Delhi High Court
Icici Lombard General Insurance ... vs Chanderwati & Ors. on 9 February, 2012
Author: G.P. Mittal
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 7th February, 2012
Pronounced on: 9th February, 2012
+ MAC. APP. No.904/2011 & CM. APPL 18798/2011(stay)
ICICI LOMBARD GENERAL INSURANCE CO. LTD.
..... Appellant
Through: Ms. Suman Bagga, Advocate
Versus
CHANDERWATI & ORS. ..... Respondents
Through: Mr. Manish Maini, Advocate
for the Respondents /Claimants
WITH
+ MAC. APP. No.906/2011
CHANDERWATI & ORS. ..... Appellants
Through Mr. Manish Maini, Advocate
Versus
SURESH KUMAR & ORS ..... Respondents
Through: Ms. Suman Bagga, Advocate
for Respondent No.3 Insurance
Company
CORAM:
HON'BLE MR. JUSTICE G.P.MITTAL
JUDGMENT
G. P. MITTAL, J.
1. These are two Cross-Appeals. MAC APP No.904/2011 has
been filed by ICICI Lombard General Insurance Co. Ltd
(hereinafter referred to as the "insurance company") seeking
reduction of compensation of `20,49,880/- awarded for the
death of Mempal who was aged about 50 years at the time of
the accident which occurred on 11.09.2010.
2. By the impugned judgment, the Tribunal took the deceased's
income as `19,470/-, deducted 1/3rd towards the personal and
living expenses and applied the multiplier of 13(according to
the deceased's age) to compute the loss of dependency as
`20,24,880/-.
3. In the Cross-Appeal MAC APP No.906/2011, preferred by the
Appellants Chanderwati & Ors. (hereinafter referred to as the
Claimants) who are the legal representatives of the deceased
Mempal, enhancement of compensation is sought on the
ground that the deceased was going to be promoted as a clerk
in the near future. He was entitled to increments @ 3% every
year apart from an increase in the salary by DA, twice every
year. It is averred that although the Claims Tribunal in para 4
of the impugned judgment admitted that the number of
dependents were four apart from one married daughter, yet the
Claims Tribunal deducted 1/3rd of the deceased income towards
personal and living expenses instead of 1/4th.
4. It is contended that the claimants were entitled to be given the
benefit of future prospects on the basis of the judgment of the
Supreme Court in K.R. Madhusudhan & Anr. v.
Administrative Officer & Anr., (2011) (1) T.A.C. 874. It is
urged that the compensation awarded towards love and
affection and loss to the estate is on the lower side.
5. Both the Appeals are bound to succeed. There is no dispute
about the proposition of law which is well-settled that the
actual salary of the deceased is the gross salary including
allowances (except allowance personal to the deceased to be
used for performing the duties) which are for the benefit of the
entire family less Income Tax. Therefore, the liability towards
payment of Income Tax was required to be deducted from the
deceased's income.
6. In Sarla Verma & Ors. V. DTC & Ors. (2009) 6SCC 121, it
was held that as a thumb rule, no addition should be made
towards future prospects where the age of the deceased is more
than 50 years. Sarla Verma(supra) was explained by the
Supreme Court in K.R. Madhusudhan(supra). In para 9
observed as under:
"9. In the Sarla Verma (supra) judgment the
Court has held that there should be no addition to
income for future prospects where the age of the
deceased is more than 50 years. The learned Bench
called it a rule of thumb and it was developed so as
to avoid uncertainties in the outcomes of litigation.
However, the Bench held that a departure can be
made in rare and exceptional cases involving special
circumstances. We are of the opinion that the rule of
thumb evolved in Sarla Verma(supra) is to be applied
to those cases where there was no concrete evidence
on record of definite rise in income due to future
prospects. Obviously, the said rule was based on
assumption and to avoid uncertainties and
inconsistencies in the interpretation of different
courts, and to overcome the same."
7. Thus, in appropriate cases, an increase towards future prospects
can be made where the deceased was more than 50 years. In
K.R. Madhusudhan(supra), the deceased was entitled to get a
rise in the income in the near future and the benefit of 25% was
given. In this case, the deceased was between 50 and 51 years.
The testimony of PW3 Radhey Shyam, LDC from the
Education Department of the MCD (the deceased's employer)
proved that the deceased was going to be promoted in near
future to the post of LDC. In that eventuality, he was to get a
salary of `22,500/- per month. In the peculiar facts and
circumstances of the case and the fact that the deceased was
less than 51 years of age, he was entitled to be given the benefit
of 30% towards future prospects.
8. Similarly, the deceased was survived by his widow, one married
daughter, one unmarried son, an unmarried daughter and father
aged 78 years. In Sarla Verma(supra), it was held that father
would not be considered as an dependent unless there is
evidence to the contrary. Thus, considering the father's age, he
will be taken as a dependent. It was proved on record that the
deceased's daughter Ruchika was unmarried and
Chanderwati's (PW1) testimony that her son Arvind was
unemployed was not challenged in cross-examination. The
Tribunal also considered the number of dependents to be four
but erred in deducting 1/3rd towards the personal and living
expenses. It should have been 1/4th in view of Sarla
Verma(supra).
9. I have already held above that deduction of Income Tax was
required to be made to compute the loss of dependency. In
Sarla Verma(Supra), it was held that while granting future
prospects, addition of 50% of actual salary to the actual salary
income of the deceased towards future prospects was required
to be made in a case where the deceased had a permanent job.
The actual salary was taken as gross salary minus income tax.
The question for determination is whether the Income Tax
should be deducted first or after making an addition of the
future prospects as it may affect the quantum of compensation.
I would like to extract Para 24 of the report in Sarla
Verma(supra) for ready reference:
"24. In G.M., Kerala SRTC v. Susamma Thomas,
(1994) 2 SCC 176, this Court increased the
income by nearly 100%, in Sarla Dixit v.
Balwant Yadav, (1996) 3 SCC 179, the income
was increased only by 50% and in Abati
Bezbaruah v. Geological Survey of India,
(2003) 2 SCC 148, the income was increased by
a mere 7%. In view of 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 deceased is more
than 50 years. Though the evidence may
indicate a different percentage of increase, it is
necessary to standardize the addition to avoid
different yardsticks being applied or different
methods of calculations 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."(underlines are mine)
10. In Shyamwati Sharma & Ors. V. Karan Singh & Ors, 2010(12)
SCC 378, the Supreme Court relied upon on Sarla
Verma(supra) regarding addition of income towards future
prospects and held that the actual salary (less Tax) should be
increased by 50% towards future prospects. Thus, the Supreme
Court was clear that Tax has to be deducted from the actual
salary before making addition towards future prospects but
while making actual computation, in para 7 the Supreme Court
deducted the Tax after making an addition of 30% in the
income towards future prospects. Since the principles laid
down in Sarla Verma were approved in para 6 of the report in
Shayamwati (supra), I would hold that the deduction towards
liability on Income Tax should be first made in the actual
income and only then an addition is to be made towards future
prospects. Para 6 and 7 of the report in Shyamwati(supra) are
extracted as under:
"6. This Court in Sarla Verma v. DTC has stated
the principles relating to "addition to income"
towards future prospects. This Court held that
wherever the deceased was below 40 years of age and
had a permanent job, the actual salary (less tax)
should be increased by 50% towards future prospects,
to arrive at the monthly income. It also held that
where the number of dependents of a deceased are in
the range of 4 to 6, the deduction towards personal
and living expenses of the deceased should be 25%. It
further held that in regard to persons aged 36 to 40
years, the appropriate multiplier should be 15. We
will recalculate the compensation by applying the said
principles. (underlines are mine)
7. As noticed above, the gross salary was `13,794/- per
month or `1,65,528 per annum. By adding 50%
towards future prospects (as the deceased was less
than 40 years of age), the deemed gross income would
have been `20,691/- per month or `2,48,292/- per
annum. The percentage of deduction towards income
tax and surcharge, taken as 30% by the High Court,
does not require to be disturbed, having regard to the
income. On such deduction, the net annual income of
the deceased would have been `1,73,800/-. From the
said sum, one-fourth (25%) had to be deducted
towards the personal and living expenses of the
deceased. Thus the contribution of the deceased to his
family would have been `1,30,350/- per annum. By
applying the multiplier of 15, the total loss of
dependency will be `19,55,250/-. By adding a sum of
`5000/- each under the heads of loss of consortium,
loss of estate and funeral expenses, the total
compensation is determined as `19,70,250/-."
11. In view of the discussion above, the overall compensation is
reassessed as under:
1. Loss of Dependency (19590 - 2280 ` 25,97,712/-
(deduction of conveyance Allowance,
TA and Washing Allowance) = 17310
X 12 - 2772(Tax) + 30% (on account of
future prospects) = 266432 X 3/4 X 13 )
2. Loss of Love and Affection ` 25,000/-
3. Loss of consortium ` 10,000/-
3. Loss to Estate ` 10,000/-
4. Funeral Expenses ` 10,000/-
Total ` 26,52,712/-
12. The overall compensation is increased from ` 20,49,880/- to `
26,52,712/-.
13. The enhanced compensation shall carry interest @ 7.5% per
annum from the date of the filing of the petition till the date of
payment. The Appellant Insurance Company is directed to
deposit the increased amount within 30 days in terms of the
Tribunal's order.
14. The compensation awarded by the Claims Tribunal shall be
apportioned and released and held in Fixed Deposit amongst
the Claimants in terms of the impugned judgment of the Claims
Tribunal i.e. the widow entitled to 40% share of the
compensation and Ruchika is entitled to 25% share and
Rachna, Arvind and Shish Ram (father) are entitled to equal
share of the remaining amount.
15. Out of the enhanced compensation, `1 lakh each along with
proportionate interest shall be released to the father (the
Respondent No.5) and the son (the Respondent No.4) of the
deceased. An amount of `2 lakhs along with proportionate
interest shall be payable and held in fixed deposit for a period
of three years in favour of Ruchika (the Respondent No.3).
Claimant Ruchika shall be entitled to apply to the Registrar
General of this Court for premature withdrawal of the amount
in case she is to be married before the completion of the period
of three years. Rest of the enhanced amount shall be payable
to the wife of the deceased (the Respondent No.1) and shall be
held in Fixed Deposit for a period of two years and four years
in equal proportion. The deposits above shall be held in UCO
Bank, Delhi High Court Branch.
16. Both the Appeals are disposed of in above terms.
17. The statutory amount, if any, deposited by the Appellant
Insurance Company shall be returned.
(G.P. MITTAL)
JUDGE
FEBRUARY 09, 2012
pst
