SC lays down norms for computation of accident claim

Satya Prakash

Tribune News Service

New Delhi, October 31

The Supreme Court on Tuesday ruled that "future prospects" of self-employed and fixed income people has to be taken into consideration while computing the amount of compensation to the dependents in fatal motor accident cases.

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Delivered by a five-judge Constitution bench headed by Chief Justice of India Dipak Misra, the verdict is a welcome departure from the existing norm, according to which dependents of only those have permanent job with scope for increase in salaries were entitled to ‘future prospects’ in deciding compensation.

‘Future prospects’ refer to what an accident victim would have earned in the form of future increase in income had he/she been alive.

The Motor Vehicles Act provides for award of compensation to be paid by insurance firms to the victim or his or her family in accident cases by using the methodology provided for in the Act. The family members have to establish the age and income of the deceased and the number of dependents.

The issue was where the deceased was self-employed or was a person on fixed salary without provision for annual increment, etc., what should be the addition as regards the future prospects. It was referred to a Constitution Bench after various smaller Benches gave conflicting verdicts.

Laying down standard criteria for computation of such claims, the bench rejected the argument that in the case those with permanent jobs, there was a certainty about what their future prospects would be unlike self-employed or those with fixed salaries for whom future prospects would be uncertain.

In fact till 2008, the practice was to award 50% of the last drawn salary as compensation in case of fatal accident claims. In 2008, a two-judge bench ruled that future prospects should be taken into account while calculating compensation to be given to the dependents of those with permanent jobs.

A specific percentage of the last drawn salary, over and above the last pay, was laid down for different age groups. Later, some other benches ruled it should also be extended to self-employed victims of motor accidents.

Now, the latest Constitution Bench verdict makes it clear that the benefits of ‘future prospects’ have to be extended to dependents of even those with no fixed income or who are self-employed. The court also standardised the computing norm.

“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,” it said.

The Bench said, “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.”

The age of the deceased should be the basis for applying the multiplier, it said, adding, “Reasonable figures on conventional heads, namely, loss of estate, loss of consortium and funeral expenses should be Rs 15,000, Rs 40,000 and Rs 15,000, respectively. The aforesaid amounts should be enhanced at the rate of 10% in every three years.”