ESI benefits cannot be deducted from motor accident compensation for claims against third-party tortfeasors, Madras High Court holds

On 29.06.2021, A. Kumar died in a motor-vehicle accident when a lorry allegedly driven rashly and negligently collided with his two-wheeler on the Wallajabad–Vandalur Road.

His wife, daughters and parents filed a claim under Section 166 of the Motor Vehicles Act, 1988 (“MV Act”) against the lorry owner and insurer.

The insurer contended that Kumar was covered under the Employees’ State Insurance (“ESI”) Scheme and that the claimants had received ESI benefits, thereby attracting the bar under Sections 53 and 61 of the Employees’ State Insurance Act, 1948 (“ESI Act”).

The Motor Accident Claims Tribunal found the lorry driver negligent and assessed compensation at ₹29,25,000, but directed that the amounts received under the ESI Scheme be deducted from the compensation.

The claimants challenged only the deduction of ESI benefits.

Whether benefits received under the ESI Act could be deducted from compensation awarded under Section 166 of the MV Act where the claim was made against an independent third-party tortfeasor and not against the deceased’s employer

Whether Sections 53 and 61 of the ESI Act barred the claimants from receiving the full compensation awarded under the MV Act in addition to ESI benefits

Whether the reference to a larger Bench in Rajkumar Agrawal v. Vehicle Tata Venture required the High Court to adopt an interim deduction or “via media” arrangement

The Court considered Section 166 of the MV Act, which permits a claim for compensation arising from the negligence of a motor-vehicle tortfeasor, and Section 167, which requires an election where the same death or injury gives rise to claims under the MV Act and the Workmen’s Compensation Act.

Section 53 of the ESI Act bars an insured person or dependant from recovering compensation or damages under another law “in respect of an employment injury sustained by the insured person as an employee under” the ESI Act; the Court held that the statutory ingredients must be read cumulatively, with the employment injury and the claim in the employee’s capacity being central to the bar.

Section 61, concerning similar benefits under other enactments, was considered in the context of the ESI Act’s scheme, under which ESI benefits may be independent of compensation arising from a third-party tort.

The Court relied on Regional Director, ESI Corporation v. Francis De Costa , Western India Plywood Ltd. v. P. Ashokan , National Insurance Co. Ltd. v. Hamida Khatoon , Royal Sundaram Alliance Insurance Co. Ltd. v. S. Ajantha , Rajkumar Agrawal , and National Insurance Co. Ltd. v. Rekhaben .

In particular, S. Ajantha supported the proposition that the ESI bar does not prevent a claim against a third-party tortfeasor, while Rekhaben affirmed that benefits arising from an independent source, such as compassionate employment, are not deductible from MV Act compensation.

The Court distinguished an employment injury claim against an employer from a tort claim arising from an accident caused by an independent third party.

Kumar’s death occurred in a public-place road accident caused by the alleged negligence of the lorry driver; the claim was directed against the lorry owner and his insurer, not against Kumar’s employer, and the claimants proceeded in their capacity as legal heirs rather than as claimants enforcing an employment-related remedy.

Consequently, the accident could not be treated as an “employment injury” for purposes of the Section 53 bar.

The ESI benefits were statutory benefits arising under a separate scheme, whereas the MV Act compensation represented liability for the tort committed by the lorry driver and owner.

Permitting the tortfeasor or insurer to deduct ESI benefits would improperly confer a benefit on the party responsible for the accident.

The Court further held that the larger-Bench reference in Rajkumar Agrawal concerned the broader operation of Sections 53 and 61 where a claimant proceeds in the capacity of an employee, and did not govern claims against an independent third-party vehicle tortfeasor.

The earlier “via media” approach adopted in C. Alliammal was treated as an interim arrangement and not as the controlling ratio for the present facts.

The High Court held that the claimants were entitled to receive the entire compensation of ₹29,25,000 awarded under the MV Act, without deduction of the ESI benefits received by them.

The award was modified accordingly, and the insurer was directed to deposit the full compensation amount with interest at 7.5% per annum from the date of the claim petition until realization, after giving credit for amounts already deposited, within six weeks.

The claimants were permitted to withdraw their respective shares in accordance with the Tribunal’s apportionment; the fifth appellant was also permitted to withdraw the share of her deceased husband, the sixth claimant.