INDIA BUSINESS WORLD - DECEMBER 16th - DECEMBER 31st
- 2007
COMPENSATION MUST INCLUDE PERKS AND CONTRIBUTION, SAYS SUPREME COURT
The Supreme Court has held that in case of accidental death, the compensation, which is liable to be paid by an insurance company, must include perks and the contributions made by an employee towards provident fund and others.
A bench comprising Justices S B Sinha and Harjit Singh Bedi, in an important ruling on December 12, rejected the contention of the appellant National Insurance Company that the compensation has to be computed only on the basic pay of an employee and not on gross salary that includes perks.
According to the apex court, the amount, required to be paid to the deceased by his employer by way of perks, should be included while computing his monthly income as that would have been added to the same by way of contribution to his family, contradistinguishing to the ones which were for his benefit.
"We may, however, hasten to add that from the said amount of income, the statutory amount of tax payable there upon namely income tax, professional tax, must be deducted as they are not repayable to the employee," the court added.
The court also ruled that medical expenses were to be paid only in the form of reimbursement on production of medical bills and therefore, cannot be included while computing the monthly salary of the employee.
An accident claim petition was filed by Indira Srivastava whose husband R K Srivastava, employed with Gabriel India Ltd, died in a road accident on September 1, 1997 in Lucknow.
The apex court, dismissing the appeal of the insurance company and upholding the judgement of Allahabad high court, also noted that the expression 'just compensation' must also be given its logical meaning and cannot be assumed as a bonanza or a source of profit.
"However, in considering as to what would be just an equitable, all facts and circumstances must be taken into consideration," it said.
The high court awarded a compensation of Rs 19,53,224, along with interest at the rate of nine per cent per annum while the tribunal had awarded compensation of Rs 20,13,890.
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