SC: Tortfeasor cannot not take benefit of the munificence/gratuity of others.

The Hon’ble Supreme Court on 12.10.2018, in the matter of Sebastiani Lakra and ors. v. National Insurance Company Ltd. & Anr. held that the tort­feasor cannot take advantage of the foresight and wise financial investments made by the deceased. It was pronounced that from the amount of compensation awarded to dependents/legal heirs of the deceased (under the Motor Vehicle Act,1988),  deductions on account of

  • Insurance 
  • Pensionary benefits
  • Gratuity
  • Grant of employment to a kin of the deceased

can not be permitted as 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 Hon’ble Apex Court also observed that:

Section 168 of the Motor Vehicles Act, 1988 mandates that “just compensation” should be paid to the claimants. Any method of calculation of compensation which does not result in the award of ‘just compensation’ would not be in accordance with the Act. The word “just” is of a very wide amplitude. The Courts must interpret the word in a manner which meets the object of the Act, which is to give adequate and just compensation to the dependents of the deceased. One must also remember that compensation can be paid only once and not time and again. (Para 5)

The traditional view was that while assessing compensation, the Court should assess the loss of income caused to the claimants by the death of the deceased and balance it with the benefits which may have accrued on account of the death of the deceased. However, even when this traditional view was being followed, it was a well settled position of law that the tort­feasor cannot not take benefit of the munificence or gratuity of others. (Para 6)

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. (Para 12)

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 tort­feasor cannot take advantage of the foresight and wise financial investments made by the deceased.(Para 13)

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. (Para 14)

Deduction can be ordered only where the tort­feasor satisfies the court that the amount has accrued to the claimants only on account of death of the deceased in a motor vehicle accident. (Para 16)

Copy of the Judgement: Judgement 12 Oct 2018

-Tushar Kaushik

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