Supreme Court Strikes Down Split Multiplier in Motor Accident Compensation, Restores Tribunal’s Award with Uniform Multiplier and Future Prospects

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Court’s Decision

The Supreme Court set aside the High Court’s decision, ruling that the split multiplier method should not have been applied in determining compensation for loss of dependency. The Court held that the High Court’s approach of considering the deceased’s pre-retirement salary and post-retirement pension separately was erroneous and contrary to established precedents. Instead, the Tribunal’s approach of using a uniform multiplier of 9 was upheld.

Additionally, the Court corrected the High Court’s failure to grant future prospects and adjusted the loss of consortium amount. As a result, the final compensation was enhanced to ₹33,03,300 (rounded off), with interest at the same rate as awarded by the Tribunal.

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Facts of the Case

1. Accident and Fatality
   • On March 7, 2014, the deceased, a 57-58-year-old phone mechanic employed with Bharat Sanchar Nagar Limited (BSNL), was hit by a bus while walking on the road after alighting from another bus.
   • He succumbed to his injuries at the scene of the accident.
2. Claim for Compensation
   • The appellants, consisting of the widow, one dependent son, and a daughter, filed a claim before the Motor Accidents Claims Tribunal (Tribunal).
   • The Tribunal awarded ₹28,66,994 under various heads, including:
     • Loss of dependency
     • Loss of consortium
     • Funeral expenses
   • Interest was granted at 7.5% per annum.
3. High Court’s Reduction of Compensation
   • The Insurance Company appealed, and the High Court reduced the compensation to ₹19,66,833, applying a split multiplier.
   • The High Court considered the deceased’s earnings in two phases:
     1. Pre-retirement income (full salary for a limited period).
     2. Post-retirement income (pension instead of salary).
   • The High Court bifurcated the deceased’s earnings and reduced the awarded amount by over ₹9 lakh.

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Issues Before the Court

1. Whether the High Court erred in applying the split multiplier method for calculating loss of dependency.
2. Whether the appellants were entitled to future prospects as per Pranay Sethi.
3. Whether the High Court’s reduction of compensation was legally justified.

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Petitioner’s Arguments (Claimants)

1. Challenged the Reduction in Compensation
   • The claimants argued that the deceased’s full income should have been considered for compensation.
   • The split multiplier method unjustly reduced their rightful claim.
2. High Court’s Approach Contradicted Established Precedents
   • The High Court’s use of a split multiplier went against the principles laid down in Sarla Verma v. DTC (2009) and Sumathi v. National Insurance Co. (2021).
3. Future Prospects Were Ignored
   • The High Court failed to include future prospects in its calculation, contrary to National Insurance Co. v. Pranay Sethi (2017).
4. Loss of Estate Compensation Should Be Granted
   • The Tribunal and High Court failed to award loss of estate compensation, which should have been included.

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Respondent’s Arguments (Insurance Company)

1. Defended the High Court’s Approach
   • The Insurance Company supported the split multiplier method, arguing that:
     • The deceased was only two years away from retirement.
     • His income post-retirement would have been significantly lower.
     • Compensation should be based on actual financial loss.
2. Claimed the Tribunal’s Award Was Excessive
   • The company argued that the Tribunal awarded an excessive amount, and the High Court’s reduction was reasonable.
3. Acknowledged Future Prospects Were Omitted
   • The Insurance Company did not dispute that Pranay Sethi required the addition of future prospects.

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Analysis of the Law

1. Split Multiplier Method is Impermissible

• The Supreme Court rejected the High Court’s use of the split multiplier method.
• In Sumathi v. National Insurance Co. Ltd. (2021), the Supreme Court ruled:“Split multiplier cannot be applied unless specific reasons are recorded.”
• The High Court did not provide any special reasons for deviating from the established multiplier method.

2. Established Method for Loss of Dependency Calculation

• As per Sarla Verma v. DTC (2009), compensation for loss of dependency must be calculated using a fixed multiplier based on the deceased’s age.
• The correct multiplier for age 57-58 is 9.

3. Future Prospects Must Be Included

• In National Insurance Co. Ltd. v. Pranay Sethi (2017), the Supreme Court held that future prospects must be added to loss of dependency.
• The deceased was employed in a permanent government job, making him eligible for a 15% future prospects addition.

4. Loss of Consortium Must Be Granted to All Dependents

• The High Court reduced loss of consortium to ₹40,000 for the widow, but ignored other dependents.
• As per Supreme Court rulings, all dependents should be compensated for consortium.

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Precedent Analysis

1. Sarla Verma v. DTC (2009)
   • Established standard multipliers based on age group.
   • Held that split multipliers should not be applied arbitrarily.
2. Sumathi v. National Insurance Co. Ltd. (2021)
   • Split multiplier approach was rejected.
   • Compensation must be calculated using a uniform multiplier.
3. Puttamma v. K.L. Narayana Reddy (2013)
   • Applying a split multiplier without justification is legally incorrect.
4. Pranay Sethi (2017)
   • Future prospects must be added to loss of dependency calculations.

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Court’s Reasoning

1. High Court Wrongly Applied the Split Multiplier
   • The High Court’s approach was contrary to settled law.
   • There was no justification for differentiating between pre-retirement and post-retirement earnings.
2. Future Prospects Must Be Included
   • The Tribunal and High Court erred by omitting future prospects.
   • The Court added a 15% increase for future prospects.
3. Loss of Consortium Must Be Granted to All Dependents
   • The Tribunal erroneously awarded only ₹1,00,000.
   • The Supreme Court corrected this by granting ₹40,000 per dependent (widow, son, daughter).

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Conclusion

• High Court’s order was set aside.
• Tribunal’s award was restored with modifications.
• Final Compensation: ₹33,03,300 (rounded off).
• Interest Rate: Same as awarded by the Tribunal (7.5% p.a.).

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Implications of the Judgment

1. Split Multiplier Method is Not Allowed
   • Courts cannot arbitrarily apply a different method without specific reasoning.
2. Future Prospects Must Always Be Included
   • Ensures fair compensation for accident victims’ families.
3. All Dependents Must Receive Consortium Compensation
   • Strengthens the rights of family members in motor accident claims.

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