SC Enhances Compensation in NRI Accident Death Case, Applies ‘Future Prospects’ Rule

The accident took place on August 31, 2007 at around 3.00 a.m. near Nirmal Kutia Chowk, Karnal, when the victim, Rajinder Singh Mihnas, aged 31 years, was driving his car and it was hit by a truck being driven in a rash and negligent manner. Singh succumbed to his injuries, leaving behind his wife, a daughter and a son. At the time of his death, Singh was based in the United States where he worked as a driver and also ran a transport company called West End Express Inc. It was claimed that he earned USD 9,600 per month, equivalent to around Rs 4,25,000 in Indian currency at that time.

The Motor Accident Claims Tribunal, however, took his monthly income to be only Rs 5,000, citing absence of concrete proof of US wage rates. In 2010, the Tribunal awarded the family Rs 7,80,000 in compensation with 6 per cent interest. The family challenged the award before the Punjab and Haryana High Court, arguing that the MACT had undervalued Singh’s income and ignored documentary evidence.

In 2017, the High Court partly allowed the appeal. Relying on records including data from the United States Department of Labour Wage and Hour Division, it fixed Singh’s monthly income at Rs 78,300 and enhanced the compensation to Rs 1,17,20,200. However, the High Court did not factor in “future prospects” while calculating the compensation, an omission which the claimants argued was contrary to the law laid down in National Insurance Company Ltd vs Pranay Sethi (2017).

In Pranay Sethi, a Constitution Bench held that where the deceased is below 40 years of age and has a fixed income, 40 per cent of the established income must be added to account for likely income growth had the victim lived. This rule applies to salaried, contractual and self-employed persons alike. The appellants submitted that since Singh was 31 years old at the time of his death, the High Court was bound to apply the 40 per cent addition for future prospects.

The Supreme Court agreed that calculating future prospects for self-employed persons working abroad is not without challenges. “Assessing the future prospects of a person self-employed in a foreign country like the United States, compared to a person in India, is difficult, given that the socio-economic-political conditions in any foreign country would be different,” the bench observed. However, it emphasised that Pranay Sethi remains binding precedent and must be applied.

The bench recalculated the compensation by first taking the High Court’s determination of monthly income at Rs 78,300, translating to Rs 9,39,600 annually. Applying the 40 per cent addition for future prospects as mandated by Pranay Sethi added another Rs 3,75,840 annually, bringing the adjusted annual income to Rs 13,15,440. After applying the appropriate multiplier and adding amounts under the conventional heads of loss of consortium, loss of estate and funeral expenses as per Pranay Sethi, the court arrived at a total compensation of Rs 1,60,15,280. This represented an enhancement of Rs 42,95,080 over the High Court’s award.

The court directed that the enhanced amount be deposited with 6 per cent interest from the date of filing of the claim petition until the date of payment. It also upheld the High Court’s reliance on US Department of Labour data to assess the deceased’s income, noting that the evidence had been properly appreciated, but found merit in the argument that the future prospects component had been wrongly omitted.

The judgment is significant as it reiterates that the principle of future prospects applies even to self-employed individuals working abroad and that credible foreign income data can be used to determine compensation in Indian motor accident claims. It underscores that compensation must reflect not only the victim’s present earnings but also the likely growth in income over their remaining working life. For families of NRIs, the decision affirms that Indian courts will recognise genuine foreign earnings and apply standardised additions for future prospects to ensure just compensation under the Motor Vehicles Act.