The Practical Lawyer

Compensation Under Section 163-A of the Motor Vehicles Act - Need for Review of
Supreme Court

Compensation Under Section 163-A of the Motor Vehicles Act - Need for Review of Supreme Court Judgment
By Ramesh Vaghela*
Cite as : (2001) 6 SCC (Jour) 9

Increase in the number of motor vehicles, poor maintenance of roads and negligence by drivers has led to substantial
increase in the road accidents resulting in death or injuries to victims. Prior to insertion of Section 163-A in the Motor
Vehicles Act, 1988 when the victim or his heirs approached Motor Accident Claims Tribunals, they were required to prove
negligence by the driver of the offending vehicle in order to make the owner liable to pay compensation. This at times
was a daunting task for the heirs of the deceased who did not witness the accident. Even in case of the injured victim
she/he could hardly be expected to recall the exact manner in which the accident occurred. Denial of compensation on
the ground that negligence of the driver of the vehicle was not established was highly unfair to the victim, particularly in a
welfare State. Realising this lacunae, Parliament passed the Motor Vehicles (Amendment) Act, 1994 (54 of 1994)
inserting Section 163-A in the Motor Vehicles Act, 1988 with effect from November 14, 1994. The section provides for
compensation on a structured-formula basis as indicated in a tabular form in the Second Schedule forming part of the
Act. In a claim for compensation under this provision the claimant is not required to plead or establish that death or
permanent disablement was due to "any wrongful act or neglect or default of the owner of the vehicle". In other words,
the claimant is entitled to compensation in accordance with the Second Schedule on the principle of no-fault liability. The
figures of compensation indicated in a tabular form in the Second Schedule show that the compensation awardable
under Section 163-A of the Motor Vehicles Act is quite substantial compared to compensation under Section 140 which
is limited to Rs 50,000 in case of death and Rs 25,000 in case of permanent disablement. For instance in the case of
death of a person aged 25 years whose annual income was Rs 12,000, the compensation payable to the heirs as per the
Second Schedule would work out to Rs 1,36,000. Section 163-A is thus an innovative and laudable provision intended to
provide for immediate relief to the victims of motor accidents. Surprisingly, however, the lawyers and litigants have not
come forward to take maximum benefit of this statutory amendment with the result that the victims have to wait for long
years till final adjudication of the claim petition. This situation prevails perhaps due to certain observations made by the
Supreme Court in U.P. SRTC v. Trilok Chandra1. The observations are to the effect that the Second Schedule contains
errors of calculation and tribunals may take it as a guide and not as a ready reckoner. The decision of the Supreme Court
in Trilok Chandra1 asserting that "the calculation of compensation and the amount worked out in the Schedule suffer
from several defects" seem to be the result of a mistaken view of the purpose of insertion of Sections 163-A and 163-B in
the Motor Vehicles Act, 1988 and not correctly appreciating the manner and method in which the table in the Second
Schedule is to be utilized while calculating the compensation.

An examination of the legislative history culminating in the introduction of a new predetermined formula for payment of
compensation to road accident victims "on the principle of no fault" reflected in the Second Schedule would at once show
that there is no justification in the reluctance of the Supreme Court to promptly accept the spirit of the innovative
legislation in this field. Despite the observation of the Bombay High Court that it was necessary in public interest to take
the view that proof of negligence on the part of the driver was irrelevant for claiming compensation, the Supreme Court in
Minu B. Mehta2 took the view that the observation of the High Court was inconsistent with the law of the land and that no
damages could become payable without proof of negligence on the part of the driver of the motor vehicle involved in the
accident.

A decade after Minu B. Mehta2 the Supreme Court in Ramanbhai Prabhatbhai3 candidly admitted that

"the observations of this Court on the above question were in the nature of obiter dicta since ... there was no necessity to
go into the question whether proof of negligence on the part of the driver was necessary or not to claim damages since it
had been found both by the High Court and this Court that such negligence had been in fact established".4

The Court's observations were in response to the introduction of Section 92-A in the Motor Vehicles Act, 1939 (Section
140 of the 1988 Act) providing for a lump sum compensation of Rs 15,000 in case of death and Rs 7500 in case of
permanent disablement, on the principle of no fault. The Supreme Court found the amendments a welcome step and
observed thus:

"Where a pedestrian without negligence on his part is injured or killed by a motorist whether negligently or not, he or his
legal representatives, as the case may be, should be entitled to recover damages if the principle of social justice should
have any meaning at all. In order to meet to some extent the responsibility of the society to the deaths and injuries
caused in road accidents there has been a continuous agitation throughout the world to make the liability for damages
arising out of motor vehicles accidents as a liability without fault." 5 (emphasis added)

The introduction of Section 163-A has to be appreciated in this background. It was introduced by Act 54 of 1994. The
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 The Practical Lawyer

Statement of Objects and Reasons to Act 54 of 1994 vividly stated the background of the introduction and indicated that
the "important suggestions made by the Transport Development Council relate to, or are on account of— "(a)

(b) providing adequate compensation to victims of road accidents without going into longdrawn procedure".6 The
Statement of Objects and Reasons then proceeds to state: "The Bill inter alia provides for— (a)-(j)

(k) a new predetermined formula for payment of compensation to road accident victims on the basis of age/income,
which is more liberal and rational."7

The Second Schedule is in consonance with the policy of the legislature and it is indeed liberal as indicated below. In fact
the Supreme Court in Trilok Chandra1 was not required to express any opinion on Section 163-A and the Second
Schedule. The accident in question had occurred in 1977 and negligence was established. The only question to be
decided related to determining the appropriate multiplier. The Court, however, did not stop at that. Making a reference to
Section 163-A and the Second Schedule, it proceeded to observe:

"We must at once point out that the calculation of compensation and the amount worked out in the Schedule suffer from
several defects. For example, in Item 1 for a victim aged 15 years, the multiplier is shown to be 15 years and the
multiplicand is shown to be Rs 3000. The total should be 3000 x 15 = 45,000 but the same is worked out at Rs 60,000.
Similarly, in the second item the multiplier is 16 and the annual income is Rs 9000; the total should have been Rs
1,44,000 but is shown to be Rs 1,71,000. To put it briefly, the table abounds in such mistakes. Neither the tribunals nor
the courts can go by the ready reckoner. It can only be used as a guide."8

This reasoning is, with respect, flawed. The flaw in this reasoning lies in the Court's proceeding to calculate when no
calculation whatsoever is required in the determination of compensation payable to the heirs in case of death of the
victim. In other words, the compensation in case of death as mentioned by "rupees in thousand" is to be straight away
awarded by selecting the figure applicable to the age of the victim and the annual income. For example, for a victim aged
15 years (mentioned as Item 1) whose annual income was Rs 3000 the compensation would be what is mentioned in the
Schedule namely, Rs 60,000. The multiplier mentioned in the Schedule has no relevance when compensation is
awarded to heirs for death of the victim. The use of the multiplier is shown in the explanation below the table. It is to be
used only when compensation is being worked out for the victim who is alive but has suffered permanent total or
permanent partial disablement. Reference to use of multiplier in the explanation figures only in Item 5 dealing with
"disability in non-fatal accidents". As regards fatal accidents, the note immediately below the table only states that the
amount of compensation "so arrived at" (by simply looking at the applicable figures) is to be reduced by 1/3rd in
consideration of the expenses which the victim would have incurred towards maintaining himself had he been alive. If
any calculation was to be done by reference to the multiplier even in fatal accidents, there was no need to give figures
since tribunals could have done the calculation by referring to the age and income of the victim both in fatal and non-fatal
cases resulting in disablement. The fact that calculation with reference to multiplier is mentioned only while determining
permanent total or permanent partial disablement clearly indicates that the multiplier mentioned in the table has no
application in working out compensation in case of death.

The Supreme Court has erred in assuming that the legislature intended a common multiplier to be applied both for claims
for fatal accidents and claims for disablement. A close study of the figures would show that in determining the "rupees in
thousand" applicable to compensation in case of death a different multiplier was applied by the legislature as indicated
below:
  Age of victimMultiplier applied1. Up to 15 years202. Above 15 years but not exceeding 20 years

193. Above 20 years but not exceeding 25 years184. Above 25 years but not exceeding 30 years175. Above 30 years
but not exceeding 35 years166. Above 35 years but not exceeding 40 years157. Above 40 years but not exceeding 45
years148. Above 45 years but not exceeding 50 years129. Above 50 years but not exceeding 55 years1010. Above 55
years but not exceeding 60 years 811. Above 60 years but not exceeding 65 years 612. Above 65 years 5
Thus if the annual income is Rs 3000 and the person's age is 15, the compensation would be Rs 60,000. If the age is
below 20, the compensation would be Rs 57,000 and if the age is below 30, the compensation would be Rs 54,000 as
indicated in the Schedule. This formula may not hold good when compensation works out to less than Rs 50,000. In all
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 The Practical Lawyer

such cases the figures mentioned is Rs 50,000. It is, therefore, mentioned in the explanation that compensation in case
of death is not to be less than Rs 50,000. This is so because, in any case, Section 140 provides for compensation of Rs
50,000 in case of death.

To take the first example again, when the age of the victim is below 15 years and the accident is fatal, using the multiplier
of 20, the compensation figure shown is Rs 60,000. From this 1/3rd is to be reduced and accordingly, the heirs would get
Rs 40,000.

Had the victim survived and suffered permanent total disablement the compensation would have to be worked out by
multiplying the annual income of Rs 3000 with the multiplier of 15 as mentioned in the table. Calculated in this manner
the compensation would be Rs 45,000 i.e. more than what would have been payable to the heirs in case of death of the
victim. Tribunals and courts, have, however, been awarding more compensation for permanent total disablement than in
cases of death. No exception can be taken to this approach. It has to be admitted that the clear legislative intent is to
adopt the table as a ready reckoner while determining the compensation under Section 163-A on the principle of no fault.
By taking the table only as a guide and using the multiplier mentioned in the table even for fatal cases, the heirs would be
deprived of a substantial amount. Take the case of income of Rs 12,000 per annum. When the age of the victim is up to
15 years, using the multiplier of 20, the compensation shown in the table is Rs 2,40,000. Deduct 1/3rd and it is Rs
1,60,000. Now instead of 20, take the multiplier of 15 shown in the table and the figure is Rs 1,80,000. Deduct 1/3rd and
the compensation payable works out to Rs 1,20,000 only, a difference of Rs 40,000, a big sum by any standard. The
legislature would hardly have intended such a result. The table is prepared meticulously taking care of all relevant
aspects. Going by the logic of the Supreme Court the entire table would, however, be defective because none of the
figures of compensation mentioned in the table match with the figure that would be arrived at multiplying the annual
income with the multiplier shown in the table. It would be preposterous to assume that the legislature would incorporate
in the Second Schedule, a table that has all the figures wrong. The Schedule and the table are part of the statute and it is
not open to courts to refuse to implement a statutory provision on the ground that it contains "several defects". Besides
the observations of the Supreme Court to the effect that there are "several defects" in the Schedule are merely casual
and passing observations and not being even obiter dicta have no binding effect as a precedent.9 As regards the
apprehension expressed in Trilok Chandra1 that "selection of multiplier cannot in all cases be solely dependent on the
age of the deceased" and that when the heirs are the parents alone, "age of parents would also be relevant"10 these are
aspects for the legislature to consider and it is no ground to refuse to enforce a part of a statute spelling out a
predetermined formula for compensation.

A Division Bench of the Gujarat High Court in Ramdevsing Chudasma11 has dealt with several aspects on the scope
and ambit of Section 163-A. It held that Section 163-A is a substantive provision providing for a summary remedy where
claim for compensation has to be decided on the basis of affidavits and documents. It held that additional amount can be
claimed under the provisions of Section 166. It also took the view that in awarding compensation under Section 163-A,
question of negligence of the victim has no relevance. An argument was raised to the effect that as the table shows
annual income figures up to Rs 40,000 only, persons with income above this cannot seek the remedy under Section 163-
A. This contention was negatived.12

However, following Trilok Chandra1 the Gujarat High Court too in Ramdevsing11 proceeded on the footing that the
Second Schedule contains mistakes and is to be treated as a guide only. Lengthy arguments were raised by eminent
counsel of the Gujarat High Court Bar. However, none of the learned advocates who appeared in the matter noticed what
is highlighted in this article. Apparently no tribunal, court or lawyer in the country has noticed the fact that the Second
Schedule is required to be understood and implemented in the manner explained above. That is probably the reason why
the innovative piece of legislation enacted with the intention to provide quick and effective monetary relief has remained
largely unutilised. It is strongly felt that the Second Schedule is to be interpreted and implemented in the manner
suggested in this article.

Unfortunately in a recent decision in Oriental Insurance Co. Ltd. v. Hansrajbhai13 the Supreme Court proceeded on the
premise that the Second Schedule contains errors and anomalies. The Court asked the Additional Solicitor-General to
verify whether corrections were made in the Second Schedule. On behalf of the Central Government a statement was
made that necessary amendments would be made in the Second Schedule. It is asserted that if the Second Schedule is
interpreted in the manner suggested in this article there would not remain any alleged errors or anomalies. On behalf of
thousands of accident victims it is urged that the Hon'ble Supreme Court may notice the error that has crept in Trilok
Chandra1 repeated in Hansrajbhai13 and pronounce the correct interpretation.

*Â Â Â M.A., M.L., Joint District Judge, District Court, Bhavnagar, Gujarat. Return to Text

- (1996) 4 SCC 362 Return to Text

- Minu B. Mehta v. Balkrishna Ramchandra Nayan, (1977) 2 SCC 441 Return to Text
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 The Practical Lawyer

- Gujarat SRTC v. Ramanbhai Prabhatbhai, (1987) 3 SCC 234 Return to Text

- Ibid at p. 244, para 8. Return to Text
- Ibid at p. 245, para 10. Return to Text
- Statement of Objects and Reasons to Act 54 of 1994 published in the Gazette of India, Part II, Section 1, No. 71 dated
12-9-1994. Return to Text
- Ibid. Return to Text
- Supra fn. 1, at p. 371, para 18. Return to Text
- Mere casual expressions in a judgment carry no weight at all. See Municipal Corpn. of Delhi v. Gurnam Kaur, (1989) 1
SCC 101, at p. 111, para 12. Return to Text
- Supra fn 1, at p. 371, para 18 Return to Text
- Ramdevsing v. Chudasma v. Hansrajbhai V. Kodala, (1999) 2 ACJ 1129 : (1999) 1 Guj LR 631 Return to Text
- Similar contention was negatived by the Punjab & Haryana High Court in National Insurance Co. v. Indu Sharma, 2000
ACJ 808, at p. 814, para 18. One can perhaps reach the figure of compensation for persons having more than Rs 40,000
annual income by employing the multiplier adopted by the legislature as discussed in this article. Return to Text
- (2001) 5 SCC 175 Return to Text

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