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Guidelines of supreme court on fixation of future prospects

Guidelines of supreme court On Fixation Of Future Prospects For Deciding Motor Accident Claims

Section 168 of the Act deals with the concept of “just
compensation” and the same has to be determined on the
foundation of fairness, reasonableness and equitability on
acceptable legal standard because such determination can never
be in arithmetical exactitude. It can never be perfect. The aim is
to achieve an acceptable degree of proximity to arithmetical
precision on the basis of materials brought on record in an
individual case. The conception of “just compensation” has to be
viewed through the prism of fairness, reasonableness and nonviolation
of the principle of equitability. In a case of death, the
legal heirs of the claimants cannot expect a windfall.
Simultaneously, the compensation granted cannot be an apology
for compensation. It cannot be a pittance. Though the discretion
vested in the tribunal is quite wide, yet it is obligatory on the part
of the tribunal to be guided by the expression, that is, “just
compensation”. The determination has to be on the foundation of
evidence brought on record as regards the age and income of the
deceased and thereafter the apposite multiplier to be applied. The
formula relating to multiplier has been clearly stated in Sarla
Verma (supra) and it has been approved in Reshma Kumari
(supra). The age and income, as stated earlier, have to be
established by adducing evidence. The tribunal and the Courts
have to bear in mind that the basic principle lies in pragmatic
computation which is in proximity to reality. It is a well accepted
norm that money cannot substitute a life lost but an effort has to
be made for grant of just compensation having uniformity of
approach. There has to be a balance between the two extremes,
that is, a windfall and the pittance, a bonanza and the modicum.
In such an adjudication, the duty of the tribunal and the Courts
is difficult and hence, an endeavour has been made by this Court
for standardization which in its ambit includes addition of future
prospects on the proven income at present. As far as future
prospects are concerned, there has been standardization keeping
in view the principle of certainty, stability and consistency. We
approve the principle of “standardization” so that a specific and
certain multiplicand is determined for applying the multiplier on
the basis of age.
58. The seminal issue is the fixation of future prospects
in cases of deceased who is self-employed or on a fixed salary.
Sarla Verma (supra) has carved out an exception permitting the
claimants to bring materials on record to get the benefit of
addition of future prospects. It has not, per se, allowed any future
prospects in respect of the said category.
59. Having bestowed our anxious consideration, we are
disposed to think when we accept the principle of
standardization, there is really no rationale not to apply the said
principle to the self-employed or a person who is on a fixed
salary. To follow the doctrine of actual income at the time of
death and not to add any amount with regard to future prospects
to the income for the purpose of determination of multiplicand
would be unjust. The determination of income while computing
compensation has to include future prospects so that the method
will come within the ambit and sweep of just compensation as
postulated under Section 168 of the Act. In case of a deceased
who had held a permanent job with inbuilt grant of annual
increment, there is an acceptable certainty. But to state that the
legal representatives of a deceased who was on a fixed salary
would not be entitled to the benefit of future prospects for the
purpose of computation of compensation would be inapposite. It
is because the criterion of distinction between the two in that
event would be certainty on the one hand and staticness on the
other. One may perceive that the comparative measure is
certainty on the one hand and uncertainty on the other but such
a perception is fallacious. It is because the price rise does affect
a self-employed person; and that apart there is always an
incessant effort to enhance one’s income for sustenance. The
purchasing capacity of a salaried person on permanent job when
increases because of grant of increments and pay revision or for
some other change in service conditions, there is always a
competing attitude in the private sector to enhance the salary to
get better efficiency from the employees. Similarly, a person who
is self-employed is bound to garner his resources and raise his
charges/fees so that he can live with same facilities. To have the
perception that he is likely to remain static and his income to
remain stagnant is contrary to the fundamental concept of
human attitude which always intends to live with dynamism and
move and change with the time. Though it may seem appropriate
that there cannot be certainty in addition of future prospects to
the existing income unlike in the case of a person having a
permanent job, yet the said perception does not really deserve
acceptance. We are inclined to think that there can be some
degree of difference as regards the percentage that is meant for or
applied to in respect of the legal representatives who claim on
behalf of the deceased who had a permanent job than a person
who is self-employed or on a fixed salary. But not to apply the
principle of standardization on the foundation of perceived lack of
certainty would tantamount to remaining oblivious to the
marrows of ground reality. And, therefore, degree-test is
imperative. Unless the degree-test is applied and left to the
parties to adduce evidence to establish, it would be unfair and
inequitable. The degree-test has to have the inbuilt concept of
percentage. Taking into consideration the cumulative factors,
namely, passage of time, the changing society, escalation of price,
the change in price index, the human attitude to follow a
particular pattern of life, etc., an addition of 40% of the
established income of the deceased towards future prospects and
where the deceased was below 40 years an addition of 25% where
the deceased was between the age of 40 to 50 years would be
reasonable.
60. The controversy does not end here. The question still
remains whether there should be no addition where the age of the
deceased is more than 50 years. Sarla Verma thinks it
appropriate not to add any amount and the same has been
approved in Reshma Kumari. Judicial notice can be taken of the
fact that salary does not remain the same. When a person is in a
permanent job, there is always an enhancement due to one
reason or the other. To lay down as a thumb rule that there will
be no addition after 50 years will be an unacceptable concept.
We are disposed to think, there should be an addition of 15% if
the deceased is between the age of 50 to 60 years and there
should be no addition thereafter. Similarly, in case of selfemployed
or person on fixed salary, the addition should be 10% 47
between the age of 50 to 60 years. The aforesaid yardstick has
been fixed so that there can be consistency in the approach by
the tribunals and the courts.
61. In view of the aforesaid analysis, we proceed to record our
conclusions:-
(i) The two-Judge Bench in Santosh Devi should have been well
advised to refer the matter to a larger Bench as it was
taking a different view than what has been stated in Sarla
Verma, a judgment by a coordinate Bench. It is because a
coordinate Bench of the same strength cannot take a
contrary view than what has been held by another
coordinate Bench.
(ii) As Rajesh has not taken note of the decision in Reshma
Kumari, which was delivered at earlier point of time, the
decision in Rajesh is not a binding precedent.
(iii) While determining the income, an addition of 50% of actual
salary to the income of the deceased towards future
prospects, where the deceased had a permanent job and
was below the age of 40 years, should be made. The
addition should be 30%, if the age of the deceased was 48
between 40 to 50 years. In case the deceased was between
the age of 50 to 60 years, the addition should be 15%.
Actual salary should be read as actual salary less tax.
(iv) In case the deceased was self-employed or on a fixed salary,
an addition of 40% of the established income should be the
warrant where the deceased was below the age of 40 years.
An addition of 25% where the deceased was between the age
of 40 to 50 years and 10% where the deceased was between
the age of 50 to 60 years should be regarded as the
necessary method of computation. The established income
means the income minus the tax component.
(v) For determination of the multiplicand, the deduction for
personal and living expenses, the tribunals and the courts
shall be guided by paragraphs 30 to 32 of Sarla Verma
which we have reproduced hereinbefore.
(vi) The selection of multiplier shall be as indicated in the Table
in Sarla Verma read with paragraph 42 of that judgment.
(vii) The age of the deceased should be the basis for applying the
multiplier.49
(viii) Reasonable figures on conventional heads, namely, loss of
estate, loss of consortium and funeral expenses should be
Rs. 15,000/-, Rs. 40,000/- and Rs. 15,000/- respectively.
The aforesaid amounts should be enhanced at the rate of
10% in every three years.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELALTE JURISDICTION
SPECIAL LEAVE PETITION (CIVIL) NO. 25590 OF 2014
National Insurance Company Limited V Pranay Sethi and Ors.
Dated:October 31, 2017