There Could Be No Deduction Even While Computing Loss Of Income From Last Drawn Pay: Supreme Court Enhances Compensation In Motor Accident Case
New India Assurance Co. Ltd. (insurance company/insurer) had filed Civil Appeals before the Supreme Court.
Justice Sudhanshu Dhulia, Justice K. Vinod Chandran, Supreme Court
The Supreme Court has enhanced the compensation in a motor accident case saying that there could be no deduction even while computing the loss of income from the last drawn pay.
New India Assurance Co. Ltd. (insurance company/insurer) had filed Civil Appeals before the Court.
The two-Judge Bench of Justice Sudhanshu Dhulia and Justice K. Vinod Chandran held, “Considering the fact that no deduction for the income tax has been made in the amounts entitled to the family of the deceased for 12 years, which would be deducted only from monthly payments, we are of the view that there could be no deduction made even while computing the loss of income from the last drawn pay; for income tax.”
AOR Meera Agarwal appeared on behalf of the Appellant/Insurance Company while Senior Advocate M.R. Shamshad appeared on behalf of the Respondents/Claimants.
Facts of the Case
The claimants were the legal heirs of the deceased who succumbed to the injuries sustained in a motor accident. In the Claim Petition before the Motor Accident Claims Tribunal (MACT), they were awarded a compensation of Rs. 37,85,800/-. The Insurance Company (Appellant) filed an Appeal, restricted to the quantum, especially on the deduction to be allowed with respect to the financial assistance under the Haryana Compensation Assistance to the Dependents of Deceased Government Employees Rules, 2006 whether the same is liable to be deducted from the total compensation. The Appeal by the claimants was for enhancement of compensation. The loss of dependency granted by the MACT at Rs. 35,65,800/- was enhanced to Rs. 45,14,986/- employing the multiplier system for calculating loss of dependency as has been declared by a Constitution Bench decision in National Company Limited v. Pranay Sethi and Other (2017).
However, under conventional heads, the award of Rs. 2,20,000/- granted by the MACT was reduced to Rs. 70,000/-. The total compensation was determined at Rs. 45,14,986/- out of which half of the compensation under the 2006 Rules was directed to be deducted i.e. Rs. 21,67,704/- on the basis of the decision of the Punjab and Haryana High Court in New India Assurance Company Ltd. v. Ajmero and Others (2016). The counsel for the Appellant submitted that the deduction as per the 2006 Rules has to be 100% as has been held by a decision of the Apex Court in Reliance General Insurance Company Ltd. v. Shashi Sharma and Others (2016) followed in National Insurance Company Ltd. v. Birendra (2020).
Reasoning
The Supreme Court after hearing the contentions of the counsel, observed, “In the present case, the deceased was aged 43 years and was getting a salary of Rs.28,300/- per month which takes his annual income to Rs.3,39,600/-. The deceased left behind his wife and three children, thus he was earning for a family comprised of five persons, in which context, the deduction for personal expenses has to be 1/4th. The High Court has deducted the income tax to arrive at the annual income of Rs.3,25,640/- and an addition has been made for future prospects at the rate of 30% which is in accordance with Pranay Sethi.”
The Court said that the last drawn salary of the deceased should have been reckoned for the purpose of calculating the loss of income under the Motor Vehicles Act, 1988 (MV Act) also.
“Hence, the loss of income, ideally would have to be computed in the following manner. Obviously since the amounts payable under the Rules of 2006 is the last drawn pay in computing the loss of income under the M.V Act necessarily the future prospects will have to be added and the multiplier applicable would be 14 since the age of the deceased was 43. The computation hence would be 30,107 x 12 x 14 x 130% x 3/4 = Rs.49,31,527/- from which the amounts payable as financial assistance under the Financial Assistance Rules of 2006 will have to be deducted which is Rs. 43,35,408/-”, it further noted.
The Court ordered that the additional loss of income payable under the MV Act would be Rs. 5,96,019/- to which will be added loss of consortium for the widow and three children at Rs. 1,60,000/- and loss of estate and funeral expenses of Rs. 30,000/-. It also held that the total compensation would be Rs. 7,86,119/- and the compensation already paid shall not be refunded.
Accordingly, the Apex Court disposed of the Appeals in the aforesaid terms.
Cause Title- New India Assurance Co. Ltd. v. Kamlesh and Others (Neutral Citation: 2025 INSC 724)
Appearance:
Appellant: AOR Meera Agarwal and Advocate Ramesh Chandra Mishra.
Respondents: Senior Advocate M. R. Shamshad, AORs Akshay Verma, Samar Vijay Singh, Advocates Shashank Singh, Savita Devi, Gaurav Gupta, Rohit Kumar, Devendra Kumar Saini, Sabarni Som, Fateh Singh, Aman Dev Sharma, Ayush Gupta, and Vaibhav Vikram Singh.
