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Tuesday, July 11, 2017

MACT - compensation parameters - Sarla Verma case & salary of IT & MNC employees

MACT [Motor Accident Claim Tribunal] OPs are gory details of claim for monetary compensation and most of them would  leave one saddened reading the details. When there is a road accident – the injured or the legal heirs (in case of death) file petition before MACT claiming compensation against the vehicle owner, driver and the insurer of the vehicle.   After due procedure, the Hon’ble Court passes award against the owner / Insurer and by virtue of Policy, Insurers effect payment of compensation.

There are Tribunals specially constituted for ensuring compensation speedily – there are also Civil Courts, and Appellate Courts.  This post is on a judgment in Court of Small Causes.  The Court of Small Causes exercise powers under the Presidency Small Causes Courts Act, 1882. Tribunals for the trial of cases under the Motor Vehicles Act and for Rent Controllers for the City of Chennai also function from Small Causes Court. The Court is presided over by the Chief Judge in the cadre of a District Judge.

Before we get into details of this, something on a judgement that is mostly relied upon in Motor accidents in arriving at the quantum of compensation.

                One Rajinder Prakash died on account of injuries sustained in a motor accident which occurred on 18.4.1988 involving a bus belonging to the Delhi Transport Corporation. At the time of the accident and untimely death, the deceased was aged 38 years, and was working as a Scientist in the Indian Council of Agricultural Research (ICAR) on a monthly salary of Rs.3402/- and other benefits. His widow, three minor children, parents and grandfather (who is no more) filed a claim for Rs.16 lakhs before the Motor Accidents Claims Tribunal, New Delhi. An officer of ICAR,  gave evidence that the age of retirement in the service of ICAR was 60 years and the salary received by the deceased at the time of his death was Rs.4004/- per month.

              Tribunal by its judgment and award dated 6.8.1993 allowed the claim in part. The Tribunal calculated the compensation by taking the monthly salary of the deceased as Rs.3402. It deducted one-third towards the personal and living expenses of the deceased, and arrived at the contribution to the family as Rs.2250 per month (or Rs.27,000/- per annum). In view of the evidence that the age of retirement was 60 years, it held that the period of service lost on account of the untimely death was 22 years. Therefore it applied the multiplier of 22 and arrived at the loss of dependency to the family as Rs.5,94,000/-. It awarded the said amount with interest at the rate of 9% per annum from the date of petition till the date of realization.

Dissatisfied with the quantum of compensation, the appellants filed an appeal. The Delhi High Court allowed the said appeal in part. The High Court was of the view that though in the claim petition the pay was mentioned as Rs.3,402 plus other benefits, the pay should be taken as Rs.4,004/- per month as per the evidence of the employer.  Having regard to the fact that the deceased had 22 years of service left at the time of death and would have earned annual increments and pay revisions during that period, it held that the salary would have at least doubled (Rs.8008/- per month) by the time he retired. It therefore determined the income of the deceased as Rs.6006/- per month, being the average of Rs.4,004/- (salary which he was getting at the time of death) and Rs.8,008/- (salary which he would have received at the time of retirement). Having regard to the large number of members in the family, the High Court was of the view that only one fourth should be deducted towards personal and living expenses of the deceased, instead of the standard one-third deduction. After such deduction, it arrived at the contribution to the family as Rs.4,504/- per month or Rs.54,048/- per annum. Having regard to the age of the deceased, the High Court chose the multiplier of 13. Thus it arrived at the loss of dependency as Rs.702,624/-.

Not being satisfied with the said increase, the appellants agitated before the Supreme Court of India. They contend that the High Court erred in holding that there was no evidence in regard to future prospects; and that though there is no error in the method adopted for calculations, the High Court ought to have taken a higher amount as the income of the deceased.

Apex Court held that 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 following well settled steps:

The Court held that generally the actual income of the deceased less income tax should be the starting point for calculating the compensation. The question is whether actual income at the time of death should be taken as the income or whether any addition should be made by taking note of future prospects. In Susamma Thomas, this Court held that the future prospects of advancement in life and career should also be sounded in terms of money to augment the multiplicand (annual contribution to the dependants); and that where the deceased had a stable job, the court can take note of the prospects of the future and it will be unreasonable to estimate the loss of dependency on the actual income of the deceased at the time of death. In that case, the salary of the deceased, aged 39 years at the time of death, was Rs.1032/- per month. Having regard to the evidence in regard to future prospects, this Court was of the view that the higher estimate of monthly income could be made at Rs.2000/- as gross income before deducting the personal living expenses.

In the instant case of Sarla Verma, the Court opined that   interest of justice would be met if one-fifth is deducted as the personal and living expenses of the deceased. After such deduction, the contribution to the family (dependants) is determined as Rs.57,658/- per annum. The multiplier will be 15 having regard to the age of the deceased at the time of death (38 years). Therefore the total loss of dependency would be Rs.57,658 x 15 = Rs.8,64,870/-.  By adding heads loss of estate and funeral expenses,  loss of consortium, the final compensation was arrived at   Rs.8,84,870/- and allowed the appeal in part.

With this background, read the details of this petition filed u/s Sec 166 of MV Act, by parents of a young girl of 22 years of age, dead in a road accident on 3.9.2014.  The deceased was on the pillion of a two wheeler which was hit by a bus. The filing date is 19.9.2014; first hearing was on 9.6.2016 and disposed by Hon’ble Judge P Velmurugan on 16.3.2017.

The issues framed were :
•        Whether rash and negligently  driven
•        Whether respondents liable to pay compensation
•        If so, the quantum

On their part, the petitioners produced the person who drove the two wheeler as eye witness and HR Manager  of an IT firm  where the deceased had been employed.  It is recorded that the evidence of the person who drove the vehicle was cogent, convincing and inspired the Tribunal into believing that the bus was driven rashly and negligently causing the accident and instant death.  The age of the deceased was taken at 23.

She was a BE from Anna University taken on employment  with CTC of Rs.301500/- ;  gross monthly salary of Rs.21555/- and bank pass book revealed  Rs.20100/- credited to her account.  The HR Manager deposed that she had joined on 15.7.2014 [less than 50 days !] and added that upon completion of 4 months training, salary would be revised to Rs.25000/-  They filed CTC letter and adduced evidence stating that  upon completion of probation salary was to be revised to Rs.335000/-

Counsel on behalf of Insurers contended that the  salary should be taken at actuals of  Rs.21555/- and not any notional increase.  The Tribunal however decided to take the salary that she would get upon completion of probation in 4 months recording that she was a meritorious student and performed well in office; that period of training was only 4 months and the salary will be increased upon completion.

The Tribunal  further made some interesting remarks  – on Indian Parliament enacting laws to protect interests of labour class to prevent exploitation, yet that continues.  After introduction of New Economic Policy, MNC, Foreign companies have come into being, employing Indians but they are not strictly implementing or following labour laws in letter and spirit.  They have not allowed employees to start or involve in Trade union movements and the employees do not have the bargaining capacity.  They are paying lesser salaries to Indian employees exploiting the competition prevalent in job market.

Tribunal  added that the cost of labour of an Indian Engineer in IT field is low in Indian market compared with developed countries and the Tribunal is inclined to take a sum of Rs.25,125/- as per her appointment order instead of the actual drawn salary.  The court adopted multiplier of 18 as per Sarla Verma, added 50% for future prospects, and as the family consisted of 2 members besides the deceased deducted 50% - calculated pecuniary loss at  25125 x 12 + 50% @ 150750 = 452250 less 50% = 226125 X 18 = 40,70,250/- 

Since the income is below 3.5 lakhs did not deduct any income tax.  Besides the pecuniary compensation allowed loss of love and affection @ 1 lakh each + funeral expenses at Rs.25000- totaling  Rs.43,05,500/-

The methodology and some of the comments in the Judgments can have a far reaching impact on compensation, if the same were to be interpreted in other cases too. Reading this, felt to be far different than the routine manner and hence thought of placing this before you all.

With regards – S. Sampathkumar

25th June 2017

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