Court’s Decision
The Bombay High Court (Aurangabad Bench), presided by Justice R.M. Joshi, enhanced the compensation awarded to the legal heirs of a road accident victim, holding that the Motor Accident Claims Tribunal (MACT) had applied an incorrect multiplier while determining compensation. The Court also granted 10% addition towards future prospects, applying the principle laid down by the Supreme Court in National Insurance Co. Ltd. v. Pranay Sethi [(2017) 16 SCC 680].
Emphasizing that the objective of compensation under the Motor Vehicles Act, 1988 is to ensure “just and fair recompense,” the Court held:
“The Tribunal erred in applying a multiplier of six for a deceased aged 51 years; as per Sarla Varma v. Delhi Transport Corporation [(2009) 6 SCC 121], the correct multiplier is eleven.”
Accordingly, the Court enhanced the total compensation to ₹2,90,400 towards pecuniary loss, to be recovered jointly and severally from the insurer and owner of the offending vehicle, with interest at 7% per annum if unpaid within eight weeks.
Facts
The appeal arose from an accident that occurred on 1 November 2001, resulting in the death of a 51-year-old man, who was the sole earning member of his family. The deceased was involved in an accident with an offending vehicle whose ownership and insurance were undisputed.
The deceased’s dependents filed a claim petition before the MACT, seeking compensation under Section 166 of the Motor Vehicles Act, asserting that he was earning ₹2,500 per month through agricultural and miscellaneous work. The Tribunal accepted the claim of accident involvement and the liability of the insurer but awarded compensation using a multiplier of six, which drastically reduced the amount payable.
Feeling aggrieved by the under-assessment of compensation, the dependents filed this appeal under Section 173 of the Motor Vehicles Act, limited to correction of the multiplier and addition of future prospects in light of recent judicial precedents.
Issues
- Whether the Tribunal erred in applying an incorrect multiplier while computing the compensation for the deceased aged 51 years.
- Whether the appellants were entitled to an addition towards future prospects in the compensation amount, even though the deceased’s income was not formally documented.
- Whether the award under conventional heads required enhancement.
Petitioners’ Arguments
Counsel for the appellants contended that the Tribunal’s award was contrary to settled law. Once the deceased’s age was established at 51 years, the appropriate multiplier, as per Sarla Varma v. Delhi Transport Corporation [(2009) 6 SCC 121], was 11, not 6. The Tribunal’s use of a lower multiplier had resulted in a significant shortfall in compensation, undermining the statutory principle of “just compensation.”
The appellants further relied on the landmark judgment in National Insurance Co. Ltd. v. Pranay Sethi (2017), where the Supreme Court recognized that even self-employed individuals or those with notional income are entitled to an addition towards future prospects, depending on their age group. As the deceased was aged 51, an additional 10% increase in his income was warranted under this principle.
It was also argued that since the owner and insurer of the offending vehicle had not disputed the findings on negligence or liability, the only question before the Court was the quantum of compensation. Thus, the enhancement sought was purely legal and did not alter the factual findings of the Tribunal.
Respondents’ Arguments
Counsel for the insurance company opposed the appeal, arguing that the Tribunal had applied the prevailing legal principles at the time of its decision, which predated the Pranay Sethi judgment. It was submitted that the law on multiplier and future prospects evolved later, and therefore, the Tribunal’s findings were consistent with the judicial approach then in force.
The insurer also contended that the deceased’s income was based on notional estimation, and therefore, further enhancement through future prospects would lead to unjust enrichment. The respondent urged that the award was fair, balanced, and did not warrant interference by the High Court.
Analysis of the Law
Justice R.M. Joshi began by reiterating the foundational principle under Section 168 of the Motor Vehicles Act — compensation must be “just, fair, and reasonable,” not a mere arithmetic computation. Courts must strike a balance between the loss suffered by the dependents and avoidance of speculative claims.
Referring to Sarla Varma [(2009) 6 SCC 121], the Court noted that the Supreme Court standardized multipliers to ensure uniformity and consistency in motor accident compensation cases. For a deceased aged between 51 and 55 years, the appropriate multiplier is 11. The Tribunal’s application of “6” was a manifest error of law, leading to an unreasonably low award.
On the question of future prospects, the Court cited Pranay Sethi [(2017) 16 SCC 680], where it was held that:
“Even in cases of notional income, future prospects must be added — 10% for those between 50 and 60 years.”
Thus, applying both Sarla Varma and Pranay Sethi, the Court found that the appellants were entitled to recalculation of compensation with the correct multiplier and additional 10% future prospects.
Precedent Analysis
- Sarla Varma v. Delhi Transport Corporation (2009) 6 SCC 121 – Laid down the standard multiplier method, ensuring uniform compensation across age groups; for age 51, the multiplier is 11.
- National Insurance Co. Ltd. v. Pranay Sethi (2017) 16 SCC 680 – Held that future prospects must be considered even for self-employed or notional income earners; 10% addition applies for ages between 50 and 60.
These precedents were crucial to the Court’s reasoning, correcting the Tribunal’s errors and ensuring conformity with Supreme Court guidelines.
Court’s Reasoning
The Court noted that the Tribunal’s assessment of the deceased’s monthly income at ₹2,500 was undisputed and required no interference. However, the use of multiplier 6 was legally incorrect, resulting in an award disproportionate to the loss suffered by the dependents.
Justice Joshi emphasized that a proper application of the multiplier method was not a matter of discretion but a binding legal mandate post-Sarla Varma. Since the deceased was 51, the correct multiplier of 11 was applied.
Further, following Pranay Sethi, the Court granted 10% addition towards future prospects, recognizing that even informal workers are entitled to such benefits to offset inflation and progressive earning potential.
The Court declined to interfere with compensation awarded under other heads such as loss of consortium, funeral expenses, and pain and suffering, finding them consistent with the law applicable at the time of the Tribunal’s decision.
Conclusion
The Bombay High Court partly allowed the appeal, enhancing the compensation as follows:
- Total pecuniary loss recalculated at ₹2,90,400, applying the correct multiplier of 11 and adding 10% for future prospects.
- Compensation under other heads (non-pecuniary damages) remained unchanged.
- Respondents held jointly and severally liable to pay the enhanced amount.
- If unpaid within eight weeks, the enhanced compensation shall carry interest at 7% per annum until realization.
The decision ensured that the dependents received fair compensation reflecting both economic loss and legal entitlement under evolving jurisprudence.
Implications
This judgment reinforces the binding nature of the Sarla Varma and Pranay Sethi guidelines in motor accident compensation cases. It affirms that courts must adopt a uniform multiplier based on age and account for future prospects even for self-employed or notional earners.
It sends a clear message that just compensation cannot be compromised due to procedural oversight or outdated application of law. The ruling also benefits numerous pending appeals where similar errors in multiplier or future prospects persist.
