Motor Accident Claim | No Deduction From Salary Just Because Deceased Was On Verge Of Retirement : Supreme Court

In a motor accident claim compensation case, the Supreme Court recently disapproved of a 50 percent deduction made in the salary of the deceased on account of the fact that he had only 6 months of service left.

A bench of Justices Rajesh Bindal and Vijay Bishnoi enhanced the compensation amount payable to the claimants (deceased's family members), holding that the High Court and the Motor Accident Claims Tribunal erred in deducting 50% from the deceased's salary while computing the compensation amount.

"In the case at hand before us, both the Tribunal as well as the High Court had made a deduction of 50% from the salary of the deceased on account the fact that only 6 months of service of the deceased was remaining. In our considered opinion, the Courts below have erred in coming to such an unreasonable conclusion", it said.

Referring to Sarla Verma v. Delhi Transport Corporation, the Court reiterated that while computing the compensation amount, the multiplicand shall be determined on the basis of "annual" income of the deceased.

"...any deduction which is not related to the accident, is impermissible in law. Additionally, as per settled law in the case of Sarla Verma's case (supra), the multiplicand is always determined on the basis of the “annual” income of the deceased so as to ensure uniformity and consistency in the calculation of motor accident claim cases."

The case pertained to a 59 year old man, who was engaged as a permanent employee with the Railways. In 2013, the man was travelling on his bicycle, when he was hit from behind by a bike being driven in a rash and negligent manner. As a result of this accident, the man suffered injuries and later passed away.

The man's widow and children filed a claim petition before MACT, claiming a compensation of Rs.36,16,264/-. They claimed that the deceased was earning Rs.25,507/- per month.

The MACT determined that the salary of the deceased was Rs.25,415/- and then made a deduction of 50% from it, noting that the deceased had only 6 months of service left. Reliance in this regard was placed on the High Court's decision in Karnataka State Road Transport Corporation v. Sri Narasubai.

Further, the MACT deducted 1/3rd of the amount on account of personal expenses of the deceased. Thus the net income of the deceased was taken to be Rs.8472/- per month. Ultimately, the Tribunal awarded a total compensation of Rs.11,37,466/-.

Seeking enhancement, the appellant-claimants approached the High Court. They disputed inter-alia the salary component and award of future prospects. While the High Court upheld the 50% deduction from the deceased's salary, it awarded compensation under other heads, such as, loss of consortium, estate, etc. The total compensation amount came to Rs.14,05,942/-.

Seeking enhancement, the appellants approached the Supreme Court. Relying on Sarla Verma case, they said that there cannot be "split income" for pre-retirement and post-retirement periods. Rather, what is to be considered is the annual income based on last drawn monthly salary. With regard to future prospects, they claimed that the addition had to be of 15%, instead of 10%, in terms of the decision in National Insurance Co Ltd. v. Pranay Sethi.

After going through the record, the Supreme Court observed that the High Court's enhancement of the compensation amount was on the lower side. Declining the 50% deduction in salary and raising the future prospects from 10% to 15% (in terms of Pranay Sethi), the compensation amount was enhanced to Rs. 23,51,362/-. Since the amount was now computed on the basis of annual income, the top Court did away with the sum awarded as loss of earning of 6 months.

Referring to Sarla Verma's case, the Court said,

"The fact that the deceased had only six months of service left does not cast any aspersion on the fact that had the accident not occurred, the deceased would have been in service and earn commensurate to the last drawn income before the death. Therefore, the annual income of the deceased would be calculated on the basis of his monthly last drawn salary."

Case Title: SUSHILA & ORS. VERSUS SUDHAKAR & ANR., SLP (CIVIL) NO. 21717 OF 2025

Citation : 2026 LiveLaw (SC) 343

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