Category Archives: Compensation

Compensation Awarded to Pay for Cosmetic Surgery

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Arun Kumar Arya, a Presiding Officer of a Motor Accident Claims Tribunal reportedly awarded compensation of 60,000 INR to a 23-year-old woman who was involved in a motor accident. There was no fracture but the accident left a scar on her left foot.

The argument was that a scar can harm a woman’s marriage prospects, and the insurance company, United India Insurance, was therefore directed to pay the victim to enable her to get plastic surgery done to remove the scar.

While it would be impossible to argue that the victims of accidents should not be compensated, the logic in this case seems less than palatable.

The Motor Vehicles Act contains a provisions which speak of the quantum of compensation which should be paid to victims of accidents taking a variety of factors including the age of the victim and the severity of the injury into consideration. The amounts of money are not especially high and if one were to compare them with the 60,000 INR directed to be paid to enable a victim to undergo a cosmetic procedure, the only conclusion one can draw is that a scar such as this is considered a serious injury.

The Tribunal may have been absolutely correct in its assessment of the scar and its effects. And if the Tribunal was correct, it hardly reflects well on Indian society. What the case comes across as
conveying is that women are judged by society not so much by what they’re like as individuals but by how flawless their bodies are. That a scar which presumably isn’t even noticeable at first glance is
capable of diminishing a woman’s worth.

Compensation for Railway Accident

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On June 6, 2008, Justice S S Shinde of the Bombay High Court held that Premchand Jakharia and Laxmiben Jakharia whose son died after he fell off a train are entitled to compensation of 400000 INR with interest at the rate of 12 % from the Central Railway as had been awarded by the Tribunal.

Central Railway had opposed their claim before the Tribunal saying that there was contributory negligence on the victim’s part. In its appeal before the High Court, it then contended that the compensation too high and that the victim was not a bonafide passenger.

Compensation to 12-Year-Old Crippled in Motor Accident

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On May 14, 2008, a Bench of the Supreme Court comprising Justices S B Sinha and L S Panta United India Insurance Co. Ltd. to pay higher compensation to a woman named Sapna who had been crippled and whose marriage prospects had suffered due to an accident she suffered when she was twelve years old.

In its judgment, the Supreme Court spoke of the principles governing a claim petition for assessing the damages in case of bodily injury suffered. It said that while awarding the compensation, the Tribunal should consider all relevant factors so as to enable the insured to be put in the same position as if he had not sustained any injury.

The principle of Restitutio-in-integrum may be applied in a case of nature. Pecuniary loss and non-pecuniary loss are required to be pressed under certain heads. So far as the pecuniary loss is concerned, the same can be ascertained. What is required to be done is a balancing act by awarding such sum which, on the one hand, shall take care of the loss suffered by the claimant for the present time and future pecuniary benefits and, on the other, pecuniary advantages which from whatever source comes to them by reason of such injuries. So far as non-pecuniary loss is concerned, the same has to be assessed broadly under certain heads, namely, damages for physical pain, mental suffering etc. besides the amount spent on medical treatment, if any.

In Sapna’s case, expenditure for medical treatment was granted. The High Court, in its judgment, noticed that although the Tribunal had referred to the likely effect on the matrimonial prospects of the appellant on account of permanent disability, due regard in that behalf had not been given. The fact that she would remain crippled throughout her life was also noticed but it did not appear to the Supreme Court that any serious consideration was bestowed thereupon.

The Supreme Court said that in given cases, the courts may deviate from the structured formula. In terms of the Second Schedule, where the deceased or injured were not having any income, the statute presumes an income of or about 15,000/- per month. If having regard to the age of the appellant, the multiplier of 15 is applied, a sum of Rs.2,25,000/- would be payable.

Besides the said sum, not only some amount of compensation should be awarded under the heading of mental agony but also some provision should be made for future treatment.

In Abati Bezbaruah v. Dy. Director General, Geological Survey of India & Anr. [(2003) 3 SCC 148], it was held:

“11. It is now a well-settled principle of law that the payment of compensation on the basis of structured formula as provided for under the Second Schedule should not ordinarily be deviated from. Section 168 of the Motor Vehicles Act lays down the guidelines for determination of the amount of compensation in terms of Section 166 thereof. Deviation from the structured formula, however, as has been held by this Court, may be resorted to in exceptional cases. Furthermore, the amount of compensation should be just and fair in the facts and circumstances of each case.”

In Nagappa v. Gurudayal Singh & Ors. [(2003) 2 SCC 274] wherein a Three Judge Bench of the Supreme Court opined that the law does not permit passing of any further award after the final award but that no one can suggest that it is improper to take into account expenditure genuinely and reasonably required to be incurred for future medical expenses. Future medical expenses required to be incurred can be determined only on the basis of fair guesswork after taking into account increase in the cost of medical treatment.”

When a person becomes completely incapable of doing any work and virtually has no enjoyment for life, the same form relevant factors and, thus, requires consideration for the purpose of determining a fair and reasonable amount of compensation.

(This article is an edited extract of the judgment.)

When an Insurance Company’s Liability Begins

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The liability of an insurer begins only after the encashment of the cheque and not before ruled a Bench of the Supreme Court comprising Justices S.B. Sinha and Lokeshwar Singh Panta in the case of National Insurance Co. Ltd. v. Yellamma & Anr. on May 5, 2008.

In this case, the owner of a Mini Bus sought an insurance policy in respect of the vehicle. To this end, he issued a third party cheque towards payment of insurance premium. Once the Development Officer of the insurance company realised this, he contacted the vehicle owner and asked him to pay the premium which was apparently not done.

The said insurance cover was issued for the period 3.9.1991 to 2.9.1992. On or about 12.9.1991, the vehicle met with an accident. Yellama who was injured therein filed a claim petition in terms of the provisions contained in Section 166 of the Motor Vehicles Act, 1988 (the Act). An award for a sum of Rs.43,000/- was made.

The High Court increased the amount of compensation to Rs.1,50,000/-. The insurance company then appealed to the Supreme Court which held that a contract of insurance like any other contract is a contract between the insured and the insurer. The amount of premium is required to be paid as a consideration for arriving at a concluded contract. If the insurer insists that a cheque should be issued only by the insured and not by a third party, no exception thereto can be taken. The fact remains that the cheque was not encashed. Concededly, the insured did not make any payment.

Section 64VB of the Insurance Act, 1938 mandates that before a contract of insurance comes into being, the premium should be received by the insurer in advance, stating :

No risk to be assumed unless premium is received in advance:
(1) No insurer shall assume any risk in India in respect of any insurance business on which premium is not ordinarily payable outside India unless and until the premium payable is received by him or is guaranteed to be paid by such person in such manner and within such time as may be prescribed or unless and until deposit of such amount as may be prescribed, is made in advance in the prescribed manner.
(2) For the purposes of this section, in the case of risks for which premium can be ascertained in advance, the risk may be assumed not earlier than the date on which the premium has been paid in cash or by cheque to the insurer.
Explanation: Where the premium is tendered by postal money order or cheque sent by post, the risk may be assumed on the date on which the money order is booked or the cheque is posted, as the case may be.

The question came up for consideration before the Supreme Court in Deddaooa & Ors. v. Branch Manager, National Insurance Co. Ltd. [(2008) 2 SCC 595], wherein upon noticing the precedents which were operating in the field, it was clearly held :

“18. The ratio of the said decision was, however, noticed by this Court in New India Assurance Co. Ltd. v. Rula and Ors. [(2003) 3 SCC 195]. It was held that ordinarily a liability under the contract of insurance would arise only on payment of premium, if such payment was made a condition precedent for taking effect of the insurance policy but such a condition which is intended for the benefit of the insurer can be waived by it.”

The dicta laid down therein clarifies that if on the date of accident the policy subsists, then only the third party would be entitled to avail the benefit therof.

In National Insurance Co. Ltd. v. Seema Malhotra and Ors. [(2001) 3 SCC 151], a Division Bench noticed both the aforementioned decisions and analysed the same in the light of Section 64-VB of the 1938 Act. It was held:

’17. In a contract of insurance when the insured gives a cheque towards payment of premium or part of the premium, such a contract consists of reciprocal promise. The drawer of the cheque promises the insurer that the cheque, on presentation, would yield the amount in cash. It cannot be forgotten that a cheque is a bill of exchange drawn on a specified banker. A bill of exchange is an instrument in writing containing an unconditional order directing a certain person to pay a certain sum of money to a certain person. It involves a promise that such money would be paid.

18. Thus, when the insured fails to pay the premium promised, or when the cheque issued by him towards the premium is returned dishonoured by the bank concerned the insurer need not perform his part of the promise. The corollary is that the insured cannot claim performance from the insurer in such a situation.

19. Under Section 25 of the Contract Act an agreement made without consideration is void. Section 65 of the Contract Act says that when a contract becomes void any person who has received any advantage under such contract is bound to restore it to the person from whom he received it. So, even if the insurer has disbursed the amount covered by the policy to the insured before the cheque was returned dishonoured, the insurer is entitled to get the money back.

20. However, if the insured makes up the premium even after the cheque was dishonoured but before the date of accident it would be a different case as payment of consideration can be treated as paid in the order in which the nature of transaction required it. … A contract is based on reciprocal promise. Reciprocal promises by the parties are condition precedents for a valid contract. A contract furthermore must be for consideration.”

In today’s world payment by cheque is ordinarily accepted as valid tender but the same would be subject to its encashment. A distinction, however, exists between the statutory liability of the insurance company vis-à-vis the third party in terms of Sections 147 and 149 of the Motor Vehicles Act and its liability in other cases but it is clear that if the contract of insurance had been cancelled and all concerned had been intimated thereabout, the insurance company would not be liable to satisfy the claim.

In this case, there cannot be any doubt or dispute whatsoever that no privity of contract came into being between the insurance company and the owner of the vehicle and as such the question of enforcing the purported contract of insurance while taking recourse to Section 147 of the Motor Vehicles Act did not arise.

Being of the opinion that the interest of justice would be subserved by the exercise of its jurisdiction under Article 142 of the Constitution of India, the Supreme Court directed that the awarded amount be paid by the insurance company to Yellama with liberty to it to recover the same from the owner of the vehicle by initiating an appropriate proceeding in this behalf.

(This article is an edited extract of the judgment.)

What Constitutes 100% Disability?

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An amputation of the right leg up to the knee joint amounts to 100% disability ruled a Bench of the Supreme Court comprising Justices Harjit Singh Bedi and Tarun Chatterjee in the case of K Janardhan v. United India Insurance Co. Ltd. & Anr. on May 9, 2008.

In this case, a tanker driver, while driving his vehicle met with an accident with a tractor coming from the opposite side. He suffered serious injuries and had an amputation of the right leg up to the knee joint.

He then moved an application before the Commissioner for Workmen’s Compensation praying that as he was 25 years of age and earning Rs. 3,000/- per month and had suffered 100% disability, he was entitled to a sum of Rs. 5 lac by way of compensation.

The Commissioner observed that the claimant was 30 years old and the salary as claimed by him was on the higher side and accordingly determined the same at Rs. 2000/- per month. He also found that as the claimant had suffered an amputation of his right leg up to the knee, he was said to have suffered a loss of 100% of his earning capacity as a driver and accordingly determined the compensation payable to him at Rs. 2,49,576/- and interest @ 12% p.a. thereon from the date of the accident.

The insurance company then appealed to the High Court which accepted that as per the Schedule to the Workmen’s Compensation Act, the loss of a leg on amputation amounted to a 60% reduction in the earning capacity and as the doctor had opined to a 65% disability, this figure was to be accepted and accordingly reduced the compensation.

The driver then approached the Supreme Court saying that being a tanker driver, the loss of his right leg ipso facto meant a total disablement as understood in terms of Section 2(1)(e) of the Workmen’s Compensation Act and as such he was entitled to have compensation computed on that basis.

He relied on Narain Singh Deo v. Srinivas Sabata & Anr. (1976) 1 SCC 289 in which a carpenter who had suffered an amputation of his left arm from the elbow was held to have suffered a total disability as the injury was of such a nature that the claimant had been disabled from all work which he was capable of performing at the time of the accident. It was observed that:

5. The expression “total disablement” has been defined in Section 2(1)(e) of the Act as follows:
“(1) `total disablement’ means such disablement whether of a temporary or permanent nature, as incapacitates workman for all work which he was capable of performing at the time of the accident resulting in such disablement.”

Applying the ratio of this judgment to the facts of the present case the Supreme Court held that the driver had also suffered a 100% disability. Under Sections 8 and 9 of the Motor Vehicles Act 1988, he would be disqualified from even getting a driving licence.

(This article is an edited extract of the judgment.)

Compensation by the Railways

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CASE NO.: Appeal (civil) 6898 of 2002
Union of India v. Prabhakaran Vijaya Kumar & Ors.
DATE OF JUDGMENT: 05/05/2008
BENCH: H. K. Sema & Markandey Katju

In an appeal by special leave against a judgment of a Division Bench of the Kerala High Court, the Supreme has held that the Railways are liable to pay compensation where a victim accidentally falls and dies while getting on to a train.

The following is a heavily edited version of the substance of the judgment.

Facts

A claim petition was filed before the Railway Claims Tribunal, Ernakulam Bench (hereinafter referred to as the ‘Tribunal’) by the husband, mother and minor son of one Smt. Abja who died on 23.5.1996 in a train accident at Varkala Railway station. The Claims Tribunal disallowed the claim, but the appeal against the said decision was allowed by the Kerala High Court and compensation of Rs. 2 lacs with interest @ 12% from the date of the petition till the date of payment was granted. Aggrieved, the Union of India appealed against the decision of the Kerala High Court.

There was no dispute that Smt. Abja was a bona fide passenger holding a second class season ticket and an identity card issued by the Southern Railway. As per the forensic report the cause of death was due to multiple injuries due to the accident. The deceased fell on to the railway track and was run over by train No.6349 Parasuram Express.

Law

The Railways Act

Section 2 (29) defines ‘passenger’ to mean a person travelling with a valid pass or ticket.

Section 123(c) defines ‘untoward incident’ to include the accidental falling of any passenger from a train carrying passengers.

Section 124A deals with compensation on account of untoward incidents:
When in the course of working a railway an untoward incident occurs, then whether or not there has been any wrongful act, neglect or default on the part of the railway administration such as would entitle a passenger who has been injured or the dependant of a passenger who has been killed to maintain an action and recover damages in respect thereof, the railway administration shall, notwithstanding anything contained in any other law, be liable to pay compensation to such extent as may be prescribed and to that extent only for loss occasioned by the death of, or injury to, a passenger as a result of such untoward incident:

Provided that no compensation shall be payable under this section by the railway administration if the passenger dies or suffers injury due to:
(a) suicide or attempted suicide by him;
(b) self-inflicted injury;
(c) his own criminal act;
(d) any act committed by him in a state of intoxication or insanity;
(e) any natural cause or disease or medical or surgical treatment unless such treatment becomes necessary due to injury caused by the said untoward incident.

Explanation – For the purposes of this section, “passenger” includes -
(i) a railway servant on duty; and
(ii) a person who has purchased a valid ticket for travelling by a train carrying passengers, on any date or a valid platform ticket and becomes a victim of an untoward incident.

Decision

The Supreme Court said that it was of the opinion that it did not legally make any difference whether the deceased was actually inside the train when she fell down or whether she was only trying to get into the train when she fell down since in either case it amounts to an ‘accidental falling of a passenger from a train carrying passengers’. Hence, it was an ‘untoward incident’ as defined in Section 123(c) of the Railways Act.

Explaining this, the Court said that since the provision for compensation in the Railways Act is a beneficial piece of legislation it should receive a liberal and wider interpretation and not a narrow and technical one.

Giving a restrictive and narrow meaning to the expression would deprive a large number of victims of train accidents (particularly poor and middle class people) from getting compensation under the Railways Act. In other words, a purposive, and not literal, interpretation should be given to the expression.

The accident in which the victim in this case died was clearly covered by the main body of Section 124A of the Railways Act, and not its proviso. If a case comes within the purview of Section 124A it is wholly irrelevant as to who was at fault since the Section lays down strict liability or no fault liability in case of railway accidents.

The theory of strict liability for hazardous activities can be said to have originated from the historic judgment of Blackburn, J. of the British High Court in Rylands v. Fletcher 1866 LRI Ex 265 although it has virtually been repudiated over time.

The Court observed that the repudiation of the principle in Rylands vs. Fletcher is contrary to the modern judicial philosophy of social justice. However, there is now a swing once again in favour of the principle of strict liability.

In India the landmark Constitution Bench decision of the Supreme Court in M.C. Mehta vs. Union of India AIR 1987 SC 1086 has gone much further than Rylands vs. Fletcher in imposing strict liability by saying that strict liability is not subject to any of the exceptions to the rule in Rylands vs. Fletcher.

The decision in M.C. Mehta’s case related to a concern working for private profit. However, the Court said that, in its opinion, the same principle also applies to statutory authorities (like the railways), public corporations or local bodies which may be social utility undertakings not working for private profit.

Strict liability has no element of moral censure. It is because such public bodies benefit the community that it is unfair to leave the result of a non-negligent accident to lie fortuitously on a particular individual rather than to spread it among the community generally.

In various social welfare statutes the principle of strict liability has been provided to give insurance to people against death and injuries, irrespective of fault. Section 124A of the Railways Act 1989 incorporates the principle of strict liability.

However, apart from the principle of strict liability in Section 124A of the Railways Act and other statutes, the Court said that ‘we can and should develop the law of strict liability de hors statutory provisions in view of the Constitution Bench decision of this Court in M.C. Mehta’s case’. Recognising that the Law of Torts is not stagnant but is growing, the Court said that it is necessary to develop new principles for fixing liability in cases like the present one.

The Court went on to say that the submissions that there was no fault or contributory negligence on the part of the Railways was based on a total misconception and hence had to be rejected.

The appeal was dismissed with no order as to costs.