Supreme Court clarifies guidelines for calculating compensation in motor accident claims

Earlier this month, a three-judge Bench of the Supreme Court has finally put an end to diverging opinions of the Supreme Court with respect to calculating compensation in claims filed under the Motor Vehicles Act, 1988 (MV Act)..On July 23, 2009 a Bench of then Justices SB Sinha and Cyriac Josehp had referred the question regarding the application of the “multiplier” in the Second Schedule of the MV Act to a larger Bench. On April 2, 2013, a Bench of Justices RM Lodha, J. Chelameswar, and MB Lokur finally disposed of the reference..In 1994, the MV Act was amended (inserting S.163A) to allow for a compensation claim to be filed whereby the compensation would be calculated on the basis of the Second Schedule of the MV Act. The Second Schedule contained a table for calculating compensation payable based on the income and age of the deceased party. The Schedule also contained a “multiplier”; a numerical value used to calculate the final quantum of compensation..However, the MV Act also contained another provision (S.166) that also allowed for compensation to be sought. Except in this case, there was no formulaic basis for calculating the compensation nor was there a reference to the “multiplier” used in the Second Schedule..The matter before the 3-judge Bench hence was whether the multiplier in the Second Schedule could be relied on in cases of claims filed under S.166 of the MV Act; in essence the Bench was to remove any discrepancies, which may arise between applications filed under S.166 and under S. 163A..After recording the divergent views adopted in the preceding years, the Bench approved of Apex Court’s decision in Sarla Verma’s case holding:.“A standard method for selection of multiplier is surely better than a criss-cross of varying methods. 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.”.In conclusion, the Bench stated:.“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.(ii) In cases where the age of the deceased is upto 15 years, irrespective of the Section 166 or Section 163A 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.(iii) 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.(iv) The Claims Tribunals shall follow the steps and guidelines stated in para 19 of Sarla Verma for determination of compensation in cases of death.(v) While making addition to income for future prospects, the Tribunals shall follow paragraph 24 of the Judgment in Sarla Verma.(vi) Insofar as deduction for personal and living expenses is concerned, it is directed that the Tribunals shall ordinarily follow the standards prescribed in paragraphs 30, 31 and 32 of the judgment in Sarla Verma subject to the observations made by us in para 38 above.”.This judgment shall go a long way in clarifying the manner in which compensation is calculated in motor accident claims. This is the second time that Justice MB Lokur has been part of a Bench that has called for greater uniformity in decisions of the Supreme Court. In November 2012, a Division Bench of Justices KS Radhakrishnan and Lokur had lamented the lack of uniformity in awarding the death penalty..(A special mention to Bar & Bench reader, Adv. P Singh for his assistance in this matter)