National Insurance Co. Ltd Vs Pranay Sethi

National Insurance Co. Ltd Vs Pranay Sethi: In case of conflicting judgments by Benches of equal strength, the earlier decision must be followed.

Case Title: National Insurance Co. Ltd Vs Pranay Sethi

Date of Order: 31 October 2017

Case No.: Special Leave Petition (Civil) No. 25590 of 2014

Neutral Citation: AIR 2017 SUPREME COURT 5157

Name of Court: Supreme Court of India

Name of Judge: Dipak Misra, Ashok Bhushan, D.Y. Chandrachud, A.M. Khanwilkar, A.K. Sikri, H.J.

Introduction:

The case of National Insurance Co. Ltd vs Pranay Sethi is a landmark judgment in motor accident compensation claims under the Motor Vehicles Act, 1988. It addresses the computation of compensation, particularly regarding future prospects, selection of multipliers, and compensation under conventional heads. The judgment provides much-needed clarity and uniformity in awarding just compensation.

Factual Background:

The case arose from a motor vehicle accident leading to the death of an individual. The claimants, being the legal heirs of the deceased, sought compensation under Section 166 of the Motor Vehicles Act, 1988. The controversy revolved around the determination of future prospects for the deceased, particularly when the deceased was self-employed or on a fixed salary. The issue was whether a certain percentage should be added to the actual income to account for future earnings growth.

Procedural Background:

The claimants initially filed for compensation before the Motor Accidents Claims Tribunal (MACT), which awarded compensation based on previous Supreme Court decisions. The insurance company challenged this before the High Court, which upheld the Tribunal's award. Dissatisfied with the decision, the insurance company appealed to the Supreme Court, leading to the present case.

Issues Involved in the Case:

Whether the multiplier specified in the Second Schedule of the Motor Vehicles Act should be strictly applied in all cases. Whether future prospects should be considered while determining the multiplicand in motor accident compensation claims. Whether self-employed individuals or those with a fixed salary should be granted an addition to their income for future prospects. The quantum of compensation under conventional heads such as loss of estate, loss of consortium, and funeral expenses. How conflicting judgments on the issue of future prospects should be resolved. Whether, in the case of conflicting opinions, the earlier judgment must be followed.

Submission of Parties:

The petitioner, National Insurance Co. Ltd, argued that the claimants were not entitled to any future prospects if the deceased was self-employed or on a fixed salary. They contended that any addition would lead to speculation and over-compensation. The respondents, legal heirs of Pranay Sethi, contended that future prospects should be included to ensure just compensation, as the deceased would have likely earned more in the future. They argued that denying future prospects to self-employed persons was discriminatory.

Discussion on Judgments Cited:

Sarla Verma v. Delhi Transport Corporation (2009) 6 SCC 121 laid down guidelines for selecting the multiplier based on the age of the deceased. Reshma Kumari v. Madan Mohan (2013) 9 SCC 65 emphasized the application of a structured formula for compensation. Rajesh v. Rajbir Singh (2013) 9 SCC 54 allowed for future prospects in all cases, including self-employed persons. Santosh Devi v. National Insurance Co. Ltd (2012) 6 SCC 421 suggested that even self-employed persons may have increased earnings over time. Trilok Chandra v. State of U.P. (1996) 4 SCC 362 addressed issues in the Second Schedule of the Motor Vehicles Act regarding multipliers.

How the Court Dealt with Conflicting Judgments?

The Supreme Court acknowledged the conflict between the rulings in Sarla Verma, Reshma Kumari, Rajesh, and Santosh Devi regarding the issue of future prospects. It clarified that Sarla Verma and Reshma Kumari were binding precedents and that the decision in Rajesh had erred in expanding future prospects indiscriminately. The Court held that future prospects should be standardized, with specific percentages assigned based on the age of the deceased. It resolved the conflicting judgments by setting uniform guidelines and emphasizing judicial discipline, ensuring consistency in future motor accident compensation cases.

How the Court Returned the Finding That in Case of Conflicting Opinions, the Earlier Judgment Must Be Followed:

The Supreme Court emphasized the principle of judicial discipline and adherence to precedent. It ruled that in cases of conflicting judgments by Benches of equal strength, the earlier judgment must be followed. The Court cited State of Bihar v. Kalika Kuer (2003) 5 SCC 448, which held that an earlier decision cannot be ignored by a later Bench of the same strength unless overruled by a larger Bench. The Court reaffirmed that the decisions in Sarla Verma and Reshma Kumari had already laid down settled law, and Rajesh had incorrectly deviated from these principles. Hence, Sarla Verma and Reshma Kumari were followed as binding precedents, ensuring consistency in judicial rulings.

Reasoning and Analysis of the Judge:

The Supreme Court clarified that future prospects should be considered even for self-employed individuals. The Court held that income should be increased by 40% if the deceased was below 40 years, 25% if between 40 and 50 years, and 10% if between 50 and 60 years. A structured approach was recommended to ensure uniformity in awarding compensation. The Court ruled that loss of estate, loss of consortium, and funeral expenses should be awarded at Rs. 15,000, Rs. 40,000, and Rs. 15,000 respectively, with a 10% increase every three years.

Final Decision:

The Supreme Court affirmed the inclusion of future prospects in compensation calculations and provided a structured framework for computing just compensation. It established specific percentages for different age groups and revised the compensation under conventional heads.

Key Takeaways and Law Settled:

Future prospects must be considered for both salaried and self-employed individuals. Standardized future prospects additions: 40% for those below 40 years, 25% for those between 40-50 years, and 10% for those between 50-60 years. Standardized deductions for personal and living expenses must follow Sarla Verma guidelines. Compensation under conventional heads must be periodically revised, increasing by 10% every three years. The age of the deceased is the basis for applying the multiplier. In case of conflicting judgments by Benches of equal strength, the earlier decision must be followed. The decision ensures uniformity and fairness in compensation awarded under the Motor Vehicles Act.

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Written By: Advocate Ajay Amitabh Suman,IP Adjutor [Patent and Trademark Attorney] ,High Court of Delhi