Jharkhand HC upholds confidence in last earned salary of deceased in accident case

The Jharkhand High Court, in its judgment delivered in a miscellaneous appeal, held that average earnings of previous financial years cannot be the basis for calculating compensation in road accident claims.

Justice Subhash Chand observed, “The deceased was a professor at the Baldeo Sahu Graduate School, Lohardaga, and was Head of the Department of Philosophy. He received the salary along with other benefits just before the accident in which death occurred. The revenue base would be the 2013-14 financial year; “Average income from previous years cannot be the basis for calculating the amount of compensation.”

The case arose from a car accident in February 2014, in which Arun Kumar, the deceased, succumbed to injuries following a collision with a truck. The Motor Accident Claims Tribunal (MACT), Ranchi, awarded compensation of Rs 74,64,773 to Kumar’s family based on their annual gross income for the financial year 2013-2014. The Oriental Insurance Company Ltd., which insured the offending truck, challenged the compensation, arguing that the average income of the three previous financial years should have been used to calculate the compensation.

The High Court dismissed this argument, emphasizing the importance of the deceased’s income at the time of his death. The Court also addressed other issues raised in the appeal, including the deduction for personal expenses.

The Court upheld the Court’s application of a one-quarter deduction, citing the Supreme Court ruling in Smt. Sarla Verma and Ors v. Delhi Transport Corporation and Anr., which provides, “the deduction for personal expenses and maintenance of the deceased must be one third (1/3) when the number of dependent family members is 2 to 3, one quarter (1/4) when the number of dependent family members is 2 to 3; 4 to 6”.

Additionally, the court modified the interest rate granted by the Court from 9% to 7.5% per annum, citing the Supreme Court’s decision in National Insurance Company vs. Mannat Johal. The Court noted, “With regard to interest on the amount of compensation, which the competent Court has awarded 9% interest, that 9% interest is not sustainable; “It could have been 7.5% annually.”

The High Court stated that dependents entitled to compensation included Kumar’s widow, his two children and his mother. On this, the court stated, “From the evidence in the file, the deceased after his death left his widow, two children and his mother, who left him his four dependents after his death.”

Consequently, the appeal was partially allowed and the challenged award issued by the MACT was modified only to the extent that the interest payable on the amount of compensation awarded by the Tribunal increased from 9% to 7.5% per annum.

Case Title: The Oriental Insurance Co. Ltd. v. Smt. Sharda Devi and ors

LL Citation: 2025 LiveLaw (Jha) 2

Click here to download the judgment