Motor Accident–Compensation on account of death–In law the presumption is that the employer at the time of payment of salary deducts income tax on the estimated income of the deceased employee from the salary and in the absence of any evidence to the contrary the salary as shown in the last pay certificate should be accepted for calculating the compensation payable to the dependent(s).

On 14th September, 1996, one Mr. Sajjan Singh Shekhawat, Assistant Engineer with the Public Works Department, was sitting on his scooter which was parked on the side of the road and was waiting for one Junior Engineer, N. Hari Babu, and another whom he had called for discussion. At that time, a driver of a Jeep No. RJ10C0833 came driving from the railway station side with high speed, recklessly and negligently and hit the scooter. Sajjan Singh along with his scooter came under the jeep and was dragged with the vehicle. Due to this accident, fatal injuries were caused to him and on reaching the hospital he expired. The scooter was also damaged completely. The wife of the deceased was aged about 24 years; the daughter was aged about 2 years and the mother was aged about 55 years at the time of death of the deceased. They jointly filed an application to the Tribunal alleging that negligent and rash driving by the driver of the jeep caused the death of Sajjan Singh and claimed compensation of Rs. 80,40,160.

The Tribunal determined the compensation to be granted in favour of the appellants at Rs. 14,93,700 jointly.

Though the High Court noticed certain mistakes in determination of the compensation it upheld the same. In determining the compensation, a notional deduction of income tax was made by the High Court from the salary of the deceased apart from the deduction of annual pension and came to the conclusion that the award passed by the Tribunal was just and proper.

Before the Supreme Court, the grievance of the appellants was as follows:

(i) No amount can be deducted towards provident fund, pension and insurance amount from the actual salary of the victim for calculating compensation.

(ii) In the absence of any evidence, the court suo motu cannot deduct any amount towards income tax from the actual salary of the victim.

(iii) On the facts of the present case, the Tribunal and the High Court should have doubled the salary by allowing 100% increase towards the future prospects, and

(iv) The Tribunal and the High Court failed to ensure payment of just and fair compensation.

The first issue therefore was “whether provident fund, pension and insurance receivable by the claimants come within the periphery of the Motor Vehicles Act to be termed as ‘pecuniary advantages’ liable for deduction”. The Supreme Court observed that the aforesaid issue fell for consideration before it in Mrs. Helen C. Rebello vs. Maharashtra State Road Transport Corporation reported [1999] 1 SCC 90. In the said case, it was held that provident fund, pension, insurance and similarly any cash, bank balance, shares, fixed deposits, etc., are all “pecuniary advantages” receivable by the heirs on account of one’s death but all these have no correlation with the amount receivable under a statue occasioned only on account of accidental death. Such an amount will not come within the periphery of the Motor Vehicles Act to be termed as “pecuniary advantage” liable for deduction.

The second issue was “whether the salary receivable by the claimant on compassionate appointment comes within the periphery of the Motor Vehicles Act to be termed as ‘pecuniary advantage’ liable for deduction”. The Supreme Court held that “Compassionate appointment” can be one of the conditions of service of an employee, if a scheme to that effect is framed by the employer. In case the employee dies in harness, i.e., while in service leaving behind the dependents, one of the dependents may request for compassionate appointment to maintain the family of the deceased employee died in harness. This cannot be stated to be an advantage receivable by the heirs on account of one’s death and has no correlation with the amount receivable under a statute occasioned on account of accidental death. Compassionate appointment may have nexus with the death of an employee while in service but it is not necessary that it should have a correlation with the accidental death. An employee dies in harness even in normal course, due to illness and to maintain the family of the deceased one of the dependents may be entitled for compassionate appointment but that cannot be termed as “pecuniary advantage” that comes under the periphery of the Motor Vehicles Act and any amount received on such appointment is not liable for deduction for determination of compensation under the Motor Vehicles Act.

The third issue was “whether the income tax is liable to be deducted for determination of compensation under the Motor Vehicles Act”. The Supreme Court observed that in the case of Sarla Verma vs. Delhi Transport Corporation (2009) 6 SCC 121, it was held that “generally the actual income of the deceased less income tax should be the starting point for calculating the compensation”. It was further observed that “where the annual income is in taxable range, the words “actual salary” should be read as “actual salary less tax”.

The Supreme Court noticed that in the present case, none of the respondents brought to the notice of the court that the income tax payable by the deceased Sajjan Singh was not deducted at source by the employer State Government. No such statement was made by Ram Avtar Parikh, an employee of the Public Works Department of the State Government who placed on record the last pay certificate and the service book of the deceased. The Tribunal or the High Court on perusal of the last pay certificate, did not notice that the income tax on the estimated income of the employee was not deducted from the salary of the employee during the said month or financial year. In the absence of such evidence, it was to be presumed that the salary paid to the deceased Sajjan Singh as per the last pay certificate was paid in accordance with law, i.e., by deducting the income tax on the estimated income of the deceased Sajjan Singh for that month or the financial year. The appellants had specifically stated that assessment year applicable in the instant case was 1997-98 and not 1996-97 as held by the High Court. They had also taken specific plea that for the assessment year 1997-98 the rate of tax on income more than Rs.40,000 and up to Rs.60,000 was 15% and not 20% as held by the High Court. The aforesaid fact was not disputed by the respondents. In view of the finding as recorded above and the provisions of the Income-tax Act, 1961, as discussed, the Supreme Court held that the High Court was wrong in deducting 20% from the salary of the deceased towards income tax for calculating the compensation. As per law, the presumption would be that the employer State Government at the time of payment of salary deducted income-tax on the estimated income of the deceased employee from the salary and in the absence of any evidence, the Supreme Court held that the salary as shown in the last pay certificate at Rs. 8,920 should be accepted which if rounded of came to Rs. 9,000 for calculating the compensation payable to the dependent(s).

The fourth issue was “whether the compensation awarded to the appellants was just and proper”. According to the Supreme Court for determination of this issue, it was required to determine the percentage of increase in income to be made towards prospects of advancement in future career and revision of pay.

According to the Supreme Court, admittedly, the date of birth of the deceased Sajjan Singh being 1st February, 1968; the submission that he would have continued in service upto 1st February, 2026, if 58 years is the age of retirement or 1st February, 2028, if 60 years is the age of retirement required to be accepted. The Supreme Court observed that he was only 28 years 7½ months old at the time of death. In normal course, he would have served the State Government minimum for about 30 years. Even if one does not take into consideration the future prospect of promotion which the deceased was otherwise entitled and the actual pay revisions taken effect from 1st January, 1996, and 1st January, 2006, it cannot be denied that the pay of the deceased would have doubled if he would have continued in the services of the State till the date of retirement. Hence, this was a fit case in which 100% increase in the future income of the deceased should have been allowed by the Tribunal and the High Court which they failed to do. The Supreme Court having regard to the facts and evidence on record, estimated the monthly income of the deceased Sajjan Singh at Rs. 9,000 x 2 = Rs. 18,000 per month. From this his personal living expenses, which should be one-third, there being three dependents, were deducted. Thereby, the ‘actual salary’ came to Rs. (18,000-6,000=12,000) per month or Rs. 12,000 x 12 = 1,44,000 per annum. As the deceased was 28½ years old at the time of death the multiplier of 17 was applied, which was appropriate to the age of the deceased. The normal compensation would then work out to be Rs. 1,44,000 x 17 = Rs. 24,48,000 to which the Supreme Court added the usual award for loss of consortium and loss of the estate by providing a conventional sum of R. 1,00,000; loss of love and affection for the daughter Rs. 2,00,000; loss of love and affection for the widow and the mother at Rs. 1,00,000 each, i.e., Rs. 2,00,000 and funeral expenses of Rs. 25,000.

Thus, according to the Supreme Court, in all a sum of Rs. 29,73,000 was a fair, just and reasonable award in the circumstances of this case. The rate of interest of 12% was allowed from the date of the petition filed before the Tribunal till payment is made.