The Supreme Court of India has held that while compassionate financial assistance paid by the government to the family of a deceased employee can be set off against motor accident compensation to prevent duplicate recovery for loss of income, this deduction cannot be applied mechanically to wipe out the independent entitlement of a dependent mother who is ineligible to receive the government assistance. A three-judge bench of the Supreme Court, comprising Justice Vikram Nath, Justice Sandeep Mehta, and Justice Vijay Bishnoi, modified an order of the High Court of Punjab and Haryana, ruling that denying compensation under the Motor Vehicles Act, 1988 to a dependent parent who receives no benefit from the state’s welfare scheme would lead to the “illegal enrichment” of the insurance company. The Court restored the mother’s one-third share in the loss of dependency compensation, enhancing the total compensation to Rs. 19,01,000.
Background
The case arose from a fatal road accident on July 23, 2012, at approximately 9:00 PM. The deceased, Sachin Kumar, a 25-year-old constable in the Haryana Police Department, was riding a motorcycle (Registration No. HR-12H-2221) on the correct side of the road at a moderate speed from Jhajjar to Rohtak. Near Pehlwan Dhaba on Rohtak-Jhajjar Road, near village Karontha, a Trolla (Registration No. RJ-14GC-8428) being driven rashly, negligently, and at high speed from the opposite direction came onto the wrong side of the road and collided with the motorcycle. Sachin Kumar sustained fatal injuries and died on the spot.
His survivors—his widow (Appellant No. 1), minor daughter (Appellant No. 2), mother (Appellant No. 3), and father (Appellant No. 4)—filed a claim petition (MACT Case No. 117 of 2012) under Section 166 of the Motor Vehicles Act, 1988, before the Motor Accident Claims Tribunal, Rohtak (the “Tribunal”). The claimants sought Rs. 40,00,000 in compensation at an interest rate of 18% per annum, stating that the deceased was drawing a monthly salary of Rs. 18,000.
The Tribunal determined the gross monthly salary of the deceased to be Rs. 16,230 on the basis of his salary certificate, and assessed his age to be between 24 and 25 years. Applying the principles laid down in Sarla Verma and Others v. Delhi Transport Corporation and Anr., (2009) 6 SCC 121, the Tribunal calculated the total compensation payable at Rs. 37,30,680 with interest at 8% per annum, payable jointly and severally by the respondents, as the offending vehicle was insured with Reliance General Insurance Company Limited (Respondent No. 1).
The Tribunal excluded the father (Appellant No. 4) from the category of dependents because he was a retired government servant receiving a pension. It divided the loss of dependency compensation equally among the widow, daughter, and mother (Appellant Nos. 1 to 3).
On appeal by the insurer (FAO No. 3633 of 2015), the High Court of Punjab and Haryana modified the award. It deducted Rs. 9,490 per annum towards the deceased’s income tax liability, adjusted conventional heads, and calculated the total compensation at Rs. 36,91,800.
However, relying on the Supreme Court judgment in Reliance General Insurance Company Ltd. v. Shashi Sharma and Others, (2016) 9 SCC 627, the High Court held that the financial assistance of Rs. 29,21,400 (equivalent to the last drawn monthly salary of Rs. 16,230 for 15 years) receivable by the family under the Haryana Compassionate Assistance to the Dependents of Deceased Government Employees Rules, 2006 (the “2006 Rules”), must be deducted from the calculated compensation. This set-off reduced the final payable compensation under the Motor Vehicles Act to Rs. 7,70,400.
The appellants subsequently challenged the High Court’s set-off order before the Supreme Court.
Arguments of the Parties
For the Appellants: Mr. Rameshwar Singh Malik, learned Senior Counsel appearing for the appellants, argued that the 2006 Rules were framed as welfare legislation to provide social security to the dependents of deceased government employees. He contended that no benefit arising from such rules could be extended to the insurance company by way of deduction from the compensation awarded under the Motor Vehicles Act.
He further submitted that the High Court erred in applying Shashi Sharma (supra) without considering the distinct facts of the case, causing financial hardship to the deceased’s young widow, minor daughter, and dependent mother, who had no independent source of income. Crucially, Malik highlighted that the deceased’s mother was completely ineligible for any financial assistance under the 2006 Rules, meaning her independent entitlement to compensation for loss of dependency could not be adjusted against state assistance paid exclusively to other family members.
For the Respondent No. 1 (Insurance Company): Mr. Joy Basu, learned Senior Counsel for Reliance General Insurance, countered that the loss of dependency compensation was fully covered by the state government’s financial assistance under the 2006 Rules, which is paid to offset loss of income. He argued that the High Court correctly applied the law laid down in Shashi Sharma (supra) in deducting the compassionate assistance from the compensation calculated under the Act. Basu also pointed out that the deceased joined the service under a non-pensionable service regime on August 3, 2007, making the appellants’ arguments and documents inapplicable.
Court’s Analysis
The Supreme Court framed three central issues:
- Whether financial assistance under the 2006 Rules is liable to be deducted from motor accident compensation to prevent “duality of loss of income”?
- Whether such financial assistance payable to other family members affects the mother’s independent entitlement?
- What is the final quantum of compensation to be awarded?
On the Deductibility of 2006 Rules Financial Assistance: Addressing the first issue, the Court analyzed Rule 5(1) of the 2006 Rules, under which the eligible family members of a deceased employee under the age of 35 are entitled to financial assistance equivalent to the last drawn salary (Rs. 16,230 per month in this case) for a period of 15 years, totaling Rs. 29,21,400.
To determine if this amount is deductible, the three-judge bench referred to Reliance General Insurance Company Ltd. v. Shashi Sharma and Others, (2016) 9 SCC 627. The Court observed that the pay and other service-related emoluments received by dependents under the 2006 Rules must be deducted when computing compensation for loss of dependency under the Motor Vehicles Act to ensure that compensation does not exceed actual pecuniary loss or act as a financial windfall. Quoting Shashi Sharma, the Court noted:
“The component of quantum of ‘loss of income’, inter alia, can be ‘pay and wages’ which otherwise would have been earned by the deceased employee if he had survived the injury caused to him due to motor accident. If the dependants of the deceased employee, however, were to be compensated by the employer in that behalf, as is predicated by the 2006 Rules… it is unfathomable that the dependants can still be permitted to claim the same amount as a possible or likely loss of income to be suffered by them to maintain a claim for compensation under the 1988 Act.”
The bench further cited the Shashi Sharma ruling on the need for a “harmonious approach” to exclude the financial assistance:
“The harmonious approach for determining a just compensation payable under the 1988 Act, therefore, is to exclude the amount received or receivable by the dependants of the deceased government employee under the 2006 Rules towards the head financial assistance equivalent to ‘pay and other allowances’ that was last drawn by the deceased government employee in the normal course.”
Accordingly, the Court affirmed that the High Court was legally justified in deducting the financial assistance from the total compensation.
On the Mother’s Ineligibility Under Government Rules and Independent Claim Under the Act: Turning to the second issue, the Supreme Court pointed out that the High Court failed to consider the eligibility of the mother (Appellant No. 3) under the 2006 Rules. Rule 3 of the 2006 Rules stipulates that eligibility is governed by the Family Pension Scheme, 1964. Under Paragraph 4, sub-paragraphs (ii) and (iii) of the 1964 Scheme, parents are eligible for pension benefits/financial assistance only if the deceased employee was unmarried or left behind neither a widow nor a child.
Because the deceased was married and left behind a widow and minor daughter, the mother was entirely ineligible to receive any financial assistance under the 2006 Rules. The Court cited the High Court’s ruling in Ram Kala Devi v. State of Haryana and Another, 2025 SCC OnLine P&H 12159, which held:
“a wholly dependent parent of a deceased Government employee shall be entitled to financial assistance only in case the employee does not leave behind either a widow or a child.”
Consequently, the Court held that while the mother was not eligible to receive any financial assistance under the 2006 Rules, she was a legal dependent under the Motor Vehicles Act and thus remained entitled to her share of compensation.
On Preventing the “Illegal Enrichment” of the Insurance Company: Evaluating the impact of the High Court’s set-off, the Supreme Court held that the deduction, in effect, completely wiped out the mother’s compensation on both fronts. The High Court had subtracted the entire Rs. 29,21,400 (received only by the widow and daughter) from the total compensation of Rs. 36,91,800, leaving a remaining balance of Rs. 7,70,400 for all claimants.
The Supreme Court observed that this mechanical set-off deprived the mother of her independent 1/3rd share of the dependency compensation (worth Rs. 11,30,600). The bench observed:
“Negating the mother’s claim, who is entitled to a 1/3rd share of the total compensation awarded, would amount to an illegal enrichment of the Respondent No.1/Insurance Company at the cost of a dependent parent.”
Recalling the legal standard of “just compensation,” the Court referenced State of Haryana and Another v. Jasbir Kaur and Others, (2003) 7 SCC 484, stating:
“Statutory provisions clearly indicate that the compensation must be ‘just’ and it cannot be a bonanza; not a source of profit; but the same should not be a pittance.”
The Supreme Court also referred to National Insurance Company Ltd. v. Birender and Others, (2020) 11 SCC 356, to clarify the sequence of calculations: the total compensation under the Act must be calculated first, and only thereafter should it be adjusted against the financial assistance actually received under the 2006 Rules.
Decision
The Supreme Court ruled that the mother of the deceased is entitled to her 1/3rd share of the loss of dependency compensation (amounting to Rs. 11,30,600 out of the total assessed Rs. 33,91,800). The Court ordered that this sum of Rs. 11,30,600 must be added to the Rs. 7,70,400 already awarded by the High Court.
This brought the final total compensation under the Motor Vehicles Act to Rs. 19,01,000, along with the interest rate awarded by the Tribunal and upheld by the High Court. The respondents were held jointly and severally liable to pay this compensation to the claimants within eight weeks of the order. The appeal was disposed of accordingly.
Case Details
- Case Title: Sarla Devi & Ors. v. Reliance General Insurance Company Limited & Ors.
- Case No.: Civil Appeal No. of 2026 (Arising out of SLP (Civil) No. 13979 of 2018) [2026 INSC 575]
- Bench: Justice Vikram Nath, Justice Sandeep Mehta, and Justice Vijay Bishnoi
- Date: May 26, 2026
