Upholding Fair Compensation: Supreme Court Rejects Split Multiplier, Affirms Standard Calculation, and Enhances Compensation for Motor Accident Claimants, ensuring just financial support

Court: Supreme Court of India.

Case Name: MAYA SINGH vs. THE ORIENTAL INSURANCE CO. LTD..

Citation: 2025 INSC 161 (Reportable)


Case Overview

This Supreme Court judgment, dated February 7, 2025, addresses a civil appeal stemming from a motor accident claim. The case concerns the compensation awarded to the family of the deceased, Laxman Das Mahour, who died in a bus accident. The core dispute centers on the method used to calculate the loss of dependency, which is the financial loss suffered by the family due to the death of the earning member.


Key Parties

The key parties involved in this case are:

  • Appellants: Maya Singh (widow), a dependent son, and a daughter of the deceased, Laxman Das Mahour, who are the claimants seeking compensation.
  • Respondents: The Oriental Insurance Co. Ltd. (the insurance provider for the bus) and others, including the owner and driver of the bus (who did not appear in court).

Background & Facts

Laxman Das Mahour was fatally struck by a bus on March 7, 2014, in Gwalior, Madhya Pradesh, after alighting from another bus. At the time of the accident, the deceased was employed as a phone mechanic with Bharat Sanchar Nagar Limited (BSNL). The Motor Accident Claims Tribunal initially awarded ₹28,66,994 as compensation, calculating the loss of dependency based on the annual income of the deceased and applying a multiplier of 9. The High Court reduced this compensation to ₹19,66,833, using a "split method" to calculate dependency, distinguishing between pre-retirement salary and post-retirement pension. They also reduced the compensation for loss of consortium to the widow.


Main Issues & Arguments

The main issues and arguments presented in the case were:

  • Split Multiplier Method: The primary issue was the High Court's application of the split method to calculate loss of dependency. The appellants contended that this method significantly reduced their rightful compensation.
  • Future Prospects: The appellants argued that the Tribunal had correctly assessed the loss of income but failed to grant a 15% increase on account of future prospects, based on the precedent set in National Insurance Company Limited v. Pranay Sethi and Others. The respondent did not dispute the fact that the appellants were entitled to an increase on account of future prospects.
  • Loss of Consortium: The High Court's reduction of the amount awarded for loss of consortium was contested by the appellants.

Supreme Court's Analysis and Judgment

The Supreme Court made the following key findings:

  • Rejection of Split Method: The Supreme Court, drawing from earlier rulings in Sarla Verma v. DTC and Sumathi v. M/s. National Insurance Company Ltd, held that applying a split multiplier for calculating compensation was erroneous. The court emphasized that the usual method of calculating dependency by applying the multiplier (as established by the Sarla Verma judgment) is to be followed unless specific reasons are recorded.
  • Multiplier and Age: The Court reiterated that, in Sarla Verma’s case, the court had outlined the proper multiplier for assessing compensation based on the deceased’s age. In this case, as the deceased was between 56 and 60 years old, the correct multiplier was 9.
  • No Special Reason: The court found that the High Court had not provided any specific reasons for deviating from the standard multiplier method or for applying a split multiplier.
  • Future Prospects: The Supreme Court agreed with the appellants' argument that the claimants were entitled to an additional 15% on account of future prospects.
  • Loss of Consortium: The Court noted that the Tribunal erred in awarding only ₹1,00,000 in total for the loss of consortium. The Supreme Court held that each of the three claimants (widow, son, and daughter) were entitled to ₹40,000 each on account of loss of consortium, totaling ₹1,20,000.
  • Final Compensation: The Supreme Court recalculated the compensation as follows:
    • Loss of Dependency: Calculated as (₹4,57,000 x 9 x 2/3 x 115/100) = ₹31,53,300.
    • Loss of Consortium: ₹40,000 x 3 = ₹1,20,000.
    • Funeral Expense: ₹15,000.
    • Loss of Estate: ₹15,000.
    • Total: ₹33,03,300 (rounded off).

Decision

The Supreme Court allowed the appeal, set aside the High Court order, and modified the Tribunal's award, increasing the total compensation to ₹33,03,300. The Court also upheld the same interest rate as awarded by the Tribunal. The Court directed the respondent to pay this amount to the claimants.


Rationale

The reasoning given by the judges is as follows:

  1. The High Court applied the "split method" without providing any specific reasons.
  2. The standard multiplier method, as outlined in Sarla Verma v. DTC, should be followed unless there are compelling and specific reasons to deviate.
  3. The deceased was 57-58 years old, and the appropriate multiplier, based on Sarla Verma, was 9.
  4. The High Court failed to consider the principle of including future prospects in compensation calculation, as established in Pranay Sethi.
  5. The Tribunal had erred in awarding only ₹1,00,000 in total for the loss of consortium. The Supreme Court held that each of the three claimants (widow, son, and daughter) were entitled to ₹40,000 each.
  6. The compensation was calculated based on the established multiplier system, accounting for future prospects, loss of consortium, funeral expenses, and loss of estate.

Excerpt

“The High Court has applied split multiplier by referring to the judgment of this Court in the case of Puttamma & Ors. v. K. L. Narayana Reddy & Anr., without recording any specific reason, contrary to the said judgment.”

“From a reading of the above judgment, it is clear that in normal course, the compensation is to be calculated by applying the multiplier, as per the judgment of this Court in the Case of Sarla Verma. Split multiplier cannot be applied unless specific reasons are recorded.”

"In the case in hand, neither any special reason has been recorded by the High Court while applying the split method nor we find there is one in the facts of the case."

“As far as loss of consortium is concerned, there are three claimants, namely, the widow, one son and one daughter. They would be entitled to compensation on account of loss of consortium @ ₹40,000/- each."


Points to Remember

Key learnings from the decision include:

  1. The standard multiplier method, as per Sarla Verma, is the primary approach for calculating loss of dependency in motor accident cases.
  2. Deviations from the standard multiplier method require compelling and specific reasons.
  3. The "split multiplier" method, which differentiates pre- and post-retirement income, is incorrect unless justified by specific reasons.
  4. Future prospects must be included in the compensation calculation as per Pranay Sethi.
  5. Fair and adequate compensation should be provided to the dependents of the deceased.
  6. The age of the deceased is a crucial factor in determining the multiplier, as per Sarla Verma v. DTC.
  7. Loss of consortium should be awarded to all eligible claimants, and the amount for each claimant is standardized.
  8. The courts and tribunals must provide specific justifications when deviating from established legal precedents.
  9. The legal system prioritizes fair compensation for the loss of a breadwinner, considering both present and future financial losses.

Conclusion

This judgment reinforces the Supreme Court's commitment to providing fair and just compensation to victims of motor accidents. It clarifies that the standard multiplier method, as defined in Sarla Verma, should be consistently applied, and deviations require explicit justification. The ruling emphasizes the importance of considering future prospects and loss of consortium, ensuring that dependents receive adequate financial support. The case serves as a crucial precedent for future motor accident claims, promoting consistency and fairness in the calculation of compensation.

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