Case: SEBASTIANI LAKRA Vs. NATIONAL INSURANCE COMPANY LTD

3. The MACT found that the revised basic pay of the deceased was Rs.51,328/- and he was entitled to DA of Rs.7,237/- at the time of his death i.e. he was getting a total salary of Rs.58,565/-. However, the MACT, for the purposes of compensation, assessed the monthly income of deceased at Rs.50,000/- per month and deducted 1/3 for his personal expenses leaving a datum figure of Rs.33,333/- per month. Since the deceased was 52 years old, the MACT following the judgment of this Court in Sarla Verma v. DTC, applied a multiplier of 11 and assessed compensation at Rs.40,00,000/- for loss of income, Rs.25,000/- was added for funeral expenses, Rs.5,000/- for the loss of estate, Rs.50,000/- towards loss of consortium and Rs.10,000/- for(2009) 6 SCC 121 loss of affection i.e. total compensation of Rs.40,90,000/- was awarded to the claimants. The claimants and the insurance company filed appeals challenging the quantum of compensation. The main ground raised by the insurance company was that the claimants were being paid a sum of Rs.50,082/- per month under the Employees Family Benefit Scheme (for short the EFB Scheme). The High Court, without giving any reasons, has reduced the compensation by almost Rs.5,00,000/-, to Rs.36,00,000/-. Reasons are the heart and soul of any judicial pronouncement. No judicial order is complete without reasons and it is expected that every court which passes an order, should give reasons for the same.

Court's reasoning:
12. The law is well settled that deductions cannot be allowed from the amount of compensation either on account of insurance, or on account of pensionary benefits or gratuity or grant of employment to a kin of the deceased. The main reason is that all these amounts are earned by the deceased on account of contractual relations entered into by him with others. It cannot be said that these amounts accrued to the dependents or the legal heirs of the deceased on account of his death in a motor vehicle accident. The claimants/dependents are entitled to just compensation under the Motor Vehicles Act as a result of the death of the deceased in a motor vehicle accident. Therefore, the natural corollary is that the advantage which accrues to the estate of the deceased or to his dependents as a result of some contract or act which the deceased performed in his life time cannot be said to be the outcome or result of the death of the deceased even though these amounts may go into the hands of the dependents only after his death.13. As far as any amount paid under any insurance policy is concerned whatever is added to the estate of the deceased or his dependents is not because of the death of the deceased but because of the contract entered into between the deceased and the insurance company from where he took out the policy. The deceased paid premium on such life insurance and this amount would have accrued to the estate of the deceased either on maturity of the policy or on his death, whatever be the manner of his death. These amounts are paid because the deceased has wisely invested his savings. Similar would be the position in case of other investments like bank deposits, share, debentures etc.. The tort-feasor cannot take advantage of the foresight and wise financial investments made by the deceased.14. As far as the amounts of pension and gratuity are concerned, these are paid on account of the service rendered by the deceased to his employer. It is now an established principle of service jurisprudence that pension and gratuity are the property of the deceased. They are more in the nature of deferred wages. The deceased employee works throughout his life expecting that on his retirement he will get substantial amount as pension and gratuity. These amounts are also payable on death, whatever be the cause of death. Therefore, applying the same principles, the said amount cannot be deducted.15. As held by the House of Lords in Perry v. Cleaverthe insurance amount is the fruit of premium paid in the past, pension is the fruit of services already rendered and the wrong doer should not be given benefit of the same by deducting it from the damages assessed.16. Deduction can be ordered only where the tort-feasor satisfies the court that the amount has accrued to theclaimants only on account of death of the deceased in a motor vehicle accident.18. The EFB Scheme is totally different from the rules which were under consideration of this Court in Shashi Sharma case (supra). Under this Scheme, the nominee or legal heir(s) of the deceased employee have to deposit the entire amount of gratuity and all other benefits payable to them on the death of the employee.19. In the present case, it stands proved that the claimants have deposited a sum of Rs.27,43,991/- received by them on the death of the deceased with the employer and are now getting about Rs.50,082/- per month. This amount of Rs.50,082/- is to be paid to the legal heirs under the EFB Scheme only till date of retirement of the deceased. Even if an interest @ of 12% per annum is calculated on the amount of Rs.27,43,991/-, that would amount to Rs.3,30,000/- per year or Rs.27,500/- per month. The appellants-claimants are getting about Rs.50,000/- per month i.e. about Rs.22,500/- per month more, but this is only to be paid for a period of about 7 years till 30.04.2021. This payment will cease thereafter.20. The aforesaid payment is totally different to the payment made by the employer in Shashi Sharma case (supra) which was statutory in nature. Therefore, we hold that this amount cannot be deducted.21. However, since the claimants are getting quite an advantage, we feel that the MACT was right in not taking into consideration the future prospects in the peculiar facts and circumstances of the case. Therefore, though we are not inclined to deduct the amount payable to the claimants, we feel that in the peculiar facts and circumstances of the case, they are not entitled to claim another amount @ of 15% by way of future prospects. The payment of the amount under the EFB Scheme more than offsets the loss of future prospects. This, in our opinion, would be just compensation.