# NATIONAL INSURANCE COMPANY LIMITED v. PRANAY SETHI AND ORS

- **Citation:** [2017] 13 S.C.R. 100
- **Court:** Supreme Court of India
- **Decided:** 2017-10-31
- **Case number:** Civil Appeal No.696 l of2015
- **Bench:** Dipak Misra, A. K. Sikri, A. M. Khanwilkar, Dr. D. Y. Cjjandrachud, Ashok Bhushan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/national-insurance-company-limited-v-pranay-sethi-and-ors-31788
- **Pages:** 41

## Headnote

Motor Vehicles Act. 1988
ss. 163-A. 166 and 168 - Computation of compensation -
Determination of multiplicand -Determination of income o_fdeceased
- Determination of reasonable figures on conventional heads - Held:
s. I 68 deals with concept ofjust compensation and the same is to
be decided on the foundation of fairness. reasonableness and
equitabilizv on acceptable legal standard - The determination has
to he on the foundation of evidence as regards the age and income
of deceased and !herea.fier apposite multiplier to be applied -
Formula relating to multiplier would he as indicated in *Sarla Verma
case and approved in **Reshma Kumari case - For grant <![just
compensation principle of standardization is approved so that a
specific and c~rtain multiplicand is determined for applying the
multiplier on the basis of age - The principle would include in its
ambit addition of fi1t11re prospects on the proven income at presenr
- The principle of standardization will also apply to the selfemplo.ved
or a person having.fixed salary. and determination of income would
include fi1ture prospects - While determining income of deceased
having permanμnt Joh. an addition of 50% of actual salary to the
income towards .fi1t11re prospects where the deceased was below age
of 40 years. addi1ion of 30°{, if the age of deceased was between
40 and 50 years and addition of 15% would be made if the deceased
was between the age of 50 to 60 years - If the deceased is selF
employed or on .fixed salary. addition of income towards .fi1ture
prospects would be 40% of income where deceased was he/ow 40
years of age; .P5°~ where deceased was between 40 and 50 years
of age and 10% where the deceased was between 5 0 and 60 years
of age. would he regarded as necessary method of computation -
Conventional and Traditional headv namely loss of estate, loss of
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NATIONAL INSURANCE COMPANY LIMITED v. PRANAY
IOI
SETHI AND ORS.
consortium and funeral expenses cannot be determined on A
percentage basis - Reasonable figures on conventional heads
should be Rs.150001-, Rs.400001- and Rs.150001- respectively to
be enhanced at the rate of 10% in every three years.
Judicial Discipline:
A co-ordinate Bench of the same strength cannot take a
contrary view than what has been held by another co-ordinate Bench
- Earlier decision of co-equal Bench binds the Bench of same
strength - Precedent - Constitution of India - Art. 141.
Judgment:
Judgment per incuriam - A decision or judgment can be per
incuriam any provision in a statute, rule or regulation, which was
not brought to the notice of the court - A judgment can also be per
incuriam if it is not possible to reconcile its ratio with that of a
previously pronounced judgment of a co-equal or a larger Bench.
Answering the referred issues, the Court
HELD : 1.1 In view of the analysis made in *Sar/a Jlerma
case which has been reconsidered in ** Reshma Kumari case, so
far as the guidance provided for appropriate deduction for personal
and living expenses is concerned, the tribunals and courts should
be guided by conclusion 43.6 of ** Reshma Kumari case. The
method provided therein is approved. [Para 43] [131-D-EJ
1.2 So far as the multiplier is concerned, the claims tribunal
and the Courts shall be guided by Step 2 that finds place in
paragraph 19 of *Sar/a Jlerma case read with paragraph 42 of the
said judgment. In Reshma Kumari case, the aforesaid has been
approved. [Paras 44 and 45] [131-E-F; 132-A]
1.3 Insofar as the aforesaid multiplicand/multiplier is
concerned, it has to be accepted on the basis of income established
by the legal representatives of the deceased. Future prospects
are to be added to the sum on the percentage basis and "income"
means actual income less than the tax paid. If the same is
followed, it shall subserve the cause of justice and the
unnecessary contest before the tribunals and the courts would
be avoided. [Paras 46 and 47] [132-F-G]
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[2017] 13 S.C.R.
1.

## Text

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[2017] 13 S.C.R. 100
NATIONAL INSURANCE COMPANY LIMITED
v.
PRANAY SETHI AND ORS.
(Special Leave Petition (Civil) No. 25590of2014)
OCTOBER 31, 2017
(DIPAK MISRA, CJI, A. K. SIKRI, A. M. KHANWILKAR,
DR. D. Y. CJJANDRACHUD AND ASHOK BHUSHAN, JJ.]
Motor Vehicles Act. 1988
ss. 163-A. 166 and 168 - Computation of compensation -
Determination of multiplicand -Determination of income o_fdeceased
- Determination of reasonable figures on conventional heads - Held:
s. I 68 deals with concept ofjust compensation and the same is to
be decided on the foundation of fairness. reasonableness and
equitabilizv on acceptable legal standard - The determination has
to he on the foundation of evidence as regards the age and income
of deceased and !herea.fier apposite multiplier to be applied -
Formula relating to multiplier would he as indicated in *Sarla Verma
case and approved in **Reshma Kumari case - For grant <![just
compensation principle of standardization is approved so that a
specific and c~rtain multiplicand is determined for applying the
multiplier on the basis of age - The principle would include in its
ambit addition of fi1t11re prospects on the proven income at presenr
- The principle of standardization will also apply to the selfemplo.ved
or a person having.fixed salary. and determination of income would
include fi1ture prospects - While determining income of deceased
having permanμnt Joh. an addition of 50% of actual salary to the
income towards .fi1t11re prospects where the deceased was below age
of 40 years. addi1ion of 30°{, if the age of deceased was between
40 and 50 years and addition of 15% would be made if the deceased
was between the age of 50 to 60 years - If the deceased is selF
employed or on .fixed salary. addition of income towards .fi1ture
prospects would be 40% of income where deceased was he/ow 40
years of age; .P5°~ where deceased was between 40 and 50 years
of age and 10% where the deceased was between 5 0 and 60 years
of age. would he regarded as necessary method of computation -
Conventional and Traditional headv namely loss of estate, loss of
100
NATIONAL INSURANCE COMPANY LIMITED v. PRANAY
IOI
SETHI AND ORS.
consortium and funeral expenses cannot be determined on A
percentage basis - Reasonable figures on conventional heads
should be Rs.150001-, Rs.400001- and Rs.150001- respectively to
be enhanced at the rate of 10% in every three years.
Judicial Discipline:
A co-ordinate Bench of the same strength cannot take a
contrary view than what has been held by another co-ordinate Bench
- Earlier decision of co-equal Bench binds the Bench of same
strength - Precedent - Constitution of India - Art. 141.
Judgment:
Judgment per incuriam - A decision or judgment can be per
incuriam any provision in a statute, rule or regulation, which was
not brought to the notice of the court - A judgment can also be per
incuriam if it is not possible to reconcile its ratio with that of a
previously pronounced judgment of a co-equal or a larger Bench.
Answering the referred issues, the Court
HELD : 1.1 In view of the analysis made in *Sar/a Jlerma
case which has been reconsidered in ** Reshma Kumari case, so
far as the guidance provided for appropriate deduction for personal
and living expenses is concerned, the tribunals and courts should
be guided by conclusion 43.6 of ** Reshma Kumari case. The
method provided therein is approved. [Para 43] [131-D-EJ
1.2 So far as the multiplier is concerned, the claims tribunal
and the Courts shall be guided by Step 2 that finds place in
paragraph 19 of *Sar/a Jlerma case read with paragraph 42 of the
said judgment. In Reshma Kumari case, the aforesaid has been
approved. [Paras 44 and 45] [131-E-F; 132-A]
1.3 Insofar as the aforesaid multiplicand/multiplier is
concerned, it has to be accepted on the basis of income established
by the legal representatives of the deceased. Future prospects
are to be added to the sum on the percentage basis and "income"
means actual income less than the tax paid. If the same is
followed, it shall subserve the cause of justice and the
unnecessary contest before the tribunals and the courts would
be avoided. [Paras 46 and 47] [132-F-G]
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1.4 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 tlje 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 nonviolation of the principle of equitability. Though the discretion
vested in the tribunal is quite wide, yet it is obligatory on the part
of the tribunal to be guided by the expression, that is, "just
compensation". The determination has to be on the foundation
of evidence brought on record as regards the age and income of
the deceased and thereafter the apposite multiplier to be applied.
The formula relating to multiplier has been clearly stated in *Sar/a
Vt!rma case and it has been approved in ** Reshma Kumari case.
The age and income, have to be established by adducing evidence.
The tribunal and the Courts have to bear in mind that the basic
principle lies in pragmatic computation which is in proximity to
reality. It is a well accepted norm that money cannot substitute a
life lost but an effort has to be made for grant of just compensation
having uniformi~ of approach. There has to be a balance between
the two extremes, that is, a windfall and the pittance, a bonanza
and the modicum. In such an adjudication, the duty of the tribunal
and the Courts is difficult and hence, an endeavour has been made
by this Court for standardization which in its ambit includes
addition of future prospects on the proven income at present. As
far as future prospects are concerned, there has been
standardization keeping in view the principle of certainty, stability
and consistency. The principle of "standardization" is approved
so that a specific and certain multiplicand is determined for
applying the multiplier on the basis of age. [Para 57] (136-B-H]
1.5 In re~pect of fixation of future prospects in cases of
deceased who is self-employed or on a fixed salary, *Sarlu Verma
case has carved out an exception permitting the claimants to bring
materials on record to get the benefit of addition of future
prospects. It has not, per se, allowed any future prospects in
NATIONAL INSURANCE COMPANY LIMITED v. PRANAY
103
SETHI AND ORS.
respect of the said category. When the Court accepts the principle A
of standardization, there is really no rationale not to apply the
said principle to the self-employed or a person who is on a fixed
salary. 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
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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. [Paras 58 and 59) (137A-D)
1.6 In case of a deceased who had held a permanent job
with inbuilt grant of annual increment, there is an acceptable
certainty. But to state that the legal representatives of a deceased
who was on a fixed salary would not be entitled to the benefit of
future prospects for the purpose of computation of compensation
would be inapposite. It is because the criterion of distinction
between the two in that event would be certainty on the one hand
and staticness on the other. One may perceive that the
comparative measure is certainty on the one hand and uncertainty
on the other but such a perception is fallacious. It is because the
price rise does affect a self-employed person; and that apart there
is always an incessant effort to enhance one's income for
sustenance. 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 ch>inge with the time. Though it may
seem appropriate that there cannot be certainty in addition of
future prospects to the existing income unlike in the case of a
person having a permanent job, yet the said perception does not
really deserve acceptance. There can be some degree of
difference as regards the percentage that is meant for or applied
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(2017] 13 S.C.R.
to in respect of the legal representatives who claim on behalf of
the deceased who had a permanent job than a person who is selfemployed or on a fixed salary. But not to apply the principle of
standardization on the foundation of perceived lack of certainty
would tantamoulnt to remaining oblivious to the marrows of ground
reality. And, therefore, degree-test is imperative. Unless the
degree-test is applied and I eft to the parties to adduce evidence
to establish, it would be unfair and inequitable. The degree-test
has to have th1e inbuilt concept of percentage. Taking into
consideration the cumulative factors, namely, passage of time,
the changing society, escalation of price, the change in price index,
the human attitμde to follow a particular pattern of life, etc., an
addition of 40% of the established income of the deceased towards
future prospects where the deceased was below 40 years and an
addition of 25% where the deceased was between the age of 40
to 50 years would be reasonable. [Para 59] (137-D-H; 138-A-D]
I. 7 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. [Para 61] [139-C]
1.8 Where the age of the deceased is more than 50 years,
as per *Sar/a Verma case, it is appropriate not to add any amount
and the same bas been approved in **Reshma Kumari case.
Judicial notice can be taken of the fact that salary does not remain
the same. When a person is in a permanent job, there is always
an enhancement due to one reason or the other. To lay down as
a thumb rule that there will be no addition after 50 years will be
an unacceptable concept. There should be an addition of 15% if
the deceased is between the age of 50 to 60 years and there
should be no addition thereafter. Similarly, in case of selfemployed or petson on fixed salary, the addition shoulu be 10%
between the age of 50 to 60 years. The aforesaid yardstick has
been fixed so that there can be consistency in the approach by
the tribunals and the courts. [Para 60] [138-E-F]
NATIONAL INSURANCE COMPANY LIMJTED v. PRANAY
105
SETHI AND ORS.
1.9 The conventional sum has been provided in the Second A
Schedule of the Act. Para 3 of the Second Schedule also provides
for General Damages in case of death. The said Schedule has
been found to be defective as stated by the Court in #Trilok
Chandra case. The Second Schedule has not been followed starting
from the decision in #Trilok Chandra case and there has been no
amendment to the same. The conventional damage amount needs
to be appositely deteri,nincd. In different cases different amounts
have been granted. The Court does not agree with the view
expressed in ##Rajesh case. It has granted Rs. 25,000/- towards
funeral expenses, Rs. 1,00,000/- loss of consortium and
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Rs. 1,00,000/- towards loss of care and guidance for minor
children. The head relating to loss of care and minor children
does not exist. Though ##Rajesh case refers to ###Santosh Devi
case, it does not seem to follow the same. The conventional and
traditional heads, cannot be determined on percentage basis
because that would not be an acceptable criterion. Unlike D
determination of income, the said heads have to be quantified.
Any quantification must have a reasonable foundation. There can
be no dispute over the fact that price index, fall in bank interest,
escalation of rates in many a field have to be noticed. The court
cannot remain oblivious to the same. There has been a thumb
rule in this aspect. Otherwise, there will be extreme difficulty in
determination of the same and unless the thumb rule is applied,
there will be immense variation lacking any kind of consistency
as a consequence of which, the orders passed by the tribunals
and courts are likely to be unguided. Therefore, the High Court
thinks it seemly to fix reasonable sums. 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 principle ofrevisiting the said heads
is an acceptable principle. But the revisit should not be factcentric or quantum-centric. The amount which the Court has
quantified should be enhanced on percentage basis in every three
years and the enhancement should be at the rate of 10% in a
span of three years. This will bring in consistency in respect of
those heads. [Paras 50, 51, 52 and 54] [134-B, D; 135-B-F]
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[ 2017] 13 S.C.R.
**Reshmr:i Kumari and Ors. v. !vfadan Mohan and Anr.
(2013) 9 SCC 65 : [2013) 2 SCR 706; *Sar/a Verma
and Ors. v. Delhi Transport Corporation and Anr
(2009) 6 SCC 121 : [2009) 5 SCR 1098 - affirmed.
##Rajes~ and Ors. v. Rajbir Singh and Ors. (2013) 9
SCC 54 : [2013) 5 SCR 961; ###Santosh Devi v.
National Insurance Company Limited and Ors. (2012)
6 SCC 421 : [2012] 3 SCR 1178 - not a binding
precedent.
National Insurance Company Limited v. Pushpa and Ors.
(2015) 9 SCC 166 ; Reshma Kumari and Ors. v .• Hadan
Mohan and Anr. (2009) 13 SCC 422 : [2009) 11 SCR
305 ; Sar/a Dix it v. Ba/want Yadav (1996) 3 SCC
179: )19!16] 3 SCR 30 ; Abati Bezbaruah v. Dy. Director
General. Geological Survey of India (2003) 3 SCC
148 : [2003] 1 SCR 1229 ; #U.P State Road Transport
Corporation and Ors. v. Trilok Chandra and Ors.
(1996) 4 SCC 362 : [1996] 2 Suppl. SCR 443 ; Supe
Dei v. National Insurance Company Limited (2009) 4
SCC 513 : )2002] 3 SCR 1176 ; United India Insurance
Co. Ltd v. Patricia Jean Mahajan (2002) 6 SCC 281 :
[2005] 2 SCR 1173 ; Deepal Girishbhai Soni v. United
India lnsltrance Co. Ltd. (2004) 5 SCC 385 ; New India
Assurance Co. Ltd v. Charlie and Anr. (2005) 10 SCC
720 : [2005] 2 SCR 1173 ; Munna Lal Jain and Anr. v.
Vipin Kumar Sharma and Ors. (2015) 6 SCC 347 :
[2015] 'I SCR 207 ; Puttamma and Ors. v. KL.
Narayana Reddy and Anr. (2013) 15 SCC 45 : [2013]
16 SCR 831 - referred to.
Mal/ell v. McMonagle 1970 AC 166 : (1969) 2 WLR
767 ; We/Is v. Wells (1999) 1 AC 345 ; Taff Vale Railway
Co. v. Jenkins 1913 AC 1 : (1911-13) All ER Rep 160
(HL) ; Nance v. British Columbia Electric Railway Co.
Ltd. 1951 SC 601 : (1951) 2 All ER 448 (PC) ;
Davies tt. Powell Dz~ffryn Associated Collieries Ltd.
1942 AC 601 : (1942) 1 All ER 657 (HL) ; Nirumalan
V Kanapathi Pillay v. Teo Eng Chuan (2003) 3 SLR
(R) 601- referred to.
NATIONAL INSURANCE COMPANY LIMITED v. PRANAY
107
SETHI AND ORS.
2.1 Discipline demanded by a precedent or the A
disqualification or diminution of a decision on the application of
the per i11curiam rule is of great importance, since without it,
certainty of law, consistency of rulings and comity of courts would
become a costly casualty. A decision or judgment can be per
i11curiam any provision in a statute, rule or regulation, which was
B
not brought to the notice of the court. A decision or judgment
can also be per incuriam if it is not possible to reconcile its ratio
with that of a previously pronounced judgment of a co-equal or
larger Bench. There can be no scintilla of doubt that an earlier
decision of co-equal Bench binds the Bench of same strength.
Though the judgment in ##Rajesh's case was delivered on a later
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date, it had not apprised itself of the law stated in **Resh ma
Kumari case but had been guided by ###Sa11tosh Devi case. It is
not a binding precedent on the co-equal Bench. [Para 30)
[124-G; 125-A-C)
2.2 The two-Judge Bench in ###Sa11tosh Devi case should
D
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 *Sar/a
Verma case a judgment by a co-ordinate Bench. It is because a
co-ordinate Bench of the same strength cannot take a contrary
· view than what has been held by another co-ordinate Bench. As
##Rajesh case has not taken note of the decision in ** Reshma
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Kumari case which was delivered at earlier point of time, the
decision in Rajesh case is not a binding precedent. [Para 61)
[138-H; 139-A-B]
Pradip Chandra Pariia and others " Pramod Chandra
Patnaik and others (2002) 1 SCC 1 : [2001) 5 Suppl.
SCR 460 ; Chandra Prakash and Ors. " State of UP
and Anr. (2002) 4 SCC 234 : [2002) 2 SCR 913 -
followed.
State of Bihar v. Kalika Kuer alias Kalika Singh and
Ors. (2003) 5 SCC 448 : [2003) 3 SCR 919; G.L. Batra
v. State of Hmyana and Ors. (2014) 13 SCC 759 :
[2013] 10 SCR 431 ; Union of India v. Godfrey Philips
India Ltd. (1985) 4 SCC 369: [1985) 3 Suppl. SCR
123 ; Sundarjas Kanya/al Bhatija v. Collectm; ThanP
Maharashtra (1989) 3 SCC 396 : r1oo
0
•
405 ; Trihhovandas P1m·h~•
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SUPRlEME COURT REPORTS
[2017] 13 S.C.R.
Motilal Patel AIR I968 SC 372 ; Madras Bar
Association v. Union of India and Anr. (2015) 8 SCC
583 : [2015] 6 SCR 638 ; Union of India v. Madras
Bar Association (2010) II SCC 1 : [20101 6 SCR
857 ; Jaisri Sahu v. Rajdewan Dubey AIR 1962 SC
83 : (1962) SCR 553; Sandhya Educational Society
and Anr. v. Union of India and Ors. (2014) 7 SCC
701 ; Rattiram and Orsi v. State of Madhya Pradesh
(2012) 4 SCC 516 : [20121 3 SCR 496 ; Indian Oil
Corporation Ltd. v. Municipal Corporation (I995) 4
SCC 96: [199513 SCR 246; Sundeep Kumar Bafna
v. State of Maharashtra and Anr. (2014) I6 SCC 623 :
[2014] 4 SCR 486 - relied on.
Case Law Reference
[2013] 2 SCR 706
affirmed
Para 1
D
[20131 5 SCR 961
(2015) 9 sec 166
[20091 5 SCR 1098
[2009] 11 SCR 305
not a binding precedent Para 1
referred to
affirmed
referred to
referred to
Para 1
Para2
Para3
Para3
Para3
Para 7
Paras
Para9
Para9
Para 10
E
[19961 3 SCR 30
[20031 1 SCR 1229
referred to
[19961 2 Suppl. SCR 443
referred to
[20021 3 SCR 1176
referred to
referred to
referred to
referred to
F
[2005] 2 SCR 1173
c2004) 5 sec 385
[20051 2 SCR 1173
[20I2j 3 SCR 1178
not a binding precedent Para 14
G
[2003) 3 SCR 919
[2013] 10 SCR 431
relied on
relied on
!19851 3 Supl'I. SCR 123 relied on
[198913 SCR 405
relied on
H
Para 17
Para 18
Para 18
Para IS
NATIONAL INSURANCE COMPANY LIMITED v. PRANAY
SETHI AND ORS.
AIR 1968 SC 372
relied on
Para 18
[2015) 6 SCR 638
relied on
Para 18
[2010) 6 SCR 857
relied on
Para 18
[1962] SCR 553
relied on
Para 19
[2001) 5 Suppl. SCR 460
followed
Para 21
[2002) 2 SCR 913
followed
Para 22
(2014) 1 sec 101
relied on
Para 24
[2012] 3 SCR 496
relied on
Para 24
(1995) 3 SCR 246
relied on
Para24
[2015) 7 SCR 207
referred to
Para 27
[2014) 4 SCR 486
relied on
Para 30
[2013) 16 SCR 831
referred to
Para 50
CIVIL APPELLATE JURISDICTION: Special Leave Petition
(Civil) No. 25590 of2014.
From the impugned Judgment and Order dated 30.05.2013 of the
High Court of Punjab and Haryana at Chandigarh in F.A.O No.5011 of
2011
WITH
Civil Appeal No.696 l of2015, Civil Appeal Nos.8770, 8045-8046
of2016 and CivilAppealNos.12046, 8611 of2017
109
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Special Leave Pettion (Civil) No.16735 of 2014, Special Leave
Petition (Civil) Nos.163, 3387, 7076, 32484, 16056, 22134, 24163, 26263,
25818,26227,29520-29521,35679,34237,36072,35371,34395,36027,
F
37617 of2016 and Special Leave Petition (Civil) Nos.8306, 7241, 17436
of2017.
Rakesh Kumar Khanna, Joy Basu, Basava Prabhu Patil, Jayant
Bhushan,A.N. Krishna Swamy, Basva Prabhu Patil, Sr. Advs., Dr. Rashmi
Khanna, Ms. Seema Rao, Mohit Nagar, Ms.Meera Agarwal, Ramesh
G
Chandra Mishra, Rajeev Maheshwaranand Roy, Abhinav, P. Srinivasan,
Sameer Nandwani, Ashish Virmani, Pallav Mongia, Akshay Abrol,
C.S. Ashri, Aru K. Sinha, Sumit Sinha, Sinha Shrey Nikhilesh, Harsh
Bhati, Ms.Arona Mehta, Ms. Manjeet Chawla, Nakul Dewan,
Pradhuman Gohil, Vikash Singh, Ms.Taruna Singh Gohil, Himanshu
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[2017] 13 S.C.R.
Chaubey, Ms.Ishita Singh, Ms.Neelu Mohan, Anuj Bhandari, Ms.Disha
Bhandari, S.K. SiajJa, R.S. Singh, R.L. Saini, Ms.Seema Kashyap, Bipin
Behari Sinha, Raj!'sh Kumar Gupta, C. N. Sreekumar, T.G. Narayanan
Nair, K.N. Madh4soodhanan, Aroon Menon, Virash B. Saharya, M.J.
Paul, Rishi Malhotra, Sudhir Naagar, Mohit Singh, Abhishek Kr. Gola,
Prashant Khatana, S.N. Parasar, Ms.Binisa Mohanty, Mritunjay Kumar
Sinha, R.Ayyam Ferumal, Ms.Enakshi Mukhopadhyay, Pramod Dayal,
Ms.Sangeeta Kumar, Sharan Thakur, Siddrath Thakur, Vijay Kumar
Pradeshi, Ajay Si!ilgh, Sushi! Balwada, Ms.Prerna Mehta, Puneet Jain,
Ms. Christi Jain, Abhinav Gupta, Ms.Priya Jain, Ms. Yashika Sharma,
Harsh Jain, Ms.Pratibha Jain, Munish Kumar Garg, Nitin Kumar Gupta,
Ms.Manju Sharma Jaitley, Ms.Garima Prashad, Ashok Kumar Sharma,
Deepak Jyoti Ghildiyal, Ms.Bandana Singh, Vikalp Mudgal, P.K. Seth,
Ms.Manjeet Chawla, R. Nedumaran, Ms.Aswathi MK., V. Vasudevan,
P.R. Kovilan, Mrs,Geetha Kovilan, Mukesh Kumar Sharma, Ms.Shweta
Shukla, Sanchar Apand, Apoorv Singhal, Anant K. Vats ya, Raj iv Singhal,
Devendra Singh, Amit Kumar Singh, Mrs. K. Enatoli Serna, Amith J.,
S.P. Jain, Himanshu Gambhir, Ms. Amandeep Kaur, Ranbir Singh Yadav,
Ms.Anzu K. Varkey, Ms. Meenakashi Midha, Kapil, Midha, Chandra
Shekhar Ashri, J.P:N. Shahi, Dr. (Mrs.) Vipin Gupta, Dr. Monika Gussain,
Ranjan Dwivedi, Bharat Bhushan, Nikhil Jain, Ashok Kumar Singh,Ansar
Ahmad Chaudhary, Ravinder Kumar Yadav, Birendra Kumar Srivastava,
Kaushal Yadav, Debasis Misra, Viresh B. Saharya, Ms.Geetha Kovilan,
Navdeep Singh, Ravi Mehrotra, R.K. Sinha, Dharmendra Kumar Sinha,
Ashwani Kumar Dubey, Amo! Sinha, Rahul Kochar, Advs for the
appearing parties.
The Judgrnent of the Court was delivered by
DIPAK MISRA, CJI. I. Perceiving cleavage ofopinion between
Reshma Kumari and others v. Madan Mohan and another1 and
Rajesh and others v. Rajbir Singh and others', both three-Judge Bench
decisions, a two-Judge Bench of this Court in National Insurance
Company Limited v. Pushpa and others' thought it appropriate to
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refer the matter to a larger Bench for an authoritative pronouncement,
and that is how the matters have been placed before us.
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1 (2013) 9 sec 65
2 (2013) 9 sec 54
'(2015) 9 sec 166
NATIONAL INSURANCE COMPANY LIMITED v. PRANAY
SETHI AND ORS. [DIPAK MISRA, CJI]
2. In the course of deliberation we will be required to travel
backwards covering a span of two decades and three years and may be
slightly more and thereafter focus on the axis of the controversy, that is,
the decision in Sar/a Verma and others v. Delhi Transport Corporation
and another' wherein the two-Judge Bench made a sanguine endeavour
to simplify the determination of claims by specifying certain parameters.
3. Before we penetrate into the past, it is necessary to note what
has been stated in Reshma Kumari (supra) and Rajesh 's case. In
Reshma Kumari the three-Judge Bench was answering the reference
made in Reshma Kumari and others v. Madan Mohan and another'.
The reference judgment noted divergence of opinion with regard to the
computation under Sections 163-A and 166 of the Motor Vehicles Act,
1988 (for brevity, "the Act") and the methodology for computation of
future prospects. Dealing with determination of future prospects, the
Court referred to the decisions in Sar/a Dixit v. Ba/want Yadav', Abati
Bezbaruah v. Dy. Director General, Geological Survey of India'
111
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and the principle stated by Lord Diplock in Mallett v. McMonagle' and
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further referring to the statement of law in Wells v. Wells' observed:-
"46. In the Indian context several other factors should be taken
into consideration including education of the dependants and the
nature of job. In the wake of changed societal conditions and
global scenario, future prospects may have to be taken into
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consideration not only having regard to the status of the employee,
his educational qualification; his past performance but also other
relevant factors, namely, the higher salaries and perks which are
being offered by the private companies these days. In fact while
determining the multiplicand this Court in Oriental Insurance
Co. Ltd. v. Jashuben 10 held that even dearness allowance and
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perks with regard thereto from which the family would have
derived monthly benefit, must be taken into consideration.
4(2009) 6 sec 121
'(2009) 13 sec 422
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• (1996) 3 sec 179
'c2003) 3 sec 148
' 1970 AC 166: (1969) 2 WLR 767
'(1999) 1 AC 345
"(2008) 4 sec 162
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4 7. One of the incidental issues which has also to be taken into
consideration is inflation. ls the practice of taking inflation into
consideration wholly incorrect? Unfortunately, unlike other
developed countries in India there has been no scientific study. It
is expected that with the rising inflation the rate of interest would
go up. In India it does not happen. It, therefore, may be a relevant
factor which may be taken into consideration for determining the
actual ground reality. No hard-and-fast rule, however, can be laid
down therefor.
48. A large number of English decisions have been placed before
us by Mr Nanda to contend that inflation may not be taken into
consideration at all. While the reasonings adopted by the English
courts and its decisions may not be of much dispute, we cannot
blindly follow the same ignoring ground realities.
49. We have noticed the precedents operating in the field as also
the rival contentions raised before us by the learned counsel for
the parties with a view to show that law is required to be laid
down in clearer terms."
4. In the said case, the Court considered the common questions
that arose for consideration. They are:-
"( 1) Whether the multiplier specified in the Second Schedule
appended to the Act should be scrupulously applied in all the cases?
(2) Whether for determination of the multiplicand, the Act provides
for any criterion, particularly as regards determination of future
prospects?"
5. Analyzing further the rationale in determining the laws under
Sections 163-A and 166, the Court had stated thus:-
"58. We are not unmindful of the Statement of Objects and
Reasons tp Act 54 of 1994 for introducing Section 163-A so as to
provide for a new predetermined formula for payment of
compensation to road accident victims on the basis of age/income,
which is more liberal and rational. That may be so, but it defies
logic as !ID why in a similar situation, the injured claimant or his
heirs/leg~! representatives, in the case of death, on proof of
negligence on the part of the driver ofa motor vehicle would get
a lesser amount than the one specified in the Second Schedule.
The courts, in our opinion, should also bear that factor in mind."
NATIONAL INSURANCE COMPANY LIMITED v. PRANAY
113
SETHI AND ORS. [DIPAK MISRA, CJI]
6. Noticing the divergence of opinion and absence of any A
clarification from Parliament despite the recommendations by this Court,
it was thought appropriate that the controversy should be decided by the
larger Bench and accordingly it directed to place the matter before
Hon 'ble the Chief Justice oflndia for appropriate orders for constituting
a larger Bench.
7. The three-Judge Bench answering the reference referred to
the Scheme under Sections 163-A and 166 of the Act and took note of
the view expressed by this Court in U.P. State Road Transport
Corporation and others v. Trilok Chandra and others 11 , wherein the
Court had stated:-
"17. The situation has now undergone a change with the enactment
of the Motor Vehicles Act, 1988, as amended by Amendment Act
54 of 1994. The most important change introduced by the
amendment insofar as it relates to determination of compensation
B
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is the insertion of Sections 163-A and 163-B ln Chapter XI entitled
'Insurance of motor vehicles against third-party risks'. Section D
163-A begins with a non obstante clause and provides for payment
of compensation, as indicated in the Second Schedule, to the legal
representatives of the deceased or injured, as the case may be.
Now if we turn to the Second Schedule, we find a Table fixing the
mode of calculation of compensation for third-party accident injury
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claims arising out of fatal accidents. The first column gives the
age group of the victims of accident, the second column indicates
the multiplier and the subsequent horizontal figures indicate the
quantum of compensation in thousand payable to the heirs of the
deceased victim. According to this Table the multiplier varies from
5 to 18 depending on the age group to which the victim belonged.
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Thus, under this Schedule the maximum multiplier can be up to 18
and not 16 as was held in Susamma Thomas 12 case.
18. We must at once point out that the calculation of compensation
and the amount worked out in the Schedule suffer from several
defects. For example, in Item 1 for a victim aged 15 years, the
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multiplier is shown to be 15 years and the multiplicand is shown to
be Rs 3000. The total should be 3000 x 15 = 45,000 but the same
is worked out at Rs 60,000. Similarly, in the second item the
" (1996) 4 sec 362
12 (1994) 2 sec I 76
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multiplier is 16 and the annual income is Rs 9000; the total should
have been Rs 1,44,000 but is shown to be Rs 1, 71,000. To put it
briefly, th¢ Table abounds in such mistakes. Neither the tribunals
nor the courts can go by the ready reckoner. It can only be used
as a guide. Besides. the selection of multiplier cannot in all cases
be solely glependent on the age of the deceased. For example, if
the decea~ed, a bachelor, dies at the age of 45 and his dependants
are his parents. age of the parents would also be relevant in the
choice of the multiplier. But these mistakes are limited to actual
calculations only and not in respect of other items. What we
propose to emphasise is that the multiplier cannot exceed 18 years'
purchase factor. This is the improvement over the earlier position
that ordin?rily it should not exceed 16. We thought it necessary to
state the correct legal position as courts and tribunals are using
higher multiplier as in the present case where the Tribunal used
the multill'lier of 24 which the High Court raised to 34. thereby
showing lack of awareness of the background of the multiplier
system in Davies case."
[Underlining is ours]
8. The Court also referred to Supe Dei I'. National Insurance
Company Limi~ed'
3 wherein it bas been opined that the position is well
E
settled that the Second Schedule under Section 163-A to the Act which
gives the amount of compensation to be determined for the purpose of
claim under the section can be taken as a guideline while determining
the compensation under Section 166 of the Act.
9. After so observing, the Court also noted the authorities in United
F India Insurance Co. Ltd v. Patricia Jean Mahajan", Deepal
Girishbhai Soni I', United India Insurance Co. Ltd.", and Jashuben
(supra). It is p~rceivable from the pronouncement by the three-Judge
Bench that it has referred to Sar/a Verma and observed that the said
decision reiterated what had been stated in earlier decisions that the
principles rel&ting to determination of liability and quantum of
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compensation were different for claims made under Section 163-A and
claims made ullder Section 166. It was further observed that Section
163-A and the Second Schedule in terms did not apply to determination
"(2009) 4 sec 513
"(2002) 6 sec 2s1
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"(2004J 5 sec 385
NATIONAL INSURANCE COMPANY LIMITED v. PRANAY
115
SETHI AND ORS. [DIPAK MISRA, CJI]
of compensation in applications under Section 166. In Sar/a Vi!rma
A
(supra), as has been noticed further in Reshma E.umari (supra), the
Court found discrepancies/errors in 1he multiplier scale given in the
Second Schedule Table and also observed th~t application of Table may
result in incongruities.
10. The three-Judge Bench further apprised itself that in Sar/a
Vi!rma (supra) the Court had undertaken the exercise of comparing the
multiplier indicated in Susamma Thomas (supra), Trilok Chandra
(supra), and New India Assurance Co. Ltd v. Charlie and another16
for claims under Section 166 of the Act with the multiplier mentioned in
the Second Schedule for claims under Section 163-A and compared the
fonnula and held that the multiplier shall be used in a given case in the
following manner:-
B
c
"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, Trilok Chandra and Charlie), which starts with
an operative multiplier of I 8 (for the age groups of 15 to 20 and
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21 to 25 years); reduced by one unit for every five years, that is,
M-17 for 26 to 30 years, M-16 for 31to35 years, M-15 for36 to
40 years, M-14 for 41to45 years, and M-13 for46 to 50 years,
then reduced by two units for every five years, that is, M-11 for
51to55 years, M-9 for 56 to 60 years, M-7 for61to65 years and
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M-5 for 66 to 70 years."
11. After elaborately analyzing what has been stated in Sar/a
Verma (supra), the three-Judge Bench referred to the language employed
in Section 168 of the Act which uses the expression "just". Elucidating
the said term, the Court held that it conveys that the amount so dctennined
F
is fair, reasonable and equitable by accepted legal standard and not on
forensic lottery. The Court observed') ust compensation" does not mean
"perfect" or "absolute compensation" and the concept of just
compensation principle requires examination of the particular situation
obtaining uniquely in an individual case. In that context, it referred to
Taff Vale Railway Co. v. Jenkins" and held:-
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"36. In Sar/a ~rma, this Court has endeavoured to simplify the
otherwise complex exercise ofassessment ofloss of dependency
" (2005) 10 sec no
" 1913 AC 1 : (1911-13) All ER Rep 160 (HL)
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and determination of compensation in a claim made under Section
166. It has been rightly stated in Sar/a Verma that the claimants
in case of death claim for the purposes of compensation must
establish (a) age of the deceased; (b} income of the deceased:
and (c) \he number of dependants. To arrive at the loss of
dependency, the Tribunal must consider (i} additions/deductions
to be made for arriving at the income; (ii) the deductions to be
made towards the personal living expenses of the deceased; and
(iii) the multiplier to be applied with reference to the age of the
deceased. We do not think it is necessary for us to revisit the law
!_m the point as we are in full agreement with the view in Sar/a
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Verma."
D
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[Emphasis is added]
12. And further:-
"!! is high time that we move to a standard method of selection of
multiplier, income for future prospects and deduction for personal
and living expenses. The courts in some of the overseas
jurisdictions have made this advance. It is for these reasons, we
think we must approve the Table in Sar/a Verma for the selection
of multiplier in claim applications made under Section 166 in the
cases of death. We do accordingly. If for the selection of multiplier,
Column (4) of the Table in Sar/a Verma is followed, there is no
likelihoqid ofthe claimants who have chosen to apply under Section
166 being awarded lesser amount on proof of negligence on the
part of the driver of the motor vehicle than those who prefer to
apply under Section 163-A. As regards the cases where the age
of the vjctimhappcns to be up to 15 years, we arc of the considered
opinion that in such cases irrespective of Section 163-A or Section
166 under which the claim for compensation has been made,
multiplier of 15 and the assessment as indicated in the Second
Schedule subject to correction as pointed out in Column (6) of the
Table in Sar/a Verma should be followed. This is to ensure that
the claimants in such cases are not awarded lesser amount when
the application is made under Section 166 of the 198 8 Act. In all
other cases of death where the application has been made under
Sectioljl 166. the multiplier as indicated in Column (4} of the Table
in Sar/a Verma should be followed."
NATIONAL INSURANCE COMPANY LIMITED v. PRANAY
117
SETHI AND ORS. [DIPAK MISRA, CJI]
This is how the first question the Court had posed stood answered.
A
13. With regard to the addition of income for future prospects,
this Court in Reshma Kumari (supra) adverted to Para 24 of the Sar/a
Verma s case and held:-
"39. The standardisation of addition to income for future prospects
shall help in achieving certainty in arriving at appropriate
compensation. We approve the method that an addition of 50% of
actual salary be made to the actual salary income of the deceased
towards future prospects where the deceased had a permanent
job and was below 40 years and the addition should be only 30%
B
c
if the age of the deceased was 40 to 50 years and no addition
should be made where the age of the deceased is more than 50
years. Where the annual income is in the taxable range, the actual
salary shall mean actual salary less tax. In the cases where the
deceased was self-employed or was on a fixed salary without
provision for annual increments, the actual income at the time of
death without any addition to income for future prospects will be
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appropriate. A departure from the above principle can only be
justified in extraordinary circumstances and very exceptional
cases."
The aforesaid analysis vividly exposits that standardization of
addition to income for future prospects is helpful in achieving certainty
E
in arriving at appropriate compensation. Thus, the larger Bench has
concurred with the view expressed by Sar/a Verma (supra) as per the
determination of future income.
14. It is interesting to note here that while the reference was
pending, the judgment in Santosh Devi v. National Insurance Company
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Limited and others" was delivered by a two-Judge Bench which
commented on the principle stated in Sar/a Verma. It said:-
"14. We find it extremely difficult to fathom any rationale for the
observation made in para 24 of the judgment in Sar/a Verma case
that where the deceased was self-employed or was on a fixed
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salary without provision for annual increment, etc. the courts will
usually take only the actual income at the time of death and a
departure from this rule should be made only in rare and
exceptional cases involving special circumstances. In our view, it
'"(2012)6SCC421
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will be 11a!ve to say that the wages or total emoluments/income of
a person who is self-employed or who is employed on a fixed
salary without provision for annual increment, etc. would remain
the same throughout his life.
15. The rise in the cost of living affects everyone across the board.
It does not make any distinction between rich and poor.