Motor Vehicle - Supreme Court Seeks Larger Bench for Clarity on Compensation for Deceased Employed Abroad

Divergent Judgments on Double Deduction and Foreign Income Moderation Prompt Supreme Court to Seek Further Deliberation

The Supreme Court of India has referred a contentious issue regarding the assessment of compensation in motor vehicle accidents involving deceased persons employed in foreign countries to a larger bench, following conflicting judgments on the methodology of calculating compensation. The decision emerged from the case "Tharunoju Eshwaramma v. K. Ram Reddy," where the appellants challenged the High Court’s approach of applying double deductions to the income of a deceased individual who was working abroad.

The case revolves around the unfortunate demise of Hari Shankar Brahma, a 27-year-old system analyst employed in the United States, who was earning an annual salary of $47,050. Initially, the Motor Vehicle Accident Claims Tribunal in Hyderabad assessed his income for compensation at Rs. 21,17,250 per annum, applying standard deductions and awarding Rs. 63,00,000 to the claimants. However, the High Court later recalculated the compensation based on one-third of the deceased’s US salary, resulting in an increased award of Rs. 83,63,000, but still applied deductions that the appellants contested as a form of double deduction.

The appellants argued that the High Court’s approach contradicted the precedent set in "National Insurance Co. Ltd. v. Pranay Sethi," which provides guidelines for future prospects and deductions. Citing various previous judgments, the appellants maintained that income earned abroad should be considered without applying extra deductions for living costs abroad, thus avoiding double deduction.

The Supreme Court, acknowledging the conflicting judicial views on whether compensation should reflect the income earned abroad in its entirety or be moderated due to foreign living standards, emphasized the need for a definitive resolution. The court pointed out that with an increasing number of Indians working overseas, a consistent and fair approach is necessary for such compensation cases.

By referring the matter to a larger bench, the Supreme Court aims to settle the debate on whether additional deductions should be applied when assessing income from foreign employment, and if so, how these should be standardized considering the cost of living differences and remittances to India. The court also highlighted the importance of guidance on applying formulas for such deductions and the relevance of the deceased’s family circumstances in the assessment process.

This move is expected to provide clarity and uniformity in future cases, ensuring that families of deceased individuals employed abroad receive just compensation without the ambiguity of varying interpretations.

Bottom Line:

Motor Vehicle Accident Compensation - Assessment of compensation in cases involving deceased persons employed in foreign countries - Divergent views exist regarding the methodology for calculating compensation, particularly whether double deduction should be applied considering the income earned in a foreign country.

Statutory provision(s): Motor Vehicles Act, 1988

Tharunoju Eshwaramma v. K. Ram Reddy, (SC) : Law Finder Doc id # 2802267