MOTOR VEHICLES ACT, 1988
Ss. 166, 168 — Compensation — Determination of quantum — Salary, allowances, income tax deduction, future prospects, and multiplier — Principles reiterated and clarified.
Held, “income” includes salary and all allowances shown in the last pay slip unless proved to be non-recurring or non-monetary. High Court erred in excluding allowances while determining the multiplicand. Relying on National Insurance Co. Ltd. v. Indira Srivastava, (2008) 2 SCC 763; Vijay Kumar Rastogi v. U.P.S.R.T.C., 2018 SCC OnLine SC 193; and National Insurance Co. Ltd. v. Nalini, 2024 SCC OnLine SC 2252, the Court reiterated that emoluments and benefits accruing to the deceased under various heads must be included for computation of loss of income, whether or not taxable.
Further held, deduction towards income tax permissible (Ranjana Prakash v. Divisional Manager, (2011) 14 SCC 639) but must be computed as per prevailing tax slabs of the relevant assessment year, and not by arbitrary flat percentage deduction.
In present case, deceased was 27 years old, employed as Engineer with Power Grid Corporation of India (a PSU). Multiplier of 17 adopted by High Court upheld as per Sarla Verma v. DTC, (2009) 6 SCC 121, affirmed in National Insurance Co. Ltd. v. Pranay Sethi, (2017) 16 SCC 680.
Addition for future prospects @ 50% justified as deceased was below 40 years and in permanent employment (Pranay Sethi, para 59.3).
After deducting income tax as per 2011 slab (Rs. 62,080 on annual income Rs. 6,40,400), net annual income computed at Rs. 5,78,324. After 50% deduction for personal expenses and 50% addition for future prospects, multiplicand arrived at Rs. 4,33,743. Applying multiplier 17, loss of dependency calculated at Rs. 73,73,631.
Adding Rs. 15,000 towards loss of estate, Rs. 40,000 towards loss of filial consortium, and Rs. 15,000 towards funeral expenses, total compensation determined at Rs. 74,43,631 with interest @ 6% p.a. from the date of claim petition till realization.
High Court judgment reducing compensation to Rs. 38,15,499 set aside. Tribunal’s approach substantially upheld with modification in computation.
— Held:
(1) Allowances form part of income for determining compensation.
(2) Deduction of 30% flat rate towards income tax impermissible; to be computed as per relevant slabs.
(3) Addition of 50% for future prospects proper.
(4) Multiplier of 17 appropriate for age 27 years.
(5) Compensation enhanced to Rs. 74,43,631 with 6% interest.
(Paras 12 to 16)
PRACTICE AND PROCEDURE
Appeal — Scope of interference by Supreme Court in computation of compensation —
Where High Court excluded admissible components of salary and applied incorrect income tax deduction, resulting in unjustified reduction of compensation, Supreme Court justified in re-appreciating computation and restoring correct multiplier, income components, and permissible deductions to arrive at “just compensation” under Ss.166 and 168 of the Act.
(Para 15)
CASE LAW REFERENCE
| Case | Citation | Referred/Followed/Applied |
|---|---|---|
| Sarla Verma v. DTC | (2009) 6 SCC 121 | Followed |
| National Insurance Co. Ltd. v. Pranay Sethi | (2017) 16 SCC 680 | Followed |
| National Insurance Co. Ltd. v. Indira Srivastava | (2008) 2 SCC 763 | Applied |
| Vijay Kumar Rastogi v. U.P.S.R.T.C. | 2018 SCC OnLine SC 193 | Applied |
| National Insurance Co. Ltd. v. Nalini | 2024 SCC OnLine SC 2252 | Followed |
| Ranjana Prakash v. Divisional Manager | (2011) 14 SCC 639 | Relied on |
FINAL ORDER
Appeal allowed.
High Court’s order modifying compensation set aside.
Compensation enhanced to Rs. 74,43,631/- with interest @ 6% per annum from the date of claim petition till actual payment.
2025 INSC 1237
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Civil Appeal @ SLP(C) No. 19878/2022
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL No. …… OF 2025
(@ Special Leave to Appeal (C) no. 19878/2022)
MANORMA SINHA & ANR. …APPELLANT (S)
VERSUS
THE DIVISIONAL MANAGER, ORIENTAL INSURANCE
COMPANY LIMITED & ANR. …RESPONDENT (S)
J U D G M E N T
MANOJ MISRA, J.
1. Leave granted.
2. This appeal arises out of judgment and order of the High
Court of Judicature at Patna1 dated 04.07.2022 passed
in Miscellaneous Appeal No. 804 of 2017, whereby the
compensation awarded by the XIth Additional District
and Sessions Judge – cum - Motor Accident Claims
Tribunal, Muzaffarpur2 in Claim Case No. 196 of 2011
was reduced from Rs. 88,20,454 to Rs. 38,15,499.
1 High Court
2 Tribunal
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Civil Appeal @ SLP(C) No. 19878/2022
3. As liability to pay compensation is not in issue, the
question that arises for our consideration is whether the
High Court was justified in reducing the compensation
payable to the appellant.
4. The operative part of the award passed by the Tribunal
including computation of compensation is found in
paragraphs 10 to 12 of the award, which are reproduced
below:
“10. Multiplier: So far quantum of compensation is
concerned, the proper multiplier will be 18 as per
Schedule-II of the M.V. Act, as the age of deceased
was 27 years as per evidence on record.
As per Ext. A & A/1 submitted by O.P. No. 2
Insurer (Insurance Company) and also Ext. 1
salary slip submitted by Claimant the salary of the
deceased for the month of Feb., 2011 was as under:
Basic Pay – Rs. 26,420/-
D.A.: 43% - Rs. 11,360/-
Local Allowance:
10% - Rs. 2,642/-
Other allowances:
49% i.e. Rs. 12,945.80
Thus, total salary of deceased comes to Rs.
53,367 per month. Therefore, loss of dependency
would come to Rs. 53,367 x 12 x 18 = Rs.
1,15,27,272/-
Out of which ½ his personal expenses would
be deducted and then loss of dependency would be
Rs. 57,63,636/-. In which 50% future prospects
would be added i.e. amount Rs. 28,81,818/- then
loss of dependency would be Rs. 86,45,454/-.
11. In addition, the claimants are entitled to get a
sum of Rs. 1,00,000/- under the head of loss of
estate, Rs. 1,00,000/- towards loss of love and
affection and Rs. 15,000/- as funeral expenses.
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Civil Appeal @ SLP(C) No. 19878/2022
Thus, total compensation will be Rs. 88,70,454/-
Hence, claimants are entitled to get Rs.
88,70,454/- with interest thereon at the rate of 6%
per annum.
12. Perusal of case record it is evident that
claimants have already received Rs. 50,000/- as
ad-interim compensation U/s. 140 M.V. Act.
Hence, this amount would be adjusted from the
amount of Rs. 88,70,454/-. Then it comes to Rs.
88,20,454/- as total compensation U/s. 166 M.V.
Act. Hence claimants are entitled to get the said
amount with interest thereon @ 6% per annum.
Therefore, it is,
ORDERED
That the O.P. No. 2 Oriental Insurance
Company Limited, Muzaffarpur is directed to pay
the total compensation amount of Rs. 88,20,454/-
to the claimants within two months with interest
thereon @ 6% per annum from the date of filing till
the date of realization failing which the law will take
its own course.”
5. On an appeal preferred by the Insurance Company (the
respondent herein), the High Court computed the
compensation in the following manner:
“In view of the above, the computation of the claim
of the appellant would be as follows:
1. Monthly basic salary Rs. 26,420/-
2. D.A. (43%) Rs. 11,360/-
3. Future prospect @ 40% Rs. 15,892/-
Rs. 52,892/-
4. Yearly income (52,892 x 12) Rs. 6,34,704/-
5. Less of 30% income tax -1,90,411/-
Rs. 4,44,293/-
6. Less of 50% personal expense - 2,22,146/-
(unmarried) Rs. 2,22,147
7. Multiplier (17 x 2,22147) Rs. 37,76,499/-
8. Conventional head (unmarried) + 39,000
(30,000 + 3,000 each in 2014,
2017 and 2020) Rs. 38,15,499/-
The aforesaid total amount of Rs. 38,15,499/- shall
be paid by the Insurance Company to the
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Civil Appeal @ SLP(C) No. 19878/2022
respondent/claimants within a period of three
months with interest thereon at the rate of 6% per
annum from the date of petition till the date of
realization.”
6. The difference between the order of the Tribunal and
that of the High Court as regards the mode of
computation of compensation is clear. The High Court
while computing the compensation has, inter alia,
excluded the allowances payable as per the last pay slip
and gave future prospects at the rate of 40% in place of
50% as was given by the Tribunal. Besides above, the
High Court made a flat deduction of 30% towards
income tax.
7. We have heard the learned counsel for the parties and
have perused the materials on record.
8. The submission of the learned counsel for the appellant
is that the High Court has erred in not including the
allowances payable for computing the compensation
and has also erred in reducing the income by a flat rate
of 30% deductible towards income tax even though it
might not be even leviable. It is submitted that if any
deduction towards income tax is to be made it cannot be
at a rate different from the rate at which the tax is
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Civil Appeal @ SLP(C) No. 19878/2022
payable on the annualized income based on the last pay
slip. It has been submitted that the income tax slab
prevailing in 2011 were: annual income up to Rs.1.60
lacs – Nil; annual income between Rs.1.60 lacs to Rs.5
lacs – 10%; annual income between Rs.5 lacs and Rs. 8
lacs – 20%; and annual income above Rs.8 lacs - 30%.
9. Per contra, the learned counsel for the respondent
submitted that though the tax payable may vary but the
allowances must be excluded in computation of salary
in view of decision of this Court in the case of Gestetner
Duplicators (Pvt.) Ltd. v. Commissioner of Income
Tax, West Bengal3. Further, while computing
compensation deduction towards income tax is to be
made as held by this Court in Ranjana Prakash &
others v. Divisional Manager & another4.
10. We have given due consideration to the rival
submissions.
11. Before we proceed to determine the just compensation
payable in the context of submissions made before us, it
would be useful to mention that there is no dispute in
3
(1979) 2 SCC 354
4
(2011) 14 SCC 639
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Civil Appeal @ SLP(C) No. 19878/2022
respect of the age of the deceased at the time of accident,
which, as per finding returned by the Tribunal, not
disturbed by the High Court, was 27 years. Therefore,
multiplier of 17, which has been adopted by the High
Court is correct.5
12. Now, the next question is whether allowances are to be
added to the salary for determining the multiplicand. In
National Insurance Co. Ltd. v. Indira Srivastava &
Ors.
6 it was held that “the term income has different
connotations for different purposes. A court of law, having
regard to the change in societal conditions consider the
question not only having regard to pay packet the
employee carries home at the end of the month but also
other perks which are beneficial to the members of the
entire family”. In Vijay Kumar Rastogi v. Uttar
Pradesh State Roadways Transport Corporation7 a
three-Judge Bench of this court noticing earlier
decisions on the point observed that “the income should
include those benefits, either in terms of money or
5 See: Sarla Verma & Ors. v. Delhi Transport Corporation & Ors., (2009) 6 SCC 121, paragraph 42, affirmed in
National Insurance Company Limited v. Pranay Sethi & Ors., (2017) 16 SCC 680, paragraph 59.6.
6
(2008) 2 SCC 763, paragraph 9
7 2018 SCC OnLine SC 193 paragraph 11
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Civil Appeal @ SLP(C) No. 19878/2022
otherwise, which are taken into consideration for the
purpose of payment of income tax or professional tax,
although some elements thereof may not be taxable due
to exemption conferred thereupon under the statute.”
Following the decision in Vijay Kumar Rastogi (supra)
in National Insurance Company Ltd. v. Nalini &
Ors.8 it was held by this Court that the emoluments and
the benefits accruing to the deceased under various
heads for the purposes of computation of loss of income,
ought to be included irrespective of whether they are
taxable or not. Thus, in our view, the High Court erred
in excluding the allowances from the computation to
arrive at the multiplicand. Hence, the total monthly
income was rightly computed by the Tribunal at
Rs.53,367.
13. As regards deduction towards income tax is concerned,
same is permissible in view of the decision of this Court
in Ranjana Prakash9 (supra). However, in our view,
deduction towards income tax should be at such rate
which the annual income may be subjected to in the
8 2024 SCC OnLine SC 2252
9 See Paragraph 9 of the judgment in Ranjana Prakash referred to in Footnote 4
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Civil Appeal @ SLP(C) No. 19878/2022
relevant year. It is not demonstrated that the allowances
received were exempt from income tax. Even the nature
of allowances has not been disclosed to enable us to
determine whether they are exempt from tax. Therefore,
we include them in the annual income and compute the
annual income as Rs. 6,40,400 (approximately) for the
purposes of tax. The tax payable in the relevant year
(i.e., with reference to the date of death) would be
Rs.62,080 (Tax: Nil up to Rs. 1.60 lacs; Rs.34,000 @ 10%
up to Rs.5.00 lacs; and Rs.28,080 @ 20% up to
Rs.6,40,400). Thus, net annual income from salary after
deduction of income tax, with the allowances, would be
Rs.5,78,324.
14. In so far as addition for future prospects is concerned,
High Court gave @ of 40% of actual income whereas
Tribunal gave @ of 50%. The deceased was an Engineer
employed with Power Grid Corporation of India, which is
a public sector undertaking. There is no material to
indicate that his job was not permanent in nature or that
he was on a contract for a limited period. In such
circumstances, in our view, addition for future prospects
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Civil Appeal @ SLP(C) No. 19878/2022
would have to be at the rate of 50% considering that
deceased was aged below 40 years at the time of
accident.10 Therefore, the High Court was not justified
in adding future prospects at the rate of 40% in place of
50% as awarded by the Tribunal.
15. In view the discussion above, after deducting 50%
towards personal expenses, 50% of annual net salary
would be Rs.2,89,162. 50% of it for future prospects
would be Rs.1,44,581. Thus, net annual income post
deduction towards personal expenses and addition for
future prospects would be Rs.4,33,743. Consequently,
the multiplicand for determining loss of dependency
would be Rs.4,33,743. As we have found that multiplier
would be 17, the loss of dependency would be 4,33,743
X 17 = Rs.73,73,631. Compensation payable under
conventional heads such as loss of filial consortium, loss
of estate and funeral expenses can be taken at the rate
specified in Pranay Sethi (supra)11 as the accident is of
the year 2011. Hence, we deem it appropriate to add
Rs.15,000 towards loss of estate, Rs.40,000 towards
10 See paragraph 59.3 of the judgment in Pranay Sethi (see footnote 5)
11 See: Paragraph 59.8 of Pranay Sethi decision referred to in Footnote No.5
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Civil Appeal @ SLP(C) No. 19878/2022
loss of filial consortium and Rs.15,000 towards funeral
expenses to Rs.73,73,631 to determine total
compensation payable as Rs.74,43,631.
16. We, therefore, allow the appeal, modify the order of the
High Court by enhancing the compensation payable to
the appellants to Rs.74,43,631 with a direction that the
aforesaid compensation shall carry interest @ six
percent per annum from the date of the claim petition
till the date of actual payment.
….............................................J.
(Pamidighantam Sri Narasimha)
................................................J.
(Manoj Misra)
New Delhi;
October 15, 2025
