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CASE NO.:

Appeal (civil) 5830 of 2007

PETITIONER:

National Insurance Company Ltd

RESPONDENT:

Indira Srivastava & Ors

DATE OF JUDGMENT: 12/12/2007

BENCH:

S.B. Sinha & Harjit Singh Bedi

JUDGMENT:

J U D G M E N T

CIVIL APPEAL NO. 5830 OF 2007

(Arising out of SLP (C) No.14452 of 2007)

S.B. Sinha, J.

1. Leave granted.

2. Connotation of the term 'income' for the purpose of determination of

'just compensation' envisaged under Section 168 of the Motor Vehicles Act,

1988 (the Act) calls for question in this appeal which arises out of a

judgment and order dated 6.4.2007 passed by the High Court of Judicature at

Allahabad, Lucknow Bench at Lucknow in FAFO No.171 of 2001.

Respondent's husband R.K. Srivastava was employed in a company named

Gabriel India Ltd. While he was travelling in an auto rickshaw from

Charbagh Railway Station, Lucknow to his residence situated at Ashok

Marg, the same met with an accident with a 'Mahindra Commander Jeep'

driven rashly and negligently. He sustained injuries and ultimately

succumbed thereto. Respondents herein filed a claim petition before the

learned Tribunal. A salary certificate was produced in the said proceedings

which is in the following terms :

Earnings

Amount

Deductions

Amount

Basic

3420.00

CPF(S)

488.00

Special Pay

70.00

CPF (Add)

FDA

350.00

GIS

3.75

VDA

1040.00

LIC/GIS

509.10

CCA

100.00

HRR

HRA

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1047.00

MSPI

60.00

Washing All.

75.00

Society

576.00

Conv.

225.00

Union

3.00

Cant.sub.

265.00

HBA

340.00

C.E.A.

2040.00

B.Fund

10.00

Total

8632.00

Total

1989.85

3. The learned Tribunal opined that in computing his income, the

element of conveyance allowance only would fall outside the purview of

income. On the aforementioned basis, the monthly income of the deceased

was assessed at Rs.20364/-. Applying the multiplier of 13, as the age of the

deceased was 45 years, it was held :

"As such, on using multiple of 13 to the annual

income of deceased at Rs.2,32,372/-, the amount

works out to Rs.30,20,836/-. The deceased would

have spent 1/3rd of this amount on himself, hence

on deducting 1/3rd from this amount, 2/3rd

compensation amount comes to Rs.20,13,890/-."

It was concluded:

"Considering all these facts, I reach to this finding

that the petitioners are entitled to get 2/3rd of the

total income of deceased worked out by using

multiple of 13 i.e. about Rs.20,00,000/-. Issue No.5

is decided accordingly. It is the liability of

opposite party No.3 Insurance Company. On

behalf of opposite party No.3, the ruling of

Hon'ble High Court Smt. Lalta Devi Vs. Suresh &

Ors., T.A.C. 8, 1999 (1) page 847 has been filed

before me, but this ruling does not extend any

specific benefit to opposite party No.3. Hence,

while deciding this issue No.5, I come to this

conclusion that the petitioners are entitled to get

Rs.20,00,000/- (Rs. Twenty Lakhs) as

compensation."

4. The High Court, on an appeal having been preferred both by the

appellant as also the respondents, partly allowed the same by a common

judgment holding that claimants were entitled to compensation calculated in

case of the deceased at Rs.19,53,224/- along with interest @ 9% from the

date of presentation of the claim petition till its realization, holding that

travelling reimbursement could not be taken into consideration for

computation of net income of the deceased.

5. Appellant is, thus, before us.

Keeping in view the importance of the question involved and

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furthermore in view of the fact that the first respondent was appearing-in-

person, we had requested Mr. L.N. Rao, learned senior counsel, to assist us

in the matter.

6. Submission of Mr. Satija, learned counsel appearing on behalf of the

appellant, is that for the purpose of computation of the amount of

compensation what was material is the basic pay and not other allowances

and, in that view of the matter, the High Court has committed a serious error

in opining otherwise. The learned counsel contended that emphasis by this

Court are being laid on computation of damages based on net income and

not gross income. It was also contended that in any event the amount of

compensation awarded by the High Court is on higher side.

7. Mr. Rao, however, submitted that apart from the basic salary,

contributions made by the employee should also be taken into consideration

for calculation of the amount of compensation, inter alia, on the premise that

the same would have become payable to him at a future date as, for example,

voluntary retirement, superannuation etc. which would be beneficial to the

entire family. It was pointed out that the contributions towards Provident

Fund, Life Insurance Corporation, gratuity etc. are includable in the

definition of income.

8. The term 'income' has different connotations for different purposes.

A court of law, having regard to the change in societal conditions must

consider the question not only having regard to pay packet the employee

carries home at the end of the month but also other perks which are

beneficial to the members of the entire family. Loss caused to the family on

a death of a near and dear one can hardly be compensated on monetory

terms.

9. Section 168 of the Act uses the word 'just compensation' which, in

our opinion, should be assigned a broad meaning. We cannot, in

determining the issue involved in the matter, lose sight of the fact that the

private sector companies in place of introducing a pension scheme takes

recourse to payment of contributory Provident Fund, Gratuity and other

perks to attract the people who are efficient and hard working. Different

offers made to an officer by the employer, same may be either for the benefit

of the employee himself or for the benefit of the entire family. If some

facilities are being provided whereby the entire family stands to benefit, the

same, in our opinion, must be held to be relevant for the purpose of

computation of total income on the basis whereof the amount of

compensation payable for the death of the kith and kin of the applicants is

required to be determined. For the aforementioned purpose, we may notice

the elements of pay, paid to the deceased :

"BASIC : 63,400.00

CONVEYANCE

ALLOWANCE : 12,000.00

RENT CO LEASE : 49,200.00

BONUS (35% OF BASIC) : 21,840.00

TOTAL : 1,45,440.00

In addition to above, his other entitlements were :

Con. to PF 10% Basic Rs. 6,240/- (p.a.)

LTA reimbursement Rs. 7,000/- (p.a.)

Medical reimbursement Rs. 6,000/- (p.a.)

Superannuation 15% of Basic Rs. 9,360/- (p.a.)

Gratuity Cont.5.34% of Basic Rs. 3,332/- (p.a.)

Medical Policy-self & Family @ Rs.55,000/- (p.a.)

Education Scholarship @ Rs.500 Rs.12,000/- (p.a.)

Payable to his two children

Directly"

10. There are three basic features in the aforementioned statement which

require our consideration :

1. Reimbursement of rent would be equivalent to HRA;

2. Bonus is payable as a part of salary; and

3. Contribution to the Provident Fund.

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11. We may furthermore notice that apart therefrom, superannuation

benefits, contributions towards gratuity, insurance of medical policy for self

and family and education scholarship were beneficial to the members of the

family.

12. We have, however, no doubt in mind that medical reimbursement

which provides for a slab and which keeping in view the terminology used,

would mean reimbursement for medical expenses on production of medical

bills and, thus, the same would not come within the purview of the

aforementioned category.

13. The question came for consideration before a learned Single Judge of

the Madras High Court in The Manager, National Insurance Co. Ltd. v.

Padmavathy & Ors. [CMA No.114 of 2006 decided on 29.1.2007], wherein

it was held :

"Income tax, Professional tax which are deducted

from the salaried person goes to the coffers of the

government under specific head and there is no

return. Whereas, the General Provident Fund,

Special Provident Fund, L.I.C., Contribution are

amounts paid specific heads and the contribution is

always repayable to an employee at the time of

voluntary retirement, death or for any other reason.

Such contribution made by the salaried person are

deferred payments and they are savings. The

Supreme Court as well as various High Courts

have held that the compensation payable under the

Motor Vehicles Act is statutory and that the

deferred payments made to the employee are

contractual. Courts have held that there cannot be

any deductions in the statutory compensation, if

the Legal Representatives are entitled to lumpsum

payment under the contractual liability. If the

contributions made by the employee which are

otherwise savings from the salary are deducted

from the gross income and only the net income is

taken for computing the dependancy

compensation, then the Legal Representatives of

the victim would lose considerable portion of the

income. In view of the settled proposition of law, I

am of the view, the Tribunal can make only

statutory deductions such as Income tax and

professional tax and any other contribution, which

is not repayable by the employer, from the salary

of the deceased person while determining the

monthly income for computing the dependancy

compensation. Any contribution made by the

employee during his life time, form part of the

salary and they should be included in the monthly

income, while computing the dependency

compensation."

14. Similar view was expressed by a learned Single Judge of Andhra

Pradesh High Court in S. Narayanamma & Ors. V. Secretary to Government

of India, Ministry of Telecommunications and Ors. [2002 ACC 582],

holding :

"In this background, now we will examine the

present deductions made by the tribunal from the

salary of the deceased in fixing the monthly

contribution of the deceased to his family. The

tribunal has not even taken proper care while

deducting the amounts from the salary of the

deceased, at least the very nature of deductions

from the salary of the deceased. My view is that

the deductions made by the tribunal from the

salary such as recovery of housing loan, vehicle

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loan, festival advance and other deductions, if any,

to the benefit of the estate of the deceased cannot

be deducted while computing the net monthly

earnings of the deceased. These advances or loans

are part of his salary. So far as House Rent

Allowance is concerned, it is beneficial to the

entire family of the deceased during his tenure, but

for his untimely death the claimants are deprived

of such benefit which they would have enjoyed if

the deceased is alive. On the other hand,

allowances, like Travelling Allowance, allowance

for newspapers/periodicals, telephone, servant,

club-fee, car maintenance etc., by virtue of his

vocation need not be included in the salary while

computing the net earnings of the deceased. The

finding of the tribunal that the deceased was

getting Rs.1,401/- as net income every month is

unsustainable as the deductions made towards

vehicle loan and other deductions were also taken

into consideration while fixing the monthly income

of the deceased. The above finding of the tribunal

is contrary to the principle of 'just compensation'

enunciated by the Supreme Court in the judgment

in Helen's case (1 supra). The Supreme Court in

Concord of India Insurance Co. v. Nirmaladevi

and Ors., 1980 ACJ 55 (SC) held that

determination of quantum must be liberal and not

niggardly since law values life and limb in a free

country 'in generous scales'."

15. We may, however, notice that a Division Bench of this Court in Asha

& Ors. v. United Indian Insurance Co. Ltd. & Anr. [2004 ACC 533],

whereupon reliance has been placed by Mr. Satija, was considering a case

where, like the present one, several perks were included in salary. We may

reproduce the salary certificate hereto below :

"This is to certify that Shri A.M. Raikar was

working as AG 111 in this organisation has been

paid the following Pay & Allowances for the

month of May, 1995:

Earnings Amount Deductions Amount

Basic 3420.00 CPF (S) 488.00

Special Pay 70.00 CPF (Add)

FDA 350.00 GIS 3.75

VDA 1040.00 LIC/GIS 509.10

CCA 100.00 HRA

HRA 1047.00 MSPI 60.00

Washing All. 75.00 Society 576.00

Conv. 225.00 Union 3.00

Cant.Sub. 265.00 HBA 340.00

C.E.A. 2040.00 B.Fund 10.00

Total 8632.00 Total 1989.85

Net Payable Rs. 6642.00 (Rupees six thousand

six hundred forty two only)."

In that case, this Court held :

"Lastly it was submitted that the salary certificate

shows that the salary of the deceased was

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Rs.8,632/-. It was submitted that the High Court

was wrong in taking the salary to be Rs.6,642/-. It

was submitted that the High Court was wrong in

deducting the allowances and amounts paid

towards LIC, Society charges and HBA etc. We

are unable to accept this submission also. The

claimants are entitled to be compensated for the

loss suffered by them. The loss suffered by them is

the amount which they would have been receiving

at the time when the deceased was alive. There can

be no doubt that the dependents would only be

receiving the net amount less l/3rd for his personal

expenses. The High Court was therefore right in so

holding."

This Court in Asha (supra) did not address itself the questions raised

before us. It does not appear that any precedent was noticed nor the term

'just compensation' was considered in the light of the changing societal

condition as also the perks which are paid to the employee which may or

may not attract income tax or any other tax.

What would be 'just compensation' must be determined having regard

to the facts and circumstances of each case. The basis for considering the

entire pay packet is what the dependents have lost due to death of the

deceased. It is in the nature of compensation for future loss towards the

family income.

16. In Rathi Menon v. Union of India [(2001) 3 SCC 714], this Court,

upon considering the dictionary meaning of compensation held :

"In this context a reference to Section 129 of the

Act appears useful. The Central Government is

empowered by the said provision to make rules by

notification "to carry out the purposes of this

Chapter". It is evident that one of the purposes of

this chapter is that the injured victims in railway

accidents and untoward incidents must get

compensation. Though the word "compensation" is

not defined in the Act or in the Rules it is the

giving of an equivalent or substitute of equivalent

value. In Black's Law Dictionary , "compensation"

is shown as

"equivalent in money for a loss sustained; or

giving back an equivalent in either money

which is but the measure of value, or in

actual value otherwise conferred; or

recompense in value for some loss, injury or

service especially when it is given by

statute."

It means when you pay the compensation in terms

of money it must represent, on the date of ordering

such payment, the equivalent value.

25. In this context we may look at Section 128(1)

also. It says that the right of any person to claim

compensation before the Claims Tribunal as

indicated in Section 124 or 124-A shall not affect

the right of any such person to recover

compensation payable under any other law for the

time being in force. But there is an interdict that no

person shall be entitled to claim compensation for

more than once in respect of the same accident.

This means that the party has two alternatives, one

is to avail himself of his civil remedy to claim

compensation based on common law or any other

statutory provision, and the other is to apply before

the Claims Tribunal under Section 124 or 124-A of

the Act. As he cannot avail himself of both the

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remedies he has to choose one between the two.

The provisions in Chapter XIII of the Act are

intended to provide a speedier remedy to the

victims of accidents and untoward incidents. If he

were to choose the latter that does not mean that he

should be prepared to get a lesser amount. He is

given the assurance by the legislature that the

Central Government is saddled with the task of

prescribing fair and just compensation in the Rules

from time to time. The provisions are not intended

to give a gain to the Railway Administration but

they are meant to afford just and reasonable

compensation to the victims as a speedier measure.

If a person files a suit the amount of compensation

will depend upon what the court considers just and

reasonable on the date of determination. Hence

when he goes before the Claims Tribunal claiming

compensation the determination of the amount

should be as on the date of such determination."

17. The amounts, therefore, which were required to be paid to the

deceased by his employer by way of perks, should be included for

computation of his monthly income as that would have been added to his

monthly income by way of contribution to the family as contradistinguished

to the ones which were for his benefit. We may, however, hasten to add that

from the said amount of income, the statutory amount of tax payable

thereupon must be deducted.

18. The term 'income' in P. Ramanatha Aiyar's Advanced Law Lexicon

(3rd Ed.) has been defined as under :

"The value of any benefit or perquisite whether

convertible into money or not, obtained from a

company either by a director or a person who has

substantial interest in the company, and any sum

paid by such company in respect of any obligation,

which but for such payment would have been

payable by the director or other person aforesaid,

occurring or arising to a person within the State

from any profession, trade or calling other than

agriculture."

It has also been stated :

'INCOME' signifies 'what comes in' (per

Selborne, C., Jones v. Ogle, 42 LJ Ch.336). 'It is

as large a word as can be used' to denote a

person's receipts '(per Jessel, M.R. Re Huggins, 51

LJ Ch.938.) income is not confined to receipts

from business only and means periodical receipts

from one's work, lands, investments, etc. AIR

1921 Mad 427 (SB). Ref. 124 IC 511 : 1930 MWN

29 : 31 MLW 438 AIR 1930 Mad 626 : 58 MLJ

337."

19. If the dictionary meaning of the word 'income' is taken to its logical

conclusion, it should include those benefits, either in terms of money or

otherwise, which are taken into consideration for the purpose of payment of

income-tax or profession tax although some elements thereof may or may

not be taxable or would have been otherwise taxable but for the exemption

conferred thereupon under the statute.

20. In N. Sivammal & Ors. v. Managing Director, Pandian Roadways

Corporation & Ors. [(1985) 1 SCC 18], this Court took into consideration

the pay packet of the deceased.

21. We may notice that in T.N. State Transport Corporation Ltd. v. S.

Rajapriya & Ors. [(2005) 6 SCC 236], this Court held :

"8. The assessment of damages to compensate the

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dependants is beset with difficulties because from

the nature of things, it has to take into account

many imponderables e.g. the life expectancy of the

deceased and the dependants, the amount that the

deceased would have earned during the remainder

of his life, the amount that he would have

contributed to the dependants during that period,

the chances that the deceased may not have lived

or the dependants may not live up to the estimated

remaining period of their life expectancy, the

chances that the deceased might have got better

employment or income or might have lost his

employment or income together.

9. The manner of arriving at the damages is to

ascertain the net income of the deceased available

for the support of himself and his dependants, and

to deduct therefrom such part of his income as the

deceased was accustomed to spend upon himself,

as regards both self-maintenance and pleasure, and

to ascertain what part of his net income the

deceased was accustomed to spend for the benefit

of the dependants. Then that should be capitalised

by multiplying it by a figure representing the

proper number of years' purchase.

10. Much of the calculation necessarily remains in

the realm of hypothesis "and in that region

arithmetic is a good servant but a bad master"

since there are so often many imponderables. In

every case "it is the overall picture that matters",

and the court must try to assess as best as it can the

loss suffered."

22. Yet again in New India Assurance Co. Ltd. v. Charlie & Anr [(2005)

10 SCC 720], the same view was reiterated. However, therein although the

words 'net income' has been used but the same itself would ordinarily mean

gross income minus the statutory deductions. We must also notice that the

said decision has been followed in New India Assurance Co. Ltd. v. Kalpana

(Smt.) & Ors. [(2007) 3 SCC 538].

23. The expression 'just' must also be given its logical meaning. Whereas

it cannot be a bonanza or a source of profit but in considering as to what

would be just and equitable, all facts and circumstances must be taken into

consideration.

24. In view of our finding abovementioned, the appeal is to be allowed in

part in so far as the High Court had directed deduction of medical

reimbursement and tax elements on the entire sum which according to the

statute constitute income. But we decline to do so for two reasons. Firstly,

the accident had taken place as far back as on 1st September, 1997 and

secondly the Tribunal as also the High Court failed to take into consideration

rise in income of the deceased by way of promotion or otherwise.

27. For the aforementioned reasons, we are not inclined to interfere with

the impugned judgment. This appeal is, therefore, dismissed. In the facts

and circumstances of the case, there shall be no order as to costs.