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Friday, October 12, 2018

The law is well settled that deductions cannot be allowed from the amount of compensation either on account of insurance, or on account of pensionary benefits or gratuity or grant of employment to a kin of the deceased. The main reason is that all these amounts are earned by the deceased on account of contractual relations entered into by him with others. It cannot be said that these amounts accrued to the dependents or the legal heirs of the deceased on account of his death in a motor vehicle accident. The claimants/dependents are entitled to ‘just compensation’ under the Motor Vehicles Act as a result of the death of the deceased in a motor vehicle accident. Therefore, the natural corollary is that the advantage which accrues to the estate of the deceased or to his dependents as a result of some contract or act which the deceased performed in his life time cannot be said to be the outcome or result of the death of the deceased even though these amounts may go into the hands of the dependents only after his death.

1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S).       10588­89                 OF 2018
(@ SLP (C) NO(S).12359­12360 OF 2018)
SEBASTIANI LAKRA & ORS.    …. APPELLANT(S)
VERSUS
NATIONAL INSURANCE COMPANY
LTD. & ANR.            … RESPONDENT(S)
J U D G M E N T
Deepak Gupta J.
Leave granted.
2. These   appeals   filed   by   the   claimants­appellants   are
directed against the judgment dated 21.12.2017 delivered by
the High Court of Orissa at Cuttack whereby compensation of
2
Rs.40,90,000/­   awarded   by   the   IInd   Addl.   District   Judgecum­Vth
 Motor   Accidents   Claim   Tribunal,   Rourkela
(hereinafter referred to as ‘the MACT’) has been reduced to
Rs.36,00,000/­.
3. The   MACT   found   that   the   revised   basic   pay   of   the
deceased   was   Rs.51,328/­   and   he   was   entitled   to   DA   of
Rs.7,237/­ at the time of his death i.e. he was getting a total
salary of Rs.58,565/­.  However, the MACT, for the purposes
of compensation, assessed the monthly income of deceased at
Rs.50,000/­ per month and deducted 1/3 for his personal
expenses leaving a datum figure of Rs.33,333/­ per month.
Since the deceased was 52 years old, the MACT following the
judgment of this Court in  Sarla  Verma  v.  DTC1
, applied a
multiplier   of   11   and   assessed   compensation   at
Rs.40,00,000/­ for loss of income, Rs.25,000/­ was added for
funeral   expenses,   Rs.5,000/­   for   the   loss   of   estate,
Rs.50,000/­ towards loss of consortium and Rs.10,000/­ for
1
(2009) 6 SCC 121
3
loss of affection i.e. total compensation of Rs.40,90,000/­ was
awarded to the claimants.  The claimants and the insurance
company   filed   appeals   challenging   the   quantum   of
compensation.    The main ground raised by the insurance
company was that the claimants were being paid a sum of
Rs.50,082/­ per month under the Employees Family Benefit
Scheme   (for   short   ‘the   EFB   Scheme’).     The   High   Court,
without giving any reasons, has reduced the compensation by
almost Rs.5,00,000/­, to Rs.36,00,000/­.   Reasons are the
heart and soul of any judicial pronouncement.   No judicial
order is complete without reasons and it is expected that
every court which passes an order, should give reasons for
the same.
4. We have heard learned counsel for the parties and it is
not disputed before us that the last drawn income of the
deceased   including   DA   was   Rs.58,565/­   per   month.
According to the insurance company, since the claimants are
getting a sum of Rs.50,082/­ under the EFB Scheme, this
4
amount should be deducted in terms of the judgment of this
Court in  Reliance  General   Insurance  Co.  Ltd.   v.  Shashi
Sharma2
.    On   the   other   hand,   the   claimants/appellants
submit that  no  deduction  should  be made in view of the
judgments rendered by this Court in the case of  Helen   C.
Rebello   v.   Maharashtra   SRTC3
  and  United   India
Insurance   Co.   Ltd.   v.   Patricia   Jean   Mahajan4
.     The
appellants further contend that, in fact, as per the judgment
rendered in National Insurance Co. Ltd. v. Pranay Sethi5
,
15% should be added towards future prospects. 
5. Section 168 of the Motor Vehicles Act, 1988 (for short
‘the Act’) mandates that “just compensation” should be paid
to the claimants.   Any method of calculation of compensation
which does not result in the award of ‘just compensation’
would not be in accordance with the Act.  The word “just” is of
2
(2016) 9 SCC 627
3
(1999) 1 SCC 90
4
(2002) 6 SCC 281
5
(2017) 16 SCC 680
5
a very wide amplitude.  The Courts must interpret the word in
a manner which meets the object of the Act, which is to give
adequate and just compensation to the dependents of the
deceased.   One must also remember that compensation can
be paid only once and not time and again. 
6. The   traditional   view   was   that   while   assessing
compensation, the Court should assess the loss of income
caused to the claimants by the death of the deceased and
balance   it   with   the   benefits   which   may   have   accrued   on
account of the death of the deceased.   However, even when
this traditional view was being followed, it was a well settled
position of law that the tort­feasor cannot not take benefit of
the munificence or gratuity of others. 
7. In Helen C. Rebello case (supra), the issue was whether
the amounts received by the deceased   by way of provident
fund, pension, life insurance policies and similarly, in cash,
6
bank   balance,   shares,   fixed   deposits   etc.,   are   ‘pecuniary
advantages’ received by the heirs on account of death of the
deceased and liable to be deducted from the compensation.
This Court held that these amounts have no co­relation with
the  compensation  receivable by the  dependents  under the
Motor Vehicle Act.  The following observations were made by
the Court:
“35.  Broadly, we may examine the receipt of the provident
fund which is a deferred payment out of the contribution
made by an employee during the tenure of his service. Such
employee or his heirs are entitled to receive this amount
irrespective of the accidental death. This amount is secured,
is certain to be received, while the amount under the Motor
Vehicles   Act   is   uncertain   and   is   receivable   only   on   the
happening of the event, viz., accident, which may not take
place at all. Similarly, family pension is also earned by an
employee for the benefit  of his family in the form of his
contribution in the service in terms of the service conditions
receivable by the heirs after his death. The heirs receive
family pension even otherwise than the accidental death. No
corelation between the two. Similarly, life insurance policy is
received either by the insured or the heirs of the insured on
account   of   the   contract   with   the   insurer,   for   which   the
insured contributes in the form of premium. It is receivable
even by the insured if he lives till maturity after paying all
the premiums. In the case of death, the insurer indemnifies
to pay the sum to the heirs, again in terms of the contract
for the premium paid. Again, this amount is receivable by
the claimant not on account of any accidental death but
otherwise on the insured’s death. Death is only a step or
contingency in terms of the contract, to receive the amount.
Similarly any cash, bank balance, shares, fixed deposits, etc.
though are all a pecuniary advantage receivable by the heirs
on account of one’s death but all these have no corelation
7
with the amount receivable under a statute occasioned only
on account of accidental death. How could such an amount
come within the periphery of the Motor Vehicles Act to be
termed as “pecuniary advantage” liable for deduction. When
we seek the principle of loss and gain, it has to be on a
similar   and   same   plane   having   nexus,   inter   se,   between
them   and   not   to   which   there   is   no   semblance   of   any
corelation.   The   insured   (deceased)   contributes   his   own
money   for   which   he   receives   the   amount   which   has   no
corelation   to   the   compensation   computed   as   against   the
tortfeasor for his negligence on account of the accident. As
aforesaid, the amount receivable as compensation under the
Act is on account of the injury or death without making any
contribution   towards   it,   then   how   can   the   fruits   of   an
amount  received  through contributions of the insured be
deducted   out   of   the   amount   receivable   under   the   Motor
Vehicles Act. The amount under this Act he receives without
any contribution. As we have said, the compensation payable
under the Motor Vehicles Act is statutory while the amount
receivable under the life insurance policy is contractual.”
8. In  Patricia  Jean  Mahajan  case (supra), the deceased
was a doctor practicing in the United States of America.  He
died on a visit to India.  His wife had received an amount of $
2,50,000/­   on   account   of   life   insurance   policies   of   the
deceased.  She had also received unemployment allowance for
8 or 9 months and it was urged that these amounts should be
deducted from the compensation assessed.  After referring to
the entire law on the subject including the decision in Helen
C. Rebello case (supra) this Court held as follows:
8
“36. We are in full agreement with the observations made in
the case of Helen Rebello that principle of balancing between
losses and gains, by reason of death, to arrive at the amount
of   compensation   is   a   general   rule,   but   what   is   more
important is that such receipts by the claimants must have
some   correlation   with   the   accidental   death   by   reason   of
which alone the claimants have received the amounts. We do
not think it would be necessary for us to go into the question
of   distinction   made   between   the   provisions   of   the   Fatal
Accidents Act and the Motor Vehicles Act. According to the
decisions referred to in the earlier part of this judgment, it is
clear that the amount on account of social security as may
have been received must have a nexus or relation with the
accidental injury or death, so far to be deductible from the
amount of compensation. There must be some correlation
between the amount received and the accidental death or it
may   be   in   the   same   sphere,   absence  (sic)  the   amount
received   shall   not   be   deducted   from   the   amount   of
compensation.   Thus,   the   amount   received   on   account   of
insurance policy of the deceased cannot be deducted from
the amount of compensation though no doubt the receipt of
the insurance amount is accelerated due to premature death
of the insured. So far as other items in respect of which
learned counsel for the Insurance Company has vehemently
urged, for example some allowance paid to the children, and
Mrs Patricia Mahajan under the social security system, no
correlation of those receipts with the accidental death has
been shown much less established. Apart from the fact that
contribution comes from different sources for constituting
the fund out of which payment on account of social security
system is made, one of the constituents of the fund is tax
which is deducted from income for the purpose. We feel that
the   High   Court   has   rightly   disallowed   any   deduction   on
account of receipts under the insurance policy and other
receipts under the social security system which the claimant
would   have   also   otherwise   been   entitled   to   receive
irrespective   of   accidental   death   of   Dr   Mahajan.   If   the
proposition “receipts from whatever source” is interpreted so
widely that it may cover all the receipts, which may come
into the hands of the claimants, in view of the mere death of
the   victim,   it   would   only   defeat   the   purpose   of   the   Act
providing  for  just  compensation  on  account  of accidental
death. Such gains, maybe on account of savings or other
9
investment etc. made by the deceased, would not go to the
benefit of the wrongdoer and the claimant should not be left
worse off, if he had never taken an insurance policy or had
not made investments for future returns.”
9. Thereafter, similar matter came up for consideration in
Vimal   Kanwar     v.   Kishore   Dan6
.     This   Court,   following
Helen C. Rebello case (supra) held that the amounts received
by the heirs by way of provident fund, pension and insurance
cannot   be   termed   as   ‘pecuniary   advantage’   liable   for
deduction.  This Court also held that the salary received on
compassionate appointment cannot be deducted.
10. In Shashi Sharma case (supra) this Court was dealing
with the payments made to the legal heirs of the deceased in
terms of Rule 5 (1) of the Haryana Compassionate Assistance
to the Dependants of Deceased Government Employees Rules,
2006 (for short ‘the said Rules’).   Under Rule 5 of the said
Rules on the death of a Government employee, the family
would continue to receive as financial assistance a sum equal
to the pay and other allowances that was last drawn by the
6
(2013) 7 SCC 476
10
deceased employee for periods set out in the Rules and after
the   said   period   the   family   was   entitled   to   receive   family
pension.     The   family   was   also   entitled   to   retain   the
Government   accommodation   for   a   period   of   one   year   in
addition to payment of Rs.25,000/­ as ex gratia.  In this case,
the three­Judge Bench adverted to the principles laid down in
Helen   C.   Rebello  case (supra), followed in  Patricia   Jean
Mahajan case (supra), and came to the conclusion that the
decision in  Vimal  Kanwar case (supra) did not take a view
contrary to Helen C. Rebello or Patricia Jean Mahajan case
(supra).  The following observations are relevant:
“15.  The principle expounded in this decision in  Helen C.
Rebello case that the application of general principles under
the common law to estimate damages cannot be invoked for
computing   compensation   under   the   Motor   Vehicles   Act.
Further,  the  “pecuniary  advantage”  from whatever   source
must correlate to the injury or death caused on account of
motor accident. The view so taken is the correct analysis and
interpretation of the relevant provisions of the Motor Vehicles
Act   of   1939,   and   must   apply   proprio   vigore   to   the
corresponding provisions of the Motor Vehicles Act, 1988.
This principle has been restated in the subsequent decision
of the two­Judge Bench in  Patricia Jean Mahajan case, to
reject the argument of the Insurance Company to deduct the
amount receivable by the dependants of the deceased by way
of “social security compensation” and “life insurance policy.”
11
However, while dealing with the scheme the Court held that
applying  a  harmonious  approach  and   to  determine  a  just
compensation payable under the Motor Vehicles Act it would
be appropriate to exclude the amount received under the said
Rules   under   the   Head   of   ‘Pay   and   Other   Allowances’   last
drawn by the employee.  We may note that on principle this
Court has not disagreed with the proposition laid down in
Helen C. Rebello or in Patricia Jean Mahajan case (supra),
but while arriving at a just compensation, it had ordered the
deduction of the salary, received under the statutory rules.
11. The   Indian   courts   have   consistently   followed   the
multiplier   system   while   assessing   compensation   and   the
judgment of this Court in  Sarla   Verma  (supra) has been
reiterated by a Constitution Bench of this Court in  Pranay
Sethi  (supra) in so far as choice of multiplier is concerned. 
12
12. The law is well settled that deductions cannot be allowed
from   the   amount   of   compensation   either   on   account   of
insurance, or on account of pensionary benefits or gratuity or
grant of employment to a kin of the deceased.   The main
reason is that all these amounts are earned by the deceased
on account of contractual relations entered into by him with
others.  It cannot be said that these amounts accrued to the
dependents or the legal heirs of the deceased on account of
his   death   in   a   motor   vehicle   accident.     The
claimants/dependents   are   entitled   to   ‘just   compensation’
under the Motor Vehicles Act as a result of the death of the
deceased in a motor vehicle accident.  Therefore, the natural
corollary is that the advantage which accrues to the estate of
the   deceased   or   to   his   dependents   as   a   result   of   some
contract or act which the deceased performed in his life time
cannot be said to be the outcome or result of the death of the
deceased even though these amounts may go into the hands
of the dependents only after his death.
13
13. As far as any amount paid under any insurance policy is
concerned whatever is added to the estate of the deceased or
his dependents is not because of the death of the deceased
but   because   of   the   contract   entered   into   between   the
deceased and the insurance company from where he took out
the   policy.     The   deceased   paid   premium   on   such   life
insurance and this amount would have accrued to the estate
of the deceased either on maturity of the policy or on his
death, whatever be the manner of his death.  These amounts
are   paid   because   the   deceased   has   wisely   invested   his
savings.     Similar   would   be   the   position   in   case   of   other
investments like bank deposits, share, debentures etc..  The
tort­feasor cannot take advantage of the foresight and wise
financial investments made by the deceased.
14. As   far   as   the   amounts   of   pension   and   gratuity   are
concerned, these are paid on account of the service rendered
by the deceased to his employer.   It is now an established
principle of service jurisprudence that pension and gratuity
14
are the property of the deceased.  They are more in the nature
of deferred wages.  The deceased employee works throughout
his life expecting that on his retirement he will get substantial
amount as pension and gratuity.   These amounts are also
payable on death, whatever be the cause of death.  Therefore,
applying   the   same   principles,   the   said   amount   cannot   be
deducted.
15. As held by the House of Lords in Perry  v.  Cleaver7
 the
insurance amount is the fruit of premium paid in the past,
pension   is   the   fruit   of   services   already   rendered   and   the
wrong   doer   should   not   be   given   benefit   of   the   same   by
deducting it from the damages assessed.
16. Deduction   can   be   ordered   only   where   the   tort­feasor
satisfies   the   court   that   the   amount   has   accrued   to   the
7 1969 ACJ 363
15
claimants only on account of death of the deceased in a motor
vehicle accident.
17. The issue before us is whether we should deduct the
amount being received by the family members under the EFB
Scheme while calculating the loss of income. 
18. The EFB Scheme is totally different from the rules which
were under consideration of this Court in  Shashi  Sharma
case (supra).  Under this Scheme, the nominee or legal heir(s)
of the deceased employee have to deposit the entire amount of
gratuity and all other benefits payable to them on the death of
the employee.
19. In the present case, it stands proved that the claimants
have deposited a sum of Rs.27,43,991/­ received by them on
the death of the deceased with the employer and are now
getting   about   Rs.50,082/­   per   month.     This   amount   of
16
Rs.50,082/­ is to be paid to the legal heirs under the EFB
Scheme only till date of retirement of the deceased.  Even if
an interest @ of 12% per annum is calculated on the amount
of Rs.27,43,991/­, that would amount to Rs.3,30,000/­ per
year or Rs.27,500/­ per month.  The appellants­claimants are
getting about Rs.50,000/­ per month i.e. about Rs.22,500/­
per month more, but this is only to be paid for a period of
about   7   years   till   30.04.2021.     This   payment   will   cease
thereafter.
20. The aforesaid payment is totally different to the payment
made by the employer in Shashi Sharma case (supra) which
was statutory in nature.  Therefore, we hold that this amount
cannot be deducted. 
21. However,   since   the   claimants   are   getting   quite   an
advantage, we feel that the MACT was right in not taking into
consideration the future prospects in the peculiar facts and
17
circumstances of the case.   Therefore, though we are not
inclined to deduct the amount payable to the claimants, we
feel that in the peculiar facts and circumstances of the case,
they are not entitled to claim another amount @ of 15% by
way of future prospects.  The payment of the amount under
the   EFB   Scheme   more   than   offsets   the   loss   of   future
prospects.  This, in our opinion, would be ‘just’ compensation.
  22. It is not disputed that the last drawn income of the
deceased including DA was Rs.58,565/­. On this amount, the
deceased would definitely have been paying some income tax.
Since exact calculations of the same has not been given, we
deduct about Rs.2,565/­ per month for this purpose and for
purposes of calculation of loss of income, assess the income
as   Rs.56,000/­   per   month.     Out   of   this   amount   1/3   is
deducted i.e. Rs.18,667/­, for personal expenses leaving a
balance of Rs. 37,333/­ per month as loss of dependency to
the family, which works out to Rs.4,47,996/­ per annum.
Applying a multiplier of 11, the compensation works out to
Rs.49,27,956/­.     In   addition   thereto,   according   to   the
18
judgment of this Court in  Pranay   Sethi  case (supra), the
claimants   are   entitled   to   Rs.15,000/­   for   loss   of   estate,
Rs.40,000/­   loss   of   consortium,   Rs.15,000/­   for   funeral
expenses   i.e.   a   total   amount   of   Rs.49,97,956/­   which   is
rounded   off   to   Rs.50,00,000/­.     On   this   amount,   the
claimants shall be entitled to interest @ of 9% per annum
from the date of filing of the petition till the payment of the
amount.  Obviously, the insurance company shall be entitled
to deduct/adjust the amounts already paid by it.
23. The appeals are allowed in the aforesaid terms.  Pending
application(s), if any, stands disposed of.
……………………………J.
(Madan B. Lokur)
……………………………J.
(S. Abdul Nazeer)
……………………………J.
(Deepak Gupta)
New Delhi
October 12, 2018