. 1,00,000 for loss of care and guidance of minor children.
14. The Second Schedule sums were Rs. 2,000 for funeral expenses, Rs. 5,000 for loss of consortium and Rs. 2,500 for loss of estate. Medical expenses were payable as actually incurred, up to Rs. 15,000 (para 51).

Issues Raised

Issues 1 and 2 are the questions framed in the Reshma Kumari reference (para 4). The others come from the Court's own analysis and conclusions.

1. Should the multiplier specified in the Second Schedule to the Act be scrupulously applied in all cases (para 4)?
2. For the multiplicand, does the Act provide any criterion, particularly for future prospects (para 4)?
3. Where the deceased was self-employed or on a fixed salary without provision for annual increment, what addition should be made for future prospects (para 33)?
4. Was Santosh Devi correct in disagreeing with a coordinate Bench decision (paras 15, 61)?
5. Is Rajesh a binding precedent, given that it was decided without noticing Reshma Kumari (paras 26, 29-30, 61)?
6. Should the Court fix the amounts for the fixed heads of loss of estate, loss of consortium and funeral expenses (paras 48, 52-54)?
7. Should there be an addition for future prospects where the deceased was over 50 years (para 60)?

Arguments Contended

The judgment records the submissions in general terms. It does not name the counsel for each side.

For the insurers

1. A stable permanent job differs from self-employment. Future prospects can reasonably be given only to the legal representatives of a person with a permanent job (para 35).
2. A definite monthly income must be treated differently from the changing income of a self-employed person (para 35).
3. A permanent job has an expected date of superannuation and certainty. The employer is identifiable and free from the vagaries of self-employed persons (para 35).
4. Standardisation is not possible for the self-employed. There are many categories and it is extremely difficult to fit all of them in one compartment (para 35).
5. In some professions, such as surgeons, sports persons, masons and carpenters, adding future prospects would be wholly unacceptable (para 35).
6. The self-employed range from unskilled labourers to skilled persons. Experience brings disparity in income (para 35).
7. The view in Sarla Verma, concurred in by Reshma Kumari, should not be disturbed (para 35).
8. Standardisation grants compensation without any nexus to the actual loss. Even if it is correct, extending it to some self-employed persons is unjustified (para 36).
9. Rajesh is not a precedent and must be overruled. The Sarla Verma method should be accepted (para 36).

For the claimants

1. Stress is laid on the concept of just compensation and what it includes (para 37).
2. On the Davies method, the grant of pecuniary advantage must be part of future pecuniary benefit (para 37).
3. Once standardisation is applied, there can be no discrimination between the salaried and the self-employed (para 37).
4. If evidence is not required in one category, the other category should not need to adduce evidence to establish future prospects (para 37).
5. Reasonable expectation of pecuniary benefit is stressed. The claimants rely on Taff Vale Railway Co. and on the Singapore High Court decision in Nirumalan V Kanapathi Pillay v. Teo Eng Chuan (para 38).
6. The standardisation formula for future income should apply to the self-employed. It would be a justifiable measure for computing loss of dependency (para 38).

Court's Reasoning

Dipak Misra, C.J.I. (for the Constitution Bench)

The judgment is a single opinion. It has 62 numbered paragraphs.

1. Reference. Noted: Reshma Kumari and Rajesh, both three-Judge Bench decisions, appeared to differ. A two-Judge Bench in Pushpa referred the matter to a larger Bench (para 1).
2. Scope. Noted: the Court would travel back over about two decades. It would focus on Sarla Verma, where a two-Judge Bench tried to simplify the determination of claims by setting parameters (para 2).
3. Reshma Kumari reference judgment. Noted: it noted divergence on computation under Sections 163-A and 166. It relied on Sarla Dixit, Abati Bezbaruah, Mallett v. McMonagle (Lord Diplock) and Wells v. Wells. It said future prospects must consider these factors:
   • education of dependants and nature of job;
   • higher private salaries and perks;
   • inflation, which may be relevant, with no hard-and-fast rule.
   It said English decisions on inflation cannot be blindly followed and that law must be laid down in clearer terms (para 3).
4. Questions framed. Noted: two common questions arose, on the Second Schedule multiplier and on criteria for the multiplicand (para 4).
5. Statement of Objects. Noted: Section 163-A gave a predetermined formula that the Statement of Objects called more liberal and rational. The reference judgment saw no logic in a Section 166 claimant getting less than the Second Schedule amount (para 5).
6. Need for larger Bench. Noted: the divergence remained and Parliament gave no clarification, so the matter went to a larger Bench (para 6).
7. Trilok Chandra. Noted: the three-Judge Bench relied on U.P. State Road Transport Corporation v. Trilok Chandra. That case records the following (para 7):
   • Amendment Act 54 of 1994 inserted Sections 163-A and 163-B in Chapter XI.
   • Section 163-A begins with a non obstante clause and provides compensation as per the Second Schedule.
   • The multiplier in the Table runs from 5 to 18 by age group, so the maximum is 18 and not 16 as in Susamma Thomas.
   • The Table has errors. For a 15-year-old with multiplier 15 and multiplicand Rs. 3,000, the total should be Rs. 45,000 but is shown as Rs. 60,000. For multiplier 16 and income Rs. 9,000, the total should be Rs. 1,44,000 but is shown as Rs. 1,71,000.
   • Tribunals and courts cannot go by the ready reckoner. It is only a guide.
   • The multiplier cannot depend only on age. For a bachelor of 45 with parents as dependants, the parents' ages also matter.
   • The multiplier cannot exceed 18. The Tribunal had used 24 and the High Court raised it to 34.
8. Supe Dei. Noted: Supe Dei held that the Second Schedule can be a guideline when compensation is decided under Section 166 (para 8).
9. Other authorities in Reshma Kumari. Noted: the three-Judge Bench also noted Patricia Jean Mahajan, Deepal Girishbhai Soni and Jashuben. It read Sarla Verma as saying that liability and quantum principles differ for Section 163-A and Section 166 claims. The Second Schedule does not apply to Section 166. Sarla Verma also found errors in the Second Schedule multiplier scale (para 9).
10. Sarla Verma multiplier table. Noted: Sarla Verma compared the multipliers in Susamma Thomas, Trilok Chandra and Charlie with the Second Schedule. It held the multiplier in Column (4) applies (para 10):
    • 18 for ages 15 to 20 and 21 to 25.
    • 17 for 26 to 30; 16 for 31 to 35; 15 for 36 to 40; 14 for 41 to 45; 13 for 46 to 50.
    • 11 for 51 to 55; 9 for 56 to 60; 7 for 61 to 65; 5 for 66 to 70.
11. Meaning of just. Noted: Reshma Kumari looked at Section 168 and the word just. It said just compensation is fair, reasonable and equitable by accepted legal standards, and not a forensic lottery. It is not perfect or absolute compensation. It cited Taff Vale Railway Co. v. Jenkins. It said the claimants must establish age, income and number of dependants. The tribunal must then consider additions and deductions to income, deductions for personal living expenses, and the multiplier by age. It fully agreed with Sarla Verma (para 11).
12. Approval of the Table. Noted: Reshma Kumari approved the Sarla Verma Table for Section 166 death claims. For victims up to 15 years, a multiplier of 15 and the Second Schedule assessment (with the Sarla Verma Column (6) correction) apply, whichever section is used. This answered the first question (para 12).
13. Future prospects in Reshma Kumari. Noted: it approved standardisation of future prospects. The addition is 50% of actual salary for a permanent job below 40 years, 30% for 40 to 50 years, and none above 50. Actual salary means salary less tax. For the self-employed or those on a fixed salary without annual increments, actual income at death applies. A departure is justified only in extraordinary circumstances and very exceptional cases. Held: the larger Bench thus concurred with Sarla Verma on future income (para 13).
14. Santosh Devi. Noted: while the reference was pending, Santosh Devi found it difficult to see any rationale for the last part of Sarla Verma para 24. It said the self-employed and those on fixed wages also see rising income. It gave the examples of a tailor, barber, blacksmith, cobbler and mason. It said the addition should be 30% for them (para 14).
15. Disagreement with a coordinate Bench. Held: on close reading, Santosh Devi expressed a different view from Sarla Verma. This is a clear disagreement. It is absolutely impermissible, given the rule of binding precedents (para 15).
16. Binding precedent. Noted: the Court turned to decisions on the concept of binding precedent (para 16).
17. Kalika Kuer. Noted: State of Bihar v. Kalika Kuer held that an earlier decision that seems incorrect still binds a later Bench of coordinate jurisdiction. It is not a reason to call it per incuriam (a decision given without noticing a binding earlier ruling). The later Bench must follow the earlier decision or refer the matter to a larger Bench (para 17).
18. G.L. Batra and Madras Bar Association. Noted: G.L. Batra accepted this principle, relying on Godfrey Philips, Sundarjas Kanyalal Bhatija and Tribhovandas Purshottamdas Thakkar. The Constitution Bench in Madras Bar Association treated the earlier Constitution Bench judgment as binding (para 18).
19. Jaisri Sahu. Noted: Jaisri Sahu v. Rajdewan Dubey said conflicting decisions make the law uncertain. A decision given per incuriam is not binding. The better course is to refer the matter to a Full Bench and not to choose between the conflicting decisions (para 19).
20. Agreement with that view. Held: the Court entirely agreed. Respecting a precedent is the fundamental norm of judicial discipline (para 20).
21. Pradip Chandra Parija. Noted: the Constitution Bench there said a two-Judge Bench should follow a three-Judge decision. If it thinks that decision is so incorrect that it cannot be followed, it should refer the matter to a three-Judge Bench, giving reasons (para 21).
22. Chandra Prakash. Noted: the Constitution Bench there said the doctrine of binding precedent promotes certainty and consistency. Under Raghubir Singh, a Division Bench decision binds a Division Bench of the same or smaller strength (para 22).
23. Concurrence. Noted: Chandra Prakash concurred with Raghubir Singh and Pradip Chandra Parija (para 23).
24. Judicial decorum. Noted: Sandhya Educational Society said judicial discipline is paramount and a coordinate Bench must respect another coordinate Bench. Rattiram v. State of Madhya Pradesh noted Raghubir Singh and Indian Oil Corporation Ltd. v. Municipal Corporation. That case criticised a High Court Division Bench for saying Ratnaprabha Dhanda was not binding on it (para 24).
25. Raghubir Singh. Noted: the judgment reproduces para 28 of Raghubir Singh. A Division Bench pronouncement binds a Division Bench of the same or smaller number of Judges. The decision need not come from a Full Court or Constitution Bench (para 25).
26. Rajesh. Noted: Rajesh was decided on 12.04.2013, after Reshma Kumari. It explained Santosh Devi. It said the increase for the self-employed or those on fixed wages is not always 30% and depends on age. Its paras 8 and 9 said the addition is 50% below 40 years and 30% for 40 to 50 years. They added 15% for 50 to 60 years for the self-employed or those on fixed wages (para 26).
27. Munna Lal Jain. Noted: a three-Judge Bench there said that, without a statutory or straitjacket formula, there are grey areas. It said courts use words such as ordinarily and normally when suggesting a formula (para 27).
28. Munna Lal Jain followed Rajesh. Noted: it followed Rajesh and said that, for the self-employed below 40 years, 50% must be added for future prospects (para 28).
29. Munna Lal Jain criticised. Held: Munna Lal Jain should have followed Reshma Kumari or referred the case to a larger Bench. Reshma Kumari, being earlier, is the binding precedent and not Rajesh (para 29).
30. Rajesh not binding. Held: relying on Sundeep Kumar Bafna, a decision can be per incuriam if its ratio cannot be reconciled with a co-equal or larger Bench decision. Rajesh did not apprise itself of Reshma Kumari and followed Santosh Devi. It is not a binding precedent on a co-equal Bench. A decision is also per incuriam if a statute, rule or regulation was not brought to the court's notice. The discipline of precedent matters because, without it, certainty of law, consistency of rulings and comity of courts would suffer (para 30).
31. Sarla Verma analysed. Noted: Sarla Verma recapitulated the principles on compensation for death. It noted the variation between the Nance and Davies methods and that Susamma Thomas preferred the Davies method. It said tribunals calculating differently on the same facts confuse the common man. It quoted Trilok Chandra on the multiplier method and on the need for a fair amount (para 31).
32. Sarla Verma on future prospects. Noted: Sarla Verma noted that Susamma Thomas raised income by nearly 100%, Sarla Dixit by 50% and Abati Bezbaruah by 7%. It adopted, as a rule of thumb, 50% for a permanent job below 40 years and 30% for 40 to 50 years. It allowed no addition above 50. For the self-employed or those on a fixed salary, it used actual income at death, with departure only in rare and exceptional cases (para 32).
33. The seminal controversy. Noted: the heart of the issue is the addition for future prospects where the deceased was self-employed or on a fixed salary without annual increment. The judgment restates the Sarla Verma rule in this paragraph (para 33).
34. First point. Noted: the Court first took up the straitjacket division between permanent employees in the taxable range and the self-employed or those on a fixed salary (para 34).
35. Insurers' submissions. Noted: the insurers' submissions on stable jobs, uncertainty of self-employed income and lack of standardisation are recorded under Arguments (para 35).
36. Insurers' further submissions. Noted: the insurers said standardisation has no nexus to actual loss and asked that Rajesh be overruled. These are recorded under Arguments (para 36).
37. Claimants' submissions. Noted: the claimants' emphasis on just compensation, the Davies method and equal treatment is recorded under Arguments (para 37).
38. Claimants' further submissions. Noted: the claimants relied on Taff Vale Railway Co. and Nirumalan. They said standardisation should apply to the self-employed (para 38).
39. Deduction for personal expenses. Noted: the Court would clear three aspects, the first being the deduction for personal and living expenses. Sarla Verma paras 30 to 32 say (para 39):
    • For a married deceased, deduct one-third where dependants are 2 to 3, one-fourth for 4 to 6, and one-fifth for more than six.
    • For a bachelor with parents as claimants, deduct 50%. Normally only the mother is a dependant and brothers and sisters are not.
    • Where a bachelor's family is large and dependent, deduct one-third and treat two-thirds as contribution to the family.
40. Multiplier and multiplicand in Reshma Kumari. Noted: Reshma Kumari agreed with the Sarla Verma multiplier and said the Table gives uniformity. It said valuing the dependency is partly arithmetic. The multiplicand is the net annual value of the dependency at the date of death. It is multiplied by the multiplier (para 40).
41. Deductions in Reshma Kumari. Noted: Reshma Kumari reproduced Sarla Verma paras 30 to 32 and approved them. What a man spends only on himself is a living expense. What he spends on others is not. The Sarla Verma standards must ordinarily be followed unless a case for departure is made out (para 41).
42. Reshma Kumari conclusions. Noted: it recorded these conclusions (para 42):
    • 43.1: for Section 166 death claims where the deceased was 15 years or above, use the Sarla Verma Column (4) multiplier with para 42 of that judgment.
    • 43.2: for a deceased up to 15 years, use multiplier 15 and the Second Schedule assessment, corrected as per Column (6).
    • 43.3: for Section 166 claims above 15 years, tribunals need not rely on the Second Schedule.
    • 43.4: follow the steps in para 19 of Sarla Verma.
    • 43.5: for future prospects, follow para 24 of Sarla Verma.
    • 43.6: for personal and living expenses, ordinarily follow Sarla Verma paras 30 to 32.
43. Personal expenses. Held: on deduction for personal and living expenses, tribunals and courts should follow conclusion 43.6 of Reshma Kumari. The Court concurred with that method (para 43).
44. Multiplier. Held: tribunals and courts shall follow Step 2 in para 19 of Sarla Verma read with para 42. The judgment extracts para 42 in full (para 44).
45. Approval in Reshma Kumari. Noted: Reshma Kumari approved this, saying it is high time to move to a standard method for the multiplier, future prospects and personal expenses. The judgment summarises its para in this paragraph (para 45).
46. Multiplicand. Held: the multiplicand must be accepted on the income established by the legal representatives. Future prospects are added as a percentage. Income means actual income less the tax paid. The multiplier is fixed by Sarla Verma, approved in Reshma Kumari (para 46).
47. Why follow this. Held: following this serves justice and avoids unnecessary contests before tribunals and courts (para 47).
48. Fixed heads. Noted: another aspect that caused confusion was loss of estate, loss of consortium and funeral expenses. The amounts differed across Santosh Devi, Sarla Verma and Rajesh, as set out under Facts. Rajesh said a formula on a socio-economic issue must be revisited from time to time. It was moved by inflation, the price index and the concept of loss of consortium. It described consortium as the spouse's right to company, care, help, comfort, guidance, society, solace, affection and sexual relations. It said at least Rs. 1,00,000 should be awarded (para 48).
49. Munna Lal Jain. Noted: Munna Lal Jain did not deal with this. Its notice was confined to the multiplier and the deduction (para 49).
50. Second Schedule defective. Noted: the conventional sums appear in the Second Schedule, which Trilok Chandra found defective. Puttamma v. K.L. Narayana Reddy held that the Second Schedule of 1994 has become redundant, irrational and unworkable (para 50).
51. General damages in the Second Schedule. Noted: the multiplier and multiplicand are settled by earlier judgments. Para 3 of the Second Schedule gives the sums for funeral expenses, loss of consortium, loss of estate and medical expenses (para 51).
52. Not followed. Noted: the Second Schedule has not been followed since Trilok Chandra and has not been amended. Different courts have awarded different amounts. The conventional damage amount needs to be determined. Rajesh granted Rs. 1,00,000 for consortium (para 52).
53. Revisiting practice. Noted: Rajesh revisited the practice of awarding compensation under conventional heads (fixed heads of compensation) (para 53).
54. Amounts fixed. Held: the Court found it difficult to agree with Rajesh on conventional heads. The head of loss of care and guidance for minor children does not exist. Rajesh refers to Santosh Devi but does not seem to follow it. Conventional heads "cannot be determined on percentage basis". They must be quantified with a reasonable foundation. The Court fixed Rs. 15,000 for loss of estate, Rs. 40,000 for loss of consortium and Rs. 15,000 for funeral expenses. The amounts should rise 10% every three years. There has been a thumb rule on this. Without it, determination would be extremely difficult, awards would vary and orders would be unguided. Price index, fall in bank interest and escalation of rates must be noticed. The principle of revisiting the heads is acceptable, but the revisit should not be fact-centric or quantum-centric. Why: the fixed sums bring consistency (para 54).
55. Future prospects. Noted: the Court now turned to adding future prospects to fix the multiplicand (para 55).
56. Santosh Devi and Rajesh. Noted: Santosh Devi did not accept that a self-employed person stays on a fixed salary for life. It noted rising living costs, extra effort and rising private salaries. Rajesh added 15% for a victim between 15 and 60 years who was self-employed or on fixed wages (para 56).
57. Just compensation. Held: just compensation under Section 168 rests on fairness, reasonableness and equitability. It can never be perfect. Legal heirs cannot expect a windfall. The compensation cannot be an apology for compensation or a pittance. The determination must rest on evidence of age and income and the apt multiplier. The Court approved the principle of standardisation. It said "money cannot substitute a life lost". The tribunal's discretion is wide but it must be guided by just compensation. The aim is an acceptable degree of proximity to arithmetical precision. Computation must be pragmatic and close to reality. The Court seeks a balance between a windfall and a pittance. Standardisation gives certainty, stability and consistency, and a specific and certain multiplicand (para 57).
58. The seminal issue. Noted: the seminal issue is future prospects for a deceased who is self-employed or on a fixed salary. Sarla Verma carved out an exception that let claimants bring materials on record. It did not, per se, allow any future prospects for this category (para 58).
59. Self-employed and fixed salary. Held: once standardisation is accepted, there is no rationale not to apply it to the self-employed or those on a fixed salary. Using only actual income at death would be unjust. Price rise affects the self-employed, and they also raise their charges. A degree-test with a percentage is imperative. An addition of 40% of established income is reasonable where the deceased was below 40 years, and 25% where between 40 and 50 years. A permanent job has an acceptable certainty. The self-employed are also hit by price rise and keep trying to raise their income. Private employers compete to raise salaries. Some difference in percentage between the two categories is accepted. Leaving the parties to prove future prospects would be unfair and inequitable. Including future prospects brings the method within just compensation under Section 168. Why: passage of time, changing society, price escalation and the price index (para 59).
60. Above 50 years. Held: a rule of no addition after 50 years is unacceptable, since salary does not remain the same. Judicial notice can be taken that salary does not remain the same, and a permanent job brings enhancement. Sarla Verma had allowed no addition above 50, and Reshma Kumari approved that. Add 15% if the deceased was between 50 and 60 years, and nothing after. For the self-employed or those on a fixed salary, add 10% between 50 and 60 years. The yardstick is fixed for consistency in the approach of tribunals and courts (para 60).
61. Conclusions. Held: the Court recorded eight conclusions. They are set out under Judgement (para 61).
62. Reference answered. Held: the reference is answered accordingly. The matters go before the appropriate Bench (para 62).

Authorities

• Reshma Kumari v. Madan Mohan, (2013) 9 SCC 65 (three Judges). Followed and approved. It is the binding decision on the multiplier, future prospects and deductions (paras 3, 7-13, 40-45).
• Reshma Kumari v. Madan Mohan, (2009) 13 SCC 422 (two Judges). The reference order that noted divergence and sent the questions to a larger Bench (paras 3, 6).
• Rajesh v. Rajbir Singh, (2013) 9 SCC 54. Held not a binding precedent. It was decided without noticing Reshma Kumari. Its fixed-head amounts were not accepted (paras 1, 26, 29-30, 48, 52-54, 56, 61).
• National Insurance Company Limited v. Pushpa, (2015) 9 SCC 166. The referring order (para 1).
• Sarla Verma v. Delhi Transport Corporation, (2009) 6 SCC 121. Approved. Its Table, its steps in para 19, and its paras 24, 30 to 32 and 42 guide the calculation (paras 2, 9-10, 31-33, 39, 44, 58).
• Santosh Devi v. National Insurance Company Limited, (2012) 6 SCC 421. Disagreed with Sarla Verma. The Court said it should have referred the matter to a larger Bench. Its 30% approach was not adopted (paras 14-15, 48, 56, 61).
• Munna Lal Jain v. Vipin Kumar Sharma, (2015) 6 SCC 347. Criticised for following Rajesh (paras 27-29, 49).
• Sarla Dixit v. Balwant Yadav, (1996) 3 SCC 179. Referred to on future prospects; income raised by 50% (paras 3, 32).
• Abati Bezbaruah v. Dy. Director General, Geological Survey of India, (2003) 3 SCC 148. Referred to; income raised by 7% (paras 3, 32).
• Mallett v. McMonagle, 1970 AC 166. Lord Diplock's principle noted in Reshma Kumari (para 3).
• Wells v. Wells, (1999) 1 AC 345. Referred to in Reshma Kumari (para 3).
• Oriental Insurance Co. Ltd. v. Jashuben, (2008) 4 SCC 162. Dearness allowance and perks count in the multiplicand (paras 3, 9).
• U.P. State Road Transport Corporation v. Trilok Chandra, (1996) 4 SCC 362. Second Schedule multiplier and errors noted (paras 7, 10, 31, 50, 52).
• Susamma Thomas, (1994) 2 SCC 176. Multiplier limit and Davies method noted (paras 7, 10, 31-32).
• Supe Dei v. National Insurance Company Limited, (2009) 4 SCC 513. Second Schedule as a guideline for Section 166 (para 8).
• United India Insurance Co. Ltd. v. Patricia Jean Mahajan, (2002) 6 SCC 281. Noted (para 9).
• Deepal Girishbhai Soni v. United India Insurance Co. Ltd., (2004) 5 SCC 385. Noted (para 9).
• New India Assurance Co. Ltd. v. Charlie, (2005) 10 SCC 720. Multiplier compared in Sarla Verma (para 10).
• Taff Vale Railway Co. v. Jenkins, 1913 AC 1. Cited in Reshma Kumari on just compensation; relied on by claimants (paras 11, 38).
• State of Bihar v. Kalika Kuer, (2003) 5 SCC 448. Earlier decision binds; refer, do not call it per incuriam (para 17).
• G.L. Batra v. State of Haryana, (2014) 13 SCC 759. Accepted the principle on precedent (para 18).
• Union of India v. Godfrey Philips India Ltd., (1985) 4 SCC 369. Relied on in G.L. Batra (para 18).
• Sundarjas Kanyalal Bhatija v. Collector, Thane, (1989) 3 SCC 396. Relied on in G.L. Batra (para 18).
• Tribhovandas Purshottamdas Thakkar v. Ratilal Motilal Patel, AIR 1968 SC 372. Relied on in G.L. Batra (para 18).
• Madras Bar Association v. Union of India, (2015) 8 SCC 583. Earlier Constitution Bench judgment treated as binding (para 18).
• Union of India v. Madras Bar Association, (2010) 11 SCC 1. The prior Constitution Bench judgment (para 18).
• Jaisri Sahu v. Rajdewan Dubey, AIR 1962 SC 83. Conflicting decisions; per incuriam; refer to a larger Bench. The Court agreed (paras 19-20).
• Seshamma v. Venkata Narasimharao; Virayya v. Venkata Subbayya; Bilimoria v. Central Bank of India. Discussed inside the Jaisri Sahu passage (para 19).
• Halsbury's Laws of England, 3rd Edn., Vol. 22. Quoted inside Jaisri Sahu on per incuriam (para 19).
• Pradip Chandra Parija v. Pramod Chandra Patnaik, (2002) 1 SCC 1. A Bench should follow a larger Bench or refer (para 21).
• Chandra Prakash v. State of U.P., (2002) 4 SCC 234. Binding precedent promotes certainty (paras 22-23).
• Raghubir Singh, (1989) 2 SCC 754. Division Bench decision binds a Bench of the same or smaller strength (paras 22-25).
• Sandhya Educational Society v. Union of India, (2014) 7 SCC 701. Judicial discipline (para 24).
• Rattiram v. State of Madhya Pradesh, (2012) 4 SCC 516. Effect of a later decision that ignores an earlier one (para 24).
• Indian Oil Corporation Ltd. v. Municipal Corporation, (1995) 4 SCC 96. Quoted in Rattiram (para 24).
• Municipal Corporation, Indore v. Ratnaprabha Dhanda. Quoted inside Indian Oil (para 24).
• Sundeep Kumar Bafna v. State of Maharashtra, (2014) 16 SCC 623. Per incuriam and discipline of precedent (para 30).
• Nance v. British Columbia Electric Railway Co. Ltd., 1951 SC 601 (PC). One method of computing loss (para 31).
• Davies v. Powell Duffryn Associated Collieries Ltd., 1942 AC 601. The other method; Susamma Thomas preferred it (paras 31, 37).
• Nirumalan V Kanapathi Pillay v. Teo Eng Chuan, (2003) 3 SLR (R) 601. Singapore decision relied on by the claimants (para 38).
• Puttamma v. K.L. Narayana Reddy, (2013) 15 SCC 45. Second Schedule is redundant, irrational and unworkable (para 50).

Also cited in footnotes: none. The footnotes give only reporter citations of the cases above.

Provisions

The descriptions below are as used in the judgment.

• Section 163-A, Motor Vehicles Act, 1988. Begins with a non obstante clause and pays compensation as per the Second Schedule. Inserted by Act 54 of 1994 (paras 3, 5, 7, 9).
• Section 163-B. Inserted with Section 163-A in Chapter XI, Insurance of motor vehicles against third-party risks (para 7).
• Section 166. Claim for compensation, as used in the judgment with just compensation and proof of negligence. The Second Schedule does not apply to it in terms (paras 3, 9, 12, 61).
• Section 168. Uses the word just. Compensation must rest on fairness, reasonableness and equitability (paras 11, 57, 59).
• Second Schedule. Table of multipliers and compensation for third-party accident claims. It also has general damages of Rs. 2,000 for funeral expenses, Rs. 5,000 for loss of consortium, Rs. 2,500 for loss of estate and medical expenses up to Rs. 15,000 (paras 7, 51).
• Amendment Act 54 of 1994. Introduced Section 163-A (paras 5, 7).

Judgement

The Court gave one judgment for the Constitution Bench. The reference is answered as follows (paras 61-62):

1. The two-Judge Bench in Santosh Devi should have referred the matter to a larger Bench. It took a different view from Sarla Verma, a decision of a coordinate Bench. As the Court puts it, "a coordinate Bench of the same strength cannot take a contrary view than what has been held by another coordinate Bench" (para 61(i)).
2. Rajesh did not take note of the earlier decision in Reshma Kumari. The decision in Rajesh is not a binding precedent (para 61(ii)).
3. Where the deceased had a permanent job and was below 40 years, add 50% of actual salary for future prospects. Add 30% if the age was 40 to 50 years and 15% if the age was 50 to 60 years. Actual salary means actual salary less tax (para 61(iii)).
4. Where 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". Add 25% for 40 to 50 years and 10% for 50 to 60 years. Established income means income minus the tax component (para 61(iv)).
5. For the multiplicand, the deduction for personal and living expenses follows paras 30 to 32 of Sarla Verma (para 61(v)).
6. The multiplier is chosen from the Table in Sarla Verma read with its para 42 (para 61(vi)).
7. The age of the deceased is the basis for applying the multiplier (para 61(vii)).
8. Reasonable figures on conventional heads are Rs. 15,000 for loss of estate, Rs. 40,000 for loss of consortium and Rs. 15,000 for funeral expenses. These amounts rise at the rate of 10% every three years (para 61(viii)).
9. The reference is answered accordingly. The matters are to be placed before the appropriate Bench (para 62).

The judgment gives no order on costs. It records no lower-court decisions in the individual matters.

Legal Principle / Ratio

Compensation for a death in a motor accident rests on age, income and dependants. Tribunals must use the Sarla Verma multiplier and deductions and must add a standard percentage for future prospects, including for the self-employed and those on a fixed salary. Fixed heads carry fixed sums.

Key holding: "an addition of 40% of the established income should be the warrant where the deceased was below the age of 40 years" (para 61(iv)).

The judgment does not label any part as obiter. The discussion of binding precedent and per incuriam decisions (paras 16-30) is the reasoning behind conclusions 61(i) and 61(ii). The description of just compensation as neither a windfall nor a pittance (para 57) states the aim of the exercise.

Subsequent Treatment

Two later Supreme Court judgments applied the decision. Their text was read from the supplementary files. The points below come only from those files. Later judgments number the paragraphs of Pranay Sethi differently, so only their own paragraph numbers are cited.

United India Insurance Co. Ltd. v. Satinder Kaur @ Satwinder Kaur — Civil Appeal No. 2705 of 2020 (arising out of SLP (Civil) No. 28548 of 2014); Supreme Court of India; S. Abdul Nazeer, Indu Malhotra and Aniruddha Bose, JJ.; 30 June 2020.

• Facts: a labourer working in Doha, Qatar, was killed in a road accident in India in 1998. His widow and three minor children claimed compensation (paras 1-3).
• Multiplier: the Court records that the Constitution Bench in Pranay Sethi affirmed the Sarla Verma chart. It also records that the age of the deceased is the basis for the multiplier (para 8).
• Future prospects: the Court records that the Constitution Bench devised a fixed standard for future prospects (para 8). It applied 30% because the deceased was just over 40 years old (para 9.3). It kept the 50% deduction for personal expenses because he lived abroad (para 9.2).
• Three fixed heads: the Court records that only loss of estate, loss of consortium and funeral expenses are awarded, at Rs. 15,000, Rs. 40,000 and Rs. 15,000. It says these heads are revised every three years at 10% (para 8).
• Extension: the Court awarded spousal consortium and parental consortium to each child. It directed that loss of love and affection be not awarded as a separate head. The amounts follow Pranay Sethi and Magma General, which gave consortium a wider meaning (paras 8, 9.7).
• Result: the Court awarded Rs. 39,65,125, reduced by 50% for contributory negligence (the deceased's own share of blame) to Rs. 19,82,563 (para 10). It directed payment within twelve weeks with interest at 12% a year (paras 12-13). It noted an earlier stay on deposit of Rs. 10 lacs (para 11). It directed that 50% go to the widow and 50% be divided equally among the three children (para 14).

R. Valli v. Tamil Nadu State Transport Corporation Ltd. — Civil Appeal No. 1269 of 2022 (arising out of SLP (Civil) No. 20913 of 2018); Supreme Court of India; Hemant Gupta and V. Ramasubramanian, JJ.; 10 February 2022.

• Facts: a 54-year-old man died when a bus hit his two-wheeler on 22.02.2011. The Tribunal used two multipliers, one up to retirement and one after it (paras 2-4).
• Use of this case: the Court records that Pranay Sethi affirmed Sarla Verma. It quotes the passages of Pranay Sethi on the multiplier, future prospects and the age basis (para 6). It records that the age of the deceased is the basis for the multiplier (para 7). It also notes that Satinder Kaur applied the age of the deceased even for a bachelor (para 10).
• Earlier High Court orders: the Court held that orders supporting a split multiplier came before Pranay Sethi. They can no longer be said to be good law (para 9).
• Result: the split-multiplier method is clearly erroneous and runs counter to Pranay Sethi (para 11). The Court applied multiplier 11 for age 54 and added 15% for future prospects. It awarded Rs. 24,33,064 with interest at 9% and costs throughout (paras 11-14).

Critical Analysis

Analysis based on the judgment text.

• Para 33 restates the Sarla Verma rule differently from paras 13 and 32. Para 33 gives the 50% addition for a permanent job by an age band that begins at 40, while paras 13 and 32 give 50% below 40 years. Para 61 is the operative statement.
• The Court's own figures for the fixed heads have no stated basis. Para 54 says the sums must have a reasonable foundation. The judgment then fixes Rs. 15,000, Rs. 40,000 and Rs. 15,000 without a stated calculation. It cites price index and fall in bank interest only as things the court cannot ignore.
• The 10% rise is fixed by time, not by index. The rise is 10% every three years for the three fixed heads (paras 54, 61(viii)). The judgment does not say how a later court should treat a change in price levels within the three years.
• The reasoning admits a lack of certainty. Para 59 accepts that future prospects for the self-employed cannot be certain. It answers this with a percentage-based degree-test and not with proof in each case.

Significance

• The decision settles the conflict between Reshma Kumari and Rajesh. It makes Reshma Kumari the binding authority (paras 29-30, 61).
• It extends standardised future prospects to the self-employed and those on a fixed salary. Earlier, they were kept at actual income (paras 59-60).
• It fixes the sums for the three fixed heads and provides a 10% rise every three years (para 54).
• It restates the discipline of precedent. A Bench of equal strength must follow an earlier decision or refer the matter to a larger Bench (paras 15-30, 61(i)).
• It aims at certainty and consistency, so that tribunals avoid unnecessary contests (paras 46-47, 57).

Exam-Important Points

• Rule: permanent job: 50% below 40 years, 30% for 40 to 50, 15% for 50 to 60. Self-employed or fixed salary: 40%, 25%, 10%. Income means income less tax (para 61).
• Trap: the percentages for the self-employed are not the Rajesh figures (50%, 30%, 15%) and not the Santosh Devi figure (30%).
• Fixed heads: loss of estate Rs. 15,000; loss of consortium Rs. 40,000; funeral expenses Rs. 15,000. A 10% rise every three years (para 54).
• Multiplier: from the Sarla Verma Table, by the age of the deceased. 18 for 15 to 25 years down to 5 for 66 to 70 years (paras 10, 44, 61).
• Precedent: Santosh Devi should have referred the matter. Rajesh is not binding because it ignored Reshma Kumari (para 61(i)-(ii)).
• Bench: five Judges. Dipak Misra, C.J.I. wrote the only opinion (paras 1-62).
• Not a fact case: the judgment answers a reference and records no accident facts (para 1).
• Loss of care and guidance for minor children: the Court said this head does not exist (para 54).

Prepared from the full text of the judgment. Paragraph numbers follow the official Supreme Court judgment text; law reports may number the same paragraph differently.