SUPREME COURT OF INDIA

(Constitution Bench)

Before :- Dipak Misra, CJI, A.K. Sikri, A.M.

Khanwilkar, Dr. D.Y. Chandrachud and Ashok

Bhushan, JJ.

Special Leave Petition (Civil) No. 25590 of 2014. D/d. 31.10.2017.

National Insurance Company Limited -Petitioners

Versus

Pranay Sethi and Ors. – Respondents

With special Leave Petition (Civil) No. 16735 of 2014, Civil Appeal No. 6961 of 2015, Special

 

Leave Petition (Civil) No. 163 of 2016, Special

Leave Petition (Civil) No. 3387of 2016,

Special Leave Petition (Civil) No. 7076 of

2016, Special Leave Petition (Civil) No. 32844

of 2016, Special Leave Petition (Civil) No.

16056 of 2016, Special Leave Petition (Civil)

No. 22134 of 2016, Special Leave Petition

(Civil) No. 24163 of 2016, Civil Appeal No.

8770 of 2016, Civil Appeal Nos. 8045-8046 of

2016, Special Leave Petition (Civil) No. 26263 of 2016, Special Leave Petition (Civil) No.

25818 of 2016, Special Leave Petition (Civil)

No, 26227 of 2016, Special Leave Petition

(Civil) Nos. 29520-29521 of 2016, Special

Leave Petition (Civil) No. 35679 of 2016,

Special Leave Petition (Civil) No. 34237 of

2016,  Special Leave Petition (Civil) No. 36072
of 2016, Special Leave Petition (Civil) No.

35371 of 2016, Special Leave Petition (Civil) No. 34395 of 2016, Special Leave Petition (Civil) No. 36027 of 2016, Special Leave Petition (Civil) No. 8306 of 2017, Special Leave Petition (Civil) No. 37617 of 2016, Special Leave Petition (Civil) No. 7241 of

2017,  Civil Appeal No.12046 of 2017, Special
Leave Petition (Civil) No. 17436 of 2017,

Civil Appeal No. 8611 of 2017. For the Petitioners :- Abhishek Gola, Akshat Agarwal, Viresh B. Saharya, T. G. Narayanan Nair, K.N. Madhusoodhan, M.J. Paul, Baij Nath Patel, Ms. Sweta, Ms. Romila, Dr. Meera Agar­wal, S.N. Parashar, Ms. Binisa Mohanty, Ms. Vimla Sinha, Mritunjay Kumar Sinha, Rishi Mal-hotra, Rajeev Maheshwaranand Roy, P. Srini-vasan, S.K. Sinha, Rajesh Kumar Gupta, Ms. Manjeet Chawla, Abhishek Gola, Sudhir Naagar, Mohit Singh, Bhanu Sanoriya, Pramod Dayal, R. Ayyam Pentmal, Ms. Sangeeta Kumar, Nakul De-wan, Pradhuman Gohil, Vikash Singh, Ms. Taruna Singh Gohil, Himanshu Chaubey, Zain Maqbool, Ms. Neelu Mohan, Ajay Singh, Sandiv Kalia, Dr. Sushil Balwada, Arun K. Sinha, Advo­cates.

For the Respondents :- Jayant Bhushan, Sr. Adv., Dr. (Mrs.) Vipin Gupta, Ranjan Dwivedi, Bharat Bhushan, Ms. Christi Jain, Priyal Jain, Shailen-dra Sharma, Ms. Pratibha Jain, Amit Kumar Singh, Mrs. K. Enatoli Sema, Nikhil Jain, Ashok Kumar Singh, Ansar Ahmad Chaudhary, Sanchar Anand, Devendra Singh, Ravinder Ku­mar Yadav, Vinay Mohan Sharma, Ms. Arti Anupriya, Ms. Preeti Singh, Ashok Kumar Sharma, Mukesh Kumar Sharma, Ms. Shweta Shukla, Ranbir Singh Yadav, Ms. Prerna Mehta, Ms. Garima Prashad, Birendra Kumar Srivas-

tava, Kaushal Yadav, Debasis Misra, Viresh B. Saharya, Mrs. Geetha Kovilan, Ashish Virmani, Pallav Mongia, Akshay Abraol, Abhinav Goyal, Sabyasachi Bhaduri, Pankaj singh, C.S. Ashita, Ms. Meenakshi Midha, Kapil Midha, Chander Shekhar Ashri, Dharmendra Kumar Sinha, Ms. Amrreeta Swaarup, Ms. Manjeet Chawla, Ash-wani Kumar Dubey, Prashant Kr. Umrao, Advo­cates.

IMPORTANT

Future prospect to to be added on stand­ardised percentage for Self employed, Fixed salary person even after the age of 50.

FINDINGS OF COURT

In view of the aforesaid analysis, we proceed to record our 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 15,000-,  40,000- and 15,000- respec­tively. The aforesaid amounts should be en­hanced at the rate of 10% in every three years.

  1. Motor Vehicles Act, 1988, Sections 163-A
    and 166 – Compensation for “Future Pros­
    pects” – Future prospects are to be added
    to the sum on the percentage basis and “in­
    come” means actual income less than the
    tax paid at multiplier fixed in Sarla Verma
    which has been approved in Reshma Ku-
    mari. [Para 46]
  2. Motor Vehicles Act, 1988, Sections 163-A
    and 166 – Compensation for loss of estate,
    loss of consortium and funeral expenses –
    Reasonable figures fixed on conventional
    heads, namely, loss of estate, loss of consor­
    tium and funeral expenses to be ? 15,000/-,
    ? 40,0007- and ? 15,000/- respectively –
    Amount should be enhanced on percentage
    basis in every three years and the enhance­
    ment should be at the rate of 10% in a span
    of three years in order to bring in consis­
    tency in respect of those heads. [Para 48]
  3. Motor Vehicles Act, 1988, Sections 163-A
    and 166 – “just compensation” – Future
    prospects – Principle of “standardization”
    approved so that a specific and certain
    multiplicand is determined for applying
    the multiplier on the basis of age – Not to
    add any amount with regard to future
    prospects to the income for the purpose of
    determination of multiplicand would be
    unjust – Determination of income while
    computing compensation has to include fu­
    ture prospects so that the method will come
    within the ambit and sweep of just compen­
    sation as postulated under Section 168 of
    the Act. [Para 57]
  4. Motor Vehicles Act, 1988, Sections 163-A
    and 166 – Future Prospects – Deceased self-
    employed or on a fixed salary – No distinc-
    ion – No rationale not to apply “stand­

ardization” principle to the self-employed or a person on a fixed salary – Taking into
consideration the cumulative factors, namely, passage of time, the changing soci­
ety, escalation of price, the change in price index, the human attitude to follow a par­
ticular pattern of life, etc., an addition of 40% of the established income of the de­
ceased towards future prospects and where the deceased was below 40 years an addi­
tion of 25% where the deceased was be­ tween the age of 40 to 50 years would be
reasonable.                                     [Para 59]

  1. Motor Vehicles Act, 1988, Sections 163-A
    and 166 – “Future Prospects” – Where the
    age of the deceased is more than 50 years –
    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 – In case of self-employed or per­
    son on fixed salary, the addition should be
    10% between the age of 50 to 60 years –
    Yardstick has been fixed so that there can
    be consistency in the approach by the tri­
    bunals and the courts. [Para 60]
  2. Motor Vehicles Act, 1988, Sections 163-A
    and 166 – Compensation – “Future Pros­
    pects” – Constitution bench recorded fol­
    lowing 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 con­
sortium and funeral expenses should be ?
15,000/-, ? 40,0007- and ? 15,0007- respec­
tively – The aforesaid amounts should be
enhanced at the rate of 10% in every
three years.                                [Para 61]

Cases referred :-

Abati Bezbaruah v. Dy. Director General, Geological

Survey of India, (2003) 3 SCC 148. Bilimoria v. Central Bank of India. Chandra Prakash v. State of U.P., 2002(2) S.C.T. 776

: (2002) 4 SCC 234. Davies v. Powell Duffryn Associated Collieries Ltd.,

1942 AC 601 : (1942) 1 All ER 657 (HL). Deepal Girishbhai Soni v. United India Insurance

Co. Ltd., 2004(2) R.C.R.(Civil) 466 : (2004) 5

SCC 385. G.L. Batra v. State of Haryana, 2013(4) S.C.T. 776 :

(2014) 13 SCC 759.

Indian Oil Corporation Ltd. v. Municipal Corpora­tion, (1995) 4 SCC 96.

Jaisri Sahu v. Rajdewan Dubey, AIR 1962 SC 83. Madras Bar Association v. Union of India, (2015) 8

SCC 583. Mallett v. McMonagle, 1970 AC 166 : (1969) 2

 

WLR767.

Municipal Corpn., Indore v. Ratnaprabha Dhanda.

Munna Lai Jain v. Vipin Kumar Sharma, 2015(3) R.C.R.(Civil) 447 : 2015(3) Recent Apex Judg­ments (R.A.J.) 459 : (2015) 6 SCC 347.

Nance v. British Columbia Electric Railway Co. Ltd., 1951 SC 601 : (1951) 2 All ER448 (PC).

National Insurance Company Limited v. Pushpa, (2015) 9 SCC 166.

New India Assurance Co. Ltd v, Charlie, 2005(2) R.C.R.(Civil) 550 : (2005) 10 SCC 720.

Niramalan V. Kanapathi Pillay v. Teo Eng Chuan, (2003) 3 SLR (R) 601.

Oriental Insurance Co. Ltd. v. Jashuben, 2008(2) R.C.R.(Civil) 91 : 2008(2) Recent Apex Judgments (R.A.J.) 62 : (2008) 4 SCC 162.

Pradip Chandra Parija v. Pramod Chandra Patnaik, 2002(1) R.C.R.(Civil) 551 : (2002) 1 SCC 1.

Puttamma v. K.L. Narayana Reddy, 2014(1) R.C.R.(Civil) 443 : 2014(1) Recent Apex Judg­ments (R. A. J.) 1 : (2013) 15 SCC 45.

Raghubir Singh, 1989(1) R.R.R. 552 : (1989) 2 SCC 754.

Rajesh v. Rajbir Singh, 2013(3) R.C.R.(Civil) 170: 2013(3) Recent Apex Judgments (R.A.J.) 659 :

(2013)   9 SCC 54.

Rattiram v. State of Madhya Pradesh, 2012(2) R.C.R.(Criminal) 471 : 2012(2) Recent Apex Judg­ments (R.A.J.) 99 : (2012) 4 SCC 516.

Reshma Kumari v. Madan Mohan, 2009(3) R.C.R.(Civil) 908 :2009(4) Recent Apex Judg­ments (R.A.J.) 664: (2009) 13 SCC 422.

Reshma Kumari v. Madan Mohan, 2013(2) R.C.R.(Civil) 660 : 2013(2) Recent Apex Judg­ments (R.A.J.) 664: (2013) 9 SCC 65.

Sandhya Educational Society v. Union of India,

(2014)   7 SCC 701.

Santosh Devi v. National Insurance Company Lim­ited, 2012(2) R.C.R.(Civil) 882 :2012(2) Recent Apex Judgments (R.A.J.) 505 : (2012) 6 SCC 421.

Sarla Dixit v. Balwant Yadav, 1996(2) R.R.R. 90: (1996) 3 SCC 179.

Sarla Vertna v. Delhi Transport Corporation, 2009(3) R.C.R.(Civil) 77 : 2009(3) Recent Apex Judgments (R.A.J.) 373 : (2009) 6 SCC 121.

Seshamma v. Venkata Narasimharao.

State of Bihar v. Kalika Kuer alias Kalika Singh, (2003) 5 SCC 448.

Sundarjas Kanyalal Bhatija v. Collector, Thane, Ma­harashtra, 1989(2) R.R.R. 111: (1989) 3 SCC 396.

Sundeep Kumar Bafna v. State of Maharashtra, 2014(2) R.C.R.(Criminal) 416 : 2014(2) Recent Apex Judgments (R.A.J.) 572: (2014) 16 SCC 623.

Supe Dei v. National Insurance Company Limited, (2009) 4 SCC 513.

Susamma Thomas, (1994) 2 SCC 176.

Taff Vale Railway Co. v. Jenkins, 1913 AC 1: (1911-13)AllERRepl60(HL).

Tribhovandas Purshottamdas Thakkar v. Ratilal Mo-tilal Patel, AIR 1968 SC 372.

U.P. State Road Transport Corporation v. Trilok Chandra, 1996(2) R.R.R. 718 : (1996) 4 SCC 362.

Union of India v. Godfrey Philips India Ltd., (1985) 4 SCC 369.

Union of India v. Madras Bar Association, (2010) 11 SCC1.

United India Insurance Co. Ltd v. Patricia Jean Maha-jan, 2002(3) R.C.R.(Civil) 534: (2002) 6 SCC 281. Virayya v. Venkata Subbayya. Wells v. Wells, (1999) 1 AC 345.

JUDGMENT

Dipak Misra, CJI. – Perceiving cleavage of opinion between Reshma Kumari and others v. Madan Mohan and another, 2013(2) R.C.R.(Civil) 660: 2013(2) Recent Apex Judg­ments (R.A.J.) 664 : (2013) 9 SCC 65 and Ra­jesh and others v. Rajbir Singh and others, 2013(3) R.C.R.(Civil) 170 : 2013(3) Recem Apex Judgments (R.A.J.) 659 : (2013) 9 SCC 54, both three-Judge Bench decisions, a two-Judge Bench of this Court mNationallnsuranct Company Limited v. Pushpa and others, (2015; 9 SCC 166 thought it appropriate to refer the mat­ter to a larger Bench for an authoritative pro nounceraent, and that is how the matters havt been placed before us.

  1. In the course of deliberation we will be re
    quired to travel backwards covering a span o
    two decades and three years and may be slight);
    more and thereafter focus on the axis of the con
    troversy, that is, the decision in Sarla Verma am
    others v. Delhi Transport Corporation and an
    other, 2009(3) R.C.R.(Civil) 77 : 2009(3) Re
    cent Apex Judgments (R.A.J.) 373 : (2009) i
    SCC 121 wherein the two- Judge Bench made
    sanguine endeavour to simplify the determina
    tion of claims by specifying certain parameters
  2. Before we penetrate into the past, it is neces
    sary to note what has been stated in Reshma Ku
    mari (supra) and Rajesh’s case. In Reshma Kv
    mari the three-Judge Bench was answering th
    reference made in Reshma Kumari and others i
    Madan Mohan    and    another,    2009(1
    C.R. (Civil) 908:2009(4) Recent Apex Judf.
    ments (R.A.J.) 664 : (2009) 13 SCC 422. Th
    reference judgment noted divergence of opinio
    with regard to the computation under Sectior

 

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 Sarla Dixit v. Balwant Yadav, 1996(2) R.R.R. 90 : (1996) 3 SCC179, AbatiBezbaruah v. Dy. Director General, Geo­logical Survey of India, (2003) 3 SCC148 and the principle stated by Lord Diplock in Mallett v. McMonagle, 1970 AC 166: (1969) 2 WLR 767 and further referring to the statement of law in Wells v. Wells, (1999) 1 AC 345 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 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, 2008(2) R.C.R. (Civil) 91 : 2008(2) Recent Apex Judgments (R.A.J.) 62: (2008) 4 SCC 162 held that even dearness allowance and perks with regard thereto from which the family would have derived monthly benefit, must be taken into consideration.

  1. One of the incidental issues which has also
    to be taken into consideration is inflation. Is
    the practice of taking inflation into consid­
    eration wholly incorrect? Unfortunately,
    unlike other developed countries in India
    there has been no scientific study. It is ex­
    pected that with the rising inflation the rate
    of interest would go up. In India it does not
    It, therefore, may be a relevant fac­
    tor which may be taken into consideration
    for determining the actual ground reality.
    No hard-and-fast rule, however, can be laid
    down therefor.
  2. A large number of English decisions have
    been placed before us by Mr Nanda to con­
    tend that inflation may not be taken into con­
    sideration at all. While the reasonings
    adopted by the English courts and its deci­
    sions may not be of much dispute, we cannot
    blindly follow the same ignoring ground re­
  1. We have noticed the precedents operating m 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.”
  2. In the said case, the Court considered the com­
    mon 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?”

  1. 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 to 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 to why in a similar situ­ation, the injured claimant or his heirs/legal representatives, in the case of death, on proof of negligence on the part of the driver of a 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.”

  1. Noticing the divergence of opinion and ab­
    sence of any clarification from Parliament de­
    spite 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 of India for appropriate orders for
    constituting a larger Bench.
  2. The three-Judge Bench answering the refer­
    ence referred to the Scheme under Sections 163-
    A and 166 of the Act and took note of the view
    expressed by this Court in P. State Road
    Transport Corporation and others v. Trilok
    Chandra and others, 1996(2) R.R.R. 718 :
    (1996) 4 SCC362, 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 in-

 

traduced by the amendment insofar as it re­lates to determination of compensation is the insertion of Sections 163-A and 163-B in Chapter XI entitled ‘Insurance of motor ve­hicles against third-party risks’. Section 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 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. Thus, under this Schedule the maximum multiplier can be up to 18 and not 16 as was held in Susamma Thomas, (1994) 2 SCC176 case.

  1. 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 multiplier is shown to be 15 years and the multiplicand is shown to be ? 3000. The total should be 3000 W 15 = 45,000 but the same is worked out at ? 60,000. Similarly, in the second item the multiplier is 16 and the annual income is ? 9000; the total should have been ? 1,44,000 but is shown to be ? 1,71,000. To put it briefly, the 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 dependent on the age of the deceased. For example, if the deceased, 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 ordinarily 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 multiplier 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]

  1. The Court also referred to Supe Dei v. Na­
    tional Insurance Company Limited, (2009) 4
    SCC 513 wherein it has been opined that the po­
    sition is well settled that the Second Schedule un­
    der 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 compensa­
    tion under Section 166 of the Act.
  2. After so observing, the Court also noted the
    authorities in United India Insurance Co. Ltd v.
    Patricia Jean Mahajan, 2002(3) R.C.R.(Civil)
    534: (2002) 6SCC281,Deepal GirishbhaiSoni
    United India Insurance Co. Ltd., 2004(2)
    R.C.R.(Civil) 466 : (2004) 5 SCC 385, and
    Jashuben (supra). It is perceivable from the pro­
    nouncement by the three-Judge Bench that it has
    referred to Sarla Verma and observed that the
    said decision reiterated what had been stated in
    earlier decisions that the principles relating to de­
    termination of liability and quantum of compen­
    sation were different for claims made under Sec­
    tion 163-A and claims made under Section 166.
    It was further observed that Section 163-A and
    the Second Schedule in terms did not apply to de­
    termination of compensation in applications un­
    der Section 166. In Sarla Verma (supra), as has
    been noticed further in Reshma Kumari (supra),
    the Court found discrepancies/errors in the mul­
    tiplier scale given in the Second Schedule Table
    and also observed that application of Table may
    result in incongruities.
  3. The three-Judge Bench further apprised itself
    that in Sarla Verma (supra) the Court had under­
    taken the exercise of comparing the multiplier in­
    dicated in Susamma Thomas (supra), Trilok
    Chandra (supra), and New India Assurance Co.
    Ltd v. Charlie and another, 2005(2) R.C.R.
    (Civil) 550: (2005) 10 SCC 720
    for claims under
    Section 166 of the Act with the multiplier men­
    tioned in the Second Schedule for claims under
    Section 163-A and compared the formula and
    held that the multiplier shall be used in a given
    case in the following manner:-

 

“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 18 (for the age groups of 15 to 20 and 21 to 25 years); reduced by one unit for every five years, that is, M-17 for 26 to 30 years, M-16 for 31 to 3 5 years, M-15 for 36 to 40 years, M-14 for 41 to 45 years, and M-13 for 46 to 50 years, then reduced by two units for every five years, that is, M-l 1 for 51 to 55 years, M-9 for 56 to 60 years, M-7 for 61 to 65 years and M-5 for 66 to 70 years.”

  1. After elaborately analyzing what has been
    stated in Sarla Verma (supra), the three-Judge
    Bench referred to the language employed in Sec­
    tion 168 of the Act which uses the expression
    “just”. Elucidating the said term, the Court held
    that it conveys that the amount so determined is
    fair, reasonable and equitable by accepted legal
    standard and not on forensic lottery. The Court
    observed “just 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,
    1913 AC 1: (1911-13) All ER Rep 160 (HL) and
    held:-

“36. In Sarla Verma, this Court has endeavoured to simplify the otherwise complex exercise of assessment of loss of dependency and de­termination of compensation in a claim made under Section 166. It has been rightly stated in Sarla 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) the 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 on the point as we are in full agreement with the view in Sarla Verma.”

[Emphasis is added]

  1. Andfurther:-

“It 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 Sarla 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 Sarla Verma is followed, there is no likelihood of the 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 victim happens to be up to 15 years, we are 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 Sarla 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 1988 Act. In all other cases of death where the ap­plication has been made under Section 166, the multiplier as indicated in Column (4) of the Table in Sarla Verma should be fol­lowed.”

This is how the first question the Court had posed stood answered.

  1. With regard to the addition of income for fu­ture prospects, this Court in Reshma Kumari (su­pra) adverted to Para 24 of the Sarla 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% 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 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 in ar­riving at appropriate compensation. Thus, the larger Bench has concurred with the view ex­pressed by Sarla Verma (supra) as per the deter­mination of future income.

  1. It is interesting to note here that while the ref­erence was pending, the judgment in Santosh Devi v. National Insurance Company Limited and others, 2012(2) R.C.R.(Civil) 882:2012(2) Recent Apex Judgments (R.A.J.) 505: (2012) 6 SCC 421 was delivered by a two-Judge Bench which commented on the principle stated in Sarla Verma. It said:-

” 14. We find it extremely difficult to fathom any rationale for the observation made in para 24 of the judgment in Sarla Verma case that where the deceased was self-employed or was on a fixed 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 will be naive 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.

  1. The rise in the cost of living affects everyone across the board. It does not make any dis­tinction between rich and poor. As a matter of fact, the effect of rise in prices which di­rectly impacts the cost of living is minimal on the rich and maximum on those who are self-employed or who get fixed in­come/emoluments. They are the worst af­fected people. Therefore, they put in extra efforts to generate additional income neces­sary for sustaining their families.
  1. The salaries of those employed under the
    Central and State Governments and their
    agencies/instrumentalities have been re­
    vised from time to time to provide a cushion
    against the rising prices and provisions have
    been made for providing security to the
    families of the deceased employees. The
    salaries of those employed in private sectors
    have also increased manifold. Till about two
    decades ago, nobody could have imagined
    that salary of Class IV employee of the Gov­
    ernment would be in five figures and total
    emoluments of those in higher echelons of
    service will cross the figure of rupees one
  2. Although the wages/income of those em­
    ployed in unorganised sectors has not regis­
    tered a corresponding increase and has not
    kept pace with the increase in the salaries of
    the government employees and those em­
    ployed in private sectors, but it cannot be de­
    nied that there has been incremental en­
    hancement in the income of those who are
    self-employed and even those engaged on
    daily basis, monthly basis or even seasonal
    We can take judicial notice of the fact
    that with a view to meet the challenges
    posed by high cost of living, the persons fall­
    ing in the latter category periodically in­
    crease the cost of their labour. In this con­
    text, it may be useful to give an example of a
    tailor who earns his livelihood by stitching
    clothes. If the cost of living increases and the
    prices of essentials go up, it is but natural for
    him to increase the cost of his labour. So will
    be the cases of ordinary skilled and un­
    skilled labour like barber, blacksmith, cob­
    bler, mason, etc.
  3. Therefore, we do not think that while mak­
    ing the observations in the last three lines of
    para 24 of Sarla Verma judgment, the Court
    had intended to lay down an absolute rule
    that there will be no addition in the income
    of a person who is self-employed or who is
    paid fixed wages. Rather, it would be rea­
    sonable to say that a person who is self-em­
    ployed or is engaged on fixed wages will
    also get 30% increase in his total income
    over a period of time and if he/she becomes
    victim of an accident then the same formula
    deserves to be applied for calculating the
    amount of compensation.”
  4. The aforesaid analysis in Santosh Devi (su-

 

pra) may prima facie show that the two-Judge Bench has distinguished the observation made in Sarla Verma’s case but on a studied scrutiny, it becomes clear that it has really expressed a dif­ferent view than what has been laid down in Sarla Verma (supra). If we permit ourselves to say so, the different view has been expressed in a dis­tinctive tone, for the two-Judge Bench had stated that it was extremely difficult to fathom any ra­tionale for the observations made in para 24 of the judgment in Sarla Verma’s case in respect of self-employed or a person on fixed salary with­out provision for annual increment, etc. This is a clear disagreement with the earlier view, and we have no hesitation in saying that it is absolutely impermissible keeping in view the concept of binding precedents.

  1. Presently, we may refer to certain decisions
    which deal with the concept of binding prece­
  2. In State of Bihar v. Kalika Kuer alias Kalika
    Singh and others, (2003) 5SCC448,
    it has been
    held:-

” 10…. an earlier decision may seem to be incor­rect to a Bench of a coordinate jurisdiction considering the question later, on the ground that a possible aspect of the matter was not considered or not raised before the court or more aspects should have been gone into by the court deciding the matter earlier but it would not be a reason to say that the decision was rendered per incuriam and liable to be ignored. The earlier judgment may seem to be not correct yet it will have the binding ef­fect on the later Bench of coordinate juris­diction. …”

The Court has further ruled:-

“10. … Easy course of saying that earlier deci­sion was rendered per incuriam is not per­missible and the matter will have to be re­solved only in two ways – either to follow the earlier decision or refer the matter to a larger Bench to examine the issue, in case it is felt that earlier decision is not correct on mer­its.”

  1. In G.L. Batra v. State ofHaryana and oth­
    ers, 2013(4) S. C. T. 776: (2014) 13 SCC 759, the
    Court has accepted the said principle on the basis
    of judgments of this Court rendered in Union of
    India v. Godfrey Philips India Ltd., (1985) 4
    SCC 369, Sundarjas Kanyalal Bhatija v. Col­
    lector, Thane, Maharashtra, 1989(2) R.R.R.

111: (1989) 3 SCC396 and Tribhovandas Pur-shottamdas Thakkar v. Ratllal Motilal Patel, AIR 1968 SC372. It may be noted here that the Constitution Bench in Madras Bar Association v. Union of India and another, (2015) 8 SCC 583 has clearly stated that the prior Constitution Bench judgment in Union of India v. Madras Bar Association, (2010) 11 SCC 1 is a binding precedent. Be it clarified, the issues that were put to rest in the earlier Constitution Bench judgment were treated as precedents by latter Constitution Bench.

  1. In this regard, we may refer to a passage from Jaisri Sahu v. Rajdewan Dubey, AIR 1962 SC 83:-

“11. Law will be bereft of all its utility if it should be thrown into a state of uncertainty by reason of conflicting decisions, and it is therefore desirable that in case of difference of opinion, the question should be authorita­tively settled. It sometimes happens that an earlier decision given by a Bench is not brought to the notice of a Bench hearing the same question, and a contrary decision is given without reference to the earlier deci­sion. The question has also been discussed as to the correct procedure to be followed when two such conflicting decisions are placed before a later Bench. The practice in the Patna High Court appears to be that in those cases, the earlier decision is followed and not the later. In England the practice is, as noticed in the judgment in Seshamma v. Venkata Narasimharao that the decision of a court of appeal is considered as a general rule to be binding on it. There are exceptions to it, and one of them is thus stated in Halsbury’s Laws of England, 3rd Edn., Vol. 22, para 1687, pp. 799-800:

“The court is not bound to follow a decision of its own if given per incuriam. A decision is given per incuriam when the court has acted in ignorance of a previous decision of its own or of a Court of a co-ordinate jurisdic­tion which covered the case before it, or when it has acted in ignorance of a decision of the House of Lords. In the former case it must decide which decision to follow, and in the latter it is bound by the decision of the House of Lords.”

In Virayya v. Venkata Subbayya it has been held by the Andhra High Court that under

 

the circumstances aforesaid the Bench is free to adopt that view which is in accord­ance with justice and legal principles after taking into consideration the views ex­pressed in the two conflicting Benches, vide also the decision of the Nagpur High Court in Bilimoria v. Central Bank of India. The better course would be for the Bench hear­ing the case to refer the matter to a Full Bench in view of the conflicting authorities without taking upon itself to decide whether it should follow the one Bench decision or the other. We have no doubt that when such situations arise, the Bench hearing cases would refer the matter for the decision of a Full Court.”

  1. Though the aforesaid was articulated in the
    context of the High Court, yet this Court has been
    following the same as is revealed from the afor-
    estated pronouncements including that of the
    Constitution Bench and, therefore, we entirely
    agree with the said view because it is the precise
    warrant of respecting a precedent which is the
    fundamental norm of judicial discipline.
  2. In the context, we may fruitfully note what
    has been stated in Pradip Chandra Parija and
    others v. Pramod Chandra Patnaik and others,
    2002(1) C.R.(Civil) 551: (2002) 1 SCC1. In
    the said case, the Constitution Bench was dealing
    with a situation where the two-Judge Bench dis­
    agreeing with the three-Judge Bench decision di­
    rected the matter to be placed before a larger
    Bench of five Judges of this Court. In that sce­
    nario, the Constitution Bench stated:-

“6…. In our view, judicial discipline and propri­ety demands that a Bench of two learned Judges should follow a decision of a Bench of three learned Judges. But if a Bench of two learned Judges concludes that an earlier judgment of three learned Judges is so very incorrect that in no circumstances can it be followed, the proper course for it to adopt is to refer the matter before it to a Bench of three learned Judges setting out, as has been done here, the reasons why it could not agree with the earlier judgment….” 22 In Chandra Prakash and others v. State of U.P. and another, 2002(2) S.C.T. 776: (2002) 4 SCC 234, another Constitution Bench dealing with the concept of precedents stated thus:-“22…. The doctrine of binding precedent is of utmost importance in the administration of our judicial system. It promotes certainty

and consistency in judicial decisions. Judi­cial consistency promotes confidence in the system, therefore, there is this need for con­sistency in the enunciation of legal princi­ples in the decisions of this Court. It is in the above context, this Court in the case of Raghubir Singh, 1989(1) R.R.R. 552 : (1989) 2 SCC 754 held that a pronounce­ment of law by a Division Bench of this Court is binding on a Division Bench of the same or smaller number of Judges….”

  1. Be it noted, Chandra Prakash concurred with
    the view expressed in Raghubir Singh and Pradip
    Chandra Parija.
  2. In Sandhya Educational Society and an­
    other v. Union of India and others, (2014) 7
    SCC 701, it has been observed that judicial deco­
    rum and discipline is paramount and, therefore, a
    coordinate Bench has to respect the judgments
    and orders passed by another coordinate Bench.
    In Rattiram and others v. State of Madhya
    Pradesh,
    2012(2)  C.R.(Criminal)  471  :
    2012(2) Recent Apex Judgments (R.A.J.) 99 :
    (2012) 4 SCC 516,
    the Court dwelt upon the issue
    what would be the consequent effect of the latter
    decision which had been rendered without notic­
    ing the earlier decisions. The Court noted the ob­
    servations in Raghubir Singh (supra) and repro­
    duced a passage from Indian Oil Corporation
    Ltd. v. Municipal Corporation, (1995) 4 SCC 96
    which is to the following effect:-

“8…. The Division Bench of the High Court in Municipal Corpn., Indore v, Ratnaprabha Dhanda was clearly in error in taking the view that the decision of this Court in Rat­naprabha was not binding on it. In doing so, the Division Bench of the High Court did something which even a later coequal Bench of this Court did not and could not do….”

  1. It also stated what has been expressed in
    Raghubir Singh (supra) by R.S. Pathak, C.J. It is
    as follows:-

“28. We are of opinion that a pronouncement of law by a Division Bench of this Court is binding on a Division Bench of the same or a smaller number of Judges, and in order that such decision be binding, it is not necessary that it should be a decision rendered by the Full Court or a Constitution Bench of the Court….”

  1. In Rajesh (supra) the three-Judge Bench had
    delivered the judgment on 12.04.2013. The pur-

 

pose of stating the date is that it has been deliv­ered after the pronouncement made in Reshma Kumari’s case. On a perusal of the decision in Rajesh (supra), we find that an attempt has been made to explain what the two- Judge Bench had stated in Santosh Devi (supra). The relevant pas­sages read as follows:-

“8. Since, the Court in Santosh Devi case actu­ally intended to follow the principle in the case of salaried persons as laid down in Sarla Verma case and to make it applicable also to the self-employed and persons on fixed wages, it is clarified that the increase in the case of those groups is not 30% al­ways; it will also have a reference to the age. In other words, in the case of self-employed or persons with fixed wages, in case, the de­ceased victim was below 40 years, there must be an addition of 50% to the actual in­come of the deceased while computing fu­ture prospects. Needless to say that the ac­tual income should be income after paying the tax, if any. Addition should be 30% in case the deceased was in the age group of 40 to 50 years.

  1. In Sarla Verma case, it has been stated that in the case of those above 50 years, there shall be no addition. Having regard to the fact that in the case of those self-employed or on fixed wages, where there is normally no age of superannuation, we are of the view that it will only be just and equitable to provide an addition of 15% in the case where the victim is between the age group of 50 to 60 years so as to make the compensation just, equitable, fair and reasonable. There shall normally be no addition thereafter.”
  2. At this juncture, it is necessitous to advert to another three- Judge Bench decision in Munna Lai Jain and another v. Vipin Kumar Sharma and others, 2015(3) R. C.R. (Civil) 447:2015(3) Recent Apex Judgments (R.A.J.) 459: (2015) 6 SCC347. In the said case, the three-Judge Bench commenting on the judgments stated thus:-

“2. In the absence of any statutory and a strait-jacket formula, there are bound to be grey areas despite several attempts made by this Court to lay down the guidelines. Compen­sation would basically depend on the evi­dence available in a case and the formulas shown by the courts are only guidelines for the computation of the compensation. That precisely is the reason the courts lodge a ca-

veat stating “ordinarily”, “normally”, “ex­ceptional circumstances”, etc., while sug­gesting the formula.”

  1. After so stating, the Court followed the prin­
    ciple stated in Rajesh. We think it appropriate to
    reproduce what has been stated by the three-
    Judge Bench:-

“10. As far as future prospects are concerned, in Rajesh v. Rajbir Singh, a three-Judge Bench of this Court held that in case of self-employed persons also, if the deceased vic­tim is below 40 years, there must be addition of 50% to the actual income of the deceased while computing future prospects.”

  1. We are compelled to state here that in Munna
    Lai Jain (supra), the three-Judge Bench should
    have been guided by the principle stated in
    Reshma Kumari which has concurred with the
    view expressed in Sarla Devi or in case of dis­
    agreement, it should have been well advised to
    refer the case to a larger Bench. We say so, as we
    have already expressed the opinion that the dicta
    laid down in Reshma Kumari being earlier in
    point of time would be a binding precedent and
    not the decision in Rajesh.
  2. In this context, we may also refer to Sundeep
    Kumar Bafna v. State of Maharashtra and an­
    other, 2014(2) R.C.R.(Criminal) 416 :2014(2)
    Recent Apex Judgments (R.A.J.) 572 : (2014)
    16 SCC 623 which correctly lays down the prin­
    ciple that discipline demanded by a precedent or
    the disqualification or diminution of a decision
    on the application of the per incuriam 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 incuriam any provision in a
    statute, rule or regulation, which was not brought
    to the notice of the court. A decision or judgment
    can also be per incuriam if it is not possible to rec­
    oncile its ratio with that of a previously pro­
    nounced judgment of a coequal 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 date, it had not ap­
    prised itself of the law stated in Reshma Kumari
    (supra) but had been guided by Santosh Devi (su­
    pra). We have no hesitation that it is not a binding
    precedent on the co-equal Bench.
  3. At this stage, a detailed analysis of Sarla
    Verma (supra) is necessary. In the said case, the

 

Court recapitulated the relevant principles relat­ing to assessment of compensation in case of death and also took note of the fact that there had been considerable variation and inconsistency in the decision for Courts and Tribunals on account of adopting the method stated in Nance v. British Columbia Electric Railway Co. Ltd., 1951 SC 601: (1951) 2AIIER 448 (PC) and the method in Davies v. Powell Duffiyn Associated Collieries Ltd., 1942 AC 601: (1942) 1AHER 657 (HL). It also analysed the difference between the consid­erations of the two different methods by this Court in Susamma Thomas (supra) wherein pref­erence was given to Davies method to the Nance method. Various paragraphs from Susamma Thomas (supra) and Trilok Chandra (supra) have been reproduced and thereafter it has been ob­served that lack of uniformity and consistency in awarding the compensation has been a matter of grave concern. It has stated that when different tribunals calculate compensation differently on the same facts, the claimant, the litigant and the common man are bound to be confused, per­plexed and bewildered. It adverted to the obser­vations made in Trilok Chandra (supra) which are to the following effect:-

“15. We thought it necessary to reiterate the method of working out ‘just’ compensation because, of late, we have noticed from the awards made by tribunals and courts that the principle on which the multiplier method was developed has been lost sight of and once again a hybrid method based on the subjectivity of the Tribunal/court has sur­faced, introducing uncertainty and lack of reasonable uniformity in the matter of deter­mination of compensation. It must be real­ised that the Tribunal/court has to determine a fair amount of compensation awardable to the victim of an accident which must be pro­portionate to the injury caused….”

  1. While adverting to the addition of income for future prospects, it stated thus:-

“24. In Susamma Thomas this Court increased the income by nearly 100%, in Sarla Dixit the income was increased only by 50% and in Abati Bezbaruah the income was in­creased by a mere 7%. In view of the impon­derables and uncertainties, we are in favour of adopting as a rule of thumb, an addition of 50% of actual salary to the actual salary in­come of the deceased towards future pros­pects, where the deceased had a permanent

job and was below 40 years. (Where the an­nual income is in the taxable range, the words “actual salary” should be read as “ac­tual salary less tax”). The addition should be only 30% if the age of the deceased was 40 to 50 years. There should be no addition, where the age of the deceased is more than 50 years. Though the evidence may indicate a different percentage of increase, it is nec­essary to standardise the addition to avoid different yardsticks being applied or differ­ent methods of calculation being adopted. Where the deceased was self-employed or was on a fixed salary (without provision for annual increments, etc.), the courts will usu­ally take only the actual income at the time of death. A departure therefrom should be made only in rare and exceptional cases in­volving special circumstances.”

  1. Though we have devoted some space in ana­
    lyzing the precedential value of the judgments,
    that is not the thrust of the controversy. We are
    required to keenly dwell upon the heart of the is­
    sue that emerges for consideration. The seminal
    controversy before us relates to the issue where
    the deceased was self-employed or was a person
    on fixed salary without provision for annual in­
    crement, etc., what should be the addition as re­
    gards the future prospects. In Sarla Verma, the
    Court has made it as a rule that 50% of actual sal­
    ary could be added if the deceased had a perma­
    nent job and if the age of the deceased is between
    40 – 50 years and no addition to be made if the de­
    ceased was more than 50 years. It is further ruled
    that where deceased was self-employed or had a
    fixed salary (without provision for annual incre­
    ment, etc.) the Courts will usually take only the
    actual income at the time of death and the depar­
    ture is permissible only in rare and exceptional
    cases involving special circumstances.
  2. First, we shall deal with the reasoning of
    straitjacket demarcation between the permanent
    employed persons within the taxable range and
    the other category where deceased was self-em­
    ployed or employed on fixed salary sans annual
    increments, etc.
  3. The submission, as has been advanced on be­
    half of the insurers, is that the distinction be­
    tween the stable jobs at one end of the spectrum
    and self-employed at the other end of the spec­
    trum with the benefit of future prospects being
    extended to the legal representatives of the de­
    ceased having a permanent job is not difficult to

 

visualize, for a comparison between the two cate­gories is a necessary ground reality. It is con­tended that guaranteed/definite income every month has to be treated with a different parame­ter than the person who is self-employed inas­much as the income does not remain constant and is likely to oscillate from time to time. Emphasis has been laid on the date of expected superannu­ation and certainty in permanent job in contradis­tinction to the uncertainty on the part of a self-employed person. Additionally, it is contended that the permanent jobs are generally stable and for an assessment the entity or the establishment where the deceased worked is identifiable since they do not suffer from the inconsistencies and vagaries of self-employed persons. It is can­vassed that it may not be possible to introduce an element of standardization as submitted by the claimants because there are many a category in which a person can be self-employed and it is ex­tremely difficult to assimilate entire range of self-employed categories or professionals in one compartment. It is also asserted that in certain professions addition of future prospects to the in­come as a part of multiplicand would be totally an unacceptable concept. Examples are cited in respect of categories of professionals who are surgeons, sports persons, masons and carpenters, etc. It is also highlighted that the range of self-employed persons can include unskilled labourer to a skilled person and hence, they cannot be put in a holistic whole. That apart, it is propounded that experience of certain professionals brings in disparity in income and, therefore, the view ex­pressed in Sarla Verma (supra) that has been con­curred with Reshma Kumari (supra) should not be disturbed.

  1. Quite apart from the above, it is contended
    that the principle of standardization that has been
    evolved in Sarla Verma (supra) has been criti­
    cized on the ground that it grants compensation
    without any nexus to the actual loss. It is also
    urged that even if it is conceded that the said view
    is correct, extension of the said principle to some
    of the self-employed persons will be absolutely
    unjustified and untenable. Learned counsel for
    the insurers further contended that the view ex­
    pressed in Rajesh (supra) being not a precedent
    has to be overruled and the methodology stood in
    Sarla Verma (supra) should be accepted.
  2. On behalf of the claimants, emphasis is laid
    on the concept of “just compensation” and what
    should be included within the ambit of “just com-

pensation”. Learned counsel have emphasized on Davies method and urged that the grant of pe­cuniary advantage is bound to be included in the future pecuniary benefit. It has also been put forth that in right to receive just compensation under the statute, when the method of stand­ardization has been conceived and applied, there cannot be any discrimination between the person salaried or self-employed. It is highlighted that if evidence is not required to be adduced in one category of cases, there is no necessity to compel the other category to adduce evidence to estab­lish the foundation for addition of future pros­pects.

  1. Stress is laid on reasonable expectation of pe­
    cuniary benefits relying on the decisions in Tafe
    Vale Railway Co. (supra) and the judgment of
    Singapore High Court mNirumalan Kanapa-
    thiPillay v. Tea Eng Chuan, (2003) 3 SLR (R)
    601. Lastly, it is urged that the standardization
    formula for awarding future income should be
    applied to self-employed persons and that would
    be a justifiable measure for computation of loss
    ofdependency.
  2. Before we proceed to analyse the principle
    for addition of future prospects, we think it
    seemly to clear the maze which is vividly re-
    flectible from Sarla Verma, Reshma Kumari, Ra­
    jesh and Munna Lai Jain. Three aspects need to
    be clarified. The first one pertains to deduction
    towards personal and living expenses. In para­
    graphs 30, 31 and 32, Sarla Verma lays down:-

“30. Though in some cases the deduction to be made towards personal and living expenses is calculated on the basis of units indicated in Trilok Chandra4, the general practice is to apply standardised deductions. Having con­sidered several subsequent decisions of this Court, we are of the view that where the de­ceased was married, the deduction towards personal and living expenses of the de­ceased, should be one-third (l/3rd) where the number of dependent family members is 2 to 3, one-fourth (l/4th) where the number of dependent family members is 4 to 6, and one-fifth (l/5th) where the number of de­pendent family members exceeds six.

  1. Where the deceased was a bachelor and the claimants are the parents, the deduction fol­lows a different principle. In regard to bachelors, normally, 50% is deducted as personal and living expenses, because it is

 

assumed that a bachelor would tend to spend more on himself. Even otherwise, there is also the possibility of his getting married in a short time, in which event the contribution to the parent(s) and siblings is likely to be cut drastically. Further, subject to evidence to the contrary, the father is likely to have his own income and will not be considered as a dependant and the mother alone will be con­sidered as a dependant. In the absence of evidence to the contrary, brothers and sisters will not be considered as dependants, be­cause they will either be independent and earning, or married, or be dependent on the father.

  1. Thus even if the deceased is survived by par­ents and siblings, only the mother would be considered to be a dependant, and 50% would be treated as the personal and living expenses of the bachelor and 50% as the contribution to the family. However, where the family of the bachelor is large and de­pendent on the income of the deceased, as in a case where he has a widowed mother and large number of younger non-earning sisters or brothers, his personal and living expenses may be restricted to one-third and contribu­tion to the family will be taken as two-third.”
  2. In Reshma Kumari, the three-Judge Bench
    agreed with the multiplier determined in Sarla
    Verma and eventually held that the advantage of
    the Table prepared in Sarla Verma is that uni­
    formity and consistency in selection of multiplier
    can be achieved. It has observed:-

“35…. The assessment of extent of dependency depends on examination of the unique situ­ation of the individual case. Valuing the de­pendency or the multiplicand is to some ex­tent an arithmetical exercise. The multipli­cand is normally based on the net annual value of the dependency on the date of the deceased’s death. Once the net annual loss (multiplicand) is assessed, taking into ac­count the age of the deceased, such amount is to be multiplied by a “multiplier” to arrive at the loss of dependency.”

  1. In Reshma Kumari, the three-Judge Bench,
    reproduced paragraphs 30, 31 and 32 of Sarla
    Verma and approved the same by stating thus:-

“41. The above does provide guidance for the appropriate deduction for personal and liv­ing expenses. One must bear in mind that the proportion of a man’s net earnings that he

saves or spends exclusively for the mainte­nance of others does not form part of his liv­ing expenses but what he spends exclusively on himself does. The percentage of deduc­tion on account of personal and living ex­penses may vary with reference to the num­ber of dependent members in the family and the personal living expenses of the deceased need not exactly correspond to the number of dependants.

  1. In our view, the standards fixed by this Court in Sarla Verma on the aspect of deduction for personal living expenses in paras 30, 31 and 32 must ordinarily be followed unless a case for departure in the circumstances noted in the preceding paragraph is made out.”
  2. The conclusions that have been summed up in Reshma Kumari are as follows:-

“43.1. In the applications for compensation made under Section 166 of the 1988 Act in death cases where the age of the deceased is 15 years and above, the Claims Tribunals shall select the multiplier as indicated in Column (4) of the Table prepared in Sarla Verma read with para 42 of that judgment.

  • In cases where the age of the deceased is
    up to 15 years, irrespective of Section 166 or
    Section 163-A 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
    Sarla Verma should be followed.
  • As a result of the above, while considering
    the claim applications made under Section
    166 in death cases where the age of the de­
    ceased is above 15 years, there is no neces­
    sity for the Claims Tribunals to seek guid­
    ance or for placing reliance on the Second
    Schedule in the 1988 Act.
  • The Claims Tribunals shall follow the
    steps and guidelines stated in para 19 of
    Sarla Verma for determination of compen­
    sation in cases of death.
  • While making addition to income for fu­
    ture prospects, the Tiibunals shall follow
    para 24 of the judgment in Sarla Verma.
  • Insofar as deduction for personal and liv­
    ing expenses is concerned, it is directed that
    the Tribunals shall ordinarily follow the

 

standards prescribed in paras 30, 31 and 32 of the judgment in Sarla Verma subject to the observations made by us in para 41 above.”

  1. On a perusal of the analysis made in Sarla
    Verma which has been reconsidered in Reshma
    Kumari, we think it appropriate to state that as far
    as the guidance provided for appropriate deduc­
    tion for personal and living expenses is con­
    cerned, the tribunals and courts should be guided
    by conclusion 43.6 of Reshma Kumari. We con­
    cur with the same as we have no hesitation in ap­
    proving the method provided therein.
  2. As 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 Sarla
    Verma read with paragraph 42 of the said judg­
    For the sake of completeness, paragraph 42
    is extracted below :-

“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 18 (for the age groups of 15 to 20 and 21 to 25 years), reduced by one unit for every five years, that is M-17 for 26 to 30 years, M-16 for 31 to 35 years, M-15 for 36 to 40 years, M-14 for 41 to 45 years, and M-13 for 46 to 50 years, then reduced by two units for every five years, that is, M-ll for 51 to 55 years, M-9 for 56 to 60 years, M-7 for 61 to 65 years and M-5 for 66 to 70 years.”

  1. In Reshma Kumari, the aforesaid has been
    approved by stating, thus:-

“It 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 Sarla 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 Sarla Verma is followed, there is no likelihood of the 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 victim happens to be up to 15 years, we are 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 Sarla 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 1988 Act. In all other cases of death where the ap­plication has been made under Section 166, the multiplier as indicated in Column (4) of the Table in Sarla Verma should be fol­lowed.”

  1. At this stage, we must immediately say that
    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. The
    multiplier has already been fixed in Sarla Verma
    which has been approved in Reshma Kumari
    with which we concur.
  2. In our considered opinion, if the same is fol­
    lowed, it shall subserve the cause of justice and
    the unnecessary contest before the tribunals and
    the courts would be avoided.
  3. Another aspect which has created confusion
    pertains to grant of loss of estate, loss of consor­
    tium and funeral expenses. In Santosh Devi (su­
    pra), the two-Judge Bench followed the tradi­
    tional method and granted ? 5,000/- for transpor­
    tation of the body, ? 10,000/- as funeral expenses
    and ? 10,000/- as regards the loss of consortium.
    In Sarla Verma, the Court granted ? 5,000/- un­
    der the head of loss of estate, ? 5,000/- towards
    funeral expenses and ? 10,0007- towards loss of
    In Rajesh, the Court granted ?
    1,00,000/- towards loss of consortium and ?
    25,000/- towards funeral expenses. It also
    granted ? 1,00,000/- towards loss of care and
    guidance for minor children. The Court en­
    hanced the same on the principle that a formula
    framed to achieve uniformity and consistency on
    a socio-economic issue has to be contrasted from
    a legal principle and ought to be periodically re­
    visited as has been held in Santosh Devi (supra).

 

On the principle of revisit, it fixed different amount on conventional heads. What weighed with the Court is factum of inflation and the price index. It has also been moved by the concept of loss of consortium. We are inclined to think so, for what it states in that regard. We quote:-

“17. … In legal parlance, “consortium” is the right of the spouse to the company, care, help, comfort, guidance, society, solace, af­fection and sexual relations with his or her mate. That non-pecuniary head of damages has not been properly understood by our courts. The loss of companionship, love, care and protection, etc., the spouse is enti­tled to get, has to be compensated appropri­ately. The concept of non-pecuniary dam­age for loss of consortium is one of the major heads of award of compensation in other parts of the world more particularly in the United States of America, Australia, etc. English courts have also recognised the right of a spouse to get compensation even during the period of temporary disablement. By loss of consortium, the courts have made an attempt to compensate the loss of spouse’s affection, comfort, solace, com­panionship, society, assistance, protection, care and sexual relations during the future years. Unlike the compensation awarded in other countries and other jurisdictions, since the legal heirs are otherwise adequately compensated for the pecuniary loss, it would not be proper to award a major amount under this head. Hence, we are of the view that it would only be just and reason­able that the courts award at least rupees one lakh for loss of consortium.”

  1. Be it noted, Munna Lai Jain (supra) did not deal with the same as the notice was confined to the issue of application of correct multiplier and deduction of the amount.

50 This aspect needs to be clarified and appo­sitely stated. The conventional sum has been pro­vided in the Second Schedule of the Act. The said Schedule has been found to be defective as stated by the Court in Trilok Chandra (supra). Recently in Puttamma and others v. K.L. Narayana Reddy and another, 2014(1) R.C.R.(Civil) 443 : 2014(1) Recent Apex Judgments (R.A.J.) 1 : (2013) 15 SCC 45 it has been reiterated by stat-ing:-

“… we hold that the Second Schedule as was en­acted in 1994 has now become redundant, ir-

rational and unworkable due to changed sce­nario including the present cost of living ana current rate of inflation and increased life expectancy.”

  1. As far as multiplier or multiplicand is con­
    cerned, the same has been put to rest by the judg­
    ments of this Court. Para 3 of the Second Sched­
    ule also provides for General Damages in case of
    death. It is as follows:-

“3. General Damages (in case of death):

The following General Damages shall be pay­able in addition to compensation outlined above:-

(i) Funeral expenses – ? 2,0007-

(ii) Loss of Consortium, if beneficiary is the spouse – ? 5,0007-

(iii) Loss of Estate – ? 2,5007-

(iv) Medical Expenses – actual expenses in­curred before death supported by bills/vouchers but not exceeding – ? 15,000/-”

  1. On a perusal of various decisions of this
    Court, it is manifest that the Second Schedule has
    not been followed starting from the decision in
    Trilok Chandra (supra) and there has been no
    amendment to the same. The conventional dam­
    age amount needs to be appositely determined.
    As we notice, in different cases different
    amounts have been granted. A sum of ?
    1,00,000/- was granted towards consortium in
    Rajesh. The justification for grant of consortium,
    as we find from Rajesh, is founded on the obser­
    vation as we have reproduced hereinbefore.
  2. On the aforesaid basis, the Court has revisited
    the practice of awarding compensation under
    conventional heads.
  3. As far as the conventional heads are con­
    cerned, we find it difficult to agree with the view
    expressed in Rajesh. It has granted ? 25,0007- to­
    wards funeral expenses, ? 1,00,0007- loss of con­
    sortium and ? 1,00,0007- towards loss of care and
    guidance for minor children. The head relating to
    loss of care and minor children does not exist.
    Though Rajesh refers to Santosh Devi, it does not
    seem to follow the same. The conventional and
    traditional heads, needless to say, cannot be de­
    termined on percentage basis because that would
    not be an acceptable criterion. Unlike determina­
    tion of income, the said heads have to be quanti­
    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, we think it seemly to fix reasonable sums. It seems to us that reason­able figures on conventional heads, namely, loss of estate, loss of consortium and funeral ex­penses should be ? 15,000/-, ? 40,000/- and ? 15,0007- respectively. The principle of revisiting the saicTheads is an acceptable principle. But the revisit should not be fact-centric or quantum-:entric. We think that it would be condign that :he amount that we have quantified should be en­hanced on percentage basis in every three years and the enhancement should be at the rate of 10% .n a span of three years. We are disposed to hold so because that will bring in consistency in re­spect of those heads.

  1. Presently, we come to the issue of addition of
    future prospects to determine the multiplicand.
  2. In Santosh Devi the Court has not accepted as
    2 principle that a self-employed person remains
    3n a fixed salary throughout his life. It has taken
    note of the rise in the cost of living which affects
    everyone without making any distinction be­
    tween the rich and the poor. Emphasis has been
    laid on the extra efforts made by this category of
    persons to generate additional income. That
    apart, judicial notice has been taken of the fact
    that the salaries of those who are employed in pri­
    vate sectors also with the passage of time in­
    crease manifold. In Rajesh’s case, the Court had
    added 15% in the case where the victim is be­
    tween the age group of 15 to 60 years so as to
    make the compensation just, equitable, fair and
    This addition has been made in re­
    spect of self-employed or engaged on fixed
    wages.
  3. Section 168 of the Act deals with the concept
    of “just compensation” and the same has to be de­
    termined on the foundation of fairness, reason­
    ableness and equitability on acceptable legal
    standard because such determination can never
    be in arithmetical exactitude. It can never be per­
    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. In a case of death, the legal heirs of the claimants cannot expect a windfall. Simultaneously, the compensation granted can­not be an apology for compensation. It cannot be a pittance. 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 Sarla Verma (supra) and it has been approved in Reshma Kumari (supra). The age and income, as stated earlier, 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 uniformity 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. We approve the principle of “standardization” so that a specific and certain multiplicand is deter-inined for applying the multiplier on the basis of age.

  1. The seminal issue is the fixation of future
    prospects in cases of deceased who is self-em­
    ployed or on a fixed salary. Sarla Verma (supra)
    has carved out an exception permitting the claim­
    ants to bring materials on record to get the benefit
    of addition of future prospects. It has not, per se,
    allowed any future prospects in respect of the
    said category.
  2. Having bestowed our anxious consideration,
    we are disposed to think when we accept the prin­
    ciple of standardization, there is really no ration­
    ale not to apply the said principle to the self-em-

 

ployed 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 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. 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 change 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. We are inclined to think that there can be some degree of difference as regards the percent­age that is meant for or applied to in respect of the legal representatives who claim on behalf of the deceased who had a permanent job than a person who is self-employed or on a fixed salary. But not to apply the principle of standardization on the foundation of perceived lack of certainty would tantamount to remaining oblivious to the mar­rows of ground reality. And, therefore, degree-

test is imperative. Unless the degree-test is ap­plied and left to the parties to adduce evidence to establish, it would be unfair and inequitable. The degree-test has to have the 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 attitude to follow a par­ticular pattern of life, etc., an addition of 40% of the established income of the deceased towards future prospects and where the deceased was be­low 40 years an addition of 25% where the de­ceased was between the age of 40 to 50 years would be reasonable.

  1. The controversy does not end here. The ques­
    tion still remains whether there should be no ad­
    dition where the age of the deceased is more than
    50 years. Sarla Verma thinks it appropriate not to
    add any amount and the same has been approved
    in Reshma Kumari. 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 al­
    ways an enhancement due to one reason or the
    To lay down as a thumb rule that there will
    be no addition after 50 years will be an unaccept­
    able concept. We are disposed to think, 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 self-employed or person on fixed salary,
    the addition should be 10% between the age of 50
    to 60 years. The aforesaid yardstick has been
    fixed so that there can be consistency in the ap­
    proach by the tribunals and the courts.
  2. In view of the aforesaid analysis, we proceed
    to record our 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 ? 15,0007-, ? 40,0007- and ? 15,0007- respec­tively. The aforesaid amounts should be en­hanced at the rate of 10% in every three years.

  1. The reference is answered accordingly. Mat­ters be placed before the appropriate Bench.