1    

REPORTABLE    

IN THE SUPREME COURT OF INDIA  

CIVIL APPELALTE JURISDICTION  

SPECIAL LEAVE PETITION (CIVIL) NO. 25590 OF 2014  

National Insurance Company Limited     …Petitioner(s)  

    Versus  

Pranay Sethi and Ors.         …Respondent(s)  

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

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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  

J U D G M E N T   

Dipak Misra, CJI.  

Perceiving cleavage of opinion between Reshma Kumari  

and others v. Madan Mohan and another1  and Rajesh and  

others v. Rajbir Singh and others2, both three-Judge Bench  

decisions, a two-Judge Bench of this Court in National  

Insurance Company Limited v. Pushpa and others3 thought it  

appropriate to refer the matter to a larger Bench for an                                                              1  (2013 ) 9 SCC 65  

2  (2013) 9 SCC 54  

3  (2015) 9 SCC 166

3    

authoritative pronouncement, and that is how the matters have  

been placed before us.  

2. In the course of deliberation we will be required to travel  

backwards covering a span of two decades and three years and  

may be slightly more and thereafter focus on the axis of the  

controversy, that is, the decision in Sarla Verma and others v.  

Delhi Transport Corporation and another4 wherein the two-

Judge Bench made a sanguine endeavour to simplify the  

determination of claims by specifying certain parameters.   

3. Before we penetrate into the past, it is necessary to note  

what has been stated in Reshma Kumari (supra) and Rajesh’s  

case.  In Reshma Kumari the three-Judge Bench was answering  

the reference made in Reshma Kumari and others v. Madan  

Mohan and another5. The reference judgment noted divergence  

of opinion with regard to the computation under Sections 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 Yadav6 ,  

                                                           4  (2009) 6 SCC 121  

5  (2009) 13 SCC 422  

6  (1996) 3 SCC 179

4    

Abati Bezbaruah v. Dy. Director General, Geological Survey  

of India7 and the principle stated by Lord Diplock in Mallett  v.  

McMonagle8 and  further referring to the statement of law in  

Wells v. Wells9 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 10   held that even dearness  allowance and perks with regard thereto from which  the family would have derived monthly benefit,  must be taken into consideration.  

47. One of the incidental issues which has also to  be taken into consideration is inflation. Is the  practice of taking inflation into consideration wholly  incorrect? Unfortunately, unlike other developed  countries in India there has been no scientific  study. It is expected that with the rising inflation  the rate of interest would go up. In India it does not  happen. It, therefore, may be a relevant factor which  may be taken into consideration for determining the  actual ground reality. No hard-and-fast rule,  however, can be laid down therefor.  

                                                           7  (2003) 3 SCC 148  

8  1970 AC 166: (1969) 2 WLR 767  

9  (1999) 1 AC 345  

10  (2008) 4 SCC 162

5    

48. A large number of English decisions have been  placed before us by Mr Nanda to contend that  inflation may not be taken into consideration at all.  While the reasonings adopted by the English courts  and its decisions may not be of much dispute, we  cannot blindly follow the same ignoring ground  realities.  

49. We have noticed the precedents operating in 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.”  

 4. In the said case, the Court considered the common  

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?”  

5. 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

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one specified in the Second Schedule. The courts, in  our opinion, should also bear that factor in mind.”  

6. Noticing the divergence of opinion and absence of any  

clarification from Parliament despite 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.  

7. The three-Judge Bench answering the reference referred to  

the Scheme under Sections 163-A and 166 of the Act and took  

note of the view expressed by this Court in U.P. State Road  

Transport Corporation and others v. Trilok Chandra and  

others11, 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 introduced 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  

                                                           11

(1996) 4 SCC 362

7    

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 Thomas12 case.  

18. 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 Rs 3000. The total should be 3000 × 15  = 45,000 but the same is worked out at Rs 60,000.  Similarly, in the second item the multiplier is 16  and the annual income is Rs 9000; the total should  have been Rs 1,44,000 but is shown to be Rs  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  

                                                           12

(1994) 2 SCC 176

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awareness of the background of the multiplier  system in Davies case.”  

[Underlining is ours]  

 8. The Court also referred to Supe Dei v. National Insurance  

Company Limited13 wherein it has been opined that the position  

is well settled that the Second Schedule under 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 compensation under  

Section 166 of the Act.  

9. After so observing, the Court also noted the authorities in  

United India Insurance Co. Ltd v. Patricia Jean Mahajan14,  

Deepal Girishbhai Soni v. United India Insurance Co. Ltd.15,  

and Jashuben (supra). It is perceivable from the pronouncement  

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 determination of  

liability and quantum of compensation were different for claims  

made under Section 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 determination of  

                                                           13

(2009) 4 SCC 513  14

(2002) 6 SCC 281  15

(2004) 5 SCC 385

9    

compensation in applications under Section 166. In Sarla  

Verma (supra), as has been noticed further in Reshma Kumari  

(supra), the Court found discrepancies/errors in the multiplier  

scale given in the Second Schedule Table and also observed that  

application of Table may result in incongruities.  

10. The three-Judge Bench further apprised itself that in Sarla  

Verma (supra) the Court had undertaken the exercise of  

comparing the multiplier indicated in Susamma Thomas  

(supra), Trilok Chandra (supra), and New India Assurance Co.  

Ltd v. Charlie and another16 for claims under Section 166 of  

the Act with the multiplier mentioned 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 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.”    

                                                           16

(2005) 10 SCC 720

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11. After elaborately analyzing what has been stated in Sarla  

Verma (supra), the three-Judge Bench referred to the language  

employed in Section 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. Jenkins17 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]  

                                                           17

1913 AC 1 : (1911-13) All ER Rep 160 (HL)

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12. And further:-  

“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.  

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13. 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.   

14. It is interesting to note here that while the reference was  

pending, the judgment in Santosh Devi v. National Insurance

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Company Limited and others18 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 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.  

15. 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.  

16. 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  

                                                           18

(2012) 6 SCC 421

14    

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 the  figure of rupees one lakh.  

17. Although the wages/income of those employed  in unorganised 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 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 unskilled labour like barber,  blacksmith, cobbler, mason, etc.  

18. Therefore, we do not think that while making  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 reasonable to say that a person who is  self-employed 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.”    

15. The aforesaid analysis in Santosh Devi (supra) may prima  

facie show that the two-Judge Bench has distinguished the

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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.   

16. Presently, we may refer to certain decisions which deal with  

the concept of binding precedent.  

17. In State of Bihar v. Kalika Kuer alias Kalika Singh and  

others19, 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  

                                                           19

(2003) 5 SCC 448

16    

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.”  

 18. In G.L. Batra v. State of Haryana and others20, 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. 21 , Sundarjas Kanyalal Bhatija v. Collector, Thane,  

Maharashtra22 and Tribhovandas Purshottamdas Thakkar v.  

Ratilal Motilal Patel 23 . It may be noted here that the  

Constitution Bench in Madras Bar Association v. Union of  

India and another 24  has clearly stated that the prior  

Constitution Bench judgment in Union of India v. Madras Bar  

Association25 is a binding precedent.  Be it clarified, the issues  

                                                           20

(2014) 13 SCC 759  21

(1985) 4 SCC 369  22

(1989)  3 SCC 396  23

AIR 1968 SC 372  24

(2015) 8 SCC 583  25

(2010) 11 SCC 1

17    

that were put to rest in the earlier Constitution Bench judgment  

were treated as precedents by latter Constitution Bench.   

19. In this regard, we may refer to a passage from Jaisri Sahu  

v. Rajdewan Dubey26:-  

“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.”  

                                                           26

AIR 1962 SC 83

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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.”  

20. 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 aforestated 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.   

21.  In the context, we may fruitfully note what has been stated  

in Pradip Chandra Parija and others v. Pramod Chandra  

Patnaik and others27.  In the said case, the Constitution Bench  

was dealing with a situation where the two-Judge Bench  

disagreeing with the three-Judge Bench decision directed the  

                                                           27

(2002) 1 SCC 1

19    

matter to be  placed before a larger Bench of five Judges of this  

Court. In that scenario, 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  

another28, 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 Singh29 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. …”  

  23. Be it noted, Chandra Prakash concurred with the view  

expressed in Raghubir Singh  and Pradip Chandra Parija.   

                                                           28

(2002) 4 SCC 234  29

(1989) 2 SCC 754

20    

24.  In Sandhya Educational Society and another v. Union  

of India and others 30 , it has been observed that judicial  

decorum 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 Pradesh31, the Court dwelt upon the issue what would  

be the consequent effect of the latter decision which had been  

rendered without noticing the earlier decisions.  The Court noted  

the observations in Raghubir Singh (supra) and reproduced a  

passage from Indian Oil Corporation Ltd. v. Municipal  

Corporation32  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 co- equal  Bench of  this Court did not and could not  do. …”  

 25. 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,  

                                                           30

(2014) 7 SCC 701  31

(2012) 4 SCC 516  32

(1995) 4 SCC 96

21    

it is not necessary that it should be a decision  rendered by the Full Court or a Constitution Bench  of the Court. …”  

 26. In Rajesh (supra) the three-Judge Bench had delivered the  

judgment on 12.04.2013. The purpose 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.  

9. 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

22    

as to make the compensation just, equitable, fair  and reasonable. There shall normally be no addition  thereafter.”  

 27. At this juncture, it is necessitous to advert to another three-

Judge Bench decision in Munna Lal Jain and another v. Vipin  

Kumar Sharma and others33 . In the said case, the three-Judge  

Bench commenting on the judgments stated thus:-  

“2. In the absence of any statutory and a  straitjacket 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  caveat stating “ordinarily”, “normally”, “exceptional  circumstances”, etc., while suggesting the formula.”  

28. After so stating, the Court followed the principle 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.”  

29. We are compelled to state here that in Munna Lal Jain  

(supra), the three-Judge Bench should have been guided by the  

                                                           33

(2015) 6 SCC 347

23    

principle stated in Reshma Kumari which has concurred with the  

view expressed in Sarla Devi or in case of disagreement, 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.  

30. In this context, we may also refer to Sundeep Kumar  

Bafna v. State of Maharashtra and another34 which correctly  

lays down the principle 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 reconcile  

its ratio with that of a previously pronounced judgment of a co-

equal 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 apprised itself of the law stated in  

                                                           34

(2014) 16 SCC 623

24    

Reshma Kumari (supra) but had been guided by Santosh Devi  

(supra).  We have no hesitation that it is not a binding precedent  

on the co-equal Bench.  

31. 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. 35 and  

the method in Davies v. Powell Duffryn Associated Collieries  

Ltd.36. 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  

                                                           35 1951 SC 601 : (1951) 2 All ER 448 (PC)  36 1942 AC 601 : (1942) 1 All ER 657 (HL)  

25    

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. …”  

 32. 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

26    

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.”  

33. Though we have devoted some space in analyzing 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 issue 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 increment, etc., what should be the addition as  

regards the future prospects. In Sarla Verma, the Court has  

made it as a rule that 50% of actual salary could be added if the  

deceased had a permanent job and if the age of the deceased is  

between 40 – 50 years and no addition to be made if the deceased  

was more than 50 years. It is further ruled that where deceased  

was self-employed or had a fixed salary (without provision for  

annual increment, etc.) the Courts will usually take only the  

actual income at the time of death and the departure is

27    

permissible only in rare and exceptional cases involving special  

circumstances.  

34. 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-employed or employed on fixed salary sans annual  

increments, etc.    

35. The submission, as has been advanced on behalf of the  

insurers, is that the distinction between the stable jobs at one  

end of the spectrum and self-employed at the other end of the  

spectrum with the benefit of future prospects being extended to  

the legal representatives of the deceased 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

28    

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.   

29    

36. Quite apart from the above, it is contended that the  

principle of standardization that has been evolved in Sarla  

Verma (supra) has been criticized 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  

expressed in Rajesh (supra) being not a precedent has to be  

overruled and the methodology stood in Sarla Verma  (supra)  

should be accepted.   

37. On behalf of the claimants, emphasis is laid on the concept  

of “just compensation” and what should be included within the  

ambit of “just compensation”.  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

30    

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.   

38. Stress is laid on reasonable expectation of pecuniary  

benefits relying on the decisions in Tafe Vale Railway Co.  

(supra) and the judgment of Singapore High Court in Nirumalan  

V Kanapathi Pillay v. Teo Eng Chuan37.  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 of dependency.   

39. Before we proceed to analyse the principle for addition of  

future prospects, we think it seemly to clear the maze which is  

vividly reflectible from Sarla Verma, Reshma Kumari, Rajesh  

and Munna Lal Jain. Three aspects need to be clarified.  The  

first one pertains to deduction towards personal and living  

expenses. In paragraphs 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  

                                                           37

(2003) 3 SLR (R) 601

31    

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 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.”  

40. In Reshma Kumari, the three-Judge Bench agreed with the  

multiplier determined in Sarla Verma and eventually held that

32    

the advantage of the Table prepared in  Sarla Verma is that  

uniformity 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.”  

41. 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.  

42. 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

33    

circumstances noted in the preceding paragraph is  made out.”  

 42. 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.  

43.2. 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.  

43.3. As a result of the above, while considering the  claim applications made under Section 166 in death  cases where the age of the deceased is above 15 years,  there is no necessity for the Claims Tribunals to seek  guidance or for placing reliance on the Second  Schedule in the 1988 Act.  

43.4. The Claims Tribunals shall follow the steps and  

guidelines stated in para 19 of Sarla Verma for  determination of compensation in cases of death.  

43.5. While making addition to income for future  prospects, the Tribunals shall follow para 24 of the  

judgment in Sarla Verma.  

43.6. Insofar as deduction for personal and living  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

34    

subject to the observations made by us in para 41  above.”    

43. 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  

deduction for personal and living expenses is concerned, the  

tribunals and courts should be guided by conclusion 43.6 of  

Reshma Kumari. We concur with the same as we have no  

hesitation in approving the method provided therein.  

44. 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  

judgment. 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-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.”  

35    

45. 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.”  

46. 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

36    

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.    

47. In our considered opinion, if the same is followed, it shall  

subserve the cause of justice and the unnecessary contest before  

the tribunals and the courts would be avoided.  

48. Another aspect which has created confusion pertains to  

grant of loss of estate, loss of consortium and funeral expenses.   

In Santosh Devi (supra), the two-Judge Bench followed the  

traditional method and granted Rs. 5,000/- for transportation of  

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

regards the loss of consortium. In Sarla Verma, the Court granted  

Rs. 5,000/- under the head of loss of estate, Rs. 5,000/- towards  

funeral expenses and Rs. 10,000/- towards loss of Consortium.   

In Rajesh, the Court granted Rs. 1,00,000/- towards loss of  

consortium and Rs. 25,000/- towards funeral expenses. It also  

granted Rs. 1,00,000/- towards loss of care and guidance for  

minor children.  The Court enhanced 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

37    

and ought to be periodically revisited 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.”  

38    

49. Be it noted, Munna Lal 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 another38  

it has been reiterated by stating:-  

“… we hold that the Second Schedule as was  enacted in 1994 has now become redundant,  irrational and unworkable due to changed scenario  including the present cost of living and current rate  of inflation and increased life expectancy.”  

 51. As far as multiplier or multiplicand is concerned, the same  

has been put to rest by the judgments of this Court.  Para 3 of  

the Second Schedule 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  - Rs. 2,000/-  (ii) Loss of  Consortium, if beneficiary is the  spouse – Rs. 5,000/-  

                                                           38

(2013) 15 SCC 45

39    

(iii) Loss of Estate - Rs. 2,500/-  (iv) Medical Expenses – actual expenses incurred  before death supported by bills/vouchers but not  exceeding  – Rs. 15,000/-”  

52. 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 damage amount  

needs to be appositely determined. As we notice, in different  

cases different amounts have been granted. A sum of Rs.  

1,00,000/- was granted towards consortium in Rajesh. The  

justification for grant of consortium, as we find from Rajesh, is  

founded on the observation as we have reproduced hereinbefore.  

53. On the aforesaid basis, the Court has revisited the practice  

of awarding compensation under conventional heads.   

54. As far as the conventional heads are concerned, we find it  

difficult to agree with the view expressed in Rajesh. It has granted  

Rs. 25,000/- towards funeral expenses, Rs. 1,00,000/- loss of  

consortium and Rs. 1,00,000/- 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

40    

traditional heads, needless to say, cannot be determined on  

percentage basis because that would not be an acceptable  

criterion. Unlike determination of income, the said heads have to  

be quantified. 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 Rs. 15,000/-, Rs. 40,000/- and Rs. 15,000/-  

respectively. The principle of revisiting the said heads is an  

acceptable principle.  But the revisit should not be fact-centric or  

quantum-centric. We think that it would be condign that the  

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% in a span of three years. We are

41    

disposed to hold so because that will bring in consistency in  

respect of those heads.    

55. Presently, we come to the issue of addition of future  

prospects to determine the multiplicand.   

56. In Santosh Devi the Court has not accepted as a principle  

that a self-employed person remains on 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 between 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 private sectors also with the  

passage of time increase manifold.  In Rajesh’s case, the Court  

had added 15% in the case where the victim is between the age  

group of 15 to 60 years so as to make the compensation just,  

equitable, fair and reasonable. This addition has been made in  

respect of self-employed or engaged on fixed wages.    

57. Section 168 of the Act deals with the concept of “just  

compensation” and the same has to be determined on the  

foundation of fairness, reasonableness and equitability on  

acceptable legal standard because such determination can never

42    

be in arithmetical  exactitude. It can never be perfect.  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

43    

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 determined for applying the multiplier on  

the basis of age.   

58. The seminal issue is the fixation of future prospects                    

in cases of deceased who is self-employed or on a fixed salary.   

Sarla Verma (supra) has carved out an exception permitting the  

claimants 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.  

59. Having bestowed our anxious consideration, we are  

disposed to think when we accept the principle of  

standardization, there is really no rationale not to apply the said  

principle to the self-employed or a person who is on a fixed

44    

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

45    

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

46    

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.  

60. The controversy does not end here.  The question still  

remains whether there should be no addition 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 always an enhancement due to one  

reason or the other.  To lay down as a thumb rule that there will  

be no addition after 50 years will be an unacceptable 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%

47    

between the age of 50 to 60 years.  The aforesaid yardstick has  

been fixed so that there can be consistency in the approach by  

the tribunals and the courts.  

61. 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

48    

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.

49    

(viii)  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.   

62.  The reference is answered accordingly. Matters be placed  

before the appropriate Bench.  

       …………………………….CJI.         (Dipak Misra )               …………………………………J.         (A.K. Sikri )                …………………………………J.         (A.M. Khanwilkar )               …………………………………J.         (Dr. D.Y. Chandrachud )               …………………………………J.         (Ashok Bhushan )  New Delhi;   October 31, 2017