Just Compensation Must Reflect Real Income, Not Arbitrary Deductions: Supreme Court Enhances Motor Accident Compensation to ₹14.29 Lakhs

“Allowances Are Not Optional Comforts—They Support Families….In computing income, courts must not look at pay slips in fragments—what supports the family in life must count in death.” — Supreme Court

Supreme Court of India delivered a significant judgment concerning motor accident compensation, laying down that salary allowances such as House Rent Allowance (HRA) and other perks cannot be arbitrarily excluded while assessing loss of dependency.

Setting aside the computation of income by the Tribunal and the High Court, which had restricted the deceased’s income to his basic pay alone, the Supreme Court enhanced the compensation from ₹7.23 lakhs to ₹14.29 lakhs, holding that just compensation cannot be sacrificed to technicalities or mathematical rigidity.

“The deceased was earning ₹6,500 per month, including allowances... the Tribunal on a hyper-technicality... reduced it to ₹3,665. This Court finds such exclusion unjust.” [Para 15–18]

“Allowances Are for the Family Too—Compensation Must Reflect Their Loss”

The case arose from a tragic accident on February 16, 2009, where Lokender Kumar, aged 35, died after being hit by a rashly driven Santro car while on his way to work. His widow and two minor children filed a claim under Section 166 of the Motor Vehicles Act, seeking ₹25 lakhs.

The Motor Accident Claims Tribunal (MACT), Gurgaon, awarded only ₹2.54 lakhs, accepting only the basic salary of ₹3,665 as income, excluding HRA and allowances. The Punjab & Haryana High Court, on appeal, enhanced the compensation to ₹7.23 lakhs, but still relied on the reduced income figure, only adding future prospects.

However, the Supreme Court took strong exception to this exclusion:

“This Court has consistently held that allowances which are included in the component of salary and used for supporting the family must be considered in determining income.” [Para 17]

Quoting Indira Srivastava v. National Insurance Co. [(2008) 2 SCC 763], the Court held:

“The term ‘income’ has different connotations... it includes perks beneficial to the entire family. Just compensation must reflect the real value of life lost—not just the basic pay carried home.” [Para 16]

The Bench further held that the salary slip (Exhibit P6), showing ₹6,500 as income, was unrebutted and thus had to be accepted in full.

“Deprivation Is Not Just Monetary—Consortium And Estate Losses Must Be Valued Fairly”

The Court also pointed out that the High Court’s award of ₹20,000 under all conventional heads (funeral expenses, loss of estate, loss of consortium) was contrary to the Constitution Bench judgment in Pranay Sethi v. National Insurance Co. [(2017) 16 SCC 680], which mandates:

• ₹15,000 each for funeral expenses and loss of estate

• ₹40,000 under loss of consortium

The Supreme Court accordingly corrected this and further relied on Magma General Insurance Co. v. Nanu Ram [(2018) 18 SCC 130] to grant parental consortium to both children, stating:

“Claimant No.1 (widow) is entitled to ₹48,400 under spousal consortium, and Claimants 2 & 3 (children) are each entitled to ₹48,400 under parental consortium.” [Para 20]

“Real Income, Real Loss, Real Justice—Not Just Numbers”

Adopting the correct multiplier of 16 for a deceased aged 35, and adding 50% future prospects, the Court computed the total loss of dependency as:

“₹6,500 x 12 x 16 = ₹12,48,000” [Para 19]

Adding all conventional heads, the total compensation came to ₹14,29,500, which the Court directed to be disbursed with 7% annual interest, excluding the delay period in filing the appeal.

“Respondents are jointly and severally liable to deposit ₹14,29,500 with 7% interest (excluding delay), within 8 weeks.” [Para 22]

The Court also carefully directed the apportionment of compensation—with 50% to the widow and 25% each to the two children, and ensured their amounts be held in fixed deposits with periodic interest withdrawals allowed for their benefit.

This judgment is a reminder that compensation under the Motor Vehicles Act must be just, comprehensive, and family-centric. By recognizing that salary allowances contribute to the survival and welfare of dependents, the Supreme Court has clarified that “just compensation” must be rooted in social reality, not artificial calculations.

“Tribunals must consider how the family lived—and how that living has been lost. Technical deductions defeat the very object of compensatory law.”

Date of Decision: August 6, 2025