The Supreme Court has referred a significant legal question regarding the enhancement of compensation under “conventional heads” in motor accident claims to a larger bench. The Division Bench of Justice Ahsanuddin Amanullah and Justice K. Vinod Chandran expressed doubts over whether the 10% enhancement every three years, as laid down in the Constitution Bench judgment of National Insurance Co. Ltd. v. Pranay Sethi (2017), applies to accidents that occurred prior to the date of that decision.
While referring the matter, the Court granted relief to the claimants in the interim, enhancing the total compensation under conventional heads to Rs. 1,50,000 with 8% interest.
Background of the Case
The case arose from a motor vehicle accident that occurred in 1998. The petitioners—the wife and two children of the deceased—approached the Supreme Court seeking an enhancement of the compensation awarded. Specifically, they sought an increase in the amounts awarded under “conventional heads” (Loss of Estate, Loss of Consortium, and Funeral Expenses).
The petitioners relied on the Constitution Bench decision in Pranay Sethi, which standardized these amounts and directed a 10% enhancement every three years to account for inflation and price rise. They also cited the judgment in Rojalini Nayak & Ors. v. Ajit Sahoo & Ors. to support their claim for enhancement.
Arguments of the Parties
The Petitioners argued that all three claimants (the widow and two children) were entitled to Loss of Consortium. Relying on Magma General Insurance Co. Ltd. v. Nanu Ram & Ors., it was submitted that the children were entitled to “filial consortium.” Furthermore, they contended that under Pranay Sethi, the conventional heads should be enhanced by 10% every three years.
The Respondents (National Insurance Co. Ltd.) countered that the principle of 10% enhancement laid down in Pranay Sethi should only apply prospectively to accidents occurring after the 2017 judgment. The counsel argued that while the standardization of amounts (Rs. 15,000, Rs. 40,000, and Rs. 15,000) could apply to the present case, the periodic 10% escalation could not be applied to an accident from 1998.
Court’s Observations and Analysis
The Bench scrutinized the specific directive in Pranay Sethi, where the Constitution Bench held:
“We think that it would be condign that the amount that we have quantified should be enhanced on percentage basis in every three years and the enhancement should be at the rate of 10% in a span of three years.”
The Court observed that the rationale behind this enhancement was the price index, fall in bank interest, and escalation of rates post-2017. Justice Chandran, writing for the Bench, noted that applying this enhancement to accidents occurring decades prior (like 1998) simply because the claim is decided later would lead to inconsistency.
The Court observed:
“The escalation cannot depend upon the date of the order by which the claim petition is finally disposed of… Many matters, in which the accident occurred in 1998, would have been disposed of prior to 2017, which in any event cannot get any enhancement based on what has been stated by the Constitution Bench in 2017.”
The Bench expressed the view that the Pranay Sethi ruling intended the first 10% enhancement to apply in 2020 (three years after the 2017 judgment) for accidents occurring after 2017. The Judges found it “difficult to accept” the interpretation that an accident in 2010 could attract a 10% increase if disposed of in 2020, and a further increase if disposed of in 2023.
“There cannot be any enhancement made with respect to an accident which occurred in the year 1998, since the compensation for loss of estate and consortium as also expenses incurred for funeral is as on that date…”
Decision: Referral and Interim Relief
Finding themselves in disagreement with the interpretation that allows retrospective enhancement, the Bench stated:
“We hence respectfully sound a doubt, with all the respect at our command, regarding the enhancement as made in the aforesaid decision to the conventional heads based on Pranay Sethi. Being a co-ordinate Bench, we would only refer the matter to a Larger Bench, which we do.”
The Registry was directed to place the matter before the Chief Justice of India for appropriate orders.
Interim Enhancement of Award: Despite the referral, the Court proceeded to calculate the compensation based on the standardized figures in Pranay Sethi without the percentage escalation for the interim:
- Loss of Estate: Rs. 15,000
- Funeral Expenses: Rs. 15,000
- Loss of Consortium: Rs. 40,000 x 3 (Spouse and two children) = Rs. 1,20,000
- Total under Conventional Heads: Rs. 1,50,000
The Court increased the amount granted by the High Court (Rs. 70,000) to Rs. 1,50,000. Additionally, considering the long pendency of the case, the interest rate was enhanced to 8% from the date of application.
The Insurance Company has been directed to pay or deposit the enhanced amount within two months.
Case Details:
- Case Title: Hasina Yasmin & Ors. v. National Insurance Co. Ltd. & Anr.
- Case Number: Special Leave Petition (C) No. 27285 of 2025
- Coram: Justice Ahsanuddin Amanullah and Justice K. Vinod Chandran
- Citation: 2025 INSC 1501
