Accident Compensation - Income To Be Assessed Based On Employee's Entitlement, Without Deduction Of Allowances : SC [Read Judgment]

FACTS OF THE CASE

An expat employed as a Regional Director for the Middle Eastern Region with GTL Overseas died in a plane crash on 22 May, 2010. The ill-fated Air India Express was travelling from Dubai to Mangalore, and crashed at the Mangalore airport.

On 10 March, 2011, his spouse submitted a claim for compensation from Air India, who paid her an amount of Rs. 4,00,70,000 on 20 March, 2012 against an indemnity. Apart from this, an amount of Rs. 40 lakhs was paid to the parents of the deceased.

On 18 April, 2012, the parents and brother of the deceased instituted a suit against Air India to claim compensation, and the Trial Court in its judgement dated 27 September, 2018, decreed the claim of the mother of the deceased in the amount of Rs. 70 lakhs, while dismissing the claims of the father and the brother.

The present Appeals arise out of a complaint that was instituted on 18 May, 2012 by the surviving spouse, son and daughter of the deceased before NCDRC, claiming a compensation of Rs. 13.42 crores, together with interest at the rate of 18% per annum from the date of the accident and other consequential payments.

NCDRC allowed the complaint and awarded final compensation of Rs. 7,35,14,187 and noted that an amount of Rs. 40 lakhs had been paid to the parents, apart from a sum of Rs. 4 crores which had been paid to the complainants, and were to be deducted from the final compensation. The balance of principal sum due was determined at Rs. 2,95,14,187, and simple interest at the rate of 9% per annum was awarded from 22 May 2010 till the date on which the amount of Rs. 40 lakhs was paid to the parents of the deceased.

The complainants were held to be entitled to interest on the amount of Rs. 6,95,14,187 with effect from the date on which the payment was made to the parents of the deceased till the date on which Rs. 4 crores was paid to the complainants. They were also held to be entitled to interest on the remaining amount with effect from the date on which Rs. 4 crores were paid to the complainants until the date on which the entire principal sum is actually paid.

In calculating the final compensation, NCDRC in its judgement dated 10 December 2018, deducted the telephone allowance of AED 30,000 from the total income (Annual Cost to Company) and adopted the conversion rate which had been adopted in the complaint which was lodged before the NCDRC.

Cross appeals were filed in these proceedings, with the first appeal being filed by the complainants.

SUBMISSIONS

Advocate Yeshwant Shenoy made four submissions on behalf of the complainants:

"(i). The NCDRC erred in making a deduction of AED 30,000 from the total CTC of the deceased as reflected in the records produced by the employer;

(ii) An addition of thirty per cent ought to have been made towards future prospects instead of twenty-five per cent in view of the judgement of the Constitution Bench in National Insurance Company Ltd. v. Pranay Sethi.

(iii)The rate for conversion of AED into INR shoud be taken at the prevailing rate on the date of the judgement of this Court and not Rs. 12.50 AED which was the rate prevailing at the filing of the complaint before the NCDRC; and

(iv) Only the salary of the deceased has been taken and not the income. The deceased was entitled to other benefits apart form salary including employees' stock options (ESOP) and other financial benefits which have not been taken into consideration."

Jatinder Kumar Sethi, Counsel on behalf of Air India, made the following submissions:

"(i) The NCDRC has erred in making a deduction of one-fifth towards the personal expenses of the deceased. The correct deduction ought to have been one-third since the complainants before the NCDRC were the spouse and two minor children.

(ii) Air India has paid a total amount of Rs. 10.46 crores to the complainants and the mother, inclusive of interest and this would sufficiently meet the interests of justice particularly having regard to the precarious financial position of Air India; and

(iii) In addition to the deduction which was made on account of the telephone allowance, the transport allowance of AED 40, 957 should also be deducted from the annual salary of the deceased in making the computation.

HELD

A Supreme Court Bench of Justices DY Chandrachud and Ajay Rastogi held the following:

No Exclusion of Telephone/Travel Allowance For Purpose of Computation

The Bench held that in a claim for compensation arising out of the death of an employee, the income has to be assessed on the basis of entitlement of the employee. Therefore, bifurcation made by employer in the salary does not provide any ground to make deductions from the total CTC.

"The bifurcation of the salary into diverse heads may be made by the employer for a variety of reasons. However, in a claim for compensation arising out of the death of the employee, the income has to be assessed on the basis of the entitlement of the employee. We, therefore, proceed for the purpose of the computation on the basis of the annual income of AED 4,82,395".

The consolidated amount is the amount annually borne by the employer on account of the employment of the deceased, said the Court. 

"Hence, we are unable to accept the reasons which weighed with the NCDRC in making a deduction of AED 30,000 from the total CTC. Similarly and for the same reason, we are unable to accept the submission of Air India that the transport allowance should be excluded", observed the Court.

In Absence of Evidence, Additional Benefits, Performance Incentive Cannot be Computed in the Salary

The submission made by Shenoy regarding the entitlement of additional financial benefits such as ESOP was rejected on the basis that the material on record did not indicate that the deceased was entitled to a specified quantum of ESOPs as a matter of right.

Additionally, any other incentives and financial benefits were linked to the performance. Therefore, while he was eligible for certain benefits on an annual basis, they were not a matter of right. On that basis, the Bench was not inclined to accept the submission that the incentive benefits should be added back to the income for the purpose of computation 

Deduction of Personal Expenses Should be 1/4^th On the Basis of Number of Dependent Family Members

The Bench referred to the Constitution Bench judgement in the case of Pranay Sethi which had been rendered in the context of determining compensation under the Motor Vehicles Act. This judgement had further relied upon an earlier judgment of Sarla Verma v. Delhi Transport Corporation.

In Sarla Verma, the Apex Court had held that, "where the deceased was married, the deduction towards personal living expenses should be one-third, where the number of dependent family members is two or three; on fourth, where the number of dependent family members is four to six; and one fifth, where the dependent family members exceeds six."

In the instant case, as there are four persons who were dependent upon the deceased, the Bench held that the appropriate deduction on account of personal expenses should have been one-fourth and not one-fifth as determined by the NCDRC.

Employment of Deceased Cannot Be Equated with that of a Person with Fixed Salary

The Pranay Sethi case also speaks of an addition for future prospects where the deceased had a "permanent job". Air India contended that the deceased did not have a permanent job and that the addition towards future prospects should be at the rate of 25% since he was 45 years and two months old on the date of the accident.

The Bench observed that the deceased was not self-employed and was a long-standing employee of a multi-national corporation.

"The employment of the deceased cannot be equated with that of a person on a fixed salary – within the meaning of paragraph 59.4 of Pranay Sethi. The reference to the expression "permanent job" in paragraph 59.3 is not intended to include only those individuals who are in the service of the government or industrial workmen protected by the statute".

In light of the above, the as the deceased was evidently a confirmed employee of his employer, the Bench held that "this should be entitled to adequate weightage in terms of the determination of compensation in the event of an untimely demise. We have come to the conclusion that 30% should be allowed on account of future prospects".


Rejected Complainants' Submission that the Exchange Rate should be that which is Prevalent Today

The Bench rejection the submission that the exchange rate should be that which is prevalent today. Shenoy had relied upon Forasol v. ONGC, Renusagar Power Co. Ltd. v. General Co. Ltd., United India Insurance Co. Ltd. v. Kantika Colour Lab and Balaram Prasad v. Kunal Saha.

The Court noted that the facts of the instant case were distinguishable from the judgements which had been cited.

"The money is not being repatriated abroad. The claimants are Indian residents. The complaint contains a claim for payment in Indian Rupees. They would be receiving the payment in Indian rupees. Moreover, we are allowing the claim for interest in terms of the decision of the NCDRC".

On the basis of the above, the Court finally held:

"The total amount which is payable on account of the aforesaid heads works out to Rs. 7,64,29,437. Interest at the rate of nine per cent per annum shall be paid on the same basis as has been awarded by the NCDRC. The balance, if any, that remains due and payable to the complainants, after giving due credit for the amount which has already been paid, shall be paid over within a period of two months from the date of receipt of a certified copy of this Order. In the event that the amount which has been paid by Air India is in excess of the amount payable under the present judgement in terms of our above order, we direct under Article 142 of the Constitution, that the excess, if any, shall not be recoverable from the claimants".