Law relating to Compensation in Vehicle Accidents

Motor accidents are on the rise

Road accidents are on the increase. Such accidents cause physical harm, mental harm, or both.

Cautious or negligent driving can end up in accidents. Negligent driving is the root cause of accidents but drunken driving, use of mobiles, non-use of helmets etc are also accelerate road accidents. The term negligence is lack of proper care, in doing something, which a reasonable man would not do.

Presumption of negligence in accidents

To prove the negligence of the driver is a difficult task. So, Motor Vehicle Accidents Claims Tribunal (MACT) applies the doctrine of res ipsa loquitor which means “things speak for themselves” based on presumption of negligence on the part of the offending driver.

To prove the presumption of negligence, the plaintiff must prove 3 things: the incident was of a type that does not generally happen without negligence, it was caused by use of a vehicle in defendant’s control and the plaintiff did not contribute to the cause.

Not to drive a vehicle without a valid insurance

A person shall not drive a motor vehicle in a public space without having a policy of insurance in force, under Section 146 of M V Act. He should not allow any other person to use it, as well.

The policy, to be issued by an authorised insurer, insures the person or classes of persons against any liability incurred by him in respect of the death of or bodily injury to any person including the owner of the goods or his authorised representative carried in the motor vehicle, or damage to any property of a third party arising out of the use of the vehicle in a public place.

The policy insures against the death of or bodily injury to any passenger of a transport vehicle, except the gratuitous passengers of the goods vehicle.

Types of motor vehicle insurance

There are two types of motor vehicle insurance: one is Comprehensive Vehicle Insurance and the other is Third-party Liability Insurance.

Comprehensive vehicle insurance: A comprehensive vehicle insurance includes third-party liability as well as any expense incurred by the policyholder due to theft or accident of the vehicle.

If the policy holder is injured, the personal accident cover entitles the policy holder to claim compensation due to death or injury due to a vehicle accident.

Third party liability insurance: The third-party liability insurance is mandatory for every vehicle owner in India, by law. If the vehicle is insured against third party liability, the insurance company pays the compensation in respect of death or bodily injury of any person or damage to any property of a third party, caused by or arising out of the use of the vehicle in a public place.

A public place is a place where public has access even though the right to access is controlled in any manner.

Therefore, the insurance company must be made a necessary party when the victim files a claim.

Transfer of vehicle will transfer the policy too

If a vehicle is transferred to a new owner the policy of insurance will be deemed to have been transferred to the new owner but the transferee  has to apply within 14 days to the insurer to make changes in the entries in regard to transfer of insurance under Section 157 of the MV Act.

MV Act provides for compensation in accidents

The victims of motor vehicle accidents are eligible to get compensation, as a relief measure, under the Motor Vehicles Act, 1988 (MV Act).

Compensation is the money that is given as equivalent for any monetary loss while the term damages is the money that is given in compensation for some loss or injury that cannot be converted into money term.

MACT adjudicates issues in compensation

The M V Act lays out provision for establishment of Motor Accidents Claims Tribunal (MACT). The MACT is empowered to adjudicate all claims relating to compensation in motor vehicle accidents, involving death, bodily injury or damage to property.

There are substantial changes in the legal provisions, rules, and procedures in regard to compensation, since the amendment of the M V Act in 2019, and enforcement of the connected Motor Vehicle Rules in 2022 (see the links at the end).

Who has to pay compensation?

The driver, owner or the insurance company of the erring vehicle are liable to pay the compensation to the road accident victims, as per the M V Act. In some cases, like hit and run vehicle accidents, the compensation is being paid from government of India’s Solatium Fund, as detailed elsewhere. The liability of the insurer is restricted by the conditions in the policy and the law in force.

Pay & recover order in case of policy violation: If the owner/driver violates any condition in the law or insurance policy relating to use of motor vehicle, the MACT can order the insurance company to pay the compensation then and to recover it from the owner/ driver. In such cases, the Insurer has to prove such violation before the MACT. The Insurer can recover the money through Collector based on MACT order, as arrears of land revenue.

This practice is based on the logic that the insurance company cannot avoid its liability to pay when the policy is valid but they have no liability when there is violation of condition of policy ( see New India Assurance Co v Kamala and Others [ AIR 2001 SC 1419] and Oriental Insurance Co Ltd v Nanjappan [AIR 2004 SC 1630].

If the violation of the condition of insurance is so fundamental to contribute to the cause of accident, such as plying a vehicle without fitness, the insurance company is not liable to pay compensation. If the violation is not so fundamental to the cause of accident, the Insurance company is not absolved from the liability to pay compensation.

When the vehicle is not having third party liability insurance, the vehicle owner / driver alone is liable to pay to the third party, but not the Insurance Company.

Claim against damage of property in accidents

For own damage: When a person’s vehicle is damaged in an accident then he has to inform the insurer, the officer of the registering authority will assess the damage, and he can make his claim for compensation for his own injury and/or property damage, against his motor vehicle insurance, if it is a comprehensive insurance policy, covering both own property damage and third-party claims in accidents.

Third party’s claim: When an accident results in injury or damage to the third party, the third party can file a compensation claim against the driver/owner, if the owner has a third-party insurance. The insurance company will pay the compensation which he/she is eligible to get.

The third party is the one who is neither the insurer nor the insured, but includes everyone: a person travelling in another vehicle, one walking on the road or a passenger in the vehicle itself.

Insured is not a third party. The third party is the one who is insured by the insurance company to indemnify him from any claim of compensation lodged against him by others (see Jugal Kishore v Ramlesh Devi : 2004 ACJ 297).

Similarly, a person driving a vehicle by stepping into the shoes of the owner of the vehicle is ineligible to get compensation in a self-imposed accident by negligent driving. A pillion rider is not a third party and he will not get third party policy cover but he will get compensation if the vehicle is under a comprehensive policy.

A person travelling on the roof top of the bus is also not a passenger and not liable to get compensation. When a passenger travels in a goods auto the insurer has no liability to pay him compensation but the owner has to pay.

What the third party should do to claim compensation?

To claim compensation, the third party has to first file an FIR (First Information Report) in the nearest police station, obtain the insurance details of the vehicle, ensure assessment of the damage by the vehicle department and then should file the claim for damages, in the prescribed format.

The MACT will then carry out the proceedings as prescribed in the law, decide the amount of compensation and do what is necessary to ensure the execution of the payment.

What the driver / owner must do when an accident occurs?

When a third party is injured or any property of him is damaged in an accident, the driver or the owner of the vehicle, under Section 134 of the M V Act, shall take reasonable steps to: –

  • secure medical attention for the injured persons,
  • give on demand by a police officer any information required by him and
  • give details of insurance, such as policy no, period of validity, date, time and place of accident, particulars of person injured/ killed, name of the driver and the particulars of his driving licence, to the insurance company.

If the driver is not providing medical attention to the victim by the driver, he should give the circumstances which prevented him from providing such medical attention, to the nearest police station as soon as possible, but within 24 hours.

Immediately after the incident, the officer authorised by the Motor Vehicle Department should inspect the vehicle, remove the vehicle for examination after intimating it to the owner if needed and return it to the owner within 24 hours, under Section 136 of the M V Act.

Certificates a driver should show to Police: Any person driving a motor vehicle in a public place, when required by a uniformed Police Officer, shall produce the Certificate of Insurance, the Certificate of Registration, the Pollution Control Certificate, the Driving Licence, and Certificate of Fitness, if any, u/s 158 (a to f) of the MV Act.

Production of certificates in accidents: If the certificates above mentioned are not produced by the driver of a vehicle involving in an accident, which causes death or injury, within 7 days of the accident, he is liable to be convicted u/s 158(3) of the act.

Cashless treatment of victims during Golden Hour

Under the Central Government’s cashless scheme and fund, which is being evolved, the General Insurance Companies will have to provide for treatment of the victims of road accidents, including during the golden hour of one hour after the incident, under Section 162 of the MV Act.

There will be a Central Government Scheme for Interim Relief for claimants, under Section 164 a of the M V Act.

Victim can seek both civil & criminal remedies

In motor vehicle accidents, there are two kinds of wrongs: the civils wrong and the criminal wrongs. Therefore, the victim has two kinds of remedies as follows:

Civil remedies: Regarding civil remedies, the victim can claim compensation under the MV Act. In that regard, the police officer is duty bound to prepare accident Information Report, such as FIR, FAR, IAR & DAR, to be forwarded to the MACT u/s 159 of the M V Act.

The MACT will have to treat it as a Miscellaneous Application for compensation, under Section 166 (4) of the M V Act, since 1st April 2022.

Criminal remedies: Regarding criminal remedies, the state government, through its police and prosecution wing, initiate criminal proceedings against the offender and punish him with imprisonment or fine or both to the offender, under the Criminal Procedure Code, 1973 (CrPC).

Maximum punishment in criminal cases: In case of death of the victim the maximum punishment that can be imposed on the driver of the vehicle is two years imprisonment or fine or both Under Section 304 A of the Indian Penal Code.

Criminal court record cannot be used in MACT: The witness statements in criminal court cannot be considered by MACT. Even the criminal court order regarding rash and negligent driving is neither conclusive nor binding on the MACT. However if an offending driver pleads guilty in a criminal court that can be used as evidence before MACT.

Pecuniary & non-pecuniary damages under civil remedies

Among civil remedies, two types of damages exist: one is non-pecuniary damages (general damages) and the other is pecuniary damages (special damages).

The non-pecuniary damages (general damages) are the damages which cannot be calculated in terms of money. They are pain & suffering, shock, loss of amenities, disfigurement, loss of expectation in life etc.

The Pecuniary damages are those damages which the victim has actually incurred and are capable of being calculated in terms of money. They include compensation for loss of earning capacity, other specific damages relating to property, expenses for medicine and special diet, expenses for attendance etc.

The detailed head of compensation are provided in para 5 in the SC judgement in Rajkumar v Ajay Kumar [(2011)1 SCC 343].

Who can make application for compensation?

An application for compensation, under Section 166 (1) of the MVA, can be filed before the MACT by: –

  1. the person who sustained injury
  2. the owner of the property damaged,
  3. the legal representative of the deceased, in case of death, and
  4. the authorised agent of the person injured, or all or any of the legal representatives of the deceased.

A legal representative who is not dependent on the deceased, such as a married daughter settled elsewhere, can also file the application. The term legal representative is wider term than the term legal heir.

The dependency of a legal heir is not the be all end all criteria in claiming compensation as pointed out in a number of cases. Dependency includes gratuitous service dependency, physical dependency, emotional dependency, psychological dependency, and so on which cannot be equated in terms of money.

Include all concerned persons in the claim

The application for compensation must be against the owner of the vehicle, its driver, or the Insurer, as the case may be.

All legal representatives should be included in the application as parties. In case, a legal representative has not joined in such an application for claim, the application shall be made on behalf of or for the benefit of all the legal representatives.

The legal representatives, who have not joined, shall be impleaded as respondents to the application.

Non-impleadment of the driver and the owner of the offending vehicle is of no consequence if the claim is made under no-fault liability, coming under Section 164 of the MV Act. In such case it would be sufficient to prove that the vehicle was involved in the accident.

When two vehicles are involved: If two vehicles are involved in the accident, it is always better to implead the owner, driver and insurer of both the vehicles. This would avoid some complications which may arise later. The applicant can exercise discretion in this matter.

In accidents involving two vehicles and one driver suffers death or injury due to his own negligence, he cannot claim compensation from the insurer of his vehicle, but can stake claim against the owner and insurer of the other vehicle.

In composite negligence where two drivers are negligent, the MACT should decide the percentage of negligence of each driver and apportion the liability of the insurance company. The third party involved in such an accident can claim severally against all or any of them.

Where can the victim file his claim for compensation?

The applicant can make claim for compensation as per his choice (under Section 166 (2) of the MV Act) in any one of the following Tribunals: –

  1. where the claimant resides or carries on business
  2. where the owner/driver of the vehicle resides
  3. where the accident took place

When accident occurs what the Police must do?

When information of a road accident is received in the Police Station, the Investigation Officer (IO), who investigates the accident, shall inspect the site of the accident, take photographs / videos of the scene of the accident and the vehicles involved in the accident and prepare a site plan drawn scale to scale, indicating the lay out and width etc of the roads or places, the position of the vehicles and persons involved and such other relevant facts.

If it is an accident involving injury the IO shall take the photographs of the injured person in the hospital. The IO shall conduct spot enquiry by examining the eye witnesses / bye standers.

The Police Officer should provide any information at his disposal relating to the vehicle and the name and address of the person injured and property damaged to the claimant of the compensation or the insurance company, within specified time u/s 160 of MV Act.

The IO shall work as a facilitator and furnish information to the MACT and other stakeholders.

File First Accident Report (FAR) in 48 hours: The IO is bound to file a First Accident Report (FAR) to the MACT, in Form I, within 48 hours of the accident.

Copies of FAR to be furnished: The copies of the FAR to be furnished to the Nodal Officer of the Insurance Company, the victim, legal representatives, State Legal Service Authority and to be uploaded on to the website of the police.

The Insurance Company has to appoint a Designated Officer for the case within 10 days of receipt of the FAR. The Designated Officer will be responsible for dealing with and processing the case and to pass a reasoned decision in respect of compensation to be paid to the victim.

The Nodal Officer to be appointed by the Insurance Company will deal with investigation of the accident case by the police officers.

Inform the Rights of the Victim: The IO shall inform the rights of the victim to the victim / legal heirs in Form II with a flowchart of the schemes available to them, within 10 days specifying the remedial scheme applicable to them.  A copy of the Form II has to be included in the Detailed Accident Report (DAR).

Driver’s information: The IO shall provide a blank copy of the Form III and collect the information of the driver in Form III, within 30 days of the accident.

Owner’s information: Similarly, the owner’s information shall be collected in Form IV within 30 days of the accident.

IAR to be filed within 50 days: The IO shall send the IAR to the Tribunal in Form V with relevant documents within 50 days of the accident.

A copy each of the IAR shall be given to the Insurance Company of the vehicle involved, the victim, the claimant, the State Legal Services Authority, insurer and General Insurance Council.

The IO as well as the Insurer should verify the details of the driver / owner in form III and Form IV, by using wahan app or shall take the help of Registering Authority. The IO shall file the verification report in Form X before the MACT along with the DAR.

Victim to provide details within 60 days: The IO shall give a blank copy of Form VI (VIA for minor) to the victim or the legal heir and collect their details in the form along with relevant documents. They shall furnish such details and documents to the IO within 60 days of the accident. If the victim includes a minor the form to be used is Form VIA.

The IO shall furnish a copy of the Form VI and VIA along with the documents and the DAR to the Insurance Company and to the Child Welfare Committee & the State Legal Service Authority, in case child is involved, within 30 days of receiving the Form VI and VIA.

The Insurance Company, then, shall verify the details of the victim within 30 days from the date of receipt of the DAR.

Investigation of the criminal case within 60 days: The IO shall complete the investigation of the criminal case relating to the vehicle accident and file the Police Report to be submitted under Section 173(2) of the Criminal Procedure Code (CrPC) before the concerned Criminal Court, within 60 days of the accident.

The IO should also file a copy of the above said police report along with the DAR to the MACT.

DAR to be filed within 90 days: The IO should compile all documents and materials in the form of a Detailed Accident Report (DAR) in Forms VII and submit them to the MACT within 90 days of the accident.

The DAR should be accompanied with the Site Plan in Form VIII, Mechanical Inspection Report in Form IX, Verification Report in Form X, and the Police Report under Section 173 (2) of the CRPC.

The DAR should be treated as a Miscellaneous Application for compensation.

Copies of the DAR to the victim etc: The IO should furnish a copy of the DAR to the victim, owner, driver of the offending vehicle.

The IO shall submit a copy of the DAR and other documents to the Nodal Officer of the Insurance Company, State Legal Service Authority, and the General Insurance Council.

The IO shall send a copy of the DAR to the concerned criminal court within 7 days of submitting it to the MACT.

If the IO fails to do his duties, he will face consequences in the form of disciplinary action under the Police Act.

Extension of time to file IAR & DAR: The IO can seek extension of time for filing IAR and DAR, for reasons beyond his control. The Tribunal can extend the time as it considers appropriate.

In case of failure to give details by parties: If the parties connected with the accident fail to disclose any relevant information or documents the IO can seek necessary direction from the MACT.

The Tribunal will give direction within 15 days to provide the information or documents.

In medico legal cases (MLC): The concerned Hospital should furnish Post-Mortem Report or Medico Legal Certificate (MLC) to the iO, within 15 days of the accident.

Registering Authority to verify documents: The Registering authority should verify the licence of the driver, fitness & permit of the vehicle, and supply to the IO within 15 days. The Registering Authority should furnish information free to claimants, insurer etc. They shall facilitate to identify the vehicle name, and address of the person using the vehicle at the time of accident, and the person injured or property involved.

The Registering authority should provide any information at its disposal relating to the vehicle and the name and address of the person injured and property damaged to the claimant of the compensation or the insurance company, within specified time u/s 160 of MV Act.

If Accident reports are not complete

If the FAR, IAR and DAR are not complete the MACT shall ask the IO to complete the documents and the date of first hearing will be done only after making them complete.

MACT can treat DAR as Claim Petition

On receiving any Accident Report (DAR) from the police officer, the Motor Accident Claim Tribunal (MACT) shall register it as a Miscellaneous Application for accident compensation, under Section 159 and 166 (3) of MV Act.

Persons involved in accident can also file a claim

The claim petitions filed by the persons involved in the accident or their representative will also be added to such Miscellaneous Application.

Such application should be filed within six months from the date of occurrence of the accident, as per Section 166 (3) of the MV Act. No condonation of delay is possible.

When DAR filed but not Police Report: If Police Report under CrPC is not filed when DAR is filed, the MACT shall either wait for the report or record the statements of the witnesses to determine the negligence before making the award.

Insurance Companies can settle claims u/s 149 M V Act

Make offer within 30 days: On receiving information about the accident either from the claimant or from the DAR, the Designated Officer ( who needs to be appointed within 10 days of receipt of information about the accident) of the insurance company shall make an offer of settlement of claim of the victim in regard to an accident claim, before the MACT within 30 days of the intimation of the accident in Form XI, under Section 149(1) of the MV Act. The Insurance company also has to appoint a Surveyor to verify the claim.

If Insurance Company does not question the liability to pay compensation, the Designated Officer of the insurance company shall take a decision as to the quantum of compensation payable to the claimant in accordance with law, within 30 days of the date of intimation of the accident. The decision of the Designated Officer will have to be submitted before the Claim Tribunal in Form XI.

Claimant to accept the offer within 30 days: The Claimant is not able to respond to the offer of compensation immediately, the MACT can allow them 30 days to respond.

If the Insurance Company does not admit the liability, it shall file the reasons, along with the Surveyor Report, in Form XI.

Pay compensation within 30 days: In case of consent award, the insurance Company will have to pay the compensation so settled within 30 days of settlement. The MACT should ensure that such settlements should not be under undue influence.

Pay the amount in consent award within 6 months: The MACT shall ensure that the claimant is awarded just compensation in the settlement and the consent award is passed within six months from the date of the accident.

If the offer is not fair pass order within 9 months: If the offer of the Insurance company is not fair, the MACT will then conduct an inquiry under Section 168 or 169 of the M V Act, and pass an order, after hearing the parties, within nine months from the date of the accident.

If the insurance company disputes: When the insurance company disputes the liability to pay compensation it shall disclose the grounds of defence in Form XI. The MACT shall conduct an inquiry as per Sections 168 & 169 of the MV Act within one year from the date of the accident.

Claimant has three other options to get compensation

A claimant, who disagrees to settle the offer of compensation with the Insurance Company, has got three options to get a fair compensation: –

  • one is under Section 164 of the MV Act under no fault liability,
  • the second one is u/s 166 of the MV Act by proving the fault or negligence of the offending vehicle &
  • the third one is under Section 161 of the MV Act in hit and run

If DAR does not bring a charge of negligence or the claimant choose to claim compensation on no-fault basis, the MACT shall register the case under Section 164 of the MV Act.

If it is a case of rash and negligent driving, it will be registered under Section 166 of the MV Act.

Compensation on no-fault liability u/s 164

A claimant can seek claim of a pre-fixed amount from Insurance Company or the vehicle owner, under Section 164 of the MV Act, without pleading the fault of the offending driver. It is called no fault liability case.

In such cases, the claimant need not plead or establish that the death or injury was caused due to the negligence of the driver or owner. The claimant will be granted fixed amount of compensation without considering whether there is fault or negligence on the part of the offending driver or on the claimant’s part. Such an approach will minimise the protracted litigation and enable the victim to get the pre-fixed net compensation without any delay.

However, on receipt of this compensation under Section 164 on no-fault liability, alternate application for claim being proceeded under Section 166 of the MV Act, if any, will automatically lapse.

In cases of no-fault liability, the applicant would get Rs 5 lakh for death, and 2.5 lakh in case of grievous hurt. But if he gets some other compensation that will be deducted from this amount.

Under Section 166 by proving the fault or negligence

If the claimant files a claim under Section 166 of MV Act, the judge of MACT will decide the claim for compensation based on evidence available in regard to the fault on the part of the parties.

In case of fault on the part of the claimant in terms of percentage (such as 40:60 or 50 :50) there will be proportionate reduction in the resultant compensation.

If compensation under Section 149 M V Act on settlement basis is accepted the party cannot file an application under this Section.

Compensation in hit and run cases under Section 161

Another type of case, dealt with under Section 161 of the MV Act, is called Hit and run case. A Hit & run case means a case pertaining to an accident arises out of a motor vehicle the identity whereof cannot be ascertained despite reasonable efforts.

The amount of compensation provided for in hit and run cases is now Rs 2 lakh in case of death of the victim, and Rs 50,000/- in case of injuries.  The amount will be met from a Solatium Fund Scheme of the Central Government. If the victim later gets any other compensation under any other law, the amount received under this scheme should be deducted from that amount.

Golden hour treatment & interim compensation: The Central Government Solatium Fund Scheme should also provide for treatment of accident victims during golden hour, and payment of interim relief as well,

Where to apply for Solatium fund? To get compensation from Solation Fund the applicant should apply to the Claim Enquiry Officer, who will hold enquiry of the claim after examining the FIR and other connected records such as Inquest Report, post-mortem report or Certificate of Injury. He will then submit it to the Claims Settlement Commissioner for granting sanction. On getting sanction, the nominated Insurance Company will then pay the party within 15 days, as per Solatium Fund Scheme.

Claims Enquiry Officer is the Subdivisional Officer of the Revenue department and Claims Settlement Commissioner is the District Collector.

MACT has to make award of just compensation

In every contested case for compensation, the MACT must consider the evidence available before it and make award of just compensation. The MACT, in its judgement, should specify the persons whom shall be paid the compensation and who has to pay it, as specified under Section 168 of the MV Act.

The insurer or the owner or the driver or all/any of them have to pay the compensation.

Procedure to be followed by MACT

Receiving application by MACT: On filing the DAR or/and receiving of the Application by any aggrieved party, the MACT may examine the documents and the applicant on oath and the substance of such examination will be reduced to writing. If the documents are not complete the Tribunal shall direct the IO to complete them within a specified date. The Tribunal can reject the defective application for curing, or transfer it to the other Tribunal if the latter has the proper jurisdiction.

Summary procedure to be followed: The MACT will follow summary procedures, as it thinks fit, as a civil court in taking evidence on oath, enforce attendance of witnesses and compelling discovery & production of documents & material objects, etc. It can follow simplified procedure to grant immediate relief. It can execute its decrees as per the Civil Procedure Code, 1973.

The examination of the doctor should be confined to the proof and assessment of disability, special assessment of disability, special circumstances about prolonged treatment, requirement of future treatment and likely expenditure and other essential features. Efforts should be made to record the evidence of the treating doctor by assigning an Advocate Commissioner. If the certificate given by the doctor is not contested, he should not be called to give oral evidence.

Issuing notice: It is the duty of the IO to produce the drivers, owners, claimants and the eye witnesses before the MACT, if the reports and documents are ordered to be complete. The Insurance Company will also be notified by the IO of the first date of hearing.

If IO cannot bring the parties: If the IO cannot bring them, the MACT shall then send a notice to the owner, Insurance Company and drivers, asking them to appear in the court and produce relevant evidence within 30 days. The parties have to appear on the date and further dates. The other parties will be asked to file their Written Statements.

Framing of issues by MACT: After perusing the application, the Written Statements and the result of the examination of witnesses, the MACT shall frame the issues. Then the witnesses will be summoned and evidence will be taken. Party can appear in person or through legal representatives.

In recording evidence, the rules of natural justice should be followed. The Tribunal should receive and disclose all the material which is relevant and the party wishes to produce. It should give to the individual concerned an opportunity to rebut such information / material.

The Tribunal has the power to have local inspection and record the statement of any person. If the party demands the concerned party has to bear the expenses for it. The Tribunal can seek the help of any specialist to assist it in holding the inquiry for its adjudication. Local commissioner can also be used by the MACT to record evidence.

The kinds of evidence to be provided before the MACT are direct evidence, circumstantial evidence, documentary evidence and expert opinion. In evidence, the statements have to be recorded word by word. MACT should then pass its orders concisely recording its findings in each of the issues framed.

MACT can suo motu execute the decree, if the payment is not made by the party within the time specified in it.

Structured method to grant predictable compensation

the Supreme Court (SC) has, in the recent times, brought in some broad principles to ensure consistency and predictability in the compensation granted in motor accident claims.

The SC considers that it may not be practically possible to have mathematical precision or identical awards, in assessing compensation. But the same or similar facts should lead to awards in the same range.

When the factors/inputs and the formula/legal principles are the same, there should be consistency and uniformity, in arriving at just compensation to the applicants. Therefore, the courts now have to follow a structured compensation method evolved over the years for providing compensation without causing much inconsistency.

Important judgements specifying structured compensation

The three key judgments in regard to fixation of compensation in motor accident cases based on structured method are:

The Pranay Sethi case was heard by a five-judge bench of the SC. The judgement laid down some broad guidelines for assessing the amount of compensation to be paid to the accident victims in areas where there were divergent approaches.

In Pranay Sethi case states that the Tribunals shall ordinarily follow the standards prescribed in the judgment in Sarla Verma case in regard to multiplier, subject to the observations made in Reshma Kumari case, in regard to arriving at a just and predictable compensation. The multiplier method originally applied in General Manager, KSRTC, Trivandrum v Susamma Thomas (AIR 1994 SC 1631) and reaffirmed by the Sarala Verma, Reshma Kumari and Pranay Sethi judgements is the right method according to SC in determining compensation under Section 166 of the M V Act.

How to calculate just compensation in vehicle accidents?

Calculate the multiplicand: To calculate just compensation in a death case, the first thing to be done is to calculate the annual income or dependency or multiplicand, after deducting the tax.

Deduct the personal expenses: Then deduct the personal expenses and living expenses from it. The resultant amount is termed as annual income or multiplicand or dependency. For this exercise the claimant must establish the age of the deceased, the income of the deceased and the number of dependents.

Ascertain multiplier: Then, ascertain the multiplier from the column 4 in the table in Sarala Verma judgement based on the age of the victim.

And finally multiply the annual income or dependency or multiplicand with the multiplier.

Add future prospects: Then, add Future Prospects to the above amount of dependency based on the basis of percentage provided in the Pranay Sethi judgement.

In short: When the annual income or multiplicand is multiplied with multiplier and added with Future Prospects, the net loss of dependency will be arrived at.

Along with that amount, add Loss of Estate, Funeral Expenses, Loss of Consortium as allowed in the Pranay Sethi judgement to arrive at the net compensation.

Deduction of personal & living expenses to find out the income

The Sarla Verma judgement, in its paragraph 14 and 15, lays down the method of deduction of personal & living expenses to ascertain the annual income or mulplicand is as follows:

Where married: Where the deceased was married, the deduction towards personal and living expenses of the deceased should be one-third where the number of dependent family members is 2 to 3, one-fourth where the number of dependent family members is 4 to 6, and one-fifth where the number of dependent family members exceeds six.

Where bachelor: Where the deceased was a bachelor and the claimants are the parents, the deduction follows a different principle. In regard to bachelors, normally, 50% is deducted as personal and living expenses, because it is assumed that a bachelor would tend to spend more on himself. Even otherwise, there is also the possibility of his getting married in a short time, in which event the contribution to the parent(s) and siblings is likely to be cut drastically. Further, subject to evidence to the contrary, the father is likely to have his own income and will not be considered as a dependant and the mother alone will be considered as a dependant. In the absence of evidence to the contrary, brothers and sisters will not be considered as dependants, because they will either be independent and earning, or married, or be dependent on the father.

Even if the deceased is survived by parents and siblings, only the mother would be considered to be a dependant, and 50% would be treated as the personal and living expenses of the bachelor and 50% as the contribution to the family.

However, where the family of the bachelor is large and dependent on the income of the deceased, as in a case where he has a widowed mother and large number of younger non- earning sisters or brothers, his personal and living expenses may be restricted to one-third and contribution to the family will be taken as two-third.

Table of Multiplier being used in deciding loss of dependency

The multiplier to be used should be as mentioned in Column (4) of the table in Sarla Verma judgement concurred by Pranay Sethi judgement.

The table starts with an operative multiplier of 18 (for the age groups of 15 to 20 and 21 to 25 years), reduced by one unit for every five years, that is M-17 for 26 to 30 years, M- 16 for 31 to 35 years, M-15 for 36 to 40 years, M-14 for 41 to 45 years, and M-13 for 46 to 50 years, then reduced by two units for every five years, that is, M-11 for 51 to 55 years, M-9 for 56 to 60 years, M-7 for 61 to 65 years and M-5 for 66 to 70 years.

Future prospects to be applied in lieu of future increase

The Pranay Sethi case settled the issue of fixation of Future Prospects in cases of deceased who is self-employed or on a fixed salary.

In regard to Future Prospects the judgement states as follows:

On permanent job: While determining the income, if the deceased had a permanent job and was below the age of 40 years, an addition of 50% of actual salary to the income of the deceased should be made towards future prospects.

If the age of the deceased was between 40 to 50 years, then the addition should be 30%.

In case the deceased was between the age of 50 to 60 years, the addition should be 15%.

The actual salary should be read as actual salary less tax.

Self-employed & on a fixed salary: In case the deceased was self-employed or on a fixed salary, an addition of 40% of the established income should be made where the deceased was below the age of 40 years.

An addition of 25% where the deceased was between the age of 40 to 50 years and 10% where the deceased was between the age of 50 to 60 years should be regarded as the necessary method of computation. The established income means the income minus the tax component.

Future prospects to be factored in permanent disability

The Karnataka High Court recently has held in its judgement that Loss of future prospects has to be factored in, even if it is not a case of death but a case of injury without amputation resulting in whole body disability, which ultimately has a bearing on the reduced earning capacity.

Conventional heads: Loss of estate, loss of consortium & funeral expenses

The confusion pertaining to grant of loss of estate, loss of consortium and funeral expenses has been nearly solved in the Pranay Sethi judgement. The amount fixed for conventional heads such as loss of estate, loss of consortium and funeral expenses are Rs. 15,000/-, Rs. 40,000/- and Rs. 15,000/- respectively.

The amounts should be enhanced at the rate of 10% in every three years since the year of Pranay Sethi judgement.

Loss of estate includes the expenditure on medicines, treatment, diet, doctor’s fee etc which had been met from and depleted the estate of the injured who died subsequently.

Loss of consortium, means the loss of spouse’s affection, comfort, solace, companionship, society, assistance, protection, care and sexual relations during the future years. It is a non-pecuniary head of damage. Since the legal representative would be adequately compensated for the pecuniary loss, it would not be proper to award a major amount under this non-pecuniary head.

Compensation in personal injury cases

In the case of grievous injury and permanent disability other items can be added in arriving at just compensation.

In personal injury cases, the compensation will be awarded only for expenses relating to treatment etc, loss of earnings and damages for pain and suffering.

But in serious injury cases when medical evidence corroborates with claimant’s evidence compensation will be granted under loss of future earning, future medical expenses, loss of amenities and loss of expectation in life.

The principle of compensation in injury cases is that the award must be just. It means that compensation should, to the extent possible, fully and adequately restore the claimant to the position prior to the accident. The object of awarding damages is to make good the loss suffered as a result of wrong done as far as money can do so, in a fair, reasonable and equitable manner.

The court or tribunal shall have to assess the damages objectively based on the nature of disability and its consequences. A person must be compensated for his inability to lead a full life, his inability to enjoy those normal amenities which he would have enjoyed but for the injuries, and his inability to earn as much as he used to earn or could have earned.

The SC, in Pappu Deo Yadav v Naresh Kumar,reminds the tribunals that they should be mindful that a serious injury not only permanently imposes physical limitations and disabilities but too often inflicts deep mental and emotional scars upon the victim. The attendant trauma of the victim’s having to live in a world entirely different from the one she or he is born into, as an invalid, and with degrees of dependence on others, robbed of complete personal choice or autonomy, should forever be in the judge’s mind, whenever tasked to adjudge compensation claims.

Principles in assessing future earnings in injury cases

The principles to be followed in assessing future earnings in injury cases are detailed in para 13 of the SC judgement in Rajkumar v Ajay Kumar [(2011)1 SCC 343] and they are as follows:

  • All injuries (or permanent disabilities arising from injuries), do not result in loss of earning capacity.
  • The percentage of permanent disability with reference to the whole body of a person, cannot be assumed to be the percentage of loss of earning capacity. To put it differently, the percentage of loss of earning capacity is not the same as the percentage of permanent disability (except in a few cases, where the Tribunal on the basis of evidence, concludes that percentage of loss of earning capacity is the same as percentage of permanent disability).
  • The doctor who treated an injured-claimant or who examined him subsequently to assess the extent of his permanent disability can give evidence only in regard the extent of permanent disability. The loss of earning capacity is something that will have to be assessed by the Tribunal with reference to the evidence in entirety.
  • The same permanent disability may result in different percentages of loss of earning capacity in different persons, depending upon the nature of profession, occupation or job, age, education and other factors.

The defence the insurance firms can raise

Insurance companies can defend the case on the following grounds:

  • the vehicle is not under permit to ply on the date
  • using the vehicle for a purpose not permitted
  • Driving of vehicle by a person not licensed
  • Policy itself is obtained by fraud or by providing false data
  • The passenger is a gratuitous one, including a second pillion rider

If the deceased in the accident is a child

In an accident the compensation is assessed based on his earning capacity and his age. But when a child dies in an accident, then while deciding the compensation child’s educational qualification, his performance in school will have to be considered. If the child was good in his studies, then he would get more compensation.  But there is no standard way of calculating claim in case of death of a child.

In the case of permanent disability of a child, the SC in Master Mallikarjun v National Insurance Company Ltd provides different slabs for different age group. The SC adds that the appropriate compensation on all other heads in addition to the actual expenditure for treatment, attendant, etc., should be, if the disability is above 10% and up to 30% to the whole body, Rs.3 lakhs; up to 60%, Rs.4 lakhs; up to 90%, Rs.5 lakhs and above 90%, it should be Rs.6 lakhs. For permanent disability up to 10%, it should be Re.1 lakh, unless there are exceptional circumstances to take different yardstick.

In proving disability it is always better to bring the doctor as a witness to prove the extent of disability directly rather than with the certificate alone.

If the deceased is an unemployed house wife

If the victim is not the earning member of the family, the compensation cannot be reduced on that pretext.

So, in 1994, the legislature had fixed the income of a non-earning person at Rs 15,000/- per month and in case of a spouse, it would be one-third income of the spouse if he is an earning member, as per the Schedule II of the M V Act. The Schedule II has been removed by the 2019 amendment of the M V Act.

However, some High Courts started fixing higher notional income, such as Rs 25,000/, based on increasing living expenses for such persons having no income.

The SC in Kurvan Ansari v Shyam Kishore Murmu says that in spite of repeated directions, the Scheduled-II of MV Act (deleted in 2019 M V Act amendment and had errors) was not amended and therefore, fixing notional income of Rs 15,000 per annum for non-earning members is not just and reasonable. Hence, the SC decided to take the notional income of a deceased child at Rs 25,000 per annum, assuming it as a non-earning member.

Contributory negligence will result in reduction of amount

Negligence is failure of a person to take reasonable care. Negligence is of two types: composite negligence or contributory negligence.

Composite negligence is the negligence in which a third person gets injured without his own negligence but due to the negligence of the other persons and the inter se liability will be fixed proportionate to their contribution.

Negligence of the injured which contributed to the accident along with negligence of the other is contributory negligence. In contributory negligence one person gets injured due to his negligence and the negligence of another person and the compensation will be granted based on the per centage of their contribution of negligence. If the applicant’s contributory negligence is assessed as 50 per cent, then the amount of compensation for which he is entitled will be reduced to one-half of what is fairly assessed.

When a person is employed by a master, the master is responsible for paying compensation under vicarious liability.

Release or deposit of amount of compensation

The MACT will decide the mode of disbursement of the award, considering the financial status and the financial needs of the claimant.

As per the guidelines issued by the SC in General Manger, Kerala State Road Transport Corporation, Trivandrum v. Susamma Thomas and Others (AIR 1994 SC 1631) and reaffirmed in A.V.Padma & Ors v R.Venugopal & Ors, long term fixed deposit of amount of compensation is mandatory only in the case of minors, illiterate claimants and widows.

Illiterate claimants: In the case of illiterate claimants, the Tribunal is allowed to consider the request for lumpsum payment for effecting purchase of any movable property such as agricultural implements, rickshaws etc. to earn a living. However, in such cases, the Tribunal shall make sure that the amount is actually spent for the purpose and the demand is not a ruse to withdraw money.

Semi-literate claimants: In the case of semi-illiterate claimants, the Tribunal should ordinarily invest the amount of compensation in long term fixed deposit. But if the Tribunal is satisfied for reasons to be stated in writing that the whole or part of the amount is required for expanding an existing business or for purchasing some property for earning a livelihood, the Tribunal can release the whole or part of the amount of compensation to the claimant provided the Tribunal will ensure that the amount is invested for the purpose for which it is demanded and paid.

Literate claimants: In the case of literate persons, it is not mandatory to invest the amount of compensation in long term fixed deposit. Thus, sufficient discretion has been given to the Tribunal not to insist on investment of the compensation amount in long term fixed deposit and to release even the whole amount in the case of literate persons.

Examination of the claimants before the award

The Claims Tribunal shall, before or at the time of passing of the award, examine the claimants to ascertain their financial condition/needs, mode of disbursement and amount to be kept in fixed deposits.

The Claims Tribunal shall ensure that the documents of the claimants such as Aadhaar Card and PAN Card, Details of the Aadhaar Linked Bank Account of the Claimant near the place of their residence along with the proper endorsement; and Two sets of photographs & specimen signatures of the claimants, are taken on record before the disbursement of the award amount.

If needed by the Tribunal the parties must file their computation of compensation in Form XIII/ XIV in death or injury cases.

MACT to issue award & deliver copies of it

The MACT shall deliver copies of the award within 15 days of judgement under Section 168 of the MV Act.

In award, the MACT cab allow simple interest from the date of claims under Section 171 of the MV Act. It can award special cost, not exceeding Rs 1000/, by way of compensation to the insurer or the party if any party is guilty of misrepresentation under Section 172 of the MV Act.

The person required to pay the amount under the award shall deposit the amount within 30 days of the date of award.

MACT to send a copy of the award to the Criminal Court

The Claim Tribunal shall send a certified copy of the award to the concerned criminal court. The IO shall also send a copy of the judgement to the criminal court within 7 days of passing it.

Execution of the award, if not paid within 90 days

The respondent, responsible to pay compensation, must deposit the compensation amount with interest, and give notice of the deposit to the claimant & the counsel and file a compliance report with the MACT, within 15 days from the date of deposit, but within 30 days from the date of award.

The MACT will then fix a date for reporting the proof of deposit of the award and examine its compliance. If the award amount is not deposited within 90 days from the date of award, the MACT will execute the order in accordance with the Section 169 (4) and Section 174 of the MV Act and the claimants will then get the award amount.

The MACT can issue order for recovery of any amount due from any person, to the Collector in the manner arrears of land revenue is collected, under Section 174 of the MV Act.

Conviction of the driver by the criminal court

If the driver of the offending vehicle is convicted by the criminal court, the court shall send a copy of the judgement as well as the affidavit of the accused with respect to his assets and income to the State Legal Services Authority.

The Authority shall conduct a summary inquiry and submit a Victim Impact Report (VIR) before the concerned criminal court within 30 days of the conviction in Form XII.

Appeal may lie to HC within 90 days

An appeal on MACT judgement for an amount exceeding Rs one lakh shall lie to the High Court (HC) within 90 days from the receipt of judgement, by depositing Rs 25000/ or 50 per cent of the amount so awarded, whichever is less.

But HC can condone delay in filing appeal under Section 173 of the MV Act.

SC bats for restructuring MACT procedures

The SC in Bajaj Allianz General Insurance Company Private Ltd. v Union of India issued the following guidelines on 16th March 2021, stressing use of electronic mailing and messaging systems in claim proceedings.

The jurisdictional police station shall report the accident (Accident Information Report) under Section 159 MVA to the tribunal and insurer, within first 48 hours either over email or a dedicated website.

Police shall collect the documents relevant to the accident and for computation of compensation and shall verify the information and documents. These documents shall form part of the Detailed Accident Report. The police shall email the Report to the tribunal and the insurer within three months.

Similarly, the claimants may also be permitted to email the application for compensation with supporting documents, under Section 166 MVA to the Tribunal and the insurer during the same time.

The tribunal shall issue summons along with the Report or the application for compensation to the insurer by email.

The insurer shall email their offer for settlement/response to the Report or the application for claim to the tribunal, along with proof of service on the claimants.

After passing the award, the tribunal shall email an authenticated copy of the award to the insurer.

The insurer shall electronically deposit the awarded amount into the bank account maintained by the tribunal for this purpose.

Other electronic or other facilities to be maintained

Each tribunal shall create an email ID peculiar to its jurisdiction for receiving the emails from the police and the insurer as mentioned above.

Similarly, all insurer throughout India shall also create an email ID peculiar to the jurisdiction of each claim tribunal. These email IDs would be prominently displayed at tribunal, the police stations and the office of the insurers for the benefit of the claimants.

Such email addresses shall be prominently displayed on the website maintained by the tribunal and the insurer.

Insurers shall appoint nodal officers for each tribunal and provide their contact details, phone and mobile phone numbers, and email address to Director Generals of State Police and the tribunals.

An online platform to be formulated

The SC was also of the opinion that the Central Government shall develop an online platform accessible to the tribunals, police authorities and insurers throughout India, as each State having an independent online platform for submission of accident reports, claims and responses to claims, will hamper efficient adjudication of claims, especially where the victim of the accident is not a resident of State where accident has occurred.

SC comes out with further directions

In Gohar Mohammed v UP State Road transport Corporation, the SC comes out with new directions based on the Motor Vehicle Rules put into operation as on 1st April 2022.

Additional reading

  1. Sarla Verma v Delhi Transport Corporation & Anr (2009) 6 SCC 121,
  2. Reshma Kumari & Ors v Madan Mohan & Anr
  3. National Insurance Co. Ltd. v Pranay Sethi & Ors (2017) 16 SCC 680
  4. Bajaj Allianz General Insurance Company Pvt Ltd. v Union of India
  5. Gohar Mohammed v UP State Road Transport Corporation [CA No 9322 of 2022 delivered on 15th December 2022]
  6. Rajkumar v Ajay Kumar [(2011)1 SCC 343]
  7. General Manager, KSRTC, Trivandrum v Susamma Thomas (AIR 1994 SC 1631)
  8. Motor Vehicle Act, 1988
  9. Motor Vehicle (Amendment) Act, 2019
  10. The Central Motor Vehicles (Fifth Amendment) Rules, 2022: enforced since 1/4/2022
  11. New Forms prescribed by Motor Vehicle (Fifth Amendment) Rules 2022
  12. Solatium Fund Scheme, 1989, of the Government of India