Sarup Singh @ Ram Sarup vs. HDFC Ergo General Insurance Company Ltd.
Background
A 28-year-old man died in a motor accident, and his wife, minor daughter, father and sister filed a claim before the Motor Accident Claims Tribunal, which awarded Rs. 20,64,000 with 9% interest based on a notional monthly income of Rs. 10,000, a 30% addition for future prospects, and standard deductions. On the insurance company's appeal, the High Court cut this down to Rs. 11,34,136 with 6% interest, using a lower notional income of Rs. 6,500 per month and, crucially, without adding anything for future prospects. The claimants appealed to the Supreme Court arguing the High Court's reduction was unjustified.
Decision Breakdown
The Supreme Court held that the High Court had erred by failing to add the mandatory 40% enhancement for future prospects required under its own precedent in National Insurance Co. Ltd. v. Pranay Sethi for a deceased under 40 years of age. Applying the High Court's own base income figure of Rs. 6,500/month but correctly adding 40% future prospects, deducting 1/3rd for personal expenses, and applying a multiplier of 17, the Court recalculated loss of dependency at Rs. 12,37,790. It also awarded consortium amounts (spousal, parental and filial) per its recent precedents, and restored the interest rate to 7.5% p.a. instead of the High Court's 6%. The appeals were partly allowed and the total compensation was fixed at Rs. 13,78,790 with 7.5% interest from the date of filing the claim.
Lesson Learnt
In motor accident death claims, courts must always add the future-prospects enhancement (40% for victims under 40) to the deceased's income when computing loss of dependency, omitting it, as the High Court did here, is a legal error the Supreme Court will correct even where the underlying income figure itself is not disturbed.