India: Awards of compensation are not Law’s Doles, says Supreme Court

April 13, 2018
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Compensation in the legal world is payment towards an injury caused. It is an act which a Court orders to be done, or money which a Court orders to be paid, by a person whose acts or omissions have caused loss or injury to another, in order that thereby the person damnified may receive equal value for his loss or be made whole in respect of his injury[1].

The purpose of compensation is to reestablish the position of the injured party to what it was before the injury took place. The assessment of compensation in itself is a complex process and is usually guided by way of applying precedents on the facts and circumstances of a particular case. One of the areas where assessing the compensation is complex is Motor Vehicle Accident Claims. The claims under the Motor Vehicle Act 1988 (hereinafter referred to as the ‘MV Act’) includes the claim of right with respect to accident caused due to the act of negligence of other.

In cases of accidental injuries, the compensation is decided on the injuries suffered and the gravity of it. In one of the leading judgements[2] by the Hon’ble Supreme Court of India in 2017 held that the determination of income while computing compensation has to include future prospects so that the method comes within “the ambit and sweep of just compensation” as postulated under the provision of the Motor Vehicle Act.[3]

While interpreting the MV Act, the Supreme Court has number of times held that this is a welfare legislation and the interpretation of provision of law is required to be made so as to help the victim. Last year i.e. in 2017, while delivering the judgement in the case of National Insurance Company Limited v. Pranay Sethi & Ors., the Hon’ble Supreme Court opined that ‘It can never be perfect. The aim is to achieve an acceptable degree of proximity to arithmetical precision based on materials brought on record in an individual case. The conception of “just compensation” has to be viewed through the prism of fairness, reasonableness and non-violation of the principle of equitability.’ Keeping up with the trend, the Supreme Court of India in its judgement in the case of Jagdish v Mohan delivered on March 6, 2018 held that ‘Awards of compensation are not law’s doles. In a discourse of rights, they constitute entitlements under law.’

Facts of the Case

  • On November 24, 2011, at 4 pm IST, an accident took place in which Jagdish (hereinafter referred to as the Appellant) got injured.
  • The Appellant and another person were riding on a motor cycle at a moderate speed. The Appellant, who was riding the motor cycle, indicated to a dumper, which was ahead of him to allow him to pass.
  • When the Appellant was passing the vehicle, it swerved on the driver’s side and hit the motor cycle of the Appellant.
  • The Appellant was gravely injured in the course of the accident. He suffered 90% permanent disability and the hands were not able to perform any function.
  • A suit was filed in the Motor Accidents Claims Tribunal No. 2, Kota (hereinafter referred to as the Tribunal). The Tribunal found that‘there was negligence on the part of the driver of the dumper and that the Appellant was liable to be compensated for the injuries sustained by him.
  • In computing the amount of compensation, the Tribunal noted that:
    • The Appellant was a carpenter and had claimed that he was in receipt of an income of INR 6,000 (USD 92 approx.) per month.
    • In the absence of documentary evidence, the Tribunal took the monthly income of the Appellant at INR 4,050 (USD 62 approx.)
    • The Appellant having been found to suffer from 90 per cent disability, the loss of the future monthly income was computed at INR 3645 (USD 56 approx.)
    • The Tribunal applied a multiplier of 18.
    • The future income was calculated to be INR 7,87,320/- (INR 3645 X 12 X 18) (USD 12132 approx.)
    • An amount of INR 1.80 lakhs (USD 2773 approx.) on account of mental and physical hardship and agony
    • INR 90,000/- (USD 1386 approx.) for loss of comfort
    • INR 25,000/- (USD 385 approx.) for expenses
    • INR 95,908/- (USD 1477 approx.) on account of medical expenses
    • INR 1 lakh (USD 1541 approx.) for attendant charges
  • After the calculation the Tribunal awarded a total amount of INR 12,81,228/- (USD 19743 approx) as compensation on which interest was allowed at the rate of 7.5 per cent per annum from the date of the filing of the claim petition.
  • Further, in appeal the High Court enhanced the award of compensation by an amount of INR 2,19,000 (USD 3372 approx.) and if the enhanced amount will not be deposited within 8 weeks, it would carry interest at 9 per cent per annum.
  • Hence, aggrieved with the computation of compensation the Appellant filed the present appeal.

Appellants Contentions

  • The Appellant submitted that he himself is unable to eat food or go to toilet. He requires assistance of someone else, as both his hands are unable to perform any function.
  • He further submitted that due to the injury there has been loss of 90% of earning ability of the Appellant.
  • He contended that he would be entitled to be compensated for loss of future prospects even though he is self-employed, which the Tribunal did not take into account.
  • He argued that the income as claimed of INR 6,000 (USD 92 approx.) per month should be the basis of computation and not INR 4,050 (USD 62.41 approx.) as allowed by the Tribunal and confirmed by the High Court.

Courts Judgement

  • The Court pointed out that certain settled principles need to be borne in mind while assessing the compensation payable. These principles are:
    • Pain, suffering and trauma resulting from the accident;
    • Loss of income including future income;
    • The inability of the victim to lead a normal life together with its amenities;
    • Medical expenses including those that the victim may be required to undertake in future; and
    • Loss of expectation of life.
  • Deciding on the issue of compensated for loss of future prospects; the Court threw light on the judgement in the case of
    National Insurance Company Limited v. Pranay Sethi & Ors. wherein it was held that the benefit of future prospects should not be confined only to those who have a permanent job and would extend to self-employed individuals. In the case of a self-employed person, an addition of 40 per cent of the established income should be made where the age of the victim at the time of the accident was below 40 years. Therefore, it held that the Appellant would be entitled to an enhancement of INR 2400/- (USD 37 approx.) towards loss of future prospects.
  • The Court observed that the disability is indeed total as the Appellant needs assistance of an attendant even to eat or to visit a toilet.

The Court rightly held that the measure of compensation must reflect a genuine attempt of the law to restore the dignity of the being. Our yardsticks of compensation should not be so abysmal as to lead one to question whether our law values human life. If it does, as it must, it must provide a realistic recompense for the pain of loss and the trauma of suffering. Awards of compensation are not law’s doles. In a discourse of rights, they constitute entitlements under law. Our conversations about law must shift from a paternalistic subordination of the individual to an assertion of enforceable rights as intrinsic to human dignity.


[2]National Insurance Company Limited v. Pranay Sethi & Ors


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