Insurance Company Ltd Vs. Indira Srivastava & Ors  Insc 1266 (12 December 2007)
Sinha & Harjit Singh Bedi
APPEAL NO. 5830 OF 2007 (Arising out of SLP (C) No.14452 of 2007) S.B. Sinha,
Connotation of the term 'income' for the purpose of determination of 'just
compensation' envisaged under Section 168 of the Motor Vehicles Act, 1988 (the
Act) calls for question in this appeal which arises out of a judgment and order
dated 6.4.2007 passed by the High Court of Judicature at Allahabad, Lucknow
Bench at Lucknow in FAFO No.171 of 2001.
husband R.K. Srivastava was employed in a company named Gabriel India Ltd.
While he was travelling in an auto rickshaw from Charbagh Railway Station, Lucknow to his residence situated at Ashok Marg,
the same met with an accident with a 'Mahindra Commander Jeep' driven rashly
and negligently. He sustained injuries and ultimately succumbed thereto.
Respondents herein filed a claim petition before the learned Tribunal. A salary
certificate was produced in the said proceedings which is in the following terms
Amount Deductions Amount Basic 3420.00 CPF(S) 488.00 Special Pay 70.00 CPF
(Add) FDA 350.00 GIS 3.75 VDA 1040.00 LIC/GIS 509.10 CCA 100.00 HRR HRA 1047.00
MSPI 60.00 Washing All. 75.00
learned Tribunal opined that in computing his income, the element of conveyance
allowance only would fall outside the purview of income. On the aforementioned
basis, the monthly income of the deceased was assessed at Rs.20364/-. Applying
the multiplier of 13, as the age of the deceased was 45 years, it was held :
such, on using multiple of 13 to the annual income of deceased at Rs.2,32,372/-,
the amount works out to Rs.30,20,836/-. The deceased would have spent 1/3rd of
this amount on himself, hence on deducting 1/3rd from this amount, 2/3rd
compensation amount comes to Rs.20,13,890/-."
all these facts, I reach to this finding that the petitioners are entitled to
get 2/3rd of the total income of deceased worked out by using multiple of 13
i.e. about Rs.20,00,000/-. Issue No.5 is decided accordingly. It is the
liability of opposite party No.3 Insurance Company. On behalf of opposite party
No.3, the ruling of Ors., T.A.C. 8, 1999 (1) page 847 has been filed before me,
but this ruling does not extend any specific benefit to opposite party No.3.
Hence, while deciding this issue No.5, I come to this conclusion that the
petitioners are entitled to get Rs.20,00,000/- (Rs. Twenty Lakhs) as
High Court, on an appeal having been preferred both by the appellant as also
the respondents, partly allowed the same by a common judgment holding that
claimants were entitled to compensation calculated in case of the deceased at
Rs.19,53,224/- along with interest @ 9% from the date of presentation of the
claim petition till its realization, holding that travelling reimbursement
could not be taken into consideration for computation of net income of the
Appellant is, thus, before us.
in view the importance of the question involved and furthermore in view of the
fact that the first respondent was appearing-in- person, we had requested Mr.
L.N. Rao, learned senior counsel, to assist us in the matter.
Submission of Mr. Satija, learned counsel appearing on behalf of the appellant,
is that for the purpose of computation of the amount of compensation what was
material is the basic pay and not other allowances and, in that view of the
matter, the High Court has committed a serious error in opining otherwise. The
learned counsel contended that emphasis by this Court are being laid on
computation of damages based on net income and not gross income. It was also
contended that in any event the amount of compensation awarded by the High
Court is on higher side.
Rao, however, submitted that apart from the basic salary, contributions made by
the employee should also be taken into consideration for calculation of the
amount of compensation, inter alia, on the premise that the same would have
become payable to him at a future date as, for example, voluntary retirement,
superannuation etc. which would be beneficial to the entire family. It was
pointed out that the contributions towards Provident Fund, Life Insurance
Corporation, gratuity etc. are includable in the definition of income.
term 'income' has different connotations for different purposes.
court of law, having regard to the change in societal conditions must consider
the question not only having regard to pay packet the employee carries home at
the end of the month but also other perks which are beneficial to the members
of the entire family. Loss caused to the family on a death of a near and dear
one can hardly be compensated on monetory terms.
Section 168 of the Act uses the word 'just compensation' which, in our opinion,
should be assigned a broad meaning. We cannot, in determining the issue
involved in the matter, lose sight of the fact that the private sector
companies in place of introducing a pension scheme takes recourse to payment of
contributory Provident Fund, Gratuity and other perks to attract the people who
are efficient and hard working. Different offers made to an officer by the
employer, same may be either for the benefit of the employee himself or for the
benefit of the entire family. If some facilities are being provided whereby the
entire family stands to benefit, the same, in our opinion, must be held to be
relevant for the purpose of computation of total income on the basis whereof
the amount of compensation payable for the death of the kith and kin of the
applicants is required to be determined. For the aforementioned purpose, we may
notice the elements of pay, paid to the deceased :
: 63,400.00 CONVEYANCE ALLOWANCE : 12,000.00 RENT CO LEASE : 49,200.00 BONUS
(35% OF BASIC) : 21,840.00 TOTAL : 1,45,440.00 In addition to above, his other
entitlements were :
to PF 10% Basic Rs. 6,240/- (p.a.) LTA reimbursement Rs. 7,000/- (p.a.) Medical
reimbursement Rs. 6,000/- (p.a.) Superannuation 15% of Basic Rs. 9,360/- (p.a.)
Gratuity Cont.5.34% of Basic Rs. 3,332/- (p.a.) Medical Policy-self &
Family @ Rs.55,000/- (p.a.) Education Scholarship @ Rs.500 Rs.12,000/- (p.a.)
Payable to his two children Directly"
There are three basic features in the aforementioned statement which require
our consideration :
Reimbursement of rent would be equivalent to HRA;
Bonus is payable as a part of salary; and 3. Contribution to the Provident
may furthermore notice that apart therefrom, superannuation benefits,
contributions towards gratuity, insurance of medical policy for self and family
and education scholarship were beneficial to the members of the family.
have, however, no doubt in mind that medical reimbursement which provides for a
slab and which keeping in view the terminology used, would mean reimbursement
for medical expenses on production of medical bills and, thus, the same would
not come within the purview of the aforementioned category.
The question came for consideration before a learned Single Judge of the Madras
High Court in The Manager, National Insurance Co. Ltd. v. Padmavathy & Ors. [CMA No.114 of 2006 decided on
29.1.2007], wherein it was held :
tax, Professional tax which are deducted from the salaried person goes to the
coffers of the government under specific head and there is no return. Whereas,
the General Provident Fund, Special Provident Fund, L.I.C., Contribution are
amounts paid specific heads and the contribution is always repayable to an
employee at the time of voluntary retirement, death or for any other reason.
made by the salaried person are deferred payments and they are savings. The
Supreme Court as well as various High Courts have held that the compensation
payable under the Motor Vehicles Act is statutory and that the deferred
payments made to the employee are contractual. Courts have held that there
cannot be any deductions in the statutory compensation, if the Legal
Representatives are entitled to lumpsum payment under the contractual
liability. If the contributions made by the employee which are otherwise
savings from the salary are deducted from the gross income and only the net
income is taken for computing the dependancy compensation, then the Legal
Representatives of the victim would lose considerable portion of the income. In
view of the settled proposition of law, I am of the view, the Tribunal can make
only statutory deductions such as Income tax and professional tax and any other
contribution, which is not repayable by the employer, from the salary of the
deceased person while determining the monthly income for computing the dependancy
compensation. Any contribution made by the employee during his life time, form
part of the salary and they should be included in the monthly income, while
computing the dependency compensation."
Similar view was expressed by a learned Single Judge of Andhra Pradesh High
Court in S. Narayanamma & Ors. V. Secretary to Government of India, Ministry of Telecommunications and
Ors. [2002 ACC 582], holding :
this background, now we will examine the present deductions made by the tribunal
from the salary of the deceased in fixing the monthly contribution of the
deceased to his family. The tribunal has not even taken proper care while
deducting the amounts from the salary of the deceased, at least the very nature
of deductions from the salary of the deceased. My view is that the deductions
made by the tribunal from the salary such as recovery of housing loan, vehicle
loan, festival advance and other deductions, if any, to the benefit of the
estate of the deceased cannot be deducted while computing the net monthly
earnings of the deceased. These advances or loans are part of his salary. So
far as House Rent Allowance is concerned, it is beneficial to the entire family
of the deceased during his tenure, but for his untimely death the claimants are
deprived of such benefit which they would have enjoyed if the deceased is
alive. On the other hand, allowances, like Travelling Allowance, allowance for
newspapers/periodicals, telephone, servant, club-fee, car maintenance etc., by
virtue of his vocation need not be included in the salary while computing the
net earnings of the deceased. The finding of the tribunal that the deceased was
getting Rs.1,401/- as net income every month is unsustainable as the deductions
made towards vehicle loan and other deductions were also taken into
consideration while fixing the monthly income of the deceased. The above
finding of the tribunal is contrary to the principle of 'just compensation'
enunciated by the Supreme Court in the judgment in Helen's case (1 supra). The
Supreme Court in Concord of India Insurance Co. v. Nirmaladevi and Ors., 1980
ACJ 55 (SC) held that determination of quantum must be liberal and not
niggardly since law values life and limb in a free country 'in generous
may, however, notice that a Division Bench of this Court in Asha & Ors. v.
United Indian Insurance Co. Ltd. & Anr. [2004 ACC 533], whereupon reliance
has been placed by Mr. Satija, was considering a case where, like the present
one, several perks were included in salary. We may reproduce the salary
certificate hereto below :
is to certify that Shri A.M. Raikar was working as AG 111 in this organisation
has been paid the following Pay & Allowances for the month of May, 1995:
Amount Deductions Amount Basic 3420.00 CPF (S) 488.00 Special Pay 70.00 CPF
(Add) FDA 350.00 GIS 3.75 VDA 1040.00 LIC/GIS 509.10 CCA 100.00 HRA HRA 1047.00
MSPI 60.00 Washing All. 75.00 Society 576.00 Conv. 225.00 Union 3.00 Cant.Sub. 265.00 HBA 340.00 C.E.A. 2040.00 B.Fund
10.00 Total 8632.00 Total 1989.85 Net Payable Rs. 6642.00 (Rupees six thousand
six hundred forty two only)."
that case, this Court held :
it was submitted that the salary certificate shows that the salary of the
deceased was Rs.8,632/-. It was submitted that the High Court was wrong in
taking the salary to be Rs.6,642/-. It was submitted that the High Court was
wrong in deducting the allowances and amounts paid towards LIC, Society charges
and HBA etc. We are unable to accept this submission also. The claimants are
entitled to be compensated for the loss suffered by them. The loss suffered by
them is the amount which they would have been receiving at the time when the
deceased was alive. There can be no doubt that the dependents would only be
receiving the net amount less l/3rd for his personal expenses. The High Court
was therefore right in so holding."
Court in Asha (supra) did not address itself the questions raised before us. It
does not appear that any precedent was noticed nor the term 'just compensation'
was considered in the light of the changing societal condition as also the
perks which are paid to the employee which may or may not attract income tax or
any other tax.
would be 'just compensation' must be determined having regard to the facts and
circumstances of each case. The basis for considering the entire pay packet is
what the dependents have lost due to death of the deceased. It is in the nature
of compensation for future loss towards the family income.
Rathi Menon v. Union of India [(2001) 3 SCC 714], this Court, upon considering
the dictionary meaning of compensation held :
this context a reference to Section 129 of the Act appears useful. The Central
Government is empowered by the said provision to make rules by notification
"to carry out the purposes of this Chapter". It is evident that one
of the purposes of this chapter is that the injured victims in railway
accidents and untoward incidents must get compensation. Though the word
"compensation" is not defined in the Act or in the Rules it is the
giving of an equivalent or substitute of equivalent value. In Black's Law Dictionary
shown as "equivalent in money for a loss sustained; or giving back an
equivalent in either money which is but the measure of value, or in actual
value otherwise conferred; or recompense in value for some loss, injury or
service especially when it is given by statute."
means when you pay the compensation in terms of money it must represent, on the
date of ordering such payment, the equivalent value.
this context we may look at Section 128(1) also. It says that the right of any
person to claim compensation before the Claims Tribunal as indicated in Section
124 or 124-A shall not affect the right of any such person to recover
compensation payable under any other law for the time being in force. But there
is an interdict that no person shall be entitled to claim compensation for more
than once in respect of the same accident.
means that the party has two alternatives, one is to avail himself of his civil
remedy to claim compensation based on common law or any other statutory
provision, and the other is to apply before the Claims Tribunal under Section
124 or 124-A of the Act. As he cannot avail himself of both the remedies he has
to choose one between the two.
provisions in Chapter XIII of the Act are intended to provide a speedier remedy
to the victims of accidents and untoward incidents. If he were to choose the
latter that does not mean that he should be prepared to get a lesser amount. He
is given the assurance by the legislature that the Central Government is
saddled with the task of prescribing fair and just compensation in the Rules
from time to time. The provisions are not intended to give a gain to the
Railway Administration but they are meant to afford just and reasonable
compensation to the victims as a speedier measure.
person files a suit the amount of compensation will depend upon what the court
considers just and reasonable on the date of determination. Hence when he goes
before the Claims Tribunal claiming compensation the determination of the
amount should be as on the date of such determination."
The amounts, therefore, which were required to be paid to the deceased by his
employer by way of perks, should be included for computation of his monthly
income as that would have been added to his monthly income by way of
contribution to the family as contradistinguished to the ones which were for
his benefit. We may, however, hasten to add that from the said amount of
income, the statutory amount of tax payable thereupon must be deducted.
The term 'income' in P. Ramanatha Aiyar's Advanced Law Lexicon (3rd Ed.) has
been defined as under :
value of any benefit or perquisite whether convertible into money or not,
obtained from a company either by a director or a person who has substantial
interest in the company, and any sum paid by such company in respect of any
obligation, which but for such payment would have been payable by the director
or other person aforesaid, occurring or arising to a person within the State
from any profession, trade or calling other than agriculture."
also been stated :
signifies 'what comes in' (per Selborne, C., Jones v. Ogle, 42 LJ Ch.336). 'It
is as large a word as can be used' to denote a person's receipts '(per Jessel,
M.R. Re Huggins, 51 LJ Ch.938.) income is not confined to receipts from
business only and means periodical receipts from one's work, lands,
investments, etc. AIR 1921 Mad 427 (SB). Ref. 124 IC 511 : 1930 MWN 29 : 31 MLW
438 AIR 1930 Mad 626 : 58 MLJ 337."
the dictionary meaning of the word 'income' is taken to its logical conclusion,
it should include those benefits, either in terms of money or otherwise, which are
taken into consideration for the purpose of payment of income-tax or profession
tax although some elements thereof may or may not be taxable or would have been
otherwise taxable but for the exemption conferred thereupon under the statute.
N. Sivammal & Ors. v. Managing Director, Pandian Roadways Corporation &
Ors. [(1985) 1 SCC 18], this Court took into consideration the pay packet of
may notice that in T.N. State Transport Corporation Ltd. v. S. Rajapriya &
Ors. [(2005) 6 SCC 236], this Court held :
The assessment of damages to compensate the dependants is beset with
difficulties because from the nature of things, it has to take into account
many imponderables e.g. the life expectancy of the deceased and the dependants,
the amount that the deceased would have earned during the remainder of his
life, the amount that he would have contributed to the dependants during that
period, the chances that the deceased may not have lived or the dependants may
not live up to the estimated remaining period of their life expectancy, the
chances that the deceased might have got better employment or income or might
have lost his employment or income together.
manner of arriving at the damages is to ascertain the net income of the
deceased available for the support of himself and his dependants, and to deduct
therefrom such part of his income as the deceased was accustomed to spend upon
himself, as regards both self-maintenance and pleasure, and to ascertain what
part of his net income the deceased was accustomed to spend for the benefit of
the dependants. Then that should be capitalised by multiplying it by a figure
representing the proper number of years' purchase.
Much of the calculation necessarily remains in the realm of hypothesis
"and in that region arithmetic is a good servant but a bad master"
there are so often many imponderables. In every case "it is the overall
picture that matters", and the court must try to assess as best as it can
the loss suffered."
again in New India Assurance Co. Ltd. v. Charlie & Anr [(2005) 10 SCC 720],
the same view was reiterated. However, therein although the words 'net income'
has been used but the same itself would ordinarily mean gross income minus the
statutory deductions. We must also notice that the said decision has been
followed in New India Assurance Co. Ltd. v. Kalpana (Smt.) & Ors. [(2007) 3
The expression 'just' must also be given its logical meaning. Whereas it cannot
be a bonanza or a source of profit but in considering as to what would be just
and equitable, all facts and circumstances must be taken into consideration.
view of our finding abovementioned, the appeal is to be allowed in part in so
far as the High Court had directed deduction of medical reimbursement and tax
elements on the entire sum which according to the statute constitute income.
But we decline to do so for two reasons. Firstly, the accident had taken place
as far back as on 1st
September, 1997 and
secondly the Tribunal as also the High Court failed to take into consideration
rise in income of the deceased by way of promotion or otherwise.
For the aforementioned reasons, we are not inclined to interfere with the
impugned judgment. This appeal is, therefore, dismissed. In the facts and
circumstances of the case, there shall be no order as to costs.