Supreme Court Reaffirms Uniform Multiplier Principle in Motor Accident Claims: Foreign Earnings No Ground for Reduction
Supreme Court Reaffirms Uniform Multiplier Principle in Motor Accident Claims: Foreign Earnings No Ground for Reduction
Author: Abhishek Jat, Advocate
Introduction
In a significant judgment, the Supreme Court of
India in Shyam Prasad Nagalla & Ors. v. The Andhra Pradesh State Road
Transport Corporation & Ors. (Civil Appeal No. 2324 of 2025, arising
out of SLP(C) No. 818/2025) has reaffirmed that the multiplier method used in
motor accident compensation cases must be determined strictly based on the age
of the deceased victim and cannot be reduced merely because the victim was
earning in foreign currency. The Bench comprising Justice Sanjay Karol and
Justice Prashant Kumar Mishra overturned the Telangana High Court’s decision,
which had incorrectly reduced the multiplier from 14 to 10 on the basis that
the deceased was earning in US dollars. The judgment underscores the principle
of uniformity in applying multipliers and prevents courts from making arbitrary
reductions in compensation calculations.
Factual Background
The case originated from a fatal road accident that
occurred on June 13, 2009. The deceased, Lakshmi Nagalla, was a 43-year-old
software engineer and a permanent resident of the United States. She lost her
life in a collision involving a negligently driven Andhra Pradesh State Road
Transport Corporation (APSRTC) bus. Her husband and two daughters, the
appellants in this case, filed a claim petition before the Motor Accident
Claims Tribunal (MACT), Secunderabad, seeking a compensation of ₹9 crores. They
based their claim on her high earnings as a software engineer, with a monthly
income of $11,600, and her additional income as a real estate agent in Georgia,
USA.
Tribunal’s Award and High Court’s Ruling
The MACT, in its 2014 ruling, awarded ₹8.05 crores
in compensation, applying the following calculations:
- Monthly income: $11,600 (post-tax deductions)
- Future prospects: 30% addition to income
- Multiplier: 14 (as per National Insurance Co. Ltd. v. Pranay
Sethi for a 43-year-old)
- Exchange rate: ₹57 per dollar (prevailing rate in 2012, when the
claim was filed)
However, the Telangana High Court in 2024 reduced
the total compensation to ₹5.75 crores, applying a multiplier of 10 instead of
14. The High Court wrongly relied on the precedent set in Patricia Jean
Mahajan v. National Insurance Co. Ltd. (2002), arguing that foreign income
justified a lower multiplier. The appellants challenged this decision before
the Supreme Court.
Supreme Court’s Analysis and Key Holdings
The Supreme Court categorically rejected the
Telangana High Court’s reasoning and reaffirmed that compensation in motor
accident claims must be determined using an age-based multiplier, irrespective
of foreign earnings. The judgment provided three key clarifications:
- Multiplier Cannot Be Reduced Based on Foreign Earnings
The Supreme Court reiterated the binding precedent
in National Insurance Co. Ltd. v. Pranay Sethi [(2017) 16 SCC 680],
which mandates that a person aged 43 must be assigned a multiplier of 14. The
Court emphasized that the determination of the multiplier is strictly based on
the age of the deceased and is not subject to modification based on the source
of income. By rejecting the High Court’s deviation, the Court ensured
uniformity in compensation calculations and removed any possibility of
discrimination based on income location.
- Exchange Rate to Be Fixed on the Date of Filing the Claim
Relying on Jiju Kuruvila v. Kunjujamma Mohan
[(2013) 9 SCC 166] and DLF Ltd. v. Koncar Generators & Motors Ltd.
[2024 SCC OnLine SC 1907], the Supreme Court clarified that the exchange rate
applicable should be the one prevailing on the date of filing the claim
petition. The Court ruled that fluctuations in currency values cannot dictate
compensation and that fixing the exchange rate as per the claim filing date
provides certainty and fairness. Accordingly, the conversion rate was set at
₹57 per dollar (2012 rate), not at the accident date or the judgment date.
- Corrected Recalculation of Compensation
The Supreme Court revised the compensation as
follows:
- Annual Income Calculation:
- Monthly income: $11,600 × 12 = $1,39,200
- Future prospects (30% addition): $1,39,200 + $41,760 = $1,80,960
- Deduction for personal expenses (1/3rd, as there were three
dependents): $1,80,960 - $60,320 = $1,20,640
- Application of Multiplier (14): $1,20,640 × 14 = $16,88,960
- Conversion to INR (₹57/$): $16,88,960 × 57 = ₹9,62,70,720
- Additional Conventional Heads: ₹1,81,500 (loss of estate, funeral
expenses, and consortium)
- Total Compensation: ₹9,64,52,220
Comparative Analysis of Awards
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Legal Implications and Conclusion
The Supreme Court’s ruling in this case has set a
crucial precedent in motor accident claims, reinforcing several important
principles:
- Uniform Application of Multiplier – Courts must adhere
strictly to the age-based multipliers outlined in Pranay Sethi. The
source of a victim’s earnings (domestic or foreign) does not justify a
deviation.
- Exchange Rate Certainty – The date of filing the claim petition
remains the definitive point for determining the exchange rate, ensuring
consistency and preventing arbitrary compensation adjustments.
- Precedent Overrides Subjective Reductions – High Courts are
bound to follow Supreme Court precedents and cannot introduce subjective
reductions in compensation calculations.
This judgment not only rectifies the error committed
by the Telangana High Court but also strengthens the legal framework governing
motor accident compensation claims. By ensuring adherence to well-established
legal principles, the Supreme Court has upheld fairness, predictability, and
non-discrimination in awarding compensation to dependents of accident victims,
whether they were earning in India or abroad.
Case Citation:
- Shyam Prasad Nagalla & Ors. v. The Andhra Pradesh State Road
Transport Corporation & Ors.
- Civil Appeal No. 2324 of 2025 (@ SLP(C) No. 818/2025)
- Decided on: February 11, 2025
- Bench: Justice Sanjay Karol & Justice Prashant Kumar Mishra
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Readers are advised to consult qualified legal professionals for specific legal concerns.
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