Supreme Court Clarifies Use of Multiplier in Motor Vehicle Compensation Cases, Endorses Sarla Verma Guidelines.

The SC addressed the application of the multiplier in compensation cases under the Motor Vehicles Act, 1988. It clarified that the Second Schedule's multiplier is not mandatory for fatal accident cases under Section 166. The Court endorsed the Sarla Verma guidelines for determining compensation, including future prospects and personal expense deductions. The reference was resolved, and civil appeals were scheduled for further proceedings before the regular Bench.

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Issues Involved:
1. Whether the multiplier specified in the Second Schedule appended to the Motor Vehicles Act, 1988 should be scrupulously applied in all casesRs.
2. Whether for determination of the multiplicand, the 1988 Act provides for any criterion, particularly as regards determination of future prospectsRs.

Summary:

Issue 1: Multiplier Specified in the Second Schedule

A two-Judge Bench referred to a larger Bench the question of whether the multiplier specified in the Second Schedule should be a guiding factor for calculating compensation in cases under Section 166 of the Motor Vehicles Act, 1988. The referral order highlighted that while some cases like Patricia Jean Mahajan and Abati Bezbaruah treated the multiplier as a guiding factor, others like Shanti Pathak advocated for a lesser multiplier without a clear legal principle. The Court noted that the Second Schedule only requires the multiplier to be applied in cases of disability in non-fatal accidents, not in fatal accident cases. The Court emphasized the need for principles to ensure that compensation under Section 166 is not less than that under Section 163A, which is based on a 'no fault liability' system.

Issue 2: Determination of Multiplicand and Future Prospects

The judgment discussed the background of no fault liability and the introduction of Sections 163A and 166 in the 1988 Act. Section 163A provides for compensation on a structured formula basis without the need to prove negligence, while Section 166 requires proof of negligence. The Court examined various precedents and concluded that the multiplier method is the established norm for determining compensation. The Court approved the table in Sarla Verma for selecting the multiplier and standardized the addition to income for future prospects, recommending a 50% addition for those below 40 years with a permanent job, 30% for those aged 40-50, and no addition for those above 50. For self-employed individuals, no addition to income for future prospects was deemed appropriate.

Guidelines for Determination of Compensation:

The Court provided detailed guidelines for determining compensation in death cases under Section 166:

(i) For deceased aged 15 years and above, the multiplier from Sarla Verma should be used.

(ii) For deceased aged up to 15 years, a multiplier of 15 should be applied.

(iii) No need to rely on the Second Schedule for claims under Section 166 for deceased above 15 years.

(iv) Follow steps and guidelines from Sarla Verma for determining compensation.

(v) For future prospects, follow the addition rules from Sarla Verma.

(vi) For personal and living expenses deductions, follow the standards from Sarla Verma.

(vii) Apply these guidelines to all pending matters.

Conclusion:

The reference was answered accordingly, and the civil appeals were directed to be posted for hearing and disposal before the regular Bench.

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