Bombay High Court
THE NEW INDIA ASSURANCE CO LTDversusSUSHEELA JANAKRAO TAMADA AND ORS
- Decided
- Disposal
- Disposed Off
Holding
Ex gratia compensation cannot be reduced and the last drawn salary, not the three‑year average, is the correct basis for loss‑of‑income calculation for a salaried deceased.
Summary
The New India Assurance Co. Ltd. appealed the compensation awarded by the Motor Accident Claims Tribunal, Pune, challenging the inclusion of a Rs.17 lakh ex gratia amount and the use of the deceased's last drawn salary rather than the average income of the preceding three years. The Court held that, following Supreme Court and Division Bench precedents, ex gratia compensation cannot be reduced. It further held that for a salaried deceased, the last drawn salary is the appropriate basis for loss‑of‑income calculations, rejecting the insurer's reliance on average income cases. Accordingly, the Court recalculated the loss of income using a Rs.45,000 monthly salary (after tax deductions) and awarded an enhanced compensation of Rs.13,00,442 to the claimants, with interest at 7.5% per annum. The Court also ordered the removal of a deceased claimant, directed the refund of any surplus to the insurer, and required the insurer to deposit any deficit. The appeal was disposed and the related civil application dismissed.
Issues considered
- Whether the ex gratia compensation received by the deceased from his employer can be reduced in the motor accident claim.
- Whether the tribunal should have used the average income of the last three years instead of the last drawn salary for calculating loss of income.
Subjects
- ex gratia
- loss of income
- motor accident claim
- compensation calculation
- interest rate
- last drawn salary
- salaried employee
- MACT
- appeal
Judgment
ppn 1 31.fa-27.16.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
Digitally signed
CIVIL APPELLATE JURISDICTION
by PRACHI
PRACHI PRANESH
PRANESH
NANDIWADEKAR
NANDIWADEKAR FIRST APPEAL NO.27 OF 2016
Date: 2026.04.29
17:28:15 +0530 WITH
CIVIL APPLICATION NO.1314 OF 2012
The New India Assurance Co. Ltd. ….Appellant
(Orig. Opponent No.2)
V/s.
Susheela Janakrao Tamada & Ors. .…Respondents
(Orig. Applicants)
----
Ms. Poonam Mittal for the appellant.
Mr. Uday B. Nighot for the respondents.
----
CORAM : JITENDRA JAIN, J.
DATED : 28 April 2026
P.C. :
1. By consent, taken up for final hearing.
2. This appeal is filed by the insurance company challenging the
compensation awarded by the Motor Accident Claims Tribunal, Pune
(‘Tribunal’) vide order dated 16 August 2011 of Rs.55,17,226/- alongwith
the interest at 9% p.a. from the date of petition till realisation.
3. I have heard Ms. Mittal, learned counsel for the insurance company
and Mr. Nighot, learned counsel for the original applicants.
4. The issue which arises for my consideration is whether the tribunal
was justified in not reducing the ex gratia compensation received by the
deceased from his employer and further whether the tribunal was justified
in taking the last drawn salary of the deceased instead of average income of
the last 3 years. The above two issues would result into the compensation
being reduced by Rs.29,66,282/-.
ppn 2 31.fa-27.16.doc
5. Insofar as the first issue with regard to the ex gratia of Rs.17 lakhs is
concerned, this Court in the case of New India Assurance Co. Ltd., Pune Vs.
Ashish Ravindra Kulkarni & Ors.1 in paragraph 18 after relying upon the
decision of the Hon’ble Supreme Court in the case of Vimal Kanwar and
Ors. Vs. Kishore Dan and Ors. 2 has come to the conclusion that such ex
gratia compensation cannot be reduced. In my view, in the light of the
decision of the Division Bench of this Court and the Hon’ble Supreme
Court, the contention raised on this issue by the insurance company has to
be rejected.
6. The second contention raised by the learned counsel for the
insurance company is that the tribunal should have considered average
income of last 3 years and not the last drawn salary. She further objected to
the last drawn salary. She relied upon the following decisions :-
(i) Amrit Bhanu Shali & Ors. Vs. National Insurance Co.Ltd. & Ors.3
(ii) Nidhi Bhargava & Ors. versus National Insurance Company Limited &
Ors.4
(iii) Shashikala & Ors. Vs. Gangalakshmamma & Anr.5
(iv) Anjali and Others Vs Lokendra Rathod and Others6
7. Mr. Nighot, learned counsel for the original applicants has relied
upon the decision of this Court in the case of New India Assurance Co. Ltd.
Vs. Alpa Rajesh Shah & Ors. 7 and contended that in case of salaried person,
last drawn salary should be considered.
1 2019 (3) Mh.L.J. 534
2 (2013) 7 SCC 476
3 2012 (11) SCC 738
4 2025 SCC OnLine SC 872
5 (2015) 9 SCC 150
6 2022 SCC OnLine SC 1683
7 2014 (2) Mh.L.J. 17
ppn 3 31.fa-27.16.doc
8. There is no dispute that the deceased was a salaried person. In the
case of a salaried person, it is not the average of the last 3 years income tax
returns, but the last drawn salary should be considered as per the decision
in the case of Alpa Rajesh Shah (supra). The judgments relied upon by the
learned counsel for the insurance company are not applicable but on the
contrary, support the case of the original applicants. Since in all these cases,
income of the latest year was considered. In all these judgments, the
income considered was that of the year in which the accident occurred.
Therefore, these judgments cannot take the case of the insurance company
any further.
9. The employer of the deceased stepped into the witness box and
deposed that the deceased was given a promotion and his salary was
increased to approximately Rs.45,000/-. This evidence has gone
unrebutted. Therefore, in my view, the salary of the deceased should be
considered at Rs.45,000/-. However, the professional tax and income tax
should be reduced from this income.
10. The revised compensation after applying the guidelines laid down by
the decision of the Hon’ble Supreme Court in the case of National Insurance
Company Ltd. Vs. Pranay Sethi8 is as under :-
Sr. Heads Amount
1. Monthly Income
(Rs. 45,000 – Rs.200 – Rs.4,863) Rs.39,937/-
2. 30% Future prospectus
Rs.11,981/-
3. Total Monthly Income
Rs.51,918/-
4. Less ¼ personal expenses
Rs.12,927.5/-
8 2017
ppn 4 31.fa-27.16.doc
5. Annual income Rs. 38938.5 x 12
Rs.4,67,262/-
6. Loss of Income 4,67,262 x 14 Rs. 65,41,668/-
(Multiplier)
7. Loss of Consortium Rs. 48,000/- x Rs.2,40,000/-
5
8. Funeral Expenses Rs.18,000/-
9. Loss of Estate Rs. 18,000/-
Total Rs. 68,17,668/-
10. Less : Compensation awarded by Rs. 55,17,226/-
the Tribunal
Total Rs.13,00,442/-
11. The enhanced compensation works out to Rs.13,00,442/-
(Rs.68,17,668/- minus Rs.55,17,226/-). The original applicants would be
entitled to the amount awarded by the tribunal and the enhanced amount
alongwith interest.
12. Insofar as interest is concerned, the applicants have not led any
evidence for award of interest at 9% p.a. The rate of interest has moved
southwards over a period of time and therefore, to balance the equity and
in the interest of justice, the rate of interest awarded by the tribunal is
modified to 7.5% p.a.
13. Statutory deposit of Rs.25,000/- to be transferred to the concerned
MACT and the parties would be at liberty to make an application for refund
of the same. The original applicants are entitled to the amount awarded by
the tribunal, enhanced amount awarded by this Court alongwith interest at
7.5% p.a. from the date of filing the petition till its realisation.
ppn 5 31.fa-27.16.doc
14. After the above exercise is done, if there is any surplus, then same
should be refunded to the insurance company and if there is any deficit,
same should be deposited by the insurance company within 8 weeks from
today.
15. Mr. Nighot, learned counsel for the original applicants submits that
original applicants no.4, father of the deceased, has expired. Therefore, his
name should be deleted. The total compensation should be granted to the
three claimants since the fourth claimant has expired. This submission is
accepted.
16. Appeal is disposed of in above terms. Consequently, civil application
does not survive and is disposed of.
(JITENDRA JAIN, J.)
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