Perquisites & Allowances Must Be Added To Basic Salary Of Deceased Victim Before Applying Rise By Future Prospects: SC On Motor Accident Compensation Claims
The Supreme Court observed that perquisites and allowances must be added to the basic salary of the deceased victim before applying the rise by future prospects while determining the dependency factor in motor accident compensation claims.
The Court reversed the judgment of the Division Bench of the Karnataka High Court holding that it erred in omitting to add the components of house rent allowance, flexible benefit plan and Company contribution to provident fund to the basic salary of the deceased while applying the principle of rise in income by future prospects.
A Bench of Justice Hima Kohli and Justice Sandeep Mehta observed, “Therefore, components of house rent allowance, flexible benefit plan and company contribution to provident fund have to be included in the salary of the deceased while applying the component of rise in income by future prospects to determine the dependency factor. The Accident Claims Tribunal was justified in factoring these components into the salary of the deceased, before applying 50% rise by future prospects due to future prospects, while calculating the total compensation payable to the appellant.”
Advocate C.M. Angadi appeared for the appellant, while AOR Arvind Gupta represented the respondent.
The appellant, the mother of the deceased, was initially awarded compensation by the Motor Accident Claims Tribunal (MACT) which included various components such as loss of dependency, loss of love and affection, and funeral expenses, with an interest rate of 6% per annum.
However, the High Court partially allowed the appeal filed by Oriental Insurance Co. Ltd (Insurance Company) and reduced the compensation. The High Court's assessment was based on the annual salary review for the year 2013, excluding allowances like house rent, flexible benefit plan, and company contribution to the provident fund from the deceased's gross income when calculating future prospects.
The Supreme Court called the High Court's approach erroneous, stating that excluding these allowances was unjustified. The Court stated that such allowances were generally fixed on a pro-rata basis with reference to the basic salary and continue to rise generally proportionate to the length of the service of the employee.
The Court held that these allowances must be added to the gross salary before applying the future prospects. "Consequently, we have no hesitation in holding that these allowances cannot be ignored and have to be added to the salary when assessing the rise in income due to future prospects of a person employed in private service..The perquisites/allowances have to be added to the basic salary of the deceased before applying the rise by future prospects.” the Court remarked.
The Bench clarified that the High Court was justified in deducting the Income Tax from the gross salary of the deceased for calculating his gross income, which was overlooked by the MACT while quantifying the award.
Consequently, the Court held, “Clearly, the High Court erred in accepting the appeal filed by the respondent No. 1- Insurance Company and reducing the compensation payable to the appellant.”
Accordingly, the Supreme Court partly allowed the appeal.
Cause Title: Meenakshi v. The Oriental Insurance Co. Ltd (Neutral Citation: 2024 INSC 573)
Appearance:
Appellant: Advocate C.M.Angadi; AOR Rameshwar Prasad Goyal
Respondent: AOR Arvind Gupta; Advocates Anil Kumar Sahu, Mohit Bidhuri, Suman Sharma, Kanav Bhardwaj and Sunil Kumar Roy