SC Refers to Larger Bench Issue of Applying Escalation in Compensation Under MV Act

The Supreme Court recently expressed doubts over a previous judgment that allowed escalation of compensation amounts under different conventional heads for road accident victims under the Motor Vehicles Act, and referred the issue to a larger bench for consideration.

A bench of Justices Ahsanuddin Amanullah and K Vinod Chandran observed that the Constitution Bench in National Insurance Co Ltd v Pranay Sethi (2017) had provided for an enhancement of 10 per cent every three years only in respect of accidents that occurred after 2017, with the first enhancement becoming applicable in 2020.

The bench said that escalation in compensation cannot depend on the date on which a claim petition is finally decided by the tribunal, the high court or the Supreme Court. It pointed out that many cases where accidents occurred as early as 1998 would have been decided before 2017 and, in any case, could not benefit from enhancements introduced by the Constitution Bench in 2017. In view of this, the bench referred the matter to a larger bench.

The claimants, Hasina Yasmin and others, had sought enhancement of compensation under the conventional heads in line with the decision in Pranay Sethi. They also relied on a recent Supreme Court judgment in Rojalini Nayak v Ajit Sahoo.

Counsel for the claimants submitted that there were three claimants (the wife and two children of the deceased) all of whom were entitled to loss of consortium. It was argued that the children were also entitled to loss of filial consortium, as held in Magma General Insurance Co Ltd v Nanu Ram.

The appellants further pointed out that the Constitution Bench in Pranay Sethi had also permitted compensation for loss of estate and funeral expenses to be enhanced by 10 per cent every three years.

However, counsel for the insurance company opposed this, arguing that the 10 per cent enhancement laid down in Pranay Sethi could apply only to accidents that occurred after the date of that judgment. While the standardised amounts fixed by the Constitution Bench could apply even to older cases, no escalation at the rate of 10 per cent every three years could be allowed where the accident itself had occurred as early as 1998, as in the present case.

Agreeing with this submission, the bench noted that the Constitution Bench had provided for enhancement over time based on factors such as changes in the price index, reduction in bank interest rates and escalation of costs across sectors.

Court said that the standard amounts fixed by the Constitution Bench were reasonable as of 2017, when the judgment was delivered. It noted that the Constitution Bench had fixed Rs 15,000 for loss of estate, Rs 40,000 for loss of consortium and Rs 15,000 for funeral expenses.

However, the bench observed that even applying the logic of price rise and loss of purchasing power, the enhancement could not be extended to claims arising from accidents that occurred before 2020, which marked three years from the 2017 judgment and the point at which the first 10 per cent escalation would apply.

Reiterating its view, the court said that escalation cannot depend on when the claim is finally decided. It again pointed out that many accidents from 1998 had already been decided before 2017 and could not receive any enhancement based on Pranay Sethi.

According to the bench, the Constitution Bench decision provided for a 10 per cent enhancement every three years only in cases where the accident itself occurred after 2017, with the first increase applicable in 2020.

The bench said it found it difficult to accept an interpretation under which an accident that occurred in 2010 would receive a 10 per cent increase if decided in 2020, and another 10 per cent increase if decided in 2023. This, it said, was not the intent of the Pranay Sethi judgment as understood by the bench.

Court further held that no enhancement could be granted for an accident that occurred in 1998, as compensation under the conventional heads had to be assessed as on the date of the accident. These amounts had already been standardised by Pranay Sethi, and any delay in payment was to be compensated through interest.

Expressing its disagreement with the earlier view, the bench said it was respectfully sounding a doubt regarding the application of escalation to conventional heads based on Pranay Sethi. Being a co-ordinate bench, it referred the matter to a larger bench and directed the Registry to place the case before the Chief Justice of India for appropriate orders.

In the present case, court enhanced the compensation under the conventional heads to Rs 1.5 lakh and increased the rate of interest to 8 per cent from the date of filing of the claim application.

The bench directed the insurance company to pay or deposit the enhanced amount before the Motor Accident Claims Tribunal within two months, along with interest at 8 per cent on the entire awarded amount, after adjusting any amount already paid. The amount would be disbursed to the claimants, subject to the outcome of the reference.

Case Title: Hasina Yasmin & Ors Vs National Insurance Co Ltd & Anr

Order Date: December 17, 2025

Bench: Justices Ahsanuddin Amanullah and K Vinod Chandran