Method of calculation of notional income of a house wife in motor vehicle accidents claims

Method of calculation of notional income of a house wife in motor vehicle accidents claims

 

 

What is the method of calculation of notional income of a house wife in motor vehicle accidents claims has been discussed in 2021(1)TNMAC 84 (SC)

KIRTI & ANR. ETC. …APPELLANT(S)

VERSUS

ORIENTAL INSURANCE CO. LTD. …RESPONDENT

Before hon’ble apex court of india.

In this case addition towards  contribution to household has been discussed. After fixing income, 25% added towards future prospects and 25% added as gratuitous income for contribution to her household duties.

 What is the method of calculation of notional income of a house wife in motor vehicle accidents claims

. One is, the opportunity cost which evaluates her wages by assessing what she would have earned had she not remained

at home, viz., the opportunity lost. The

second is, the partnership method which

assumes that a marriage is an equal economic

partnership and in this method, the

homemaker's salary is valued at half her

husband's salary. Yet another method is to

evaluate homemaking by determining how

much it would cost to replace the homemaker

with paid workers. This is called the

Replacement Method.”

 

The brief facts of the cases are as follows:

These petitions have been filed by three surviving dependents (who are

two minor daughters and father) of the two deceased, impugning the

judgment dated 17.07.2017 of the High Court of Delhi through which

the motor accident compensation of Rs 40.71 lakhs awarded by the

Motor Accident Claims Tribunal, Rohini (hereinafter, “Tribunal”) on

24.12.2016 under Section 168 of the Motor Vehicle Act, 1988 (“MV

Page | 1

Act”), was reduced to Rs 22 lakhs.

FACTUAL MATRIX

3. The deceased couple, Vinod and Poonam, while commuting on a

motorcycle in Delhi at around 7AM on 12.04.2014 were hit at an

intersection by a Santro Car bearing registration ‘DL 7CA 1053’. The

impact immediately incapacitated both the deceased and they soon

passed away from craniocerebral damage and haemorrhagic shock

caused by the accident’s bluntforce trauma.

4. An FIR was registered under Sections 279 and 304 of the Indian

Penal Code, 1860 (hereinafter, “IPC”) against the driver, and the

statement of an independent eyewitness (Constable Vishnu Dutt) was

recorded, which evidenced rash driving and negligence on part of the

cardriver.

Subsequently, a claim petition was filed under Section 166

of the MV Act by the two toddler daughters and septuagenarianparents

of the deceased. This was contested by the driver and owner

claiming that the deceased were themselves driving negligently and

the accident was as a result of their very own actions. Two witnesses

were examined by the appellant claimants and none by the

respondents. The insurance company (Respondent No. 1) offered as

settlement a compensation of Rs 6.47 lakhs for the death of Poonam

and Rs 10.71 lakhs for Vinod.

 

5. The Tribunal took note of the chargesheet filed against the driver

in the criminal case and also his failure to step into the witness box.

Relying on the strong testimony of the independent witness, it was

concluded that the car driver was indeed driving rashly and thus

liability ought to be fastened on the respondent insurer.Regarding the

quantum of compensation, the Tribunal began by determining the

ages of Poonam and Vinod as being 26 and 29 years respectively.

Consequently, an agemultiplier of 17 was adopted. Although the

deceased’s father took a plea that Vinod was earning Rs 14,000 every

month as a teacher at the Pratap Public School in Delhi, but he was

unable to substantiate his claim with any documentary evidence.

Thus, minimum wage in Delhi was adopted for computation of loss of

dependency. An additional 25% income was accounted for future

prospects of Poonam, and 1/3rd of Vinod’s salary was deducted

towards personal expenses. Rs 2.50 lakhs was given for each deceased

as compensation for loss of love and affection, estate, and funeral

charges. Thus, the Tribunal awarded a total sum of Rs 40.71 lakhs for

both deceased to the claimants.

6. This computation was challenged by the respondent insurer

before the High Court, on grounds that the Tribunal had erroneously

relied upon the minimum wage as notified by Government of Delhi as

there was no proof that the deceased were employed in Delhi. Instead,

given their established residence in Haryana, the minimum wage

notified for that State ought to be the basis for calculation of loss of

dependency. Simultaneously, addition of future prospects as well as

nondeduction of personal expenses for Poonam was prayed to be

reversed. Further, compensation was sought to be halved on grounds

of contributory negligence. A categorical submission was made

highlighting the then divergent law on the issue of payment of ‘future

prospects’ to non permanent employees, pending resolution of which,

it was prayed that no such addition be granted to the claimants.

7. The High Court concurred with these contentions and

consequently reduced the notional income for both deceased by

adopting the lowest minimum wage applicable for unskilled workers in

Haryana, instead of Delhi. Similarly, 1/3rd of Poonam’s income was

deducted towards personal expenses and future prospects were denied

to both deceased. However, given the totality of circumstances and

Poonam’s contribution to her household, 25% additional gratuitous

income was added to her salary. The High Court thus brought down

the total compensation payable to the claimants to Rs 22 lakhs.

CONTENTIONS OF PARTIES

8. This reduction has been assailed before us by learned counsel

for the claimants. Recomputation is sought of compensation for loss

 

of dependency consequent to the decision of the Constitutional Bench

of supreme Court in National Insurance Co Ltd v. Pranay Sethi1, which

authoritatively settles the law on future prospects for non permanent

employees as well. Furthermore, the anomaly between the gratuitous

increase of income between Vinod and Poonam, and the usage of

unskilled minimum wage for Vinod have been brought to our notice.

9. Learned Counsel for the respondent insurer, on the other hand,

has sought to forestall any increase in compensation, including under

the ground of future prospects. It is claimed that the High Court’s

decision was a consent order, and that the counsel for the appellants

had conceded to a lower computation under the head of loss of

dependency, which thus cannot be challenged before this Court.

ANALYSIS

I. Deduction for Personal Expenses

10. The court has considered the rival submissions. It

cannot be disputed that at the time of death, there in fact were four

dependents of the deceased and not three. The subsequent death of

the deceased’s dependent mother ought not to be a reason for

reduction of motor accident compensation. Claims and legal liabilities

crystallise at the time of the accident itself, and changes post thereto

1 (2017) 16 SCC 680. ought not to ordinarily affect pending proceedings. Just like how

Appellantclaimants cannot rely upon subsequent increases in minimum wages, the respondent insurer too cannot seek benefit of the subsequent death of a dependent during the pendency of legalproceedings. Similarly, any concession in law made in this regard byeither counsel would not bind the parties, as it is legally settled that advocates cannot throwaway legal rights or enter into arrangements contrary to law.

11. Any compensation awarded by a Court ought to be just, reasonable and consequently must undoubtedly be guided by principles of fairness, equity, and good conscience.  Not only did the family of the deceased consist of septuagenarian parents, but there were also two toddlergirls, aged merely 3 and 4 years; each of whom requires exceptional care and expenditure till they reach the stage of selfdependency.

Tragically, in addition to the married couple, the negligence of the driver also extinguished the life of the family’s third child who was a foetus in Poonam’s womb at the time of the accident.

Thus, the appropriate deduction for personal expenses for both Vinod

and Poonam ought to be 1/4th only, and not 1/3rd as applied by the

Tribunal and the High Court, more so when there were four family

members dependent on the deceased.

2 Director of Elementary Education v. Pramod Kumar Sahoo, (2019) 10 SCC 674, ¶ 11.

3 See, Helen C Rebello v. Maharashtra State Road Transport Corp, (1999) 1 SCC 90, ¶ 28.

 

II. Assessment of monthly income

12. Second, although it is correct that the claimants have been

unable to produce any document evidencing Vinod’s income, nor have

they established his employment as a teacher; but that doesn’t justify

adoption of the lowest tier of minimum wage while computing his

income. From the statement of witnesses, documentary evidence on record

and circumstances of the accident, it is apparent that Vinod

was comparatively more educationally qualified and skilled. Further,

he maintained a reasonable standard of living for his family as

evidenced by his use of a motorcycle for commuting. Preserving the

existing standard of living of a deceased’s family is a fundamental

endeavour of motor accident compensation law. Thus, at the very

least, the minimum wage of Rs 6197 as applicable to skilled workers

during April 2014 in the State of Haryana ought to be applied in his

case.

III. Addition of Future Prospects

13. Third and most importantly, it is unfair on part of the

Respondent insurer to contest grant of future prospects considering

their submission before the High Court that such compensation ought

not to be paid pending outcome of the Pranay Sethi (supra)

4 See, RK Malik v. Kiran Pal, (2019) 14 SCC 1, ¶ 9.

reference. Nevertheless, the law on this point is no longer res integra,

and stands crystalised, as is clear from the following extract of the

aforecited

Constitutional Bench judgment5:

“59.4. In case the deceased was selfemployedor on a fixed

salary, an addition of 40% of the established income should

be the warrant 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.”[

Emphasis supplied]

14. Given how both deceased were below 40 years and how they

have not been established to be permanent employees, future

prospects to the tune of 40% must be paid. The argument that no

such future prospects ought to be allowed for those with notional

income, is both incorrect in law and without merit considering the

constant inflation induced increase in wages. It would be sufficient to

quote the observations of this Court in Hem Raj v. Oriental

Insurance Co. Ltd., as it puts at rest any argument concerning nonpayment

of future prospects to the deceased in the present case:

“7. We are of the view that there cannot be distinction where

there is positive evidence of income and where minimum

5 National Insurance Co Ltd v. Pranay Sethi, (2017) 16 SCC 680, ¶ 59.4.

6 Sunita Tokas v. New India Insurance Co Ltd, 2019 SCC OnLine SC 1045.

7 (2018) 15 SCC 654.

 

income is determined on guesswork in the facts and

circumstances of a case. Both the situations stand at the

same footing. Accordingly, in the present case, addition of

40% to the income assessed by the Tribunal is required to be

made..”

[Emphasis supplied]

IV. Other heads and division of compensation

15. Finally, given the lack of arguments on the other heads of

funeral charges, loss of estate, love, and affection; there arises no

cause of alteration. We similarly see no infirmity with the High Court’s

adoption of 17 as the age multiplier, award of 9% interest, calculation

of Poonam’s notional income or the division of total compensation in

the ratio of 1:2:2 between the grandfather and the two girls. For ready

reference, a comparative table of revised compensation after suitable

increases would thus be as follows:

TRIBUNAL                             HIGH COURT                                                SUPREME COURT

Head     

 Vinod       Poonam           Vinod           Poonam                              Vinod                 Poonam

A Monthly Income

 8554               9438                5547.1            5547.1                          6197.1                  5547.1

BDeduction towards Personal Expenses

 

33%           None                            33%                  33%                         25%             25%

C Age Multiplier

17                     17                     17                 17                                      17               17

D Adjustment for Future Prospects

None                25%                  None         None                                           40%         40%

EIncrease for Special Circumstances

None             None                      None          25%                                        None        25%

F Funeral Charges & Loss of Estate

 250000 250000 250000 250000 250000 250000

 

G Total per deceased

1413344     2656690           1004406          1193007                     1577419          1735236

(rounded off)

 1414000     2657000         1005000           1195000                    1580000           1740000

Total compensation

 4071000                                            200000                                                   3320000

CONCLUSION

16. For the reasons aforestated, the appeals are allowed inpart.

The total motor accident compensation of Rs 22 lakhs awarded by the

High Court to the claimantappellants is increased by Rs 11.20 lakhs

to reach a new total of Rs 33.20 lakhs. The enhanced amount of

compensation shall be paid within two months along with interest @

9% p.a. from the date of filing of the Detailed Accident Report i.e.

23.05.2014, and shall be apportioned per the terms laid down by the

Tribunal.

 

Here arise the question of notional income of a housewife and whether future prospects should apply to the same or not.

2. There are two distinct categories of situations wherein the

Court usually determines notional income of a victim. The first

category of cases relates to those wherein the victim was

employed, but the claimants are not able to prove her actual

income, before the Court. In such a situation, the Court

‘guesses” the income of the victim on the basis of the evidence on

record, like the quality of life being led by the victim and her

family, the general earning of an individual employed in that field,

the qualifications of the victim, and other considerations.

3. The second category of cases relates to those situations

wherein the Court is called upon to determine the income of a

nonearning victim, such as a child, a student or a homemaker.

Needless to say, compensation in such cases is extremely difficult

to quantify.

4. The Court often follows different principles for determining

the compensation towards a nonearning victim in order to arrive

at an amount which would be just in the facts and circumstances

of the case. Some of these involve the determination of notional

income. Whenever notional income is determined in such cases,

different considerations and factors are taken into account. For

instance, for students, the Court often considers the course that

they are studying, their academic proficiency, the family

background, etc., to determine and fix what they could earn in

the future. [See M. R. Krishna Murthi v. New India Assurance

Co. Ltd., 2019 SCC OnLine SC 315]

5. One category of nonearning victims that Courts are often

called upon to calculate the compensation for are homemakers.

The granting of compensation for homemakers on a pecuniary

basis, as in the present case, has been considered by this Court

earlier on numerous occasions. A threeJudge Bench of apex

Court in Lata Wadhwa v. State of Bihar, (2001) 8 SCC 197,

while dealing with compensation for the victims of a fire during a

function, granted compensation to housewives on the basis of the

services rendered by them in the house, and their age. The apex

Court, in that case, held as follows:

“10. So far as the deceased housewives are

concerned, in the absence of any data and as

the housewives were not earning any income,

attempt has been made to determine the

compensation on the basis of services

rendered by them to the house. On the basis of

the age group of the housewives, appropriate

multiplier has been applied, but the estimation of

the value of services rendered to the house by the

housewives, which has been arrived at Rs 12,000

per annum in cases of some and Rs 10,000 for

others, appears to us to be grossly low. It is true

that the claimants, who ought to have given data

for determination of compensation, did not assist

in any manner by providing the data for

estimating the value of services rendered by such

housewives. But even in the absence of such

data and taking into consideration the

multifarious services rendered by the

housewives for managing the entire family,

even on a modest estimation, should be Rs

3000 per month and Rs 36,000 per annum…”

6. In Arun Kumar Agrawal v. National Insurance Co. Ltd.,

(2010) 9 SCC 218, the apex Court, while dealing with the grant of

compensation for the death of a housewife due to a motor vehicle

accident, held as follows:

“26. In India the courts have recognised that

the contribution made by the wife to the

house is invaluable and cannot be computed

in terms of money. The gratuitous services

rendered by the wife with true love and

affection to the children and her husband and

managing the household affairs cannot be

equated with the services rendered by others.

A wife/mother does not work by the clock. She is

in the constant attendance of the family

throughout the day and night unless she is

employed and is required to attend the

employer's work for particular hours. She takes

care of all the requirements of the husband and

children including cooking of food, washing of

clothes, etc. She teaches small children and

provides invaluable guidance to them for their

future life. A housekeeper or maidservant can do

the household work, such as cooking food,

washing clothes and utensils, keeping the house

clean, etc., but she can never be a substitute for

a wife/mother who renders selfless service to her

husband and children.

27. It is not possible to quantify any amount

in lieu of the services rendered by the

wife/mother to the family i.e. the husband

and children. However, for the purpose of

award of compensation to the dependants,

some pecuniary estimate has to be made of

the services of the housewife/mother. In that

context, the term “services” is required to be

given a broad meaning and must be construed by

taking into account the loss of personal care and

attention given by the deceased to her children

as a mother and to her husband as a wife. They

are entitled to adequate compensation in lieu of

the loss of gratuitous services rendered by the

deceased. The amount payable to the dependants

cannot be diminished on the ground that some

close relation like a grandmother may volunteer

to render some of the services to the family which

the deceased was giving earlier.”

The above pronouncement has been followed by the apex  Court in its

recent judgment in Rajendra Singh v. National Insurance Co.

Ltd., 2020 SCC OnLine SC 521, wherein the notional income of

a deceased housewife was calculated for the purposes of granting

compensation in a motor accident case.

7. Before discussing this topic further, it is necessary to

comment on its gendered nature. In India, according to the 2011

Census, nearly 159.85 million women stated that “household

work” was their main occupation, as compared to only 5.79

million men.

8. In fact, the recently released Report of the National

Statistical Office of the Ministry of Statistics & Programme

Implementation, Government of India called “Time Use in India2019”,

which is the first Time Use Survey in the country and

collates information from 1,38,799 households for the period

January, 2019 to December, 2019, reflects the same gender

disparity.  The key findings of the survey suggest that, on an

average, women spend nearly 299 minutes a day on unpaid

domestic services for household members versus 97 minutes

spent by men on average.2 Similarly, in a day, women on average

spend 134 minutes on unpaid care giving services for household

members as compared to the 76 minutes spent by men on

average.3 The total time spent on these activities per day makes

the picture in India even more clear women on average spent

16.9 and 2.6 percent of their day on unpaid domestic services

and unpaid care giving services for household members

respectively, while men spent 1.7 and 0.8 percent.4

9. It is curious to note that this is not just a phenomenon

unique to India, but is prevalent all over the world. A 2009 Report

by a Commission set up by the French Government, analyzing

data from six countries, viz. Germany, Italy, United Kingdom,

France, Finland and the United States of America, highlighted

similar findings:

“117. Gender differences in time use are significant. In each of the countries underconsideration, men spend more time in paid

work than women and the converse is true for

unpaid work. Men also spend more time on

leisure than women. The implication is that

women provide household services but other

members of the household benefit…”5

 

10. The sheer amount of time and effort that is dedicated to

household work by individuals, who are more likely to be women

than men, is not surprising when one considers the plethora of

activities a housemaker undertakes. A housemaker often

prepares food for the entire family, manages the procurement of

groceries and other household shopping needs, cleans and

manages the house and its surroundings, undertakes decoration,

repairs and maintenance work, looks after the needs of the

children and any aged member of the household, manages

budgets and so much more. In rural households, they often also

assist in the sowing, harvesting and transplanting activities in

the field, apart from tending cattle [See Arun Kumar Agrawal

(supra); National Insurance Co. Ltd. v. Minor Deepika rep. by

her guardian and next friend, Ranganathan, 2009 SCC

OnLine Mad 828]. However, despite all the above, the conception

that housemakers do not “work” or that they do not add

economic value to the household is a problematic idea that has

persisted for many years and must be overcome.

11. The concurring opinion in the Arun Kumar Agrawal

judgment (supra), has highlighted this bias:

“44. This bias is shockingly prevalent in the work

of census. In the Census of 2001 it appears that

those who are doing household duties like

cooking, cleaning of utensils, looking after

children, fetching water, collecting firewood have

been categorised as nonworkers and equated

with beggars, prostitutes and prisoners who,

according to the census, are not engaged in

economically productive work. As a result of

such categorisation about 36 crores (367 million)

women in India have been classified in the

Census of India, 2001 as nonworkers and

placed in the category of beggars, prostitutes and

prisoners. This entire exercise of census

operations is done under an Act of Parliament.”

12. In fact, this unfortunate silence when it comes to the value

of housework has been a problem which was identified as far

back as in 1920, when the economist Pigou noted the oddity and

contradictions when it came to the calculation of the contribution

of women in the national income, by stating that:

“…the services rendered by women enter into the

dividend when they are rendered in exchange for

wages, whether in the factory or in the home, but

do not enter into it when they are rendered by

mothers and wives gratuitously to their own

families. Thus, if a man marries his housekeeper

or his cook, the national dividend is diminished”.6

This issue was further focused on by those in the field of

feminism economics in the 1970s and 1980s, who criticized the

traditional labour statistics which did not consider unpaid

domestic work and therefore undervalued women’s role in the

economy.7

13. On considering the growing awareness around this issue,

the United Nations Committee on the Elimination of

Discrimination against Women adopted General Recommendation

No. 17 on the “Measurement and quantification of the

unremunerated domestic activities of women and their recognition

in the gross national product” in 1991. The General

Recommendation affirmed that “the measurement and

quantification of the unremunerated domestic activities of women,

which contribute to development in each country, will help to

reveal the de facto economic role of women”.

14. It is worth noting that the above General Recommendation

is passed in furtherance of Article 11 of the Convention on the

Elimination of All Forms of Discrimination against Women which

relates to ending discrimination against women in the field of

employment, a Convention that India has ratified.

15. The issue of fixing notional income for a homemaker,

therefore, serves extremely important functions. It is a

recognition of the multitude of women who are engaged in this

activity, whether by choice or as a result of social/cultural

norms. It signals to society at large that the law and the Courts of

the land believe in the value of the labour, services and sacrifices

of homemakers. It is an acceptance of the idea that these

activities contribute in a very real way to the economic condition

of the family, and the economy of the nation, regardless of the

fact that it may have been traditionally excluded from economic

analyses. It is a reflection of changing attitudes and mindsets and

of our international law obligations. And, most importantly, it is a

step towards the constitutional vision of social equality and

ensuring dignity of life to all individuals.

16. Returning to the question of how such notional income of a

homemaker is to be calculated, there can be no fixed approach. It

is to be understood that in such cases the attempt by the Court

is to fix an approximate economic value for all the work that a

homemaker does, impossible though that task may be. Courts

must keep in mind the idea of awarding just compensation in

such cases, looking to the facts and circumstances [See R.K.

Malik v. Kiran Pal, (2009) 14 SCC 1].

17. One method of computing the notional income of a

homemaker is by using the formula provided in the Second

Schedule to the Motor Vehicles Act, 1988, which has now been

omitted by the Motor Vehicle (Amendment) Act, 2019. The Second

Schedule provided that the income of a spouse could be

calculated as one third of the income of the earning surviving

spouse. This was the method ultimately adopted by the Court in

the Arun Kumar Agrawal (supra) case. However, rationale

behind fixing the ratio as onethird is not very clear. [See Arun

Kumar Agrawal (supra)]

18. Apart from the above, scholarship around this issue could

provide some guidance as to other methods to determine the

notional income for a homemaker. Some of these methods were

highlighted by a Division Bench of the Madras High Court in the

case of Minor Deepika (supra) which held as follows:

“10. The Second Schedule to the Motor Vehicles

Act gives a value to the compensation payable in

respect of those who had no income prior to the

accident and for a spouse, it says that one third

of the income of the earning surviving spouse

should be the value. Exploration on the internet

shows that there have been efforts to understand

the value of a homemaker's unpaid labour by

different methods. One is, the opportunity cost

which evaluates her wages by assessing what

she would have earned had she not remained

at home, viz., the opportunity lost. The

second is, the partnership method which

assumes that a marriage is an equal economic

partnership and in this method, the

homemaker's salary is valued at half her

husband's salary. Yet another method is to

evaluate homemaking by determining how

much it would cost to replace the homemaker

with paid workers. This is called the

Replacement Method.”

 

19. However, it must be remembered that all the above methods

are merely suggestions. There can be no exact calculation or

formula that can magically ascertain the true value provided by

an individual gratuitously for those that they are near and dear

to. The attempt of the Court in such matters should therefore be

towards determining, in the best manner possible, the truest

approximation of the value added by a homemaker for the

purpose of granting monetary compensation.

20. Whichever method a Court ultimately chooses to value the

activities of a homemaker, would ultimately depend on the facts

and circumstances of the case. The Court needs to keep in mind

its duty to award just compensation, neither assessing the same

conservatively, nor so liberally as to make it a bounty to

claimants [National Insurance Company Limited v. Pranay

Sethi, (2017) 16 SCC 680; Kajal v. Jagdish Chand, (2020) 4

SCC 413].

21. Once notional income has been determined, the question

remains as to whether escalation for future prospects should be

granted with regard to it. Initially, the awarding of future

prospects by this Court was related to the stability of the job held

by the victim [See General Manager, Kerala State Road

Transport Corporation, Trivandrum v. Susamma Thomas

(Mrs), (1994) 2 SCC 176; Sarla Dixit (Smt) v. Balwant Yadav,

(1996) 3 SCC 179]. This focus on the stability of the job of the

victim, while awarding future prospects, was continued in the

judgment of this Court in Sarla Verma (Smt) v. Delhi

Transport Corporation, (2009) 6 SCC 121 wherein the Court

held as follows:

“24. In Susamma Thomas [(1994) 2 SCC 176] this Court increased the income by nearly 100%, in Sarla Dixit [(1996) 3 SCC 179] the income was

increased only by 50% and in Abati Bezbaruah [(2003) 3 SCC 148] the income was increased by a mere 7%. In view of the

imponderables and uncertainties, we are in

favour of adopting as a rule of thumb, an

addition of 50% of actual salary to the actual

salary income of the deceased towards future

prospects, where the deceased had a

permanent job and was below 40 years. (Where

the annual income is in the taxable range, the

words “actual salary” should be read as “actual

salary less tax”). The addition should be only

30% if the age of the deceased was 40 to 50

years. There should be no addition, where the

age of the deceased is more than 50 years.

Though the evidence may indicate a different

percentage of increase, it is necessary to

standardise the addition to avoid different

yardsticks being applied or different methods of

calculation being adopted. Where the deceased

was selfemployed or was on a fixed salary

(without provision for annual increments,

etc.), the courts will usually take only the

actual income at the time of death. A

departure therefrom should be made only in

rare and exceptional cases involving special

circumstances.”

(emphasis supplied)

22. However, there was a shift in jurisprudence regarding future

prospects with the fiveJudge Bench decision of this Court in

Pranay Sethi (supra). This Court extended the benefit regarding

future prospects to even selfemployed persons, or those on a

fixed salary. The Court held as follows:

“57. Having bestowed our anxious consideration,

we are disposed to think when we accept the

principle of standardisation, there is really no

rationale not to apply the said principle to the

selfemployed or a person who is on a fixed

salary. To follow the doctrine of actual

income at the time of death and not to add

any amount with regard to future prospects to

the income for the purpose of determination

of multiplicand would be unjust. The

determination of income while computing

compensation has to include future prospects

so that the method will come within the

ambit and sweep of just compensation as

postulated under Section 168 of the Act. In

case of a deceased who had held a permanent job

with in built grant of annual increment, there is

an acceptable certainty. But to state that the

legal representatives of a deceased who was on a

fixed salary would not be entitled to the benefit of

future prospects for the purpose of computation

of compensation would be inapposite. It is

because the criterion of distinction between the

two in that event would be certainty on the one

hand and staticness on the other. One may

perceive that the comparative measure is

certainty on the one hand and uncertainty on the

other but such a perception is fallacious. It is

because the price rise does affect a selfemployed

person; and that apart there is

always an incessant effort to enhance one's

income for sustenance. The purchasing

capacity of a salaried person on permanent

job when increases because of grant of

increments and pay revision or for some other

change in service conditions, there is always a

competing attitude in the private sector to

enhance the salary to get better efficiency

from the employees. Similarly, a person who

is selfemployed is bound to garner his

resources and raise his charges/fees so that

he can live with same facilities.…Taking into

consideration the cumulative factors, namely,

passage of time, the changing society,

escalation of price, the change in price index,

the human attitude to follow a particular

pattern of life, etc., an addition of 40% of the

established income of the deceased towards

future prospects and where the deceased was

below 40 years an addition of 25% where the

deceased was between the age of 40 to 50 years

would be reasonable.”

 

23. The rationale behind the awarding of future prospects is

therefore no longer merely about the type of profession, whether

permanent or otherwise, although the percentage awarded is still

dependent on the same. The awarding of future prospects is now

a part of the duty of the Court to grant just compensation, taking

into account the realities of life, particularly of inflation, the quest

of individuals to better their circumstances and those of their

loved ones, rising wage rates and the impact of experience on the

quality of work.

24. Taking the above rationale into account, the situation is

quite clear with respect to notional income determined by a Court

in the first category of cases outlined earlier, those where the

victim is proved to be employed but claimants are unable to prove

the income before the Court. Once the victim has been proved to

be employed at some venture, the necessary corollary is that they

would be earning an income. It is clear that no rational

distinction can be drawn with respect to the granting of future

prospects merely on the basis that their income was not proved,

particularly when the Court has determined their notional

income.

25. When it comes to the second category of cases, relating to

notional income for nonearning victims, it is my opinion that the

above principle applies with equal vigor, particularly with respect

to homemakers. Once notional income is determined, the effects

of inflation would equally apply. Further, no one would ever say

that the improvements in skills that come with experience do not

take place in the domain of work within the household. It is

worth noting that, although not extensively discussed, this Court

has been granting future prospects even in cases pertaining to

notional income, as has been highlighted in [Hem Raj v. Oriental Insurance Company Limited, (2018) 15 SCC 654; Sunita Tokas v. New

India Insurance Co. Ltd., (2019) 20 SCC 688].

26. Therefore, on the basis of the above, certain general

observations can be made regarding the issue of calculation of

notional income for homemakers and the grant of future

prospects with respect to them, for the purposes of grant of

compensation which can be summarized as follows:

a. Grant of compensation, on a pecuniary basis, with respect

to a homemaker, is a settled proposition of law.

b. Taking into account the gendered nature of housework, with

an overwhelming percentage of women being engaged in the

same as compared to men, the fixing of notional income of a

homemaker attains special significance. It becomes a

recognition of the work, labour and sacrifices of homemakers and a reflection of changing attitudes. It is also

in furtherance of our nation’s international law obligations

and our constitutional vision of social equality and ensuring

dignity to all.

c. Various methods can be employed by the Court to fix the

notional income of a homemaker, depending on the facts

and circumstances of the case.

d. The Court should ensure while choosing the method, and

fixing the notional income, that the same is just in the facts

and circumstances of the particular case, neither assessing

the compensation too conservatively, nor too liberally.

 

 The granting of future prospects, on the notional income

calculated in such cases, is a component of just

compensation.