COMPUTING JUST COMPENSATION

Source: The Hitavada      Date: 22 Oct 2018 14:55:14

 THROUGH the judgement of the case – Sebastiani Lakra and Others v. National Insurance Company Ltd. and Another, delivered on October 12, 2018, a 3-judge bench of the Supreme Court, consisting of Justices Madan B. Lokur, S. Abdul Nazeer and Deepak Gupta have re-iterated the well settled law that while computing “just compensation” in accident cases 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 appeals in the case were filed by the appellants-claimants against the judgement delivered by the Orissa High Court at Cuttack whereby compensation of Rs. 40,90,000 awarded by the Motor Accidents ClaimTribunal, Rourkela on December 21, 2017 was reduced to Rs. 36,00,000.

In appeal, without giving any reasons, the High Court reduced the compensation by almost Rs. 5 lakhs. As 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.  

According to the court, 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 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 lifetime 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.

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 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 had wisely invested his savings. Similar would be the position in case of other investments like bank deposits, shares, debentures etc. The tort-feasor cannot take advantage of the foresight and wise financial investments made by the deceased.

It is now an established principle of service jurisprudence that pension and gratuity 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.

As held by the British House of Lords in the case – Percy v. Cleaver- 1969 ACJ 363, the insurance amount is the fruit of the premium paid in the past, pension is fruit of services already rendered and the wrong doer should not be given benefit of the same by deducting it from the damages assessed.

Deduction can be ordered only where the tortfeasor satisfies the court that the amount has accrued to the claimants only on account of death of the deceased in a motor vehicle accident.

The issue before the Supreme Court was whether it should deduct the amount being received by the family members under the Employees Family Benefit-EFB Scheme, while calculating the loss of income. The EFB Scheme is totally different from the rules which were under consideration of the Supreme Court in the case – Reliance General Insurance Co. Ltd. v. Shashi Sharma (2016) 9 SCC 627.UnderthisScheme,thenominee orlegalheir(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.

 In this 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 Rs. 50,082/- is to be paid to the legal heirs under the EFB Scheme only till date of retirement of the deceased. Even an interest at 12 pc per annum is calculated on the amount of Rs. 27,43,991/- that would amount to Rs. 3,30,000/- year or Rs. 27,500/- per month. The appellants-claimants are getting about Rs. 50,000/- per month, that is about Rs. 22,500/- per month more, but this is only to be paid for a period of about 7 years till April 30, 2021. This payment will cease thereafter.

This payment is totally different from the payment made by the employer in Shashi Sharma’s case, which was statutory in nature. Therefore, the court held that this amount cannot be deducted. However, since the claimants were getting quite an advantage, the court felt that the Motor Accident ClaimTribunal- MACT - was right in not taking into consideration the future prospects in the peculiar facts and circumstance of the case.

 Therefore, though the court was not inclined to deduct the amount payable to the claimants, it felt that in the peculiar facts and circumstances of the case, the claimants were not entitled to claim another amount at 15 pc, by way of future prospects. The payment of the amount under the EFB Scheme more than offsets the loss of future prospects.

This in the court’s opinion, would be ‘just’ compensation. Awarding the compensation of Rs. 50 lakhs, the court stated that on this amount the claimants shall be entitled to 9 pc per annum interest from the date of filing of the petition till payment of the amount. The court permitted the insurance company to deduct/adjust the amount already paid by it. The Supreme Court allowed the appeals in the stipulated terms.