The Supreme Court of India delivered a landmark ruling emphasizing the inclusion of perquisites and allowances in calculating the compensation for motor accident claims. This judgment marks a significant shift in how compensation is assessed, particularly in cases involving salaried employees with diverse remuneration components. The apex court ruled that allowances such as house rent and contributions to the provident fund must be factored into the deceased’s basic salary before applying the rise by future prospects. The judgment was delivered by a bench comprising Justice Hima Kohli and Justice Sandeep Mehta.
Background of the Case
The case in question, Meenakshi vs. The Oriental Insurance Co. Ltd, involved an appeal by the claimant, Meenakshi, against a reduction in compensation awarded for the death of her son, Suryakanth, in a motor accident on August 29, 2013. The original compensation was granted by the Principal Senior Civil Judge and Motor Accident Claims Tribunal (MACT) at Kalaburagi in MVC No. 887 of 2013. The Tribunal had awarded โน1,04,01,000/- to Meenakshi, the deceased’s mother, for the loss of her sole dependent. The compensation included loss of dependency, love and affection, and funeral expenses.
Legal Issues Involved
The case raised several important legal questions:
1. Inclusion of Allowances in Salary: Whether allowances like house rent, flexible benefits, and provident fund contributions should be included in the salary of the deceased while calculating the compensation based on future prospects.
2. Calculation of Loss of Dependency: The methodology used to calculate the loss of dependency and whether the future prospects were applied correctly.
3. Tax Deductions: The appropriateness of deducting income tax from the gross salary of the deceased before calculating the compensation.
Observations of the Court
The Supreme Court found the approach of the High Court of Karnataka, which had reduced the compensation to โน49,57,035/-, to be flawed. The High Court excluded several components from the deceased’s salary, leading to a lower compensation amount. The Supreme Court noted that:
“The reasoning assigned by the High Court, that the perquisites/allowances in the nature of house rent, flexible benefit plan and Company contribution to provident fund would have to be excluded from the gross income for the purpose of applying future prospects, is erroneous on the face of record. There cannot be any two views on the aspect that these perquisites/allowances admissible to a salaried employee do not remain static and continue to rise generally proportionate to the length of the service of the employee.”
Decision of the Court
The Supreme Court emphasized that allowances are integral to an employee’s salary and typically increase over time with the employee’s career progression. Therefore, excluding these components while calculating future prospects would result in unjustified compensation for the dependents. The Court referenced previous rulings to substantiate its decision, including:
– Raghuvir Singh Matolya and Others v. Hari Singh Malviya and Others (2009) 15 SCC 363
– National Insurance Company Ltd. v. Nalini and Ors. [SLP (C) No. 4230/2019]
The Supreme Court restored the compensation to โน93,66,272/-, considering:
– Loss of Dependency: โน93,16,272/-
– Funeral Expenses: โน25,000/-
– Loss of Love and Affection: โน25,000/-
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Parties Involved
– Appellant: Meenakshi (Mother of the deceased, Shri Suryakanth)
– Respondent: The Oriental Insurance Co. Ltd.
Legal Representation
– For the Appellant: Senior Advocate Geeta Ahuja.
– For the Respondent: Legal team from The Oriental Insurance Co. Ltd.
