The Supreme Court, in a significant ruling on motor accident compensation, has held that the principle of adding to the income for ‘future prospects’ must be applied even when the deceased was a self-employed individual in a foreign country, unless specific evidence is presented to the contrary. The bench of Justice K. Vinod Chandran and Justice N.V. Anjaria allowed an appeal by the claimants, enhancing their compensation by over ₹42 lakhs after including a 40% addition for future prospects, which the High Court had denied.
Background of the Case
The case originates from a fatal motor accident on August 31, 2007, near Nirmal Kutia Chowk, Karnal. The deceased, Rajinder Singh Mihnas, aged 31, was travelling in a car when it was struck by a negligently driven Swaraj Mazda truck. Mr. Mihnas, a national of the United States of America, was working as a driver and running a transport company named West End Express Inc. in the USA. His legal heirs, including his wife and children, filed a claim petition under Section 166 of the Motor Vehicles Act.
The Motor Accident Claims Tribunal (MACT), despite evidence of the deceased being a U.S. national and his employment, assessed his income at a mere ₹5,000 per month. The Tribunal reasoned that there was insufficient material to prove the daily wages paid in the USA. Applying a multiplier of 16, the MACT awarded a total compensation of ₹7,80,000.
Dissatisfied, the claimants appealed to the High Court of Punjab & Haryana. The High Court disagreed with the Tribunal’s assessment of income, finding that documents like the income tax record with a social security number and a salary certificate had been wrongly overlooked. The High Court recalculated the deceased’s income based on the minimum wage in the U.S. ($7.25 per hour), arriving at an income of ₹78,300 per month. This led to an enhanced compensation of ₹1,17,20,200. However, the High Court refused to grant any amount towards ‘future prospects’, citing a previous decision of the Supreme Court.
Submissions before the Supreme Court
The claimants brought the matter before the Supreme Court, challenging the High Court’s order solely on the ground of its refusal to add an amount for ‘future prospects’. They argued that the denial was contrary to the law laid down by the Constitution Bench in National Insurance Company v. Pranay Sethi, which mandates a 40% addition to the established income for a self-employed person below the age of 40.
The respondents, on the other hand, contested the High Court’s determination of the deceased’s income, arguing it was exaggerated and the supporting documents were not properly authenticated.
Court’s Analysis and Decision
The Supreme Court bench dismissed the respondents’ objections regarding the income assessment, noting that the High Court’s findings were “proper and evidence-based” and that no cross-objections had been filed by the insurer. The Court also upheld the multiplier of 16 as being correct according to the Pranay Sethi judgment.
The central issue addressed by the Court was the grant of ‘future prospects’. The bench found merit in the appellants’ contention, stating that the law laid down in Pranay Sethi must be applied. The Court acknowledged the unique circumstances of the case, observing, “There will be no gainsaying that assessing the ‘future prospects’ of a person self-employed in a foreign country like United States, compared to a person in this country, would become difficult for the simple reason that the socio-economic-political conditions in any foreign country would be different.”
However, the Court concluded that in the absence of any specific evidence to determine future prospects in a foreign country, the established legal standard in India must be applied to ensure just compensation. The Court observed, “…in order to determine the just compensation to a person who died in an accident occurred in India, the dictum of law in Pranay Sethi (supra) shall have to be followed and applied specially when no material evidence is offered to determine the future prospects in the foreign country.”
Quoting from Pranay Sethi, the judgment reiterated the rationale for granting future prospects to the self-employed, stating, “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.”
Following this principle, the Court ordered that 40% of the established income must be added towards future prospects, as the deceased was 31 years old at the time of his death. The Court also revised the compensation under conventional heads—loss of estate (₹15,000), funeral expenses (₹15,000), and loss of consortium (₹40,000 each for the four dependents)—in line with the Pranay Sethi standards.
Final Award
The Supreme Court recalculated the total compensation, arriving at a figure of ₹1,60,15,280. This resulted in an additional compensation of ₹42,95,080 over and above what the High Court had awarded. The Court directed the respondent insurance company to deposit the additional amount with interest at 6% within four weeks. The appeal was accordingly allowed in part.
