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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

the High Court of Orissa at Cuttack whereby compensation of

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Rs.40,90,000/­ awarded by the IInd Addl.  District Judge­

cum­Vth  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

judgment of this Court in  Sarla Verma v. DTC1, applied a

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

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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

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amount should be deducted in terms of the judgment of this

Court  in  Reliance General Insurance Co. Ltd. v. Shashi

Sharma2.  On the other hand, the claimants/appellants

submit that  no deduction should be  made in view of the

judgments rendered by this Court in  the case of  Helen C.

Rebello v. Maharashtra SRTC3  and  United India

Insurance Co. Ltd. v. Patricia Jean Mahajan4.   The

appellants further contend that, in fact, as per the judgment

rendered in National Insurance Co. Ltd. v. Pranay Sethi5,

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

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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 not take benefit of

the munificence or gratuity of others.   

7. In Helen C. Rebello case (supra), the issue was whether

the amounts received by the deceased   by way of provident

fund, pension, life insurance policies and similarly, in cash,

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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

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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  Patricia Jean Mahajan  case (supra), the deceased

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

C. Rebello case (supra) this Court held as follows:

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“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

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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

Vimal  Kanwar   v.  Kishore  Dan6.   This Court, following

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

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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

Mahajan case (supra), and came to the conclusion that the

decision in  Vimal Kanwar  case (supra) did not take a view

contrary to Helen C. Rebello or Patricia Jean Mahajan case

(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.”

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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  Sarla  Verma  (supra)  has  been

reiterated by a Constitution Bench of this Court in  Pranay

Sethi  (supra) in so far as choice of multiplier is concerned.  

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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.

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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

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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.

15. As held by the House of Lords in Perry  v.  Cleaver7 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

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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

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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

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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

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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.  

……………………………J. (Madan B. Lokur)

……………………………J. (S. Abdul Nazeer)

……………………………J. (Deepak Gupta)

New Delhi October 12, 2018