Saturday, 28 September 2019

Basic concept of No fault liability compensation under motor vehicle Act

Previous law
Sec 140 of Motor Vehicles Act, 1988 was dealing with the liability without fault. The claimant involved in a motor vehicle accident is not required to prove wrongful act, neglect, or default on the part of the owner of the vehicle or by any other person.
The claim under these provisions is neither defeated or affected in any way, by any wrongful act, neglect or default on the part of the claimant; nor can be of the claimant’s share of responsibility for the accident.  In other words, the legal defense of ‘contributory negligence’ is not available to the motorist and his insurer.

These provisions apply in cases where the claimant suffers death or permanent disablement, as defined in the Act. The object behind no-fault principle is to give minimum statutory relief expeditiously to the victim of the road accident or his legal representative. To that extent, these provisions constitute a measure of social justice.
Where no-fault liability is concerned, there is clearly a departure from the usual common law principle that a claimant should establish negligence on the part of the owner or driver of the motor vehicle before claiming any compensation for death or permanent disablement arising out of a motor vehicle accident.
The right to claim compensation U/S 140 in respect of death of permanent disablement of any person shall be in addition to any other right to claim compensation in respect thereof under any other provision of this Act or of any other law for the time being in force.
Thus the claims for death or permanent disablement can also b e pursued under other provisions of the Act on the basis of negligence.  The motorist i.e. the owner of the vehicle or driver of the vehicle is liable to pay compensation on the basis of ‘no fault’ as well as on the basis of ‘fault’ or negligence he has to pay first the compensation on ‘no fault’ basis i.e. Rs. 550,000 or Rs. 25,000 as the case may be, for death or permanent disablement.
If such compensation paid is less than the compensation awarded on the principle of ‘fault’ or negligence, the motorist is liable to pay the balance.  For example, if Rs. 30,000/- is awarded for permanent disablement on the basis of negligence, the claimant is entitled to receive only Rs. 5,000 being the excess over the no-fault compensation settled first. In any claim for compensation under this Section,  the claimant shall NOT be required to plead or establish that the death or permanent disablement in respect of which the claim has been made, was due to any wrongful act or neglect or default of the owner/s of the vehicle/s concerned or any other person.

Present position

On 22 May 2018, the Central Government issued a notification by which the scale of compensation for third party fatal accidents and injury claims under the Second Schedule of the Motor Vehicles Act 1988 (MV Act) was amended. These claims for compensation are considered on a 'no-fault liability' basis as envisaged under S.163A of the MV Act. In other words, the claimant is not required to prove or plead that death or permanent disablement was due to 'any wrongful act or neglect or default of the owner of the vehicle.'
The erstwhile Second Schedule of the MV Act provided for compensation on a 'structured formula basis' which was indicated in a tabular form. Broadly, compensation was formulated on the basis of the victim's age and income and suffered from several defects and inconsistencies as observed by the Supreme Court in Sarla Verma v Delhi Transport Corporation [(2009) 6 SCC 121]. 

In addition, the Supreme Court in Puttamma v KL Narayan Reddy [(2013) 15 SCC 45] observed that the Second Schedule of the MV Act was in need of an urgent amendment, as it was based on the prevailing cost index of 1994.
The notification of May 2018 has now amended the Second Schedule and removes the formula system that had existed without amendment since 1994.
As per the substituted Second Schedule, compensation will now payable be as follows:
“THE SECOND SCHEDULE
(See Section 163-A)
SCHEDULE FOR COMPENSATION FOR THIRD PARTY FATAL ACCIDENTS/INJURY CASES CLAIMS
1. (aFatal Accidents: Compensation payable in case of Death shall be five lakh rupees.
(bAccidents resulting in permanent disability: Compensation payable shall be = [Rs. 5,00,000 × percentage disability as per Schedule I of the Employee's Compensation Act, 1923 (8 of 1923)]:
Provided that the minimum compensation in case of permanent disability of any kind shall not be less than fifty thousand rupees.
(cAccidents resulting in minor injury: A fixed compensation of twenty five thousand rupees shall be payable:
2. On and from the date of 1st day of January, 2019 the amount of compensation specified in the clauses (a) to (c) of paragraph (1) shall stand increased by 5 per cent annually.”

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