Fatal Motor Accident Cases: Principles For Computing Compensation

With over 1.5 lakh deaths annually in motor accident cases in India (as per the latest official records), it is not unsurprising that claims on account of compensation for motor accident deaths is one of the most disputed arenas of litigation in the Supreme Court. Time and again the Apex court has attempted to lay down a rule of thumb to grant compensation to ensure that there is consistency and predictability in the compensation that is granted in motor accident related claims. The need for consistency and predictability in motor accident related claims was highlighted in Sarla Verma v. Delhi Transport Corporation & Anr ("Sarla Verma") wherein it was held: "While it may not be possible to have mathematical precision or identical awards, in assessing compensation, same or similar facts should lead to awards in the same range. When the factors/inputs are the same, and the formula/legal principles are the same, consistency and uniformity, and not divergence and freakiness, should be the result of adjudication to arrive at just compensation."(¶8) Compensation awarded does not become 'just compensation' under the Motor Vehicles Act, 1988 ["MV Act"], merely because one Motor Accident Claims Tribunal ["MACT"] considers it to be just – there should be uniformity across all MACT in coming down to a similar formulation of compensation. Both §140 and §163-A allow compensation on a no-fault liability basis. The former provides for interim relief whereas the latter is a final one (¶¶43-45). As per §163-B, a claimant can file a claim under any one of the sections but not both. Introduction of §163-A was a shift from the fault-liability regime that existed previously since the requirement of proving fault of the owner of the motor vehicle was done away with (¶41). However, courts found that the method of compensation through a structured compensation method provided for in Schedule II of the Act was riddled with inconsistencies and defects. To make more effective this grant of compensation, courts evolved their own formula for grant of compensation. Since the formulas evolved are only guidelines for compensation, in the absence of statutory and a straitjacket formula, there are bound to be grey areas. Nonetheless, the author here surmises the broad principles that have been formulated in granting compensation for fatal accidents and paints a picture of the grey areas that emerge when such questions arise before the Court. The author also argues that the 2018 Amendment to the Schedule II of the Act providing for fixed compensation instead of the structured formula method evolved by the Courts is faulty. Accordingly, statutory changes must be made to reflect the method evolved by the judiciary to ensure uniformity in application of the guidelines. Judicial Dicta evolved on the Principles for Assessing Compensation The compensation is given by assessing the following heads: Loss of dependency;Loss of consortium, loss of estate and funeral expenses; andContributory Negligence (if any). The parameters of calculating the same are delineated below. Loss of Dependency In Sarla Verma, it was laid down that the important factors to be considered a) age of the deceased at the time of death; b) his income at the time of death; and c) the number of dependants left behind. To adequately take into account all these factors in calculating loss of dependency, the following methodology was adopted: (Actual Income of the deceased per annum - Personal and living expenses of the deceased + Future Prospects) x Multiplier. The actual income is based on income less tax if the income comes within the taxable bracket. Here computation of notional income is also done in special cases such as those of housewives. It was held in Lata Wadhwa v. State of Bihar that considering the multifarious services rendered by housewives, their notional income for the age group of 34 to 59 years should be INR 36,000/- per annum for the purposes of computing compensation. For elderly ladies aged 62 to 72 years, value would be taken at INR 20,000/- per annum. In Arun Kumar Agrawal v. National Insurance Co. Ltd., the MACT gave notional income of INR 5,000/- per month to the housewife and the Supreme Court held that the amount payable to dependents could not be diminished on the grounds that a close relative could volunteer for the services provided by the deceased (¶27). Following this, the Supreme Court in the recent June 2020 case of Rajendra Singh v. National Insurance Co. Ltd. held that income of the housewife would be computed at INR 5,000/- per month and an amount of 40% would also be granted towards future prospects (¶11). On the question of whether pension received by a widow who died in a motor vehicle accident would be computed in calculation of income, the Supreme Court in National Insurance Company Limited v. Birender and Ors. said it would ...

Fatal Motor Accident Cases: Principles For Computing Compensation

Ragini Agarwal

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