Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | C.A. No.-012702-012702 – 2025 |
| Diary Number | 31977/2022 |
| Judge Name | HON’BLE MR. JUSTICE MANOJ MISRA |
| Bench |
HON’BLE MR. JUSTICE MANOJ MISRA HON’BLE MR. JUSTICE UJJAL BHUYAN |
| Precedent Value | Binding authority for computation of compensation in Motor Accident Claims |
| Overrules / Affirms | Affirms and clarifies existing precedents |
| Type of Law | Statutory interpretation under the Motor Vehicles Act, 1988 |
| Questions of Law |
|
| Ratio Decidendi | The Supreme Court held that (1) all allowances and perquisites forming part of the last pay-slip must be included in the “income” multiplicand, regardless of taxability; (2) any deduction for income tax must be at the actual applicable slab rate for the year of death; and (3) a 50 percent addition for future prospects applies to a permanent public sector employee aged below 40 at the time of the accident. |
| Judgments Relied Upon |
|
| Logic / Jurisprudence / Authorities Relied Upon by the Court |
|
| Facts as Summarised by the Court | A 27-year-old permanent engineer employed by Power Grid Corporation of India died in a 2011 motor accident. The Motor Accident Claims Tribunal awarded ₹88.20 lakh; the Patna High Court reduced it to ₹38.15 lakh by excluding allowances, applying a flat 30 percent tax deduction and 40 percent future prospects. The appeal concerns only the mode of computation. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All subordinate courts adjudicating motor accident compensation claims under Section 166, MV Act |
| Persuasive For | High Courts and tribunals in motor accident matters |
| Follows | Srivastava, Rastogi, Nalini, Ranjana Prakash, Pranay Sethi |
What’s New / What Lawyers Should Note
- All allowances and perks reflected in the last pay-slip must be included in the income multiplicand, even if they may be tax-exempt.
- Income-tax deduction is permissible but must be computed at the actual applicable slab rate for the year of death, not by flat percentages.
- A 50 percent addition for future prospects applies to permanent public sector employees under 40, reaffirming Pranay Sethi.
- Conventional heads (loss of filial consortium, estate, funeral expenses) are to be awarded as per the Pranay Sethi schedule for the year of accident.
Summary of Legal Reasoning
- Multiplier – Age of deceased (27) fixed multiplier at 17 per Sarla Verma & Pranay Sethi.
- Allowances as Income – Following Srivastava, Rastogi & Nalini, all salary components and allowances must be added to the multiplicand, irrespective of taxability.
- Income-Tax Deduction – Per Ranjana Prakash, deduction for tax is allowed but must use the actual slab rates for the relevant year (2011), not an arbitrary flat rate.
- Future Prospects – Public sector employee under 40 merits a 50 percent addition for future prospects, as held in Pranay Sethi.
- Conventional Heads – Loss of consortium, estate and funeral expenses awarded as per Pranay Sethi schedule for 2011 accidents.
- Result – Computed net annual income at ₹4,33,743; loss of dependency at ₹4,33,743 × 17 = ₹73,73,631; plus ₹70,000 for conventional heads; total ₹74,43,631 with 6 percent interest.
Arguments by the Parties
Petitioner (Insurance Company)
- Allowances should be excluded based on Gestetner principles.
- Flat 30 percent deduction towards income tax justified.
Respondent (Claimants)
- All allowances are part of income under Srivastava, Rastogi & Nalini.
- Any tax deduction must follow actual slab rates for the year of death.
- Future prospects should be 50 percent for a permanent public sector employee below 40.
Factual Background
In 2011, a 27-year-old engineer employed by Power Grid Corporation of India died in a motor accident. The Motor Accident Claims Tribunal awarded ₹88.20 lakh (including allowances, 50 percent future prospects, conventional heads). On appeal, the Patna High Court reduced compensation to ₹38.15 lakh by excluding allowances, applying a flat 30 percent tax deduction and fixing future prospects at 40 percent. Liability was never in dispute. The Supreme Court entertained the insurer’s appeal to determine the correct computation methodology under Section 166, MV Act.
Statutory Analysis
- Section 166, Motor Vehicles Act, 1988: Grants Tribunal inherent jurisdiction to award compensation for death or bodily injury.
- Schedule II, MV Act: Prescribes multipliers based on age for calculating loss of dependency.
- Section 140, MV Act: Interim compensation adjustment.
Alert Indicators
- ✔ Precedent Followed – Existing law on income components, tax deduction and future prospects reaffirmed.