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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.3723 OF 2012 (arising out of SLP (C) No. 24489 of 2010)

Santosh Devi … Appellant

Versus

National Insurance Company Ltd. and others … Respondents

J U D G M E N T

G.S. SINGHVI, J.

1. Leave granted.

2. Feeling  dissatisfied  with  the  enhancement  granted  by  the  Punjab  and  

Haryana  High  Court  in  the  amount  of  compensation  determined  by  Motor  

Accident Claims Tribunal, Gurdaspur (for short, ‘the Tribunal’) in MACT Case  

No. 97 of 1995, the appellant has filed this appeal.

3. Shri  Swaran  Singh  (the  appellant’s  husband)  died  in  a  road  accident  

when the Maruti car in which he was travelling with Varinder Singh (husband  

of respondent No. 2 and the father of respondent Nos. 3 and 4) went out of  

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control.  Varinder  Singh,  who was driving the vehicle  also suffered multiple  

injuries and died on the spot.

4. The appellant  and other legal  representatives  of  Swaran Singh filed a  

petition under Section 166 of  the Motor Vehicles Act,  1988 (for  short,  ‘the  

Act’) for award of compensation to the tune of Rs. 4 lacs.  They pleaded that  

the accident was caused due to rash and negligent driving of the Maruti car by  

Varinder Singh; that at the time of his death, the age of the deceased was about  

45 years and that he was earning Rs. 5,000/- per month by running a milk dairy  

and doing agriculture.  The legal representatives of Varinder Singh denied that  

the accident had occurred due to rash and negligent driving of the Maruti car. In  

the written statement filed on behalf of respondent No. 1, it was pleaded that the  

claim petition was not maintainable because the deceased, who was travelling  

in the car  cannot be treated as a third party and that the person driving the  

vehicle did not have valid driving licence. Respondent No.1 also controverted  

the claimant’s assertion about the income of Swaran Singh.

5. On the pleadings of the parties the Tribunal framed the following issues:

“1)   Whether  the  death  of  Swaran  Singh  not  amounting  to  culpable  homicide  took  place  on  account  of  the  rash  and  negligent driving of Maruti Car No. PB-035A-0090 driven by  Varinder Singh?

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2) To  what  amount  of  compensation  the  applicants  are  entitled? If so, from whom?

3) Relief.”

6. In support of the claim petition, the appellant examined herself and two  

other witnesses, namely, Bakhshish Singh and Surain Singh. Respondent No.1  

examined Milap Chand, Clerk, in the office of the District Transport Officer,  

Gurdaspur. On behalf of the legal representatives of Varinder Singh copies of  

driving licence, insurance policy and registration certificate were produced and  

marked as Exhibits R1 to R3.  

7. After  analysing  the  evidence  produced  by  the  parties,  the  Tribunal  

decided issue No.1 in the affirmative and held that the accident was caused due  

to rash and negligent driving of Maruti car by Varinder Singh. While dealing  

with issue No.2, the Tribunal adverted to the statement made by the appellant in  

her cross-examination that the deceased did not own any agricultural land and  

that  he  was  cultivating  land on lease  basis  and proceeded  to  determine  the  

amount of compensation by assuming his income as Rs. 1,500/- per month. The  

Tribunal was also of the view that two sons of the appellant, namely, Sulakhan  

Singh and Surjit Singh cannot be treated as dependants of the deceased because  

their age was 26 years and 23 years respectively.  The Tribunal deducted Rs.  

500/- towards personal expenses of the deceased and held that dependency of  

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the  appellant  and  other  family  members  would  Rs.1,000/-  per  month.  The  

Tribunal then applied the multiplier of 11 and declared that the claimants are  

entitled to compensation of Rs. 1,32,000/- with interest at the rate of 12 per cent  

per annum from the date of application.   

8. The High Court relied upon the judgment of this Court in Sarla Verma v.  

Delhi Transport Corporation (2009) 6 SCC 121, applied the multiplier of 14 and  

held that the claimants are entitled to total compensation of Rs.1,77,500/-  with  

interest at the rate of 7 per cent per annum on the enhanced amount from the  

date of appeal till realisation.  

9. Learned  counsel  for  the  appellant  relied  upon  the  judgment  in  Sarla  

Verma’s  case  and  argued  that  the  Tribunal  and  the  High  Court  committed  

serious error by not giving the benefit of 30 per cent increase in the income of  

the  deceased  which  he  would  have  earned  for  the  next  25  years.  Learned  

counsel further argued that the deduction of Rs.500/- towards personal expenses  

of  the  deceased  was  totally  disproportionate  to  size  of  his  family  and  the  

Tribunal and the High Court overlooked stark reality that it is impossible for a  

person  having  meagre  earning  of  Rs.  1,500/-  per  month  to  spend  1/3rd on  

himself  and  leave  2/3rd  of  his  income  for  five  dependants  including  three  

children.  He criticised the observations made by the Tribunal that Sulakhan  

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Singh  and  Surjit  Singh  could  not  be  treated  as  dependant  of  the  deceased  

because they were major and argued that in the absence of any evidence to the  

contrary, there was no reason to discard the testimony of the appellant that in all  

five family members were dependant on the deceased.     

10. Learned counsel for respondent No.1 submitted that the rule of 30 per  

cent addition in the income of the deceased as laid down in Sarla Verma’s case  

cannot  be  applied  to  a  case  like  the  present  one  because  the  deceased  was  

neither  in  Government  service  nor  he  was  a  permanent  employee  of  a  

corporation or company which may have ensured increase in his income from  

time to time.  He argued that those employed in unorganized sectors cannot be  

placed  at  par  with  Government  employees  and  those  employed  in  

agencies/instrumentalities of the State or private corporations/companies.   

11. We  have  considered  the  respective  arguments.  Although,  the  legal  

jurisprudence  developed  in  the  country  in  last  five  decades  is  somewhat  

precedent-centric,  the  judgments  which  have  bearing  on  socio-economic  

conditions of the citizens and issues relating to compensation payable to the  

victims of motor accidents,  those who are deprived of their land and similar  

matters  needs  to  be  frequently  revisited  keeping  in  view the  fast  changing  

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societal values, the effect of globalisation on the economy of the nation and  

their impact on the life of the people.   

12. In R.K. Malik v. Kiran Pal (2009) 14 SCC 1, the two Judge Bench while  

dealing with the case involving claim of compensation under Section 163-A of  

the Act, noticed the judgments in M.S. Grewal v. Deep Chand Sood (2001) 8  

SCC 151, Lata Wadhwa v. State of Bihar (2001) 8 SCC 197, Kerala SRTC v.  

Susamma Thomas (1994) 2 SCC 176, Sarla Dixit v. Balwant Yadav (1996) 3  

SCC 179  and  made  some  of  the  following  observations,  which  are  largely  

reflective  of  the  philosophy  that  victims  of  the  road  accidents  and/or  their  

family members should be awarded just compensation:

“In  cases  of  motor  accidents  the  endeavour  is  to  put  the  dependants/claimants  in  the  pre-accidental  position.  Compensation in cases of motor accidents, as in other matters,  is  paid  for  reparation  of  damages.  The  damages  so  awarded  should be adequate sum of money that would put the party, who  has  suffered,  in  the  same position  if  he  had not  suffered on  account of the wrong. Compensation is therefore required to be  paid  for  prospective  pecuniary  loss  i.e.  future  loss  of  income/dependency suffered on account  of  the wrongful  act.  However, no amount of compensation can restore the lost limb  or the experience of pain and suffering due to loss of life. Loss  of a child, life or a limb can never be eliminated or ameliorated  completely.

To put it simply—pecuniary damages cannot replace a human  life or limb lost. Therefore, in addition to the pecuniary losses,  the law recognises that payment should also be made for non- pecuniary  losses  on  account  of,  loss  of  happiness,  pain,  

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suffering  and  expectancy  of  life,  etc.  The  Act  provides  for  payment of “just compensation” vide Sections 166 and 168. It  is  left  to  the  courts  to  decide  what  would  be  “just  compensation” in the facts of a case.”

13. In  Sarla  Verma’s  case  (supra),  another  two  Judge  Bench  considered  

various  factors  relevant  for  determining  the  compensation  payable  in  cases  

involving motor accidents, noticed apparent divergence in the views expressed  

by  this  Court  in  different  cases,  referred  to  large  number  of  precedents  

including the judgments in U.P. SRTC v. Trilok Chandra (1996) 4 SCC 362,  

Nance v. British Columbia Electric Railway Co. Ltd. 1951 AC 601, Davies v.  

Powell Duffryn Associated Collieries Ltd. 1942 AC 601 and made an attempt to  

limit the exercise of  discretion by the Tribunals  and the High Courts in the  

matter of award of compensation by laying down straightjacket formula under  

different headings, some of which are enumerated below:

“(i) Addition to income for future prospects

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.  

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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.

(ii) Deduction for personal and living expenses

Though  in  some  cases  the  deduction  to  be  made  towards  personal and living expenses is calculated on the basis of units  indicated  in  Trilok Chandra,  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.

(iii) Selection of multiplier

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-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.”

14. We find it extremely difficult to fathom any rationale for the observation  

made in paragraph 24 of the judgment in Sarla Verma’s case that where the  

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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 naïve  

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.  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 extra efforts to generate additional  

income necessary for sustaining their families.  The salaries of those employed  

under the Central and State Governments and their agencies/instrumentalities  

have been revised 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 Government would be in five  

figures and total emoluments of those in higher echelons of service will cross  

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the figure of rupees one lac.  Although, the wages/income of those employed in  

unorganized sectors  has not  registered a corresponding increase and has not  

kept pace with the increase in the salaries of the Government employees and  

those employed in private sectors but it cannot be denied that there has been  

incremental enhancement in the income of those who are self-employed and  

even those engaged on daily basis, monthly basis or even seasonal basis.  We  

can take judicial notice of the fact that with a view to meet the challenges posed  

by high cost  of  living,  the persons falling in the latter  category periodically  

increase the cost of their labour.  In this context, it may be useful to give an  

example of a tailor who earns his livelihood by stitching cloths. 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  

unskilled labour, like, barber, blacksmith, cobbler, mason etc. Therefore, we do  

not think that while making the observations in the last three lines of paragraph  

24 of Sarla Verma’s 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 reasonable to say  

that a person who is self-employed or is engaged on fixed wages will also get  

30 per cent increase in his total income over a period of time and if he / she  

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becomes victim of accident then the same formula deserves to be applied for  

calculating the amount of compensation.  

15. It is also not possible to approve the view taken by the Tribunal which  

has been reiterated by the High Court albeit without assigning reasons that the  

deceased would have spent 1/3rd of his total earning, i.e.,  Rs. 500/-, towards  

personal expenses. It seems that the Presiding Officer of the Tribunal and the  

learned  Single  Judge  of  the  High  Court  were  totally  oblivious  of  the  hard  

realities of the life.  It will be impossible for a person whose monthly income is   

Rs.1,500/- to spend 1/3rd on himself leaving 2/3rd for the family consisting of  

five  persons.  Ordinarily,  such  a  person  would,  at  best,  spend  1/10 th of  his  

income on himself or use that amount as personal expenses and leave the rest  

for his family.   

16. The Tribunal’s observation that the two sons of the appellant cannot be  

treated dependant on their father because they were not minor is neither here  

nor there.  In the cross-examination of the appellant, no question was put to her  

about the source of sustenance of her two sons. Therefore, there was no reason  

for the Tribunal to assume that the sons who had become major can no longer  

be regarded dependant on the deceased.  

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17. In the result, the appeal is allowed, the impugned judgment as also the  

award of the Tribunal are set aside and it is declared that the claimants shall be  

entitled  to  compensation  of  Rs.2,94,840  [Rs.1,500  +  30%   of  Rs.1,500  =  

Rs.1,950  less  1/10th towards  personal  expenses  =  Rs.1,755  x  12  x  14  

=Rs.2,94,840].   The  claimants  shall  also  be  entitled  to  Rs.5,000/-  for  

transportation of the body, Rs.10,000/- as funeral expenses and Rs.10,000/- in  

lieu of loss of consortium.  Thus, the total amount payable to the claimants will  

be  Rs.3,19,840/-.   The  enhanced amount  of  compensation  i.e.  Rs.1,42,340/-  

(Rs.3,19,840 - Rs.1,77,500) shall carry interest of 7 per cent from the date of  

application till realisation.   

18. Respondent No.1 – Insurance Company is directed to pay to the appellant  

the total amount of compensation within a period of three months by getting  

prepared a demand draft in her name which shall  be delivered to her at the  

address given in the claim petition filed before the Tribunal.  While doing so,  

respondent  No.1  shall  be  free  to  deduct  the  amount  already  paid  to  the  

appellant.

…..……….....……..….………………….…J.               [G.S. SINGHVI]

…………..………..….………………….…J.      [SUDHANSU JYOTI MUKHOPADHAYA]

New Delhi, April  23,  2012.     

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