Court: Supreme Court of India.
Case Type: Special Leave Petition (Civil).
Case No.: 25590 of 2014.
Petitioner: National Company Limited.
Respondent: Pranay Sethi and ors.
Bench:
- Chief Justice of India Dipak Misra.
- Justice A.K. Sikri.
- Justice A.M. Khanvilkar.
- Justice Dr D.Y. Chandrachud.
- Justice Ashok Bhushan.
Statutes Referred:
- Motor Vehicles Act,1988 (For short, ‘The Act’)
Cases Referred:
- Sarla Verma and others v. Delhi Transport Corporation and another.
- Reshma Kumari and others v. Madan Mohan and another.
- Rajesh and others v. Rajbir Singh and others.
- Jaisri Sahu v. Rajdewan Dubey.
- Chandra Prakash and others v. the State of U.P. and another.
- Rattiram and others v. State of Madhya Pradesh.
- Sundeep Kumar Bafna v. the State of Maharashtra and another.
- Puttamma and others v. K.L. Narayana Reddy and another.
Facts:
- In the case of Sarla Verma (supra), the Court had held that 50% of the annual salary could be added as future prospect if the deceased had a permanent job and was aged between 40-50 years.
- No amount could be added if the deceased was over 50 years.
- However, if a deceased person was self employed or had a fixed income with no scope for increment, the Courts will usually take only the actual annual salary at the time of death.
- There was no provision to consider for the future prospect of such a person even if he was well within the age bracket.
- This stand of the Court was challenged in the case at hand.
Issue:
- Suppose a deceased person is self-employed or a person with a fixed salary without any provision for annual increment. What amount should be added to the compensation to the legal representatives of the deceased with regards to future prospect?
Contentions by the Petitioner:
- The benefit of future prospects extended only to the legal representatives of an individual with a permanent job and not to the legal representatives of an individual who is self-employed, upon the individual’s death, is quite rational.
- The income of a self-employed person does not remain constant and oscillates every month. In contrast, an individual with a stable, permanent job has a fixed/stable income every month.
- The date of retirement is fairly certain in a permanent job. The same is not the case with self-employment.
- There many categories within which an individual can be self-employed, and it isn’t easy to integrate all of those categories and professions into one compartment.
- The addition of future prospects as a multiplicand would be unacceptable in certain professions.
- The term ‘self-employed’ includes both unskilled labour and skilled professional. Hence, it cannot be brought under a single umbrella.
- Experience brings about an income disparity.
- The views expressed in Sarla Verma and Reshma Kumari should not be disturbed.
Contentions by the Respondent:
- Relying on the Davies method, the respondent urged that the grant of pecuniary advantage should be included in future pecuniary prospects.
- There cannot be any discrimination between a salaried individual and a self-employed individual in the right to receive compensation, especially when the method of standardisation has been conceived and applied.
- If there is no compulsion to provide evidence regarding future prospects in one category of cases, then there should not be any compulsion to provide evidence for the same in a different category of cases.
- The standardised measure for awarding compensation for future prospects should be applied in cases of self-employed individuals. This would ensure a just method of calculating the loss of dependency.
Obiter Dicta:
- The Court, insofar as the deduction of personal and living expenses is concerned, agreed with the observations made in paragraphs 30, 31, and 32 in Sarla Verma and others v. Delhi Transport Corporation and another:
- “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 (1/3rd) where the number of dependent family members is 2 to 3, one-fourth (1/4th) where the number of dependent family members is 4 to 6, and one-fifth (1/5th) where the number of dependent family members exceeds six.
- 31. 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.
- 32. 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 a large number of younger nonearning 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.”
- With regards to the multiplier, the claims tribunal and the Courts shall be guided by Step 2 that finds a place in paragraph 19 of Sarla Verma read with paragraph 42 of the said judgment.
- “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, M16 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-11 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.”
- The above-mentioned multiplier/multiplicand is to be applied to the original income established by the legal representatives of the deceased. ‘Income’ means income minus the tax to be paid.
- Reasonably figures for compensation on conventional heads, namely- loss of expense, loss of consortium and loss of funeral expenses, should be Rs. 15,000/-, 40,000/- and 15,000/- respectively. The quantified amounts would be enhanced on a percentage basis of 10% every three years.
- When we (the Court)accept the principle of standardisation, there is really no rationale not to apply the said principle to the self-employed or a person who is on a fixed salary.
- 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.
- 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 were between 40 to 50 years. If 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.
- 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 computation method. The established income means the income minus the tax component.
Judgement:
- The future prospects in pecuniary terms of a person who is self-employed or on a fixed salary must be considered.
- The Court laid down the values and percentages for the same.
Rationale:
- If the multiplier/multiplicand system established in Sarla Verma is used, it would promote the cause of justice and avoid irregularities before the tribunals and courts.
- Conventional heads must be determined by a fixed amount and not based on percentage because that would not be an acceptable criterion. The specified amounts must then be revisited and updated periodically to keep them consistent with inflation, escalation rates, etc.
- Following only the doctrine of actual income at the time of death and not adding any amount with regard to future prospects in determining the multiplicand would be unjust.
Conclusion:
- The concept of ‘just compensation’ must be viewed through the spectrum of reasonableness, fairness and equitability. A sincere effort must be made to grant a just compensation.
Prepared by Mihir Poojary.