National Insurance Company Limited v. Pushpa And Others

Order

1. Delay condoned. Issue notice returnable in four weeks.

2. The learned counsel for the petitioner has prayed for grant of stay. Regard being had to the totality of circumstances, it is directed that the petitioner insurer shall deposit a sum of Rs 20,00,000 (Rupees twenty lakhs only) before the Tribunal within four weeks and the Tribunal shall distribute it proportionately as per the directions given in its award.

3. Respondents 1 to 7, the legal heirs of deceased Kamalesh Mewada, filed a claim petition, MACP No. 194 of 2010 before MACT, Kekri, Ajmer, Rajasthan, under Section 166 of the Motor Vehicles Act, 1988 (for brevity “the Act”) for grant of compensation amounting to Rs 1,55,55,000 along with interest at the rate of 12% per annum from the date of filing of the claim petition. On the basis of evidence brought on record the Tribunal awarded a sum of Rs 27,35,744 with 6% interest payable jointly and severally by the owner, driver and the insurer.

4. As is evincible from the award passed by the Tribunal, the aforesaid amount was determined as compensation on the basis that the deceased was aged about thirty years and his income was Rs 13,300 per month. The Tribunal added 30% towards future prospects by placing reliance on the decision in Santosh Devi v. National Insurance Co. Ltd. (2012) 6 SCC 421 The insurer was directed to deposit the amount within thirty days before the Tribunal.

5. Being dissatisfied with the aforesaid award, the Insurance Company preferred SB Civil Misc. Appeal No. 2386 of 2013. One of the contentions that raised before the High Court was that the Tribunal should not have added thirty per cent in income towards future prospects of the deceased as he was not a salaried person but engaged in business. The High Court found Civil Misc. Appeal No. 2386 of 2013, 2013 SCC OnLine Raj 3771 that there is some contradiction in the decision in Rajesh v. Rajbir Singh (2013) 9 SCC 54 and Reshma Kumari v. Madan Mohan (2013) 9 SCC 65 and thereafter, observed as follows:

“The learned counsel for the appellant has also relied on Union of India v. S.K Kapoor (2011) 4 SCC 589 wherein the Hon'ble Supreme Court has expressed its opinion that in case a latter Bench of equal strength does not agree with the decision of a former Bench, the proper course would be for the subsequent Bench to refer the case to a larger Bench. There can be no issue about the principle laid down by the Hon'ble Supreme Court on this point.

However, simultaneously the rule of precedent are also a life to the fact that, at times, the proper course may not be followed by the court of laws. In order to meet out such an eventuality, the rule is that the latter judgment should be followed in case the former and the latter Benches are of equal strength.

Thus, this Court has no option but to follow the judgment and the opinion expressed by the Hon'ble Supreme Court in Rajesh (2013) 9 SCC 54.”

Being of this view, the High Court concurred with the opinion expressed by the Tribunal pertaining to grant of benefit in respect of addition of income for future prospects. Needless to say, the other contentions raised by the insurer were rejected.

6. The learned counsel for the petitioner submitted that as there is a manifest contradiction in the two decisions rendered by the Benches of equal strength, the controversy should be resolved by referring it to a larger Bench.

7. To appreciate the said submission, we think it appropriate to refer to the decisions in chronology and what has been laid down therein. In Sarla Verma v. DTC (2009) 6 SCC 121, this Court, while dealing with the issue of addition of income for future prospects, took note of the decisions in Kerala SRTC v. Susamma Thomas (1994) 2 SCC 176, Sarla Dixit v. Balwant Yadav (1996) 3 SCC 179 and Abati Bezbaruah v. Geological Survey of India (2003) 3 SCC 148 and in para 24 opined thus: (Sarla Verma case (2009) 6 SCC 121)

“24. In Susamma Thomas (1994) 2 SCC 176, this Court increased the income by nearly 100%, in Sarla Dixit (1996) 3 SCC 179 the income was increased only by 50% and in Abati Bezbaruah (2003) 3 SCC 148 the income was increased by a mere 7%. In view of the imponderables and uncertainties, we are in favour of adopting as a rule of thumb, an addition of 50% of actual salary to the actual salary income of the deceased towards future prospects, where the deceased had a permanent job and was below 40 years. (Where the annual income is in the taxable range, the words ‘actual salary’ should be read as ‘actual salary less tax’.) The addition should be only 30% if the age of the deceased was 40 to 50 years. There should be no addition, where the age of the deceased is more than 50 years. Though the evidence may indicate a different percentage of increase, it is necessary to standardise the addition to avoid different yardsticks being applied or different methods of calculation being adopted. Where the deceased was self-employed or was on a fixed salary (without provision for annual increments, etc.), the courts will usually take only the actual income at the time of death. A departure therefrom should be made only in rare and exceptional cases involving special circumstances.”

8. In Santosh Devi (2012) 6 SCC 421, the Court, while dealing with the contention of addition of income for the future prospects to a case where the deceased was neither a government servant nor was a permanent employee of a corporation or a company which may have ensured increase in his income from time to time, referred to para 24 of the judgment in Sarla Verma (2009) 6 SCC 121 and stated thus: (Santosh Devi case (2012) 6 SCC 421)

“14. We find it extremely difficult to fathom any rationale for the observation made in para 24 of the judgment in Sarla Verma case (2009) 6 SCC 121 that where the deceased was self-employed or was on a fixed salary without provision for annual increment, etc., the courts will usually take only the actual income at the time of death and a departure from this rule should be made only in rare and exceptional cases involving special circumstances. In our view, it will be naïve to say that the wages or total emoluments/income of a person who is self-employed or who is employed on a fixed salary without provision for annual increment, etc., would remain the same throughout his life.

15. The rise in the cost of living affects everyone across the board. It does not make any distinction between rich and poor. As a matter of fact, the effect of rise in prices which directly impacts the cost of living is minimal on the rich and maximum on those who are self-employed or who get fixed income/emoluments. They are the worst affected people. Therefore, they put in extra efforts to generate additional income necessary for sustaining their families.

16. The salaries of those employed under the Central and State Governments and their agencies/instrumentalities have been revised from time to time to provide a cushion against the rising prices and provisions have been made for providing security to the families of the deceased employees. The salaries of those employed in private sectors have also increased manifold. Till about two decades ago, nobody could have imagined that salary of Class IV employee of the Government would be in five figures and total emoluments of those in higher echelons of service will cross the figure of rupees one lakh.

17. Although the wages/income of those employed in unorganised sectors has not registered a corresponding increase and has not kept pace with the increase in the salaries of the government employees and those employed in private sectors, but it cannot be denied that there has been incremental enhancement in the income of those who are self-employed and even those engaged on daily basis, monthly basis or even seasonal basis. We can take judicial notice of the fact that with a view to meet the challenges posed by high cost of living, the persons falling in the latter category periodically increase the cost of their labour. In this context, it may be useful to give an example of a tailor who earns his livelihood by stitching clothes. If the cost of living increases and the prices of essentials go up, it is but natural for him to increase the cost of his labour. So will be the cases of ordinary skilled and unskilled labour, like, barber, blacksmith, cobbler, mason, etc.

18. Therefore, we do not think that while making the observations in the last three lines of para 24 of Sarla Verma (2009) 6 SCC 121 judgment, the Court had intended to lay down an absolute rule that there will be no addition in the income of a person who is self-employed or who is paid fixed wages. Rather, it would be reasonable to say that a person who is self-employed or is engaged on fixed wages will also get 30% increase in his total income over a period of time and if he/she becomes the victim of an accident then the same formula deserves to be applied for calculating the amount of compensation.”

9. In Rajesh (2013) 9 SCC 54, a three-Judge Bench, delivered the judgment on 12-4-2013, opining thus:

“8. Since, the Court in Santosh Devi case (2012) 6 SCC 421 actually intended to follow the principle in the case of salaried persons as laid down in Sarla Verma case (2009) 6 SCC 121 and to make it applicable also to the self-employed and persons on fixed wages, it is clarified that the increase in the case of those groups is not 30% always; it will also have a reference to the age. In other words, in the case of self-employed or persons with fixed wages, in case, the deceased victim was below 40 years, there must be an addition of 50% to the actual income of the deceased while computing future prospects. Needless to say that the actual income should be income after paying the tax, if any. Addition should be 30% in case the deceased was in the age group of 40 to 50 years.

9. In Sarla Verma case (2009) 6 SCC 121, it has been stated that in the case of those above 50 years, there shall be no addition. Having regard to the fact that in the case of those self-employed or on fixed wages, where there is normally no age of superannuation, we are of the view that it will only be just and equitable to provide an addition of 15% in the case where the victim is between the age group of 50 to 60 years so as to make the compensation just, equitable, fair and reasonable. There shall normally be no addition thereafter.”

10. In Reshma Kumari (2013) 9 SCC 65 which was decided on 2-4-2013, the three-Judge Bench was dealing with the reference made by the two-Judge Bench (2009) 13 SCC 422, and one of the questions that was referred to it reads as follows: (Reshma Kumari case (2013) 9 SCC 65)

“1.2. Whether for determination of the multiplicand, the 1988 Act provides for any criterion, particularly as regards determination of future prospects?”

While answering the same, the Court referred to para 24 of Sarla Verma case (2009) 6 SCC 121 and held thus: (Reshma Kumari case (2013) 9 SCC 65 & 91, paras 39 & 43)

“39. The standardisation of addition to income for future prospects shall help in achieving certainty in arriving at appropriate compensation. We approve the method that an addition of 50% of actual salary be made to the actual salary income of the deceased towards future prospects where the deceased had a permanent job and was below 40 years and the addition should be only 30% if the age of the deceased was 40 to 50 years and no addition should be made where the age of the deceased is more than 50 years. Where the annual income is in the taxable range, the actual salary shall mean actual salary less tax. In the cases where the deceased was self-employed or was on a fixed salary without provision for annual increments, the actual income at the time of death without any addition to income for future prospects will be appropriate. A departure from the above principle can only be justified in extraordinary circumstances and very exceptional cases.

43.5. While making addition to income for future prospects, the Tribunals shall follow para 24 of the judgment in Sarla Verma (2009) 6 SCC 121.”

11. Be it noted, though the decision in Reshma (2013) 9 SCC 65 was rendered at earlier point of time, as is clear, the same has not been noticed in Rajesh (2013) 9 SCC 54 and that is why divergent opinions have been expressed.

12. We are of the considered opinion that as regards the manner of addition of income for future prospects there should be an authoritative pronouncement. Therefore, we think it appropriate to refer the matter to a larger Bench. Let the papers be placed before the Hon'ble the Chief Justice of India for constitution of appropriate larger Bench.