State Legal Services Authority's Guidelines Not Binding In Motor Accident Compensation Cases With Proof Of Earnings: Apex Court

The Supreme Court has ruled that guidelines issued by State Legal Services Authorities for determining disability compensation in motor accident claims should not be applied in cases where proof of earning has been presented.

The Bench of Justice J.K. Maheshwari and Justice Rajesh Bindal made the observation while hearing an appeal filed by a motor accident victim who suffered 63% permanent disabilities, including partial paralysis and difficulty in moving, speaking, and performing basic tasks.

The Court held that these guidelines are primarily intended for situations where no evidence of income is available and for settling disputes in Lok Adalats. "In view of the foregoing, it is to conclude that henceforth, the guidelines, if any, issued by any of the State Legal Services Authority of the High Court would apply as guiding factor in the cases where the proof of income is not available and ordinarily to decide the cases in Lok Adalat," the Court said. 

"Such guidelines are not binding either on the High Court or on MACT to determine just and fair compensation. The Courts are at liberty to decide the amount of compensation while appreciating the evidence so brought on record and what is just and reasonable in the facts. In absence of such evidence, the guidelines of the legal services authority may be relied upon but only for guidance," the Bench further said. 

The appellant’s compensation, originally awarded by the Motor Accident Claims Tribunal (MACT) at Rs.15,51,000, was reduced by the Rajasthan High Court to Rs. 7,35,000/-, relying on the guidelines issued by the Rajasthan State Legal Services Authority. The MACT had based its award on the appellant's annual income of Rs. 1,00,000/- as shown in the Income Tax returns, but the High Court, in applying the Legal Services Authority guidelines—particularly clause 3(d)—reduced the compensation.

Aggrieved by the reduction, the appellant approached the Court, arguing that the High Court wrongly applied the guidelines despite clear proof of income.

The Bench agreed with the appellant, stating that the High Court made an error in relying on the State Legal Services Authority guidelines when evidence of the appellant’s earnings had been provided. The bench emphasized that the guidelines should only be used in cases where no proof of income is available, and even then, they are not binding on the High Court or the MACT.

"Having considered the submissions and looking at the findings recorded by the High Court, it is required to be observed that the guidelines issued from time to time by the State Legal Services Authority were to ordinarily apply where the proof of earning is not available and to settle such disputes in Lok Adalat. It is also required to be observed that such guidelines ought not to be made applicable for determining just and reasonable compensation in the cases where the proof of earning has been brought on record," the Court said.

The Bench further noted that while the guidelines issued by State Legal Services Authorities can serve as a reference when no evidence of earnings exists, they are not binding on higher courts like the High Court or the Supreme Court. In such cases, courts are free to decide just and reasonable compensation based on the available evidence.

The Court allowed the appeal, setting aside the High Court's decision to reduce the compensation and restoring the original amount awarded by the MACT. "...we set aside the award of the High Court to reduce the amount of compensation and restore the award of MACT. Accordingly, this appeal is allowed and the appellant is held entitled to the compensation as directed by the MACT. Pending application(s), if any, shall stand disposed of," the Court ordered. 

Cause Title: Hans Raj v. Oriental Insurance Company Limited & Anr. 

Appearance:-

Petitioner: Advocates H. D. Thanvi, Nikhil Kumar Singh, Achal Singh Bule, Rishi Matoliya (AOR)

Respondent: Advocates T. Mahipal (AOR), Rohit Kumar Sinha, Sanjay Kumar Singh, Abhishek Gautam (AOR), Suruchi Mittal, Karan Kapur, Neeraj Goswami, Md. Imran

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