Can Allowances Be Excluded When Computing Compensation in Motor Accident Cases?
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Synopsis
The Supreme Court has made a pivotal ruling that allowances should be included when calculating compensation in motor accident cases, doubling the compensation awarded to the deceased's family. This landmark decision underscores the importance of considering all components of a victim's salary.
Key Takeaways
- The Supreme Court mandates inclusion of allowances in compensation calculations.
- Compensation for the deceased's family was significantly increased.
- The ruling highlights the importance of all income components.
- Future compensation cases will follow this precedent.
- Claimants must demonstrate regular receipt of allowances.
New Delhi, Aug 7 (NationPress) The Supreme Court has reaffirmed that allowances that constitute a victim's salary must not be disregarded during the calculation of compensation in motor accident incidents. This decision led to an increase in the compensation awarded to the deceased's family from Rs 7.23 lakh to Rs 14.29 lakh.
A bench comprising Justices Sudhanshu Dhulia and Aravind Kumar delivered this ruling stemming from the case involving the tragic death of Lokender Kumar, who was fatally struck by a vehicle on the Sohna–Gurgaon road in 2009.
The appellants, which included the deceased's widow and two minor children, contested the ruling of the Punjab and Haryana High Court. This previous judgment had supported the removal of House Rent Allowance (HRA) and other benefits from the deceased's salary when determining the compensation amount.
In this ruling, the apex court expressed disagreement with the Motor Vehicle Claims Tribunal's method of lowering the deceased's monthly earnings from Rs 6,500 to Rs 3,665 by omitting HRA and various allowances.
Quoting the National Insurance Co. Ltd. v. Indira Srivastava case, the bench led by Justice Dhulia remarked that a deceased individual’s income encompasses not only the salary received but also additional perks that benefit the entire family.
The court noted that it has consistently maintained that when allowances are part of the deceased's salary, they should be factored into compensation calculations, provided that claimants demonstrate these allowances were regularly received and utilized for family welfare.
After examining the evidence, it was concluded that no opposing proof was presented to challenge the inclusion of allowances, which accounted for nearly 50% of the deceased’s salary. Hence, the bench asserted that the deceased's actual earnings of Rs 6,500 per month should have been considered for the compensation calculation.
Upon detailed review, the Supreme Court determined the loss of dependency at Rs 12.48 lakh, based on a monthly salary of Rs 6,500, deducting one-third for personal expenses, adding 50% for future prospects, and applying a multiplier of 16.
Additionally, the court awarded other amounts: Rs 48,400 for spousal consortium to the widow, Rs 48,400 each for parental consortium to the two children, and Rs 18,150 each for loss of estate and funeral expenses, culminating in a total of Rs 14,29,500.
Furthermore, the Supreme Court instructed the insurer to deposit this amount with a 7% annual interest from the date the claim petition was filed, excluding delays of 1,855 days in filing the appeal and 75 days in resubmission.
The apex court ordered that the compensation granted to Claimant No. 1 (the widow) should be released in her favor by the jurisdictional Tribunal. In contrast, the compensation awarded to Claimant Nos. 2 and 3 (the deceased's two children) shall be placed in fixed deposits (FDs) at any nationalized bank, with the periodic interest from these FDs allocated for the children's benefit.
Point of View
This ruling by the Supreme Court is a landmark decision that reinforces the principle of fairness in compensation calculations. It highlights the need for comprehensive assessment of all income components of a deceased victim, ensuring that families receive adequate support in their time of need.
NationPress
06/09/2025
Frequently Asked Questions
Why did the Supreme Court rule against excluding allowances?
The Supreme Court ruled that allowances are integral to a victim's salary and must be included in compensation calculations to ensure fair support for the victim's family.
What was the outcome of the case?
The Supreme Court increased the compensation awarded to the deceased’s family from Rs 7.23 lakh to Rs 14.29 lakh.
Who were the appellants in this case?
The appellants included the deceased's widow and two minor children.
How does this ruling affect future compensation cases?
This ruling sets a precedent that allowances should be considered in future motor accident compensation cases, ensuring families receive full financial support.
What should claimants demonstrate to include allowances?
Claimants must show that the allowances were regularly received and utilized for the family's benefit.
