In a significant ruling on motor accident compensation, the Supreme Court of India has held that allowances such as House Rent Allowance (HRA) must be included when determining the income of a deceased person for calculating loss of dependency. A bench of Justice Sudhanshu Dhulia and Justice Aravind Kumar set aside the “hyper technical” view taken by a Motor Accident Claims Tribunal and a High Court, substantially enhancing the compensation awarded to the family of a man killed in a road accident from ₹7.23 lakh to ₹14.29 lakh.
The court was hearing an appeal filed by the wife and two minor children of Lokender Kumar, who died in a motor vehicle accident on February 16, 2009.
Background of the Case
Lokender Kumar was killed when a Santro car, driven in a rash and negligent manner, struck him on the Sohna-Gurgaon Road. His wife, Kavita Devi, and two children filed a claim petition under Section 166 of the Motor Vehicles Act before the Motor Vehicle Accident Claims Tribunal (MACT) in Gurgaon, seeking ₹25 lakh in compensation.
The claimants contended that the deceased, aged 35, was employed with R.M. Manpower Services in Gurgaon, earning a salary of ₹6,500 per month, and also had an agricultural income of ₹5,000 per month. To prove his employment and income, they examined PW4 Inder Singh, the manager of the firm, who produced a salary slip (Ex. P6) showing a monthly income of ₹6,500.
The Tribunal, however, noted a discrepancy between two ESI forms. Form 6 showed an average monthly wage of about ₹6,407, while Form 6A indicated wages of around ₹3,665 per month. Citing this inconsistency and the fact that the ₹6,500 salary included HRA and other unspecified allowances, the Tribunal determined the deceased’s income to be only ₹3,665 per month. After deductions for personal expenses and applying a multiplier of 8, the Tribunal awarded a total compensation of ₹2,54,720.
Dissatisfied, the claimants appealed to the Punjab and Haryana High Court. The High Court partially allowed the appeal, adding 50% for future prospects and applying the correct multiplier of 16 as per the Sarla Verma judgment. However, it upheld the Tribunal’s determination of the monthly income at ₹3,665. This resulted in an enhanced compensation of ₹7,23,680. The claimants then approached the Supreme Court seeking further enhancement.
Arguments Before the Supreme Court
Mr. Fuzail Ahmad Ayyubi, counsel for the appellants, argued that both the Tribunal and the High Court had erred in ignoring the salary certificate (Ex. P6) which clearly showed an income of ₹6,500 per month. He further contended that the award under conventional heads was not in line with the principles laid down by the Constitution Bench in National India Insurance Company Limited v. Pranay Sethi and Others.
Ms. Suman Bagga, appearing for the Insurance Company, supported the High Court’s order and prayed for the dismissal of the appeal.
Court’s Analysis and Decision
The Supreme Court observed that while the High Court had enhanced the compensation, the amount was “on the lower side.” The primary question before the court was whether HRA and other allowances should be deducted while determining the deceased’s income.
The bench disapproved of the Tribunal’s approach, stating, “the Tribunal on a hyper technicality namely certain discrepancy in Form 6 and Form 6A considered the basic salary of the deceased as Rs. 3,665/- p.m. after excluding the HRA and other allowances.”
Relying on its previous judgment in National Insurance Co. Ltd. v. Indira Srivastava and Others, the court reiterated that the term ‘income’ must be given a broad meaning. It quoted from the said judgment:
“The term ‘income’ has different connotations for different purposes. A 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… 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…”
Applying this principle, the Supreme Court held that allowances should be included in the income, especially when the claimants have shown they were regularly received and used for the family’s benefit. The court noted that after the accident, the entire burden of supporting two minor children fell on the deceased’s wife. Therefore, it held that the income of the deceased at the time of the accident was ₹6,500 per month.
The court then recalculated the compensation:
- Loss of Dependency: Taking the monthly income as ₹6,500, deducting 1/3rd for personal expenses (₹2,167), adding 50% for future prospects (₹2,167), and applying a multiplier of 16, the loss of dependency was calculated as ₹12,48,000 (₹6,500 x 12 x 16).
- Conventional Heads: Following the law laid down in Pranay Sethi and Magma General Insurance Company Limited v. Nanu Ram, the court awarded ₹18,150 for loss of estate, ₹18,150 for funeral expenses, ₹48,400 for spousal consortium to the wife, and ₹48,400 each (totaling ₹96,800) for parental consortium to the two children.
The total compensation was thus enhanced to ₹14,29,500. The court directed the insurance company to deposit this amount with 7% annual interest from the date of filing the petition, excluding the period of delay (1855 days) in filing the appeal before the Supreme Court. The compensation is to be paid to the wife and two children in a 50:25:25 ratio.
