ORIENTAL INSURANCE CO. LTD. versus RAM PRASAD VARMA & ORS.

Citation: [2009] 1 S.C.R. 209 · Decided: 13-01-2009 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Disposed off

Judgment (excerpt)

[2009] 1 S.C.R. 209 
ORIENTAL INSURANCE CO. LTD. 
v. 
RAM PRASAD VARMA & ORS. 
(Civil Appeal No.106 of 2009) 
JANUARY 13, 2009 
[S.S. SINHA AND CYRIAC JOSEPH, JJ.] 
Motor Vehicles Act, 1988 - ss.166 and 163A: 
A 
B 
Claimant, employee in public sector undertaking, c 
suffering permanent disability due to accident - Both his legs 
amputated - Claimant 55 years of age at that time and 
earning gross income of Rs.2.3 lacs - Determination of 
cofT)pensation by applying structured formula as contained in 
the Second Schedule - Appropriate multiplier- Held: Though 
D 
Second Schedule, as such, might not have been applicable 
as maximum annual income of a deceased or an injured 
which could be taken into consideration therefor is 
Rs.40, 0001-, however, keeping in view the peculiar factual 
circumstances of the case, the Tribunal was justified in 
E 
adopting the multiplier of eight. 
Claimant suffering permanent disability -
While 
determining compensation, Tribunal not deducting 1/3rd 
income towards miscellaneoas expenses - Challenge to -
Held: Where claimant, though alive, is not in a position to 
F 
move and for every sr:nall thing h~s to depend upon others, 
a direction to deduct 1!3rd amount from his income need not 
always be insisted upon - On facts, no interference called for. 
Compensation - Determination of - While determining 
G 
compensation, Tribunal not deducting amount of income tax 
from gross salary of claimant - Challenge to - Held: An 
employee when not in employment is not to pay his tax -
Income tax payable from salary, therefore, was required to be 
deducted. 
209 
H 
210 
SUPREME COURT REPORTS 
(2009) 1 S.C.R. 
A 
Respondent No.1 was an employee in ONGC, a 
public sector undertaking. He was hit by a lorry which ran 
over his legs. Consequently both his legs were 
amputated. At the relevant time, respondent no.1 was 55 
years of age and was earning a gross salary of about 2.3 
s lacs p.a. Respondent No.1 having suffered permanent 
disability filed claim petition for compensation. The 
Claims Tribunal applied the structured formula as 
contained in the Second Schedule appended to the Motor 
Vehicles Act and adopting the multiplier of eight, awarded 
c a sum of Rs.19.63 lakhs with interest at the rate of 12% 
p.a. from the date of filing of the petition till realization. 
Appeal thereagainst by the insurance company was 
dismissed by the High Court, which however, considering 
the prevailing rate of interest, reduced the rate of interest 
0 to 9% p.a. 
In appeal to this Court, it was contended by the 
insurance company that the Tribunal, and consequently 
the High Court, committed serious error in applying the 
multiplier of eight as respondent no.1 was to retire within 
E few years, i.e. on attaining the age of sixty years and that 
while determining compensation, the Tribunal further 
erred in not deducting the amount of income tax from the 
gross salary of claimant as also in not deducting his one-
third income towards miscellaneous expenses. 
F 
Disposing of the appeal, the Court 
HELD:1.1. The life expectancy of an Indian citizen is 
about 62 years. Respondent no.1 was a highly placed 
employee in a prestigious public sector undertaking. He 
G was to retire within a few years, but in view of the injuries 
suffered he had to give up his job. A person on retirement, 
in the event if pension scheme is applicable, would be 
entitled to pensionary benefits. Had respondent no.1 
worked for five years more, the amount of pension 
H calculated on the basis of last pay drawn would have 
.¥ 
• 
ORIENTAL INSURANCE CO. LTD. v. RAM PRASAD 
211 
VARMA&ORS. 
been more than what might have become payable in the 
A 
year 1998 when he met with the accident. By reason of 
termination of service, he was not only deprived of his 
salary but also various other allowances to which he was 
otherwise entitled to. His family members could have 
taken benefit of some of the allowances. [Paras 10 and 
B 
15] [215-F-G; 218-C] 
1.2. The amount of compensation which represents 
the· loss of income can be calculated either in terms of 
the structured formula as contained in the Second 
Schedule appended to the Motor Vehicles Act or on the 
C 
basis of the other materials brought on record. In a case 
of this nature, the Tribunal cannot be said to have 
committed any illegality in applying the structured 
formula. The Second Schedule as such may not have any 
application as the maximum annual income of a deceased 
D 
or an injure

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