The Supreme Court has referred an important legal question concerning the enhancement of compensation under “conventional heads” in motor accident claims to a Larger Bench, expressing doubts over the retrospective application of the 10% enhancement formula laid down in National Insurance Co. Ltd. v. Pranay Sethi (2017).

A Division Bench comprising Justice Ahsanuddin Amanullah and Justice K. Vinod Chandran examined whether the direction in Pranay Sethi—mandating a 10% increase every three years in amounts awarded under conventional heads—would apply to accidents that occurred prior to the 2017 judgment.

Interim Relief Granted

While referring the issue, the Court granted interim relief on merits to the claimants by enhancing the total compensation under conventional heads to ₹1,50,000, along with 8% interest.

Background of the Case

The case arose out of a motor vehicle accident that occurred in 1998. The petitioners—the wife and two children of the deceased—approached the Supreme Court seeking enhancement of compensation awarded under conventional heads, namely:

• Loss of Estate

• Loss of Consortium

• Funeral Expenses

They relied on the Constitution Bench judgment in Pranay Sethi, which standardized the amounts under these heads and directed a 10% enhancement every three years to account for inflation. Reliance was also placed on Rojalini Nayak & Ors. v. Ajit Sahoo & Ors.

Arguments of the Parties

The petitioners contended that:

• All three claimants were entitled to loss of consortium, including filial consortium for the children, relying on Magma General Insurance Co. Ltd. v. Nanu Ram & Ors.

• The 10% enhancement prescribed in Pranay Sethi should be applied, irrespective of the date of the accident.

The respondent insurer (National Insurance Co. Ltd.) argued that:

• The 10% enhancement should apply prospectively, i.e., only to accidents occurring after the 2017 judgment.

• While the standardized amounts fixed in Pranay Sethi could be applied, the periodic enhancement could not be extended retrospectively to older accidents.

Court’s Observations

The Bench closely examined the directive in Pranay Sethi, where the Constitution Bench had observed that the quantified amounts should be enhanced by 10% every three years considering factors such as price index, fall in bank interest, and escalation of costs.

Justice K. Vinod Chandran, speaking for the Bench, noted that applying such enhancement to accidents that occurred decades earlier merely because the claim was decided later would lead to serious inconsistencies. The Court observed:

“The escalation cannot depend upon the date of the order by which the claim petition is finally disposed of…”

The Bench further found it difficult to accept an interpretation under which an accident in 2010 could attract multiple enhancements simply based on the year of disposal of the claim.

Referral to Larger Bench

Expressing respectful disagreement with the interpretation allowing retrospective enhancement, the Bench held that the issue requires authoritative determination by a Larger Bench. It observed:

“Being a co-ordinate Bench, we would only refer the matter to a Larger Bench, which we do.”

Accordingly, the Registry has been directed to place the matter before the Chief Justice of India for appropriate orders.

The decision is expected to have wide ramifications for motor accident compensation claims, particularly those arising from accidents that occurred prior to the 2017 Pranay Sethi judgment.