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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL  APPELLATE JURISDICTION

CIVIL APPEAL NOS.  2476-2477 OF 2019 (ARISING OUT OF SLP (C) NOS. 31521-31522 OF 2017)

M.R. KRISHNA MURTHI .....APPELLANT(S)

VERSUS

THE NEW INDIA ASSURANCE CO. LTD. & OTHERS

.....RESPONDENT(S)

J U D G M E N T

A.K. SIKRI, J.

Leave granted.

2) The appellant herein, who is a practicing advocate, had suffered in nasty

accident at the young age of 18 years.  He was a student at that time studying in

Modern School, Delhi.  It was 26th May, 1988.  He was travelling along with his

mother from Delhi to Mussoorie to celebrate his 18th birthday falling on 27th

May, 1988.  On Delhi-Dehradun highway the accident took place in which his

entire left leg was crushed. He was rushed to the hospital and his hospitalization

continued for over two months.  He had to undergo surgery for which he was

operated on 31st May, 1988.  Though, the appellant was  discharged from the

hospital  after  two months,  his  treatment  continued for  over  6  years,  during

which period he had to undergo further operations.  In all, three surgeries were

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performed.  First, for putting plates and screws, another for removal of plates

and screws wherein doctor discovered that he could not remove the plates and

screws of femur bone. The result is that even today the said screws and plates in

the femur bone remain planted.  This exposes him to the risk of another fracture

anytime.  The third operation was for removal of a lump in the right leg which

had developed after the accident and had grown over the years.

3) As per the appellant, the net result of the aforesaid accident of such severity is

that  he is  suffering  permanent  disability  (pain  and difficulty  in  locomotion)

even today.  This disability is certified by the District Government Hospital,

Muzaffarnagar  at  40%, as per  the disability certificate  dated 10th December,

2005 (Exh. PW-4/103).

4) The  appellant  filed  an  application  claiming  compensation  before  Motor

Accidents Claims Tribunal (MACT), Muzaffarnagar, U.P. as the accident took

place in the area within the jurisdiction of the said MACT.  However, on his

application for transfer of the said claim petition, this Court passed orders dated

12th January, 1998 transferring the case to MACT, Patiala House, New Delhi.

The MACT, after conclusion of the trial, rendered its award dated 23rd May,

2007 attributing negligence to the driver  of the ambassador car which had hit

the vehicle in which the appellant was travelling.  As the accident occurred due

to the negligence of the said driver (Respondent no. 4 in MACT case), and the

offending  vehicle  was  insured  with  Respondent  no.  1,  namely,  New  India

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Assurance  Company  Limited,  the  liability  was  fastened  on  the  Insurance

Company, the driver of the vehicle as well as the owner of the vehicle who also

arrayed as respondents.  The MACT, thereafter, dealt with the issue of quantum

of compensation and awarded a sum of Rs. 8,48,000/-, the breakup of which is

as under:

"Pain and sufferings Rs.50,000/- Medicines Rs.2,10,000/- Special Diet Rs.15,000/- Conveyance Rs.15,000/- Compensation on account Rs.4,08,000/- of loss of income adopting  multiplier of 18 permanent Rs.75,000/- disability attendant  Rs.25,000/- loss of enjoyment Rs.50,000/- Total Rs.8,48,000/-”

5) The MACT also awarded interest  @7% for a period of 10 years,  inter alia,

taking note of the fact that  the claim petition has been dismissed in default

twice.  

6) The appellant  filed the appeal thereagainst before the High Court.  However,

when it was taken up for hearing, nobody appeared on behalf of the appellant.

Going  by  the  fact  that  on  several  consecutive  dates  the  appellant  was  not

represented and remained absent, instead of dismissing the appeal in default, the

High  Court  decided  the  matter  on  merits  after  hearing  the  counsel  for  the

Insurance Company and on perusing the record.

7) Main contention of the appellant in appeal was that MACT had failed to take

into  account  the  disability  certificate  which  showed  that  the  appellant  had

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suffered permanent disability to the extent of 40%.  This submission is rejected

by the High Court with the observations that the MACT had, in fact, calculated

the loss of future income on the basis of inference that the claimant has suffered

functional disability to the extent of 40% corresponding to affecting his earning

capacity.  The High Court also took note of the income tax returns which were

filed by the appellant for the periods 2003-04, 2004-05, 2005-06.  However, as

per the High Court, these income tax returns were irrelevant and could not be

taken into consideration as accident occurred way back in the year 1988 and,

therefore,  compensation  had  to  be  fixed  with  reference  to  the  date  of  the

accident when the claimant was a boy of 18 years only.  Instead, only addition

is made by the High Court, that too on some other count.  It has noted that the

appellant would require services of a driver till he attains age of 70 years, which

is a normal expected lifespan.  Though, no evidence was led in support of this

claim, the High Court has awarded an additional lumpsum damages in the sum

of  Rs.  50,000/-  on  this  account,  given the  nature  of  disability  and physical

disfigurement suffered by the appellant.   

8) The appellant, thereafter, preferred a review petition under Order LXVII Rule 1

of the Code of Civil Procedure seeking review of the judgment dated 17th May,

2016 rendered by the High Court.  It was pointed out that there was an error

committed  by  the  MACT  as  it  had  applied  the  multiplier  of  17,  whereas

multiplier of 18 should have been adopted while calculating the compensation

towards loss of income, going by the fact that the appellant was only 18 years

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of age when he suffered the injuries.  This plea has been accepted by the High

Court thereby applying the multiplier of 18, instead of 17 which has resulted in

enhancement  of  compensation  by  Rs.24000/-  together  with  corresponding

interest.  Main judgment dated 17th May, 2016 as well as order dated 19th May,

2017 passed in review petition are the subject matters of the present appeals.

9) Mr. Arun Mohan, learned senior counsel appearing for the appellant has made

two-fold submissions which are paraphrased in the following manner:

(i) In the first instance, it is submitted that the MACT as well as the High

Court have erred in computing the future earning by fixing the income at the

rate of Rs.5000/- only while assessing the loss of future earnings. No doubt,

submitted  the learned senior  counsel,  the appellant  was  only a  student  and,

therefore, there was no real earning at that stage.  Only future prospects can be

taken into consideration, as per the law laid down by this Court in a series of

judgments.  However,  submission  of  learned  senior  counsel  was  that  while

assessing the loss of future earning, the Court should have regard to the family

background of the victim, the institution in which he is getting education, his

potential to adopt the career he desired to choose, career prospects in view of

attendant circumstances etc. In this hue, Mr. Arun Mohan submitted that the

appellant belongs to a family of lawyers as both his parents were senior lawyers

practicing in Supreme Court.  Because of this family background, the appellant

also wanted to join legal profession.  Though, at the time of accident, he was

studying in school, after school he intended to pursue his studies in law.  He, in

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fact,  did law and has joined the legal  profession,  which fact  was placed on

record, as by the time the appellant became a lawyer the case before MACT

was still pending.  Further, having regard to affluent family background, the

appellant at the time of accident was studying in prestigious Modern School,

Barakhamba Road, New Delhi.  All these circumstances clearly indicated that

the appellant had a bright future and, therefore, his future earnings could not be

considered  without  keeping  in  view  the  aforesaid  factors.   In  such

circumstances, loss of future earning prospects by treating the future earnings at

the rate of Rs.5000/- only was abysmally low.   He also submitted that though in

the review petition filed before the High Court, specific ground to this effect

was taken, it has not even been considered by the High Court.

(ii) Second submission of Mr. Arun Mohan was a passionate plea aimed at

reforming the system at following levels:

(a) On-road safety and grant of adequate compensation to the

victims without any delay.  For ensuring expeditious settlement of

claims,  resort  to  alternate  means which  may include  innovative

measures.

(b) Taking  adequate  steps  including  adopting  innovative

measures, to ensure fast track disposal of cases by MACTs.

(c) Ensuring  receipt  of  compensation  in  the  safe  hands  of

victims and/or kiths and kins of victims, that too over a sustained

period.

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10) Detailed  submissions  on  these  aspects  and  suggestions  of  Mr.  Arun

Mohan are as under:

"Road Safety and Compensation

IT  is  perceived  that  of  road  accidents  (1,40,000  dead  per  year  and 5,00,000 injured per year), less than 10% reach the MACT with claims. Almost 90% do not have Access to Justice. And of the 10% or so who do reach MACT, the questions arise: 1. What is the ‘Cost’ to the State judiciary and insurance sector for adjudication of these claims? 2. What are the time delays? 3.  On what income source do the dependents/injured survive during pendency till the payout? 4. Of the ultimate payout, how much actually reaches the recipients and how much is lost? 5. After, say, five years of receiving the compensation, what actually remains with the majority of the recipients?

These were some disturbing questions on a ground level survey.

Put differently, firstly, as most are poor, there is hardly any access to justice; the court resources are wasted; there are delays and difficulties and slicing away (cut) from the payout; and little safety for the money that is received.

As a Solution to these problems, there are two proposals:

1. establishing a Motor Accidents Mediation Authority (MAMA) in every district;

2. making it compulsory for the accident investigator to:

(a) send a copy of his Report to MAMA; (b) send e-mail to National Road Safety Council’s cell

identifying  the  accident  spot  and  how  similar  accidents  could  be prevented in future.

MAMA will follow the following procedure:

1. MAMA will then issue notices to the claimants and others.

2. interim compensation (with recourse) of few thousand rupees a month  pending  adjudication  as  direct  credit  to  Aadhaar  linked  bank account;

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3. completion of paperwork at MAMA;

4. mediation proceedings at MAMA;

5. complete safety in the hands of the recipient.

The amount settled is not given as rupees (or even FDRs), but as Annuity Certificates, which have more return for the same value-meaning lesser payout by the insurance sector with full receipt by the claimant.”

11) He  further  submitted  that  this  Court  may  consider  a  direction  to  the

Government to frame these procedures and schemes. LIC/RBI can provide for

availability  of  Annuity  Certificates  in  consultation  with  the  Pension  Fund

Regulatory and Development Authority and the commercial  Banks/insurance

companies.

12) To facilitate appreciation and implementation, he gave two flowcharts as

below:

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13) In the Flowchart-1 (under the existing law), a direction from this Court is

sought to all MACTs to compulsorily refer motor accident cases to the District

Mediation Authority which will serve the purpose till the Government amends

the Statute.  Flowchart - 2 shows where the amended statute and the rules can

provide for  establishing a  Motor  Accident  Mediation Authority  (MAMA) in

every district in the country.  He also suggested that rules can provide for every

accident  investigator  to  send information to  :  (1)  MAMA; and (2)  National

Road Safety Council’s Cell.

14) Speaking with an optimist tone, Mr. Mohan submitted that there is a hope

that with a provision for MAMA:

(1) access to justice will substantially increase;

(2) the court costs will reduce;

(3) insurance sector costs (as payout) will reduce;

(4) Annuity  Certificates  of  the  payout  will  nearly  eliminate  the  ‘slicing

away’; and

(5) the  actual  benefit  to  the  recipients  will  be  far  more  (with  Annuity

Certificates) than it is at present.

15) Mr. Salil  Paul,  learned counsel  appearing  for  the  Insurance  Company

advanced  his  argument  on  the  quantum  of  compensation  based  on  future

prospective.  His submission was that the yardstick adopted by the courts below

in  fixing  the  income  based  on  future  prospective  on  the  basis  of  which

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compensation  is  given  to  the  appellant  is  in  tune  with  various  judgments

rendered by this Court as well as the High Court. Therefore, no interference was

called for, insofar as grant of compensation is concerned.  He referred to certain

judgments in support.

16) With reference to the second submission of Mr. Arun Mohan, Mr. Salil

Paul gave a positive response with the plea that since suggestions given by Mr.

Arun Mohan were in larger public interest for reformation of the system, he had

no objection if the Court issues appropriate directions in this behalf.  At the

same time, he also pointed out  that  insofar  as speedy disposal  of  cases and

payment  of  compensation  to  the  victims,  particularly,  young  victims  are

concerned, the High Court of Delhi had given directions on the basis of which

Claims  Tribunal  Agreed  Procedure  was  approved  by  High  Court  of  Delhi.

Modified version thereof has now been approved as recent as on 7th December,

2018 which takes care of the speedy disposal as well as periodical payments to

be made to the young victims over a period of time.   Mr. Salil Paul placed on

record  the  relevant  judgments  as  well  as  Modified  Claims  Tribunal  Agreed

Procedure approved by the Delhi High Court vide orders dated 7th December,

2018.   

17) We now proceed to discuss the merits of the aforesaid two proposition

advanced before us.   

(I) Assessment of Compensation:

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Admittedly, the appellant was a student studying in a school.  He was not

doing any job or was in any vocation and, thus, was not earning anything.  The

loss of future earning is to be assessed on the aforesaid basis.  Before adverting

to the arguments that are raised by Mr. Arun Mohan and taken note of above, it

would be appropriate to scan through certain judgments cited before us by both

the parties in order to decipher the principles for  determining loss of future

earning in such circumstances.  First case which we would like to refer is the

judgment in the case of  Arvind Kumar Mishra v.  New India Assurance Co.

Ltd., (2010) 10 SCC 254.  In that case also, the appellant who was a victim of

accident, was a student.  He was in the final year of engineering which he was

doing  from a  reputed  college.   He  had  a  brilliant  academic  record,  having

passed all  semester  examinations with distinction.   In the accident that  took

place,  the  appellant  suffered  multiple  injuries  which  led  to  70% permanent

disability.   This  disability  rendered  him  incapacitated  which  had  the

consequence of dashing forever his dream of becoming Mechanical Engineer,

studies for which career he had undertaken.  On the aforesaid facts, his future

earning  were  assessed  at  Rs.60,000/-  per  annum  by  taking  salary  and

allowances payable to Assistant Engineer in public employment.  This future

earning was discounted at 30% on the basis of which multiplicand was taken at

Rs.42,000/- per annum.  Going by his age which was 25 years at the time of

accident, multiplier of 18 was applied and on that basis, compensation towards

loss of future earning was assessed at Rs.7,56,0000/-.

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Second case to which reference is made is Oriental Insurance Company

Limited  v.  Deo Patodi & Ors., (2009) 13 SCC 123.  Here, the victim was a

brilliant student and while a student, he was also earning Rs.80,000/- per month

in a job on part-time basis in the United Kingdom.  He had not accepted a job

offered  by  a  US  based  company  at  a  salary  of   Rs.18  lakhs  per  annum.

However, at the time of accident, he was not working.  Accident took place on

June 12, 2003 when he was 22 years of age.  He suffered head injuries which

proved  fatal  and  he  died  within  six  days  i.e.  on  June  18,  2003.   While

computing the compensation under the head ‘loss of dependency’ (he was the

only son of the claimant), the Tribunal as well as the High Court held that the

deceased would have earned only Rs.18,000/- per month.  This Court, in appeal,

however, considered the aforesaid estimation of income to be on lower side and

the Court decided to fix the earning at Rs.25,000/- per month, which was 1/3rd

of  the amount  that  he was receiving in  the United Kingdom.  The relevant

discussion in this behalf runs as under:

"8. The question in regard to the calculation of loss of dependency, it is trite, would vary from case to case. The fact that the deceased was a brilliant  student  is  not  in  dispute.  He  had  graduated  in  Business Administration in the UK. Even as a student, in a job on a part-time basis he was being paid a salary of Rs 80,000 per month (UK £1008.31). He paid his income tax even in the UK. After his graduation, he came back to  India.  He  was  offered  a  job  as  EU  Controller  by  GOA LLC,  a company based in Chicago, USA at an annual salary of Rs 18 lakhs (i.e. $41,600). However, when the accident took place he was not working; having not accepted the said offer. He was still a student. It would have been hazardous for the Tribunal to calculate the amount of compensation towards the loss of dependency on that basis.

9. The Tribunal and the High Court, however, in our opinion, keeping in view the aforementioned backdrop might not be correct in holding that

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he would have earned only Rs 18,000 per month. It is true that the cost of living in the western countries would be higher. The standard of living in  the  western  countries  cannot  be  followed;  in  the  absence  of  any material placed before this Court it should not be followed in India. Even in  a  case  where  the  victim of  an  accident  was  earning salary  in  US dollars, this Court opined that a lower multiplier should be applied.

10. In United India Insurance Co. Ltd. v. Patricia Jean Mahajan [(2002) 6 SCC 281] this Court held: (SCC pp. 294-95, paras 19-20)

“19. In the present case we find that the parents of the deceased were 69/73 years. Two daughters were aged 17 and 19 years. The main question, which strikes us in this case is that in the given circumstances the amount of multiplicand also assumes relevance. The total amount of dependency as found by the learned Single Judge  and also  rightly  upheld  by the  Division  Bench comes  to 2,26,297  dollars.  Applying  multiplier  of  10,  the  amount  with interest and the conversion rate of Rs 47, comes to Rs 10.38 crores and  with  multiplier  of  13  at  the  conversion  rate  of  Rs  30  the amount comes to Rs 16.12 crores with interest. These amounts are huge indeed. Looking to the Indian economy, fiscal and financial situation, the amount is certainly a fabulous amount though in the background of American conditions it may not be so. Therefore, where there is so much of disparity in the economic conditions and affluence  of  the  two  places  viz.  the  place  to  which  the  victim belongs and the  place where  the  compensation is  to  be  paid,  a golden  balance  must  be  struck  somewhere,  to  arrive  at  a reasonable and fair mesne. Looking by the Indian standards they may not  be  much  too  overcompensated  and  similarly  not  very much under compensated as well, in the background of the country where  most  of  the  dependent  beneficiaries  reside.  Two  of  the dependants,  namely, parents  aged 69/73 years  live  in  India,  but four  of  them  are  in  the  United  States.  Shri  Soli  J.  Sorabjee submitted that the amount of multiplicand shall surely be relevant and  in  case  it  is  a  high  amount,  a  lower  multiplier  can appropriately be applied. We find force in this submission. …

20.  The  court  cannot  be  totally  oblivious  to  the  realities.  The Second Schedule while prescribing the multiplier, had maximum income of Rs 40,000 p.a. in mind, but it is considered to be a safe guide  for  applying  the  prescribed  multiplier  in  cases  of  higher income also but in cases where the gap in income is so wide as in the present case income is 2,26,297 dollars, in such a situation, it cannot  be  said  that  some  deviation  in  the  multiplier  would  be impermissible. Therefore, a deviation from applying the multiplier as provided in the Second Schedule may have to be made in this case.  Apart  from  factors  indicated  earlier  the  amount  of multiplicand also becomes a factor to be taken into account which

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in this case comes to 2,26,297 dollars, that is to say an amount of around Rs 68 lakhs per annum by converting it at the rate of Rs 30. By Indian standards it is certainly a high amount. Therefore, for the  purposes  of  fair  compensation,  a  lesser  multiplier  can  be applied to a heavy amount of multiplicand.”

The said decision, however, to some extent was clarified by this Court in Punjab National Bank v. Indian Bank [(2003) 6 SCC 79] .

11. It is in the aforementioned situation, we are of the opinion that the fair amount of compensation should have been calculated at Rs 25,000 per month being about one-third of the amount which he was receiving in the UK.”

18) We may also take note of one judgment of High Court of Delhi in MAC. APP. No.

135  of  2008  titled  ‘New India  Assurance  Co.  Ltd. v. Ganga  Devi  & Ors.’ decided  on

November 23, 2009.  In that case also, accident resulted in death of the victim, named, Dr.

Brij Mohan.  He was 24 years of age at the time of accident and had completed his

MBBS.  He was doing one year internship and was getting stipend of Rs.5,000/-

per month.  The deceased had cleared the UPSC examination for the post of

Medical Officer and was scheduled to be appointed as Medical Officer after

completing the internship. Evidence of PW-2, Senior Assistant of the Hospital,

where  the  deceased  was  interning,  was  produced  who  deposed  that  after

completing his internship, there was a possibility of getting absorbed as Junior

Resident Doctor in the same hospital at salary of Rs.18,000/- to Rs.20,000/- per

month.

19) The Tribunal took the view that the aforesaid evidence was insufficient to

prove  the  income.   Accordingly, it  took the  minimum wages  of  a  graduate

worker as Rs.3,543/- per month and added 50% towards inflation and rise in

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price index.   From this,  1/3rd was deducted towards personal  expenses and

multiplier  of  11  was  applied  to  compute  the  loss  of  dependency  at

Rs.9,35,352/-. The High Court set aside the order of the Tribunal holding that

evidence  of  PW-2  was  believable.   On  that  basis,  income  was  taken  at

Rs.18,000/-  per  month  to  which  50%  was  added  towards  future  prospects,

following  the  judgment  of  this  Court  in  Sarla  Verma  v.  Delhi  Transport

Corporation, (2009) 6 SCALE 129.  Deduction towards personal expenses was

made on which multiplier of 13 was applied.   

20) The aforesaid cases are of all those victims who were students at the time

of accident and were not in actual employment.  In addition, Mr. Arun Mohan

had also referred to the judgment in N. Manjegowda v. Manager, United India

Insurance Company Limited, (2014) 3 SCC 584, where victim of an accident

was a young advocate aged about 36 years.  In the accident, he sustained whole

body disability of  50%.  This judgment is cited for the purpose of showing

principle laid down by the Court in determining the loss of earning capacity of

an advocate who suffers disability in an accident.  The Tribunal had assessed

the loss of future income due to disability at Rs.6,17,500/- per annum.  The

High Court reduced the same to Rs.1,50,000/-.  This Court noted that due to the

said accident, the appellant had suffered partial sensory loss all over his limbs

and there was lack of  proper coordination in all  four limbs.   He needed an

assistance for daily routine work.  This kind of disability, in the opinion of the

Court, hindered his ability to practice as an advocate and compete with others in

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the field of legal profession.  He was bound to suffer huge professional loss in

the said condition.  This Court, in the aforesaid circumstances, took the view

that loss of future income fixed at Rs.6,17,500/- did not require any deduction.

On  the  contrary,  the  loss  of  earning  should  be  treated  as  70%  and  the

appropriate multiplier should be 16 in place of 13.  On that basis, the loss of

income due to disability needed enhancement from Rs.6,17,500/- by at  least

Rs.4,00,000/-  and  the  compensation  under  the  head  loss  of  income  due  to

disability was worked out accordingly.   

21) It would be also appropriate to take note of certain judgments dealing

with the assessment of loss of future earnings on account of disability suffered

as a result of accident, even when these cases pertain to those victims who were

having their earnings, as these cases would throw light on the general principles

which were laid down for assessing such a loss.

22) In the case of  Raj Kumar  v.  Ajay Kumar & Anr.,  (2011) 1 SCC 343,

where  the  victim suffered  45% disability  to  left  lower  limb and  permanent

functional  disability of  25%, the Court  held that  it  is  a functional  disability

which would be the operative criteria for assessing the loss of future earnings

and  not  physical  disability.   There  is  a  detailed  and  lucid  discussion  of

assessment of future loss of earning due to permanent disability, covering all

possible  facets  and  discussing  every  nuance  of  the  subject  matter.   After

explaining  the  meaning  of  permanent  disability  and  contrasting  it  with

temporary  disability  and  also  the  manner  in  which  permanent  disability  of

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different  limbs  expressed  by  Doctors  in  the  Disability  Certificates  is  to  be

interpreted, the Court clarified that the assessment of compensation under the

head of loss of future earnings would depend upon the effect and impact of such

permanent  disability  on  his  earning  capacity.    The  manner  in  which  the

assessment is to be carried out is contained in the following passages in the said

judgment:

"12.   Therefore,  the Tribunal  has to first  decide whether  there is  any permanent disability and, if so, the extent of such permanent disability. This means that the Tribunal should consider and decide with reference to the evidence:

(i) whether the disablement is permanent or temporary;

(ii)  if  the  disablement  is  permanent,  whether  it  is  permanent  total disablement or permanent partial disablement;

(iii)  if  the  disablement  percentage is  expressed with reference to  any specific limb,  then the effect  of  such disablement  of  the limb on the functioning of the entire body, that is, the permanent disability suffered by the person.

If the Tribunal concludes that there is no permanent disability then there is no question of proceeding further and determining the loss of future earning capacity. But if the Tribunal concludes that there is permanent disability then it will proceed to ascertain its extent. After the Tribunal ascertains the actual extent of permanent disability of the claimant based on the medical evidence, it  has to determine whether such permanent disability has affected or will affect his earning capacity.

13.  Ascertainment of the effect of the permanent disability on the actual earning capacity involves three steps. The Tribunal has to first ascertain what  activities  the  claimant  could carry on in  spite of  the permanent disability and what he could not do as a result of the permanent disability (this is also relevant for awarding compensation under the head of loss of amenities  of  life).  The  second  step  is  to  ascertain  his  avocation, profession and nature of work before the accident, as also his age. The third step is to find out whether (i) the claimant is totally disabled from earning any kind of livelihood, or (ii) whether in spite of the permanent disability, the claimant could still effectively carry on the activities and functions,  which  he  was  earlier  carrying  on,  or  (iii)  whether  he  was prevented  or  restricted  from  discharging  his  previous  activities  and

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functions, but could carry on some other or lesser scale of activities and functions  so  that  he  continues  to  earn  or  can  continue  to  earn  his livelihood.

xx xx xx

19. We may now summarise the principles discussed above:

(i)  All  injuries  (or  permanent  disabilities  arising from injuries),  do not result in loss of earning capacity.

(ii) The percentage of permanent disability with reference to the whole body  of  a  person,  cannot  be  assumed to  be  the  percentage  of  loss  of earning capacity. To put it differently, the percentage of loss of earning capacity is not the same as the percentage of permanent disability (except in a few cases, where the Tribunal on the basis of evidence, concludes that the percentage of loss of earning capacity is the same as the percentage of permanent disability).

(iii)  The doctor who treated an injured claimant or who examined him subsequently  to  assess  the  extent  of  his  permanent  disability  can  give evidence only in regard to the extent of permanent disability. The loss of earning capacity is something that will have to be assessed by the Tribunal with reference to the evidence in entirety.

(iv) The same permanent disability may result in different percentages of loss of earning capacity in different persons, depending upon the nature of profession, occupation or job, age, education and other factors.”

23) From the conjoint reading of the aforesaid judgments, inter alia, following principles

can be culled out which would be relevant for deciding the instant appeal:

(i) In those cases where the victim of the accident is not an earning person but a student,

while assessing the compensation for loss of future earning, the focus of the examination

would be the career prospect and the likely earning of such a person in future.  For example,

where the claimant is pursuing a particular professional course, the poseer would be: what

would have been his income had he joined a service commensurating with the said course.

That can be the future earning.

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(ii) There may be cases where the victim is not, at that stage, doing any such course to get

a particular job.  He or she may be  studying in a school.  In such a case, future career would

depend upon multiple factors like the family background, choice/interest of the complainant

to pursue a particular career, facilities available to him/her for adopting such a career, the

favourable  surrounding circumstances  to  see  which  would  have  enabled  the  claimant  to

successfully pick up the said career etc.

If the chosen field is employment, then the future earning can be taken on the basis of

salary and allowances which are payable for such calling.  In case, career is a particular

profession, the future earning would depend on host of other factors on the basis of which

chances to achieve success in such a profession can be ascertained.

(iii) There  may  be  cases  like  Deo Patodi  where  even a  student,  the  claimant

would have made earnings on part-time basis or would have received offer for a

particular job.  In such cases, these factors would also assume relevance.

(iv) After  ascertaining  the  likely  earning  of  the  victim  in  the  aforesaid

manner, the nature of injuries and disability suffered as a result thereof would

be kept in mind while determining as to how much earning has been affected

thereby.  Here, impact of injuries on functional disability is to be seen.  In case

of  death  of  victim,  it  would  result  in  total  loss  of  earning.   In  the  case  of

injuries,  the  nature  of  disability  becomes  important.   Such  an  exercise  was

undertaken in N. Manjegowda case.

24) The relevant factors which are brought on record by the learned senior

counsel for the appellant are these: the appellant belongs to a family of lawyers

as  both  his  parents  were  senior  lawyers  practicing  in  the  Supreme  Court.

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Because  of  his  family  background,  the  appellant  also  wanted  to  join  legal

profession,  even though at  the time of  accident,  he was studying in  school.

Having  regard  to  affluent  family  background,  the  appellant  at  the  time  of

accident was studying in prestigious Modern School, Barakhamba Road, New

Delhi.  All these circumstances clearly indicated that the appellant had a bright

future  and,  therefore,  his  future  earnings  could  not  be  considered  without

keeping in view the aforesaid factors.  The appellant also produced evidence in

respect of his disability.  This disability does not indicate much loss of prospects

in earning as it is similar to N. Manjegowda case.  Of course, his movements

are restricted and he needs a Driver as he is not in a position to drive the car

himself.  This would hinder the earning capacity to some extent, though not

significant extent.   

25) From the judgment of the MACT, we find that, on this aspect, it has

followed judgment  of  Arun Sondhi  v.  Delhi  Transport  Corporation,

(2001) ACJ 1779 and has awarded the compensation at Rs.4,08,000/-.

It has also added Rs.75,000/- on account of 40% permanent disability

on the ground that apart from resulting in loss of income, it has severe

impact  on  the  life  of  the  appellant  as  a  whole.   The  figure  of

Rs.4,08,000/- is calculated in the following manner:

"42.   Learned  counsel  for  petitioner  has  argued  at  length  that  a substantial  amount  of  compensation  is  required to  be  awarded to  the petitioner on account of loss of earning capacity in future.  It has been stated that on account of injuries suffered in the accident the income of the  petitioner  has  reduced  to  60%  of  what  he  could  have  earned otherwise.  I consider that this argument raised by learned counsel for the

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petitioner cannot be accepted.  The petitioner was student at the time of accident.  He started his career after around 5 years of accident.  I do not say that the injuries did not have an adverse impact on the petitioner, but to quantify the same in the manner claimed by the petitioner may not be just.  In this regard, I consider that the guidance can be taken from the case of Arun Sondhi v. Delhi Transport Corporation, 2001 ACJ 1779. In this case, the injured was a student of 21 years and he had suffered disability of 100%.  In L.P.A. the loss of future earning was assessed at Rs.5000/-  p.m.  and  after  adopting  multiplier  of  16  compensation  of Rs.10,80,000/- was allowed.  If the same principle is adopted and future earning is taken at Rs.5000/- p.m. and the disability of 40%, the monthly loss of income comes to Rs.2000/- p.m. or Rs.24,000/- p.a.  It is a settled proposition that in the case of permanent disability the multiplier is to be adopted according to the age at the time of trial.  In this case adopting this  principle  if  the  multiplier  of  17  is  adopted  the  compensation  on account  of  loss  of  future  income  comes  to  Rs.24,000/-  x  17  = Rs.4,08,000/-.”

26) As can be seen from the above, loss of future earning is assessed

at Rs.2,000/- per month or Rs.24,000/- per annum.  In the process, the

MACT has not considered future prospects having regard to the relevant

facts  pointed  out  above  which  should  have  been  taken  into

consideration.  At the same time, it is the functional disability which has

to be kept in mind.  Though, not very seriously, the functional capacity

has been impaired because of the disability suffered by the appellant as

the appellant cannot run around like other young advocates of his age.

Going by the overall circumstances, we are of the opinion that in case of

the appellant, loss of future earning can be fixed at Rs.5,000/- per month

i.e. Rs.60,000/- per annum on which multiplier of 18 is to be applied.

Calculated  in  this  manner,  the  loss  future  earning  comes  to

Rs.10,80,000/-.   The  appellant,  thus,  would  be  paid  another  sum of

Rs.6,54,000/-  under  this  head along with interest  as awarded by the

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Court below.  We may place on record the statement of Mr. Arun Mohan

that  the  appellant  has  volunteered  to  give  this  amount  to  any

Government  or  public  charitable  organisation  working  towards  road

safety.  We appreciate this gesture of the appellant.  We leave it to the

appellant  to  donate  the  amount  to  any  particular  organisation  of  his

choice.   Alternatively, it  can  also  be  given  for  MAMC project  by  the

appellant.  Choice would entirely be that the appellant.

(II) With this, we advert to the second proposition advanced by Mr. Arun Mohan.  At the

outset, we would like to point out that this aspect pertains to the reforms that can be brought

insofar as payment of compensation to the victims of road accidents is concerned.  We would

also like to commend the suggestions given by Mr. Arun Mohan to bring about such reforms

which are visionary in nature.  The two aspects which he has highlighted are taken up for

discussion in seriatim.

(A)     ROAD SAFETY AND COMPENSATION:

27) Focus here is to ensure access to justice for road accident victims and also to bring

about a mechanism which prevents delays and other obstacles in awarding compensation to

road accident victims.  The suggestion of Mr. Arun Mohan for establishing a MAMA in every

District is worthy of acceptance.  Whatever steps are taken by the authorities for reducing

road accidents, harsh reality is that accidents would keep on happening.  There may be a

possibility  of  reducing the   number  of  road accidents,  but  occurrence  thereof  cannot  be

totally eliminated.  Such accidents, particularly fatal accidents, would always lead to filing of

claims by the victims and/or kith and kin of victims, for compensation.  Fatal accidents also

trigger prosecution of the driver who was negligent and rash in driving which caused the

accident. Insofar as disputes regarding claims are concerned, there is a need to resolve the

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same at the earliest inasmuch as compensation money may be badly needed by the claimants

for so many reasons and delay may bring insurmountable sufferings of various kind.  Having

regard to the fact that large number of accidents are giving rise to phenomenal quantum jump

in such cases, methods need to be adopted for quick resolution.  Here, mediation as a concept

of dispute resolution, even before dispute becomes part of adversarial adjudicatory process,

would  be  of  great  significance.   Advantages  of  mediation  are  manifold.   This  stands

recognised by the Legislature as well as policy makers and need no elaboration.  Mediation is

here to stay.  It is here to evolve.  It is because of the advantages of mediation as a method

here to find new grounds.  It is here to prosper, as its time has come.  It is now finding

statutory recognition and has been introduced in few Statutes as well.   Examples are the

Companies  Act,  Insolvency and Bankruptcy  Code,  Commercial  Courts  Act  etc.  In  these

enactments provisions are made even for pre-litigation mediation by making this  process

mandatory.  There is, in any case, umbrella provisions  in the form of Section 89 of the Code

of Civil Procedure which, inter alia, provides for court annexed mediation as well.  Time is

ripe now to have similar mechanism for settling accident claims as well.   Therefore,  the

suggestion  of  establishing  MAMA  is  laudable.  We  recommend  to  the  Government  to

examine the feasibility of setting up MAMA by making necessary amendments in the Motor

Vehicles Act itself.  In fact, the way mediation movement is catching up in this country, there

is a dire need to enact Indian Mediation Act as well.

28) Till the time such an amendment is made by the Parliament, National Legal Services

Authority (NALSA) should take up this work as a project.  A complete report/module be

made about the functioning of Motor Accident Mediation Cell (MAMC).  This exercise be

completed within a period of two months.  Thereafter, this project can be shared with all

State Legal Services Authorities (SLSA) so that State Legal Services Authorities implement

the same through their respective District Legal Services Authorities (DLSAs).

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29) There  is  Mediation  and  Conciliation  Project  Committee  (MCPC)  in  the  Supreme

Court which takes various policy decisions for better working of mediation, including court

annexed mediation.  Broadening the structure of MCPC, so as to have proper coordination

with High Court Mediation Centers as well as Mediation Centers at District Court Level is

achieved.  Thus, NALSA can even consider entrusting the project of MAMC to MCPC as

well.

30) In a book titled ‘Road Accidents: Prevention, Attention and Compensation’,  authored

by Mr. Arun Mohan, Senior Advocate various aspects pertaining to access to justice to road

victims are deliberated upon.  There is a specific chapter on the establishment of MAMA

which  can  be  of  immense  help  to  the  NALSA for  preparing  and  finalizing  the  project.

NALSA would  be  well-advised  to  take  into  consideration  the  suggestions  and proposals

given in  that  book.   It  may, inter  alia,  make a  provision for the accident  investigator  to

compulsorily send a copy of report to MAMC or email to National Road Safety Council.

Forwarding  the  copy  to  MAMC  shall  facilitate  mediation,  on  the  other  hand  giving

information to National Road Safety Council would help the council to take measures for

preventing such accidents in future.   

(B)  FAST TRACKING DISPOSAL OF CASES BY MACTs :

31) Establishment of MAMA/MAMC is for the purpose of resolving the claims before the

case is filed in the MACT.  It is a matter of common knowledge that for amicable settlement

of the cases pending before MACT, ADR in the form of Lok Adalat is resorted to, which has

achieved tremendous success over a period of time.  These Lok Adalats are also organised by

the Legal Services Authorities.  Settlement of cases by Lok Adalats have their own pros and

cons.  Be as it may, resort to Lok Adalat should continue because of its own advantages.

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32) Notwithstanding,  the  aforesaid  ADR  methods,  adjudicatory  process  before  the

MACTs is  indispensable.  There cannot  be a guarantee that 100% cases  would be settled

through mediation or Lok Adalat.  Therefore, there is a dire need for deciding these cases

without  delays  and  within  reasonable  period.    The  Delhi  High  Court  has  given  few

judgments providing for mechanism to speed up the disposal of such cases and to ensure that

schemes are settled within a period of 90/120 days from the date of accident.  In nutshell,

these directions include that on the occurrence of accident, the police which comes into the

picture in the first instance, should complete the investigation and along with filing of FIR

before the concerned Court of Metropolitan Magistrate, copies are sent to MACT as well as

Insurance Company also.  Insurance Company is supposed to look into the same to find out

as to whether the claim is payable and within 30 days it should respond to MACT and once

all these documents are before the MACT in the form of evidence etc. as well it would enable

the MACT to decide the case within 30 days.  The case where entire procedure is articulated

is judgment dated 16th December, 2009 in FAO No. 843 of 2003.  This Court has also given

its imprimatur in Jaiprakash v. National Insurance Company (SLP(Civil) No. 11801-11804

of 2005) in its order dated 13th May, 2016 in the following manner:

"Insofar as the said suggestion is concerned, learned Solicitor General drew  our  attention  to  the  response  filed  before  us  on  behalf  of  the General Insurance Council, in particular paragraph 4, which states that presently the procedure suggested in Paragraph 23 is being followed by the Insurance Companies in Delhi by way of a Scheme called "Claims Tribunal Agreed Procedure" which was formulated by the Delhi High Court in the judgment dated 16.12.2009 passed in FAO No.843 of 2003 in Rajesh Tyagi & Ors. v. Jaibir Singh 3 & Ors. It  is also mentioned therein that Tribunal as well as the Legal Service Authority are taking effective steps to implement the said procedure, which is being carried out in the National Capital Territory of Delhi. In paragraph 5, it is further submitted that since this procedure has been successful in Delhi it can be extended on pan India basis. The agreed procedure has also been filed as Annexure R5 with the response filed on behalf of the General Insurance Council.  

“We have  also  perused  the  procedure,  which  has  been  placed before us as Annexure R5 with the response which, in our view,

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appears to be a comprehensive one and that we can issue further directions  to  the  Registrar  General  of  the  Delhi  High  Court  to ensure  that  procedure  is  strictly  followed  insofar  as  Delhi  is concerned and also circulate the said procedure to  all  the other High Courts and the Registrar General of all the other High Courts are  directed  to  ensure  that  the  said  procedure  is  implemented through  the  Motor  Accidents  Claims  Tribunals  in  coordination with the Legal Service Authorities as well as the Director General of Police of the States concerned.

The Registry of the Supreme Court is directed to forward a copy of this order along with Annexure R5 (pages 32 to 46 in the response filed on behalf of the General Insurance Council) to all the High Courts including the Delhi High Court to ensure compliance of the present order.”

33) Vide  order  dated  6th November,  2017  in  Jaiprakash  case, this  Court

modified its order dated 13th May, 2016 and directed all States to implement the

Modified Claims Tribunal Agreed Procedure formulated by Delhi High Court

on 12th December, 2014.  The copy of the  Modified Claims Tribunal Agreed

Procedure was directed to be circulated to the Registrar General of each High

Court  for  necessary  compliance.   The  relevant  part  of  the  said  order  is

reproduced hereunder:

"It is also pointed out by learned amicus curiae that the order passed by Justice Midha referred to in our order of 13th May, 2016 was actually modified by Justice Midha on 12th December, 2014. The order dated 13th May, 2016 will, therefore, stand modified to the extent that Justice Midha has himself modified his earlier order on 12th December, 2014. The Registry will send a copy of this order as well as the order passed by Justice Midha on 12th December, 2014 to the Registrar General of each High Court for necessary information and compliance.”

34) This needs to be followed at All India Level.  NALSA should take up and

monitor the same as well in coordination and cooperation with various high

courts to facilitate the same.

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(C)  Ensuring receipt of compensation in the safe hands of victims  and/or

kiths and kins of victims:       

35) Mr. Arun Mohan has suggested that Government may frame procedures

and schemes in this behalf.  In particular LIC/RBI can provide for availability

of  annuity  services  in  consultation  with  Pension  Fund  Regulatory  and

Development  Authority  and the commercial  banks/insurance companies.   To

facilitate the same, the learned senior counsel has given two flowcharts,  one

under the existing law and the other on establishment of MAMA.  The details

for framing such procedure and schemes are given in the book of Mr. Arun

Mohan referred to above.  We impress upon the Government to look into the

feasibility  of  framing  such  schemes  and  for  the  availability  of  annuity

certificates.  This exercise may be done within the period of six months and

decision be taken thereupon.

36) In addition,  we would also like to mention that  the Delhi  High Court

(speaking through J.R. Midha, J.) in Rajesh Tyagi v. Jaiveer Singh and Others

(FAO No.  842 of  2003)  undertook the  exercise  of  framing Motor  Accident

Claims Annuity Deposit Scheme (MACAD Scheme) in cooperation with Indian

Banks Association.   Purpose  of  involving the  banks  was  to  ensure  that  the

Scheme is implemented through the banks.  In its order dated 7th December,

2018 passed in the aforesaid case, the learned Judge recorded that 21 banks had

taken decision to implement MACAD Scheme which was  approved by the

Court on 1st May, 2018.  Operative documents of these 21 banks were taken on

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record.  The court directed that sets of these operative documents be furnished

to the Registrar General of the High Court so that these are circulated to all the

MACTs.  Further, directions for implementation of the said Scheme are given.

Therefore, we would like to reproduce order dated 7th December, 2018 in its

entirety.

"1. Mr. Lalit Bhasin, learned counsel for Indian Bank Association has handed over copies of the operative documents of 21 Banks which have implemented  Motor  Accident  Claims  Annuity  Deposit  Scheme (MACAD Scheme)  approved  by  this  Court  on  01st  May, 2018.  The compilations  of  the  operative  documents  of  21  banks  are  taken  on record. Learned counsel for the Indian Bank Association shall furnish the sets  of  the  operative  documents  to  the  Registrar  General  for  being circulated  to  all  the  Claims  Tribunals.  2.  The  Registrar  General  is directed to circulate the aforesaid compilation to all the Claims Tribunals for being implemented forthwith. The Claims Tribunals shall  disburse the awarded amount to the claimants in a phased manner in terms of the order dated 01st May, 2018 and the award amount be disbursed through MACAD Scheme.  3.  All  the  Banks  are  directed  to  appoint  a  Nodal Officer within four weeks. Learned counsel for the IBA shall compile the list of all the Nodal Officers of the Banks with their respective addresses, phone numbers as well as e-mail addresses and submit the same to the Registrar General who shall circulate the list of Nodal Officers to all the Claims  Tribunals.  The  Nodal  Officer  of  each  Bank  shall  ensure  the implementation of the MACAD Scheme by their branches. The Claims Tribunal shall send the copy of the disbursement order by e-mail to the Nodal Officer of that Bank who shall ensure the disbursement by the Bank within three weeks of the receipt of the e-mail. 4. The Indian Bank Association and Delhi State Legal Services Authority shall give adequate publicity to MACAD Scheme in the print as well as digital media. 5. Claims  Tribunal  Agreed  Procedure  in  terms  of  the  order  dated  15th December,  2017  is  further  modified  to  incorporate  the  directions contained in orders dated 18th January, 2018, 09th March, 2018, 01st May, 2018, 20th July, 2018 and 07th September, 2018. The Modified Claims  Tribunal  Agreed  Procedure  is  annexed  to  this  order.  6.  The Registrar General shall circulate the Modified Claims Tribunal Agreed Procedure  to  all  the  Claims  Tribunals.  The  Claims  Tribunals,  Delhi Police and Insurance Companies are directed to implement the Modified Claims Tribunal Agreed Procedure with effect from 01st January, 2019. 7.  Learned  amicus  curiae  submits  that  the  Committee  is  deliberating upon the issues referred to it by this Court. Let the final report of the Committee be submitted before this Court on the next date of hearing. 8. List for reporting compliance on 08th February, 2019 at 02:30 P.M. 9.

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This  Court  appreciates  the  assistance  rendered  by  Mr.  Lalit  Bhasin, learned  counsel  for  Indian  Bank  Association  for  implementation  of MACAD Scheme. 10. Copy of this order along with Modified Claims Tribunal Agreed Procedure be sent to the Registrar General of this Court, National Legal Services Authority (NALSA), Delhi State Legal Services Authority (DSLSA), Delhi Police as well as General Insurance Council (5th Floor, Building No.14, National Insurance Building, Jamshedji Tata Road,  Churchgate,  Mumbai-400020).  General  Insurance Council  shall circulate  this  order  to  all  the  Insurance  Companies.  11.  Copy of  this order be given dasti to learned counsel for the parties as well as learned counsel for IBA and Delhi Police under signature of Court Master.”

37) Thus,  direction  for  implementation  of  the  ‘Claims  Tribunal  Agreed

Procedure’ which is  substituted  by modified  procedure,  as  noted  above,  are

already there.  However, we find that there is no proper implementation thereof

by the Claims Tribunals.  We, thus, direct that there should be programmes from

time to time, in all State Judicial Academies to sensitizing the presiding officers

of the Claims Tribunals, Senior Police Officers of the State Police as well as

Insurance Company for the implementation of the said Procedure.

38) The Modified Claims Tribunal Agreed Procedure as approved by High

Court  of  Delhi  in  its  aforesaid  order  dated  7th December,  2018  has  the

propensity to ensure speedy disposal of MACT cases.   Likewise, Operative

Documents of 21 documents which have implemented Annuity Deposit Scheme

can ensure that compensation is delivered to the persons for whom it is meant.

It has the element of annuity payments as well.  There is, therefore, a need to

implement the MACAD Scheme by the Claims Tribunals in the entire country.

We direct  accordingly.  We also  direct  21 banks to  implement  its  operative

documents on All India basis.    

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39) We sum up the various directions/recommendations hereinbelow:

(a) We impress upon the Government to also consider the feasibility of

enacting  Indian  Mediation  Act  to  take  care  of  various  aspects  of

mediation in general.

(b) The Government may examine the feasibility of setting up MAMA

by making necessary amendments in the Motor Vehicles Act.  For this

purpose, it can consider the two flow charts given by the appellant.

(c) In the interregnum, NALSA is directed to set up Motor Accident

Mediation  Cell  which  can  function  independently  under  the  aegis  of

NALSA or can be handed over to MCPC.  Such a project should be

prepared within a period of two months and it should start functioning

immediately thereafter at various levels as suggested in this judgment.

We reiterate the directions contained in order dated November 6, 2017

in  Jai Prakash  case for implementation of the latest Modified Claims

Tribunal Agreed Procedure.  For ensuring such implementation, NALSA

is directed to take up the same in coordination and cooperation with

various  High  Courts.   MACAD Scheme  shall  be  implemented  by  all

Claim Tribunals on All India basis.  21 Banks, Members of Indian Banks

Assocation,  who  had  taken  decision  to  implement  MACAD  Scheme

would do the same on All India basis.

(d) We impress upon the Government  to  look into the feasibility  of

framing  necessary  schemes  and  for  the  availability  of  annuity

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certificates.  This exercise may be done within the period of six months

and decision be taken thereupon.

(e) Likewise, we direct that there should be programmes from time to

time, in all State Judicial Academies, to sensitizing the Presiding Officers

of the Claims Tribunals, Senior Police Officers of the State Police as well

as Insurance Company for the implementation of the said Procedure.

40) The appeals are disposed of in the aforesaid manner.

.............................................J. (A.K. SIKRI)

.............................................J. (S. ABDUL NAZEER)

NEW DELHI; MARCH 05, 2019