Shriram General Insurance Co Ltd v. Shabir & Ors

1. The present appeal is filed challenging the order dated 16.07.2014 (‘the impugned award’) passed by the learned Presiding Officer, Motor Accident Claim Tribunal Karkardooma Courts, Delhi (‘Tribunal’) in MACT No.233/2012.

2. The impugned award is essentially challenged on the ground that future prospects should not have been considered while awarding the compensation since the deceased at the time of death was working on a fixed salary.

3. The appellant in support of its contention relied upon the judgment passed by the Hon’ble Apex Court in the case of Smt. Sarla Devi & Ors. v. DTC and Anr.: (2009) 6 SCC 121, wherein it was held that when the deceased is working on a fixed salary with no proof of periodical increase, the claimants are not entitled to any element of future prospects being added in the amount of compensation.

4. It is undisputed that the Hon’ble Apex Court in the case of Santosh Devi v. National Insurance Co. Ltd.: (2006) 6 SCC 421, had held that the Courts/ Tribunals must take note of the rising cost of living and that even self-employed persons cannot be held to be remaining on a fixed salary throughout their lives. The Hon’ble Apex Court took note of the fact that the salaries of even those employed in private sector increases manifold with passage of time and, thus, the income in regard to future prospects has to be added in every case whether the deceased was self-employed or salaried.

5. The view taken by the Hon’ble Apex Court in the case of Santosh Devi v. National Insurance Co. Ltd. (supra) was, thereafter, followed in National Insurance Company Ltd v. Pranay Sethi & Ors.: (2017) 16 SCC 680.

6. Recently, the Hon’ble Apex Court in the case of Kavita Nagar & Ors. v. The Oriental Insurance Co. Ltd.: Civil Appeal No(s) --- of 2024 (arising out of SLP (Civil) NO. 15643/2016), held that it is imperative to consider the future prospects of persons earning potential while determining the compensation. It was held that simply focusing on the person’s present income at the time of death, disregards the natural progression of a career. It was held as under: “13. In motor accident claim cases, it is imperative to consider the future aspects of a person’s earning potential when determining compensation. Simply focusing on a deceased individual’s current income at the time of death disregards the natural progression of a career or the intrinsic motivation to improve one’s financial position over time. Both self-employed individuals and those on fixed salaries strive to increase their earnings, adapting to economic changes such as inflation and the cost of living. While individuals on a fixed salary may appear to have a predictable income, this view overlooks the reality that salaries, even for employees in permanent positions, generally increase over time due to factors like inflation, promotions, and company policies. For instance, a government employee or someone in the private sector with a fixed salary may still receive annual increments, benefits, or adjustments based on performance, seniority, or pay revisions. These incremental increases reflect the natural progression of a person’s career and the adjustment to costof- living changes, making it unjust to disregard future earning potential simply because an individual receives a fixed salary. Similarly, those who are self-employed, though lacking the certainty of a regular salary, are still motivated to grow their income to maintain their standard of living in an ever-changing economy. The view expressed in National Insurance Company Ltd. (Supra),rightly emphasizes that failing to account for these dynamics creates a distorted view, where individuals in self-employment or fixed-income roles are presumed to have a stagnant earning potential. This outlook is fundamentally flawed because it negates the drive for income growth, which is inherent to human ambition and sustenance.

14. The need to factor in future prospects when determining compensation becomes even clearer and more pressing when considering the basic human drive to sustain and improve one’s life. A self-employed individual, just like someone on a fixed salary, strives to increase their income to meet growing expenses and to adapt to changing circumstances. This is particularly important when considering the purchasing power and quality of life, which tend to increase as a person’s career progresses. The notion that a self-employed person’s income will remain static is flawed, as they, too, make efforts to raise their fees or charges to keep pace with inflation and market demands. For instance, someone working in a government role or another fixed-income job might receive annual salary adjustments or benefits, reflecting a growth trajectory over time. Similarly, a self-employed professional—such as a doctor, lawyer, or small business owner—will often increase fees or expand services to keep pace with rising costs. Recognizing these future prospects ensures a fair and just compensation by aligning with real-world economic dynamics, which Section 168 of the Motor Vehicles Act, 1988 seeks to uphold.

15. This drive to improve one’s income is universal, regardless of the employment status, and should be reflected in the compensation calculations for motor accident claims. As the precedent in the quoted judgment suggests, it is unjust to disregard future prospects solely based on the perceived static nature of the income. Instead, a degree-test should be applied, accounting for factors like age, career growth, and economic conditions, ensuring fair compensation that reflects the individual’s true earning potential over time.

16. In the present cases, owing to the age of the deceased and the findings of the Tribunal with respect to his salary, the principles of just compensation and standardization need to be applied. It would be apposite to hold that someone on a fixed salary would not be entitled to the benefit of future prospects. Simply because there is no certainty of periodic increase unlike those with permanent employment with fixed annual increments, such a comparison and distinction between the categories is unjust and unreasonable, as increasing costs of living affect everyone and everyone would make the effort increase their income over time. Thus, we find no validity in the order of the High Court to the extent of setting aside of the addition of the future prospects owing to the deceased being employed on a fixed salary.”

7. It is also not disputed that the judgment passed by the Hon’ble Apex Court in the case of Santosh Devi v. National Insurance Co. Ltd. (supra) and the National Insurance Company Ltd v. Pranay Sethi & Ors. (supra), has since been followed and has been applied even in cases which were decided prior to the said judgment being passed. Consequently, the claimants are entitled to the benefit arising out of the judgment in the case of National Insurance Company Ltd v. Pranay Sethi & Ors. (supra).

8. In view of the above, I find no merit in the present appeal and the appeal is, therefore, dismissed.

9. The Registry is directed to release the statutory amount deposited by the appellant in terms of Section 173 of the Motor Vehicles Act, 1988 in favour of the appellant.

10. The Registry is also directed to release the compensation amount deposited before this Court along with all accrued interest in favour of Respondent Nos. 1 to 6, after verification of their identity. AMIT MAHAJAN, J JANUARY 29, 2025 “SS”