MACT ~ Award higher than petition & % deduction towards personal expenses

Road traffic is ever increasing and no. of accidents too are on the increase – such accidents leave behind an indelible trail on the victims – thus MCOPs before the Motor Accident Claims Tribunals are gory details of blood split on the road and the penury of the victims.  Either the person injured in the road accident involving a motor vehicle in a public place or the family members of the deceased – follow a simple procedure in filing a Petition before the MACT claiming compensation. Though human life is priceless and cannot be valued, there has to be a methodology (that has evolved over the years) in arriving at a compensation that is fair and just. 

Motor Accident Claims Tribunals are constituted for expeditious disposal of petitions arising out of accidents caused by motor vehicles, yet there are cases of inordinate delay in their disposal due to multifarious factors.  The Motor Vehicles Act 1988 deals with the concept of “just compensation” and the same has to be determined on the foundation of fairness, reasonableness and equitability on acceptable legal standard.  When there is a death of a person on road out of accident involving a motor vehicle, the  measure of damage is the pecuniary loss suffered and is likely to be suffered by each dependant as a result of the death.

The assessment of damages to compensate the 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 altogether.

The accepted methodology in arriving at the compensation 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 capitalized by multiplying it by a figure representing the proper number of year's purchase.  

In the oft quoted judgment in Sarala Verma&others  Vs Delhi Transport Corporation decided in Apr 2009 by the Apex Court, it was beautifully summarised that in computing, basically only three facts need to be established by the claimants for assessing compensation in the case of death : (a) age of the deceased; (b) income of the deceased; and the (c) the number of dependents. The issues to be determined by the Tribunal to arrive at the loss of dependency are (i) additions/deductions to be made for arriving at the income; (ii) the deduction to be made towards the personal living expenses of the deceased; and (iii) the multiplier to be applied with reference of the age of the deceased. If these determinants are standardized, there will be uniformity and consistency in the decisions. There will lesser need for detailed evidence. It will also be easier for the insurance companies to settle accident claims without delay. To have uniformity and consistency, Tribunals should determine compensation in cases of death, by the following well settled steps:

The Honble Court held that the personal and living expenses of the deceased should be deducted from the income, to arrive at the contribution to the dependents is an accepted one. No claimant would admit that the deceased was a spendthrift, even if he was one. It is also very difficult for the respondents in a claim petition to produce evidence to show that the deceased was spending a considerable part of the income on himself or that he was contributing only a small part of the income on his family. Therefore, it became necessary to standardize the deductions to be made under the head of personal and living expenses of the deceased. This lead to the practice of deducting towards personal and living expenses of the deceased:-

-          1/3 rd of the income if the deceased was married person

-          1/2  (50%) of income if deceased was a bachelor

Though in some cases the deduction to be made towards personal and living expenses is calculated on the basis of units indicated in Trilok Chandra, the general practice is to apply standardized deductions. Having considered several subsequent decisions of this court, we are (Sarala Verma judgment) of the view that where the deceased was married, the deduction towards personal and living expenses of the deceased, should be:

o   one-third (1/3) where the number of dependent family members is 2 to 3

o   one-fourth (1/4) where the number of dependant family members is 4 to 6

o   one-fifth (1/5) where the number of dependant family members exceed six.

Where the deceased was a bachelor and the claimants are the parents, the deduction follows a different principle. In regard to bachelors, normally, 50% is deducted as personal and living expenses, because it is assumed that a bachelor would tend to spend more on himself. Even otherwise, there is also the possibility of his getting married in a short time, in which event the contribution to the parent(s) and siblings is likely to be cut drastically. The other landmark judgment : National Insurance Vs Pranay Sethi largely accepted this view (in respect of personal deductions)

This was an appeal filed seeking further enhancement of compensation from Rs.21.53 lakhs awarded by the High Court of Kerala at Ernakulam. By the impugned judgment, the High Court enhanced the compensation from 11.83 to 21.53 lakhs.  The cause of action arose in a road accident – the victim left behind wife of 22 years and two children of 3 years and 9 months.  There was an aged father at about 90 years of age too.  Petition had been filed for 25 lakhs.  The Tribunal assessed monthly income at 12000 – deducted ½ towards personal expenses and awarded 11.83 lakhs. 

The respondent – Insurers filed an appeal and the claimants filed  cross objections seeking enhancement in compensation. The High Court of Kerala awarded an additional sum of 9.70 lakhs. While doing so, the High Court took into consideration the salary certificate of a Food centre in Doha disclosing a salary of 2500 Qatar Riyals,  equivalent to Rs.30,000 p.m.  For authentication the salary certificate was  attested/counter signed by the Assistant Consulate Officer, Embassy of India, Doha.  The Supreme Court held that in their opinion, the assessment of the income of the deceased by the High Court was just and proper.

The Supreme Court found that the overall compensation awarded was just and reasonable of all heads  (except under the head of loss of dependency); further stated that in our considered opinion, the High Court has faulted in deducting 2/3rd of the total income towards the personal expenses of the deceased, while quantifying the compensation. Taking into consideration the high cost of living at Doha, as observed by the High Court as wellas the fact that the deceased was having his wife, two minor children and aged father as dependants and as there is no other earning member in the family of the deceased, in the facts and circumstances of the case, a deduction of 40% of the salary for the personal expenses would be appropriate for the purpose of quantifying compensation.

Taking into consideration such factors including the factor of uncertainties in the job in that Country as well as uncertainty in staying back in the said country for a longer period and in the absence of any material to show as to for how many years the deceased was having contract to serve, the claimants are entitled to a total compensation of Rs.28 lakhs with interest at the rate of 8% per annum from the date of filing the claim petition till its realization.

Though the claimants had claimed a total compensation of 25 lakhs only before the Tribunal, the Apex Court altering 66% deduction, reduced it to 60% (specific to this case) and awarded a compensation @ 28 lakhs (higher than claimed) stating that there is  no restriction that the Court cannot award compensation exceeding the claimed amount, since the function of the Tribunal or Court under Section 168 of the Motor Vehicles Act, 1988 is to award “just compensation”. The Motor Vehicles Act is a beneficial and welfare legislation. A “just compensation” is one which is reasonable on the basis of evidence produced on record. It cannot be said to have become time-barred. Further, there is no need for a new cause of action to claim an enhanced amount.

The Respondents Insurers were directed to pay  within a period of two months from the date of receipt of a copy of this order.  Thus was the case disposed.

As usual, there is so much learning for everyone – more specifically for the Insurer  that  i) award can be more than the petition value ii) deduction need not be ¼; ½ ;1/5; or  2/3 .. .. it can be 40% as well !!

With regards – S. Sampathkumar

11^th Dec 2018.

PS : Citation : Ramla and others ..Vs National Insurance Company Limited : Apex Court judgment : Hon’ble Mohan M Shantanagoudar  - Civil appeal NO.11495  of 2018