Railway accident compensation cannot be withheld based on literacy or financial status, Allahabad HC rules; full amount to be released to adult claimants

The petitioners were dependants, legal representatives, or injured passengers who had obtained compensation awards from the Railway Claims Tribunal (RCT) for death or injury arising from railway accidents or untoward incidents.

Relying on Rule 5 of the Railway Accidents and Untoward Incidents (Compensation) Rules, 1990, the RCTs released only a portion—frequently 10%—of the awarded amount and directed that the balance be kept in fixed deposits or annuities in nationalised banks.

The petitioners challenged the constitutional validity of these provisions, principally on the ground that they violated Article 14 by differentiating between literate and illiterate claimants and between financially strong and weak claimants.

They also challenged the consequential RCT orders withholding part of the compensation.

Whether Rule 5.1 and Rule 5.4.1(i) of the 1990 Rules, by permitting the RCT to withhold or defer disbursement of compensation based on a claimant’s literacy, financial condition, or assessed needs, violate Article 14 of the Constitution.

Whether Rule 5.4.1(ii), by permitting restrictions on the issuance and use of cheque books and debit cards and by regulating withdrawals from the claimant’s bank account, is constitutionally valid and within the authority of the RCT.

Whether subordinate legislation can restrict or defer the benefit of compensation awarded under Sections 123, 124, and 124A of the Railways Act, 1989.

Whether the impugned provisions could be preserved through the doctrine of reading down rather than being declared wholly invalid.

The Court applied Sections 123, 124, 124A, 125, and 129 of the Railways Act, 1989, which establish railway liability and provide for compensation for death or injury arising from railway accidents and untoward incidents.

It considered Rule 3 of the 1990 Rules, which prescribes the compensation payable, including compensation up to ₹8 lakh in cases of death or incapacitating injury.

Rule 5 was examined as the provision regulating the mode of payment.

The Court held that subordinate legislation must facilitate, and cannot substantially curtail, the statutory benefit conferred by the parent enactments.

Applying Article 14, it found that differential treatment based on literacy or financial condition must have a rational and constitutionally permissible basis.

The Court relied on Runna v. Vth Additional District Judge/Motor Accidents Claims Tribunal and Kabi Pradhan v. Union of India for the principle that the State cannot impose unwarranted restrictions on compensation awarded to a major claimant.

It also relied on B.R. Enterprises v. State of U.P., Calcutta Gujarati Education Society v. Calcutta Municipal Corporation, and Authorized Officer, Central Bank of India v. Shanmugavelu for the doctrine of reading down, under which a provision should be given a constitutionally valid, workable interpretation where possible, with invalidation being a last resort.

The Court reasoned that Rule 5.1 and Rule 5.4.1(i) created an impermissible distinction between literate and illiterate claimants and between financially strong and financially weak claimants by authorising the RCT to release only a small portion of the compensation and retain the balance in fixed deposits.

The protective rationale concerning possible exploitation by touts, agents, or intermediaries did not justify withholding 90% of the awarded compensation, particularly when claimants generally possessed bank accounts linked with Aadhaar and mobile numbers and there was no material showing that illiterate or financially weak persons were incapable of managing their funds.

The Court further held that the statutory compensation was intended to reach the claimant and that Rule 5 could not operate as a substantive barrier to the benefit granted under the Railways Act, 1989.

However, instead of invalidating Rule 5 in its entirety, the Court read down the impugned provisions: compensation was to be released to major claimants except those covered by Rule 5.2, and bank-account safeguards were retained only in a limited form for claimants who did not already possess an individual savings account near their permanent residence.

Rule 5.1 was read down to require release of the awarded amount to the claimant, except in cases covered by Rule 5.2 concerning minors or persons of unsound mind.

Rule 5.4.1(i) and (ii) were read down so that the RCT could direct opening of an individual savings account only where the claimant did not already have a verified account in a nationalised bank near the place of permanent residence; in a newly opened account, the bank could withhold issuance of a debit card, but the claimant could withdraw funds by cheque or withdrawal form.

The RCTs were directed to release the entire awarded amount to the petitioners who were majors and not governed by Rule 5.2, including amounts already placed in fixed deposits, and the impugned RCT orders were modified accordingly.