SEBASTIANI LAKRA vs. NATIONAL INSURANCE COMPANY LTD.

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 Signature Not Verified Digitally signed by DEEPAK GUGLANI Date: 2018.12.21 15:26:08 IST Reason: the High Court of Orissa at Cuttack whereby compensation of 2 Rs.40,90,000/­   awarded   by   the   IInd   Addl.   District   Judge­ th cum­V   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 1 judgment of this Court in   , applied a Sarla Verma v. DTC 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 2     On   the   other   hand,   the   claimants/appellants Sharma . submit   that   no   deduction   should   be   made   in   view   of   the judgments rendered by this Court in the case of   Helen C. 3 Rebello   v.   Maharashtra   SRTC   and   United   India 4 Insurance   Co.   Ltd.   v.   Patricia   Jean   Mahajan .     The appellants further contend that, in fact, as per the judgment 5 rendered in  National Insurance Co. Ltd. v. Pranay Sethi , 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 take benefit of the munificence or gratuity of others.   7. In   case (supra), the issue was whether Helen C. Rebello 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     case (supra), the deceased Patricia Jean Mahajan 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 case (supra) this Court held as follows: C. Rebello   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 6 .     This   Court,   following Vimal   Kanwar     v.   Kishore   Dan 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 case (supra), and came to the conclusion that the Mahajan   decision in   Vimal Kanwar   case (supra) did not take a view contrary to  or case Helen C. Rebello     Patricia Jean Mahajan   (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     (supra)  has  been Sarla  Verma 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. 7 15. As held by the House of Lords in  Perry   v.   Cleaver  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.