INTRODUCTION:

A review of statutory compensation regimes reveals that such laws contain three broad types of compensation mechanisms:

a. State Compensation Schemes: In many statutory compensation schemes, the State takes on the responsibility to compensate the victim. An example is the Railway Act, 1989 which provides in Section 124 and 124A that if an accident or any untoward incident such as a terrorist attack or dacoity occurs in the course of working of a railway, any death caused will be compensated by the railway to the tune of Rs. 4 lakhs, regardless of whether the accident was the result of the wrongful act, neglect or default of the railway administration.

In some instances, the State takes up the responsibility to compensate only in cases where the actual wrongdoer has not been identified. For example, Section 163 of the Motor Vehicles Act, 1988, provides that the State shall prepare a scheme for the payment of compensation to victims of hit and run motor accidents.

State Compensation Schemes are not fault based. They create a liability on the state to pay compensation regardless of whether the death in questionwas caused by the State itself, or by any specific wrongdoer. These schemes are based on public policy considerations of alleviating the burden imposed on victims by certain types of accidents.

b. Private no-fault liability: Many statutory compensation regimes create no-fault liability upon private persons forcertain types of accidents.In such cases, a person claiming compensation does not have to prove that the death or disablement in question was due to any wrongful act, neglect or default of the defendant.

Some statutes provide for a fixed sum of compensation under the no-fault liability rule, whereas others provide a variable sum of compensation, usually linked to the age of, wage of, and nature of injury to, the victim.

It is pertinent to note that whenever statutes place a no-fault liability upon a private party, such as a motor vehicle owner, an employer, or the owner of hazardous wastes, they also require such person to take compulsory insurance to cover the risk of liability.

c. Fault based liability: In addition to no-fault liability mechanisms under the statutory compensation schemes, some laws permit beneficiaries to claim on the basis of fault liability under general principles of tort law. For example, Section 141, MV Act expressly preserves the right of the claimant to seek compensation on the principle of fault in addition to compensation under the principle of no-fault liability as provided in Section 140, MV Act.

Many questions have been raised as to effectiveness of compensation law in providing timely and necessary succor to victims. In what follows, we examine the inadequacies of the laws relating to compensation for fatal and other injuries.

GENERAL

The sector-specific regime of protection for victims of wrongful acts enacted by the Parliament like the Motor Vehicles Act, 1988, the Public Liability Insurance Act, 1989, the Employees Compensation Act, 1923, etc. are largely uneven and fragmented. In some cases, the State takes up the responsibility for compensating victims and their dependents and ensures that a minimum financial guarantee is provided to dependents upon the death or permanent disablement of a relative, regardless of who the wrongdoer is and whether the wrongdoer is identified or not. In other cases, while the State does not provide this financial protection itself, it ensures through the mechanism of no-fault liability and compulsory insurance that the victim is compensated for loss suffered without having to prove fault of the alleged wrongdoer. In yet another set of situations, however, the State leaves victims and their dependents to fend for themselves. When the State recognizes the need for providing financial security to victims/dependents in the event of fatal accidents in some cases, it is not clear why the same protection should not be extended to all cases. Also, different compensation amounts are awarded by the State under the various state based compensation schemes.¹ There is no consistent principle for determining the amount of fixed State compensation, which therefore varies from scheme to scheme and State to State.² The public policy reasons for such disparate treatment to victims of fatal accidents are unclear.

1. Fatal Accidents Act, 1855

The death of a close family member, apart from being a traumatic and distressing event, is highly disruptive, and can make the person vulnerable to destitution, especially if the person was dependent upon the deceased.³ The financial difficulties that may result from the death of an earning member of the family means that the person may be in urgent need of compensation. At the same time, however, these very financial difficulties can render it difficult for a person to successfully claim compensation if it involves protracted and expensive litigation.⁴

The FAA is not sensitive to the economic impact of the death of an earning member of the family, and especially the disparate impact of such an accident on the lives of persons with limited resources. First, the Actonly recognizes claims involvingfault based liability, which means that the plaintiff has to prove that the death resulted from a wrongful act, neglect or default of the defendant to avail of any compensation. For those who have limited resources, engaging in adversarial litigation can be a huge burden, especially at a time when they are particularly vulnerable. The burden is amplified by a delay prone judicial process which increases the cost of suing a defendant.⁵ Where fault is not proved, no compensation is provided to the plaintiff. Consequently, in such cases the burden of the entire accident is shifted onto the plaintiff, whereas any benefit from the activity that caused the accident remains with the defendant. In this context, it is pertinent to note that the Hon’ble Supreme Court in CharanLalSahu suggested that the Fatal Accidents Act be amended to provide for a fixed compensation amount to be paid on a “no fault liability” basis.⁶

Second, even where fault is ultimately proved, since the law does not provide for any interim compensation, no relief is provided to the victim during the trial. Significant delays in the system exacerbate this problem and can prevent a poor litigant from pursuing the claim or compel him/her to settle the case for a small amount of compensation.⁷ For this reason, in Charan Lal Sahu, the Hon’ble Supreme Court recommended that the adjudicatory authority be empowered to provide interim relief in appropriate cases.⁸

Third, since compensation is to be recovered only from the wrongdoer, if no wrongdoer is identified, or if his/her fault is not proved, the victim is left to his or her own devices and receives no compensation. For this reason, the Hon’ble Supreme Court in Charan Lal Sahu recommended the creation of an Industrial Disasters Fund to provide immediate effective relief without needing to identify and prove the fault of any wrong doer.⁹

Fourth, even if fault is proved, the amount of compensation is limited by the wrongdoer’s ability to pay. In cases where the wrongdoer has a limited capability to pay (or, as in the case of the Bhopal gas tragedy, where the wrongdoer has ensured that their liability is limited), the victim is left uncompensated to that extent. The FAA is therefore focused on the wrongdoer’s fault and ability to pay as opposed to the victim’s entitlement to compensation or his/her requirement for rehabilitation. In this context, the Hon’ble Supreme Court recommended in Charan Lal Sahu that industries and concerns engaged in hazardous activities should be compulsorily required to take insurance against potential liability.¹⁰ Such an insurance mechanism will ensure that the claimant receives the compensation he/she is entitled to, even where the defendant’s ability to pay is limited.

Fifth, the FAA does not quantify the amount of compensation to be paid under that law. Nor does it provide any method for calculating the amount to be awarded as compensation. This leads to uncertainty as to the amount of compensation and can further inhibit poor litigants from pursuing a claim.¹¹ It may be noted that the FAA provides that “the Court may give such damages as it may think proportioned to the loss resulting from such death to the parties respectively, for whom and for whose benefit such action shall be brought.” The law therefore principally focuses on compensating for the pecuniary loss to each beneficiary under the Act, which is generally accomplished by using the multiplier method.¹² However, this method links the determination of the compensation amount to the earning capacity of the deceased. As such, the method provides for regressive compensation since it affords lesser compensation for the death of a poorer person and more for the death of a rich person.¹³ Given that the financial needs of the poorer family are likely to be more urgent than the financial needs of the richer family (because for a high income earner a higher proportion of the income can be used for savings and wealth creation), the method goes against the norms of social justice and equal moral worth of individuals.¹⁴

The inadequacy of this regressive compensation systemis also aggravated dueto existing social inequalities because of which the work of many individuals is either not compensated through wages in the wage market (such as housewives), or is compensated less because of prevailing social attitudes about such work (such as domestic labour).¹⁵ By providing lower compensation for the death of such individuals, the law reinforces the social structures that de-emphasize the value of the work done by such individuals in the first place. Therefore, in seeking to bring the claimant back to the position s/he would have been in had the tort not occurred, this approach incorrectly assumes that the initial position is itself “natural, neutral and unproblematic.”¹⁶

Sixth, the FAA requires plaintiffs to pursue their claims in civil courts by following ordinary civil procedure. In light of the potentially vulnerable position of the plaintiff, the delays in the judicial system and the high cost of litigation in ordinary courts can dissuade plaintiffs from either pursuing their claims, or can force them to settle with the defendant for a small amount.¹⁷ There is need, therefore, for providing a less cumbersome procedure for claiming compensation. As recommended by the Hon’ble Supreme Court in Charan Lal Sahu, the Act needs to be amended to provide for a special forum and simplified procedure, which is “conducive to the expeditious determination of claims.”¹⁸

Seventh, the FAA provides a limited list of beneficiaries who can claim under the Act. It restricts beneficiaries to a grandparent, parent, spouse, child and grandchild of the deceased. However, the Act is not in consonance with other laws that provide a wider list of beneficiaries and recognize that in the Indian familial context, a larger category of persons may be dependent upon the deceased, including siblings, in- laws, aunts and uncles, etc.¹⁹ In its 111^th Report, the Law Commission pointed out this inadequacy of the FAA, and recommended that the list of beneficiaries be expanded keeping in mind changes to the Fatal Accidents Act in England, as well as the list of beneficiaries under other laws in India.²⁰

Finally, all the arguments above can be extended to not only death but alsoto other serious injuries, especially those resulting in severe permanent disablement. While the FAA does not deal at all with injuries that do not result in death, the general tort law captures these cases. Here too, the law is not sensitive to the disruption and vulnerability to destitution that serious injury (especially serious permanent disablement) can cause to the victim or his/her family.

2. Motor Vehicles Act, 1988

The Motor Vehicles Act, 1988 is probably the most used statutory compensation regime. However, despite providing for no-fault liability, the Act contains problems and loopholes that need to be addressed.

First, the Solatium Scheme under Section 161 only covers ‘hit and run’ situations, where the vehicle or its owner has not been identified. No cover is provided for those cases where the owner of the vehicle is identified but s/he does not have insurance and does not have the ability to pay. So also, gratuitous passengers in vehicles that only have third party insurance are also not covered under this scheme. According to the Hon’ble Supreme Court in Jai Prakash v. National Insurance Company,²¹ around 20% of all victims of Motor Vehicles Accidents fall into these categories. Further, the amount of solatium for a fatal accident is Rs. 25000/-. This amount has not been revised since 1994 and is wholly inadequate to provide financial relief to the dependents of a victim in the immediate aftermath of a death. For this reason, in Jai Prakash the Hon’ble Supreme Court called for an increase in the solatium amount under Section 161.²²

Second, both Section 140 and Section 163A provide for no-fault liability. However, while the compensation under Section 140 is fixed at Rs. 50000/-, the compensation under Section 163A is provided on the basis of a structured formula that takes into account the age and income of the victim. The minimum amount to be recovered under Section 163A is Rs. 50000/-.²³ Therefore, in effect, Section 140 is subsumed within Section 163A. The only difference between the two, in relation to fatal accidents, is that the compensation under Section 140 is available as an interim relief, whereas Section 163A requires a final determination before the compensation is paid.²⁴ However, since a litigant is required to choose between Section 140 and Section 163A,²⁵ in effect, if a person opts for the structured formula, no interim relief will be available to them. There is need therefore to re-visit the usefulness of Section 140, and modifythe MV Act so as to provide effective interim relief measures.

In addition, as per the decision of the Hon’bleSupreme Court in Deepal Girishbhai Soni v. United India Insurance Co. Ltd., Baroda,²⁶ the option to avail of the structured scheme is only available for the death of persons who have an income upto Rs. 40000/- per annum. According to the Hon’ble Supreme Court, persons earning above this income cannot take benefit of the no fault liability regime in Section 163A. The low cap on income, along with the exclusion of persons earning more than Rs. 40000/- from the structured scheme, limits the applicability of this beneficial provision in a large number of cases, and pushes such litigants to claim compensation through the long-drawn out and uncertain fault liability process.

Third, the provisions in relation to non-earning persons creates an anomaly in the law. The notional income for a non-earning person is taken to be Rs. 15000/-. However, in case a person is actually an income earner, the actual income, even if it is less than Rs. 15000/- is used for the purpose of calculating the compensation amount. As a result, the death of a non-earning person may be compensated at a higher rate than the death of an earning person in many cases. The Hon’ble Supreme Court noted this anomaly in Sarla Verma v. Delhi Transport Corporation.²⁷

Forth, the provision in the Second Schedule for non-earning spouses is also problematic. Take the example of a family of 3 persons: father (with annual income of Rs. 30000/-), mother (a homemaker with no income), a child aged 6 years (with no income). If the mother and child die in a motor accident, the compensation calculation will be as follows:

The schedule fixes the notional income of a non-earning person at Rs. 15000/-. This means that for the child, the compensation amount would be Rs. 15000 x 15 (the multiplier) = Rs. 225000/- less 1/3^rd as deduction for own living expenses = Rs.1,50,000/-In the same family, a non-earning spouse’s income, in this case the mother’s, will be calculated as 1/3^rd the husband’s income = Rs. 10000/-. If she was 30 years old at the time of death, the compensation amount would be Rs. 10000 x 18 =180000 less 1/3^rd for her own living expenses. In effect, the death of the mother will be compensated at a rate less than that of a small child, unless the spousal income is Rs. 45000/- or more. This anomaly arises because there is no lower cap on the notional income of the non-earning spouse.

Further, there is no rational basis in fixing the notional income of non-earning spouse at 1/3^rd of the earning spouse. This amount may not adequately represent the contribution of the non-earning spouse to the household, or to the earning potential of the earning spouse, or her contribution to the economy in general. The Hon’ble Supreme Court has recognized that “the services produced in the home by the women for other members of the household are an important and valuable form of production.”²⁸ So also, the Madras High Court in National Insurance Co. Ltd. v. Minor Deepika,²⁹ has held that a gender just model of compensation would consider marriage an equal partnership between both the spouses, and would recognize the contribution of a non-earning spouse in the income generated by the earning spouse. As such, the High Court recommended that the economic contribution of the non-earning spouse be fixed at half the income of the earning spouse, in recognition of the non-earning spouse’s equal contribution to the family income.

Fifth, as the Hon’ble Supreme Court has itself recognized in U.P. State Road Transport Corporation v. Trilok Chand,³⁰ that the Second Schedule is riddled with mathematical errors. There is urgent need to rectify these mistakes and bring clarity to the law.³¹

Finally, for cases that do not fall under Section 163-A, or for persons who opt for compensation on the basis of fault under Section 166, there is no certainty as to the principles on the basis of which compensation will be calculated. At the Hon’ble Supreme Court has pointed out in Sarla Verma v. Delhi Transport Corporation,³² even when the courts/tribunals apply the multiplier method, different judges use different multipliers for the same age group; account differently for future prospects in calculating the income; and make different deductions for the deceased’s own living expenses. Therefore, disparities abound in the calculation of compensation because of which the amount of compensation to be awarded becomes judge-centric.

3. Railways Act, 1989

The Railways Act provides for no-fault liability of the railways in all cases of death and personal injury that result from accidents or untoward incidents involving trains. The quantum of compensation for death is fixed at Rs. 4,00,000/- regardless of the age or income of the victim.³³ While on the one hand, this scheme provides equal compensation to all persons, and is therefore egalitarian in spirit, the amount of compensation was last revised in 1997, and is wholly inadequate to provide just compensation to many victims whose pecuniary and non-pecuniary loss exceeds this amount. Even the Motor Vehicles Act, 1988 allows for compensation amounts to the extent ofRs. 5,33,333/- plus other damages, under the no-fault liability regime.

If victims of railways accidents desire higher compensation amounts, they are required to file civil suits under the general tort law, and prove fault on part of the railways. However, if they do proceed under the general tort law, claimants are barred from receiving compensation under the no-fault regime. In effect therefore, victims have to choose between a very inadequate, but more readily accessible compensation system, or adequate compensation which is accessed through a cumbersome procedure.

4. Public Liability Insurance Act, 1991

The Public Liability Insurance Act provides for no-fault liability for accidents arising out handling of hazardous substances. The compensation in case of death under this scheme is fixed at Rs. 25,000/- along with medical expenses upto a maximum of Rs. 12,500/-. If a claimant seeks higher compensation, he or she has to approach the civil court and pursue a claim under the general tort law. The Public Liability Insurance Act therefore provides very minimal and wholly inadequate relief in case of accidents. For all practical purposes, a claimant has no option but to resort to lengthy and cumbersome civil remedies under the general tort law. This inadequate no-fault liability structure is particularly problematic in light of India’s historical experience with mass torts, especially the Bhopal Gas Tragedy case, which resulted, inter-alia, from a mishandling of hazardous material; and in light of the Hon’ble Supreme Court’s decision in M. C. Mehta v. Union of India,³⁴ holding that,

“We are of the view that an enterprise which is engaged in a hazardous or inherently dangerous industry which poses a potential threat to the health and safety of the persons working in the factory and residing in the surrounding areas owes an absolute and non-delegable duty to the community to ensure that no harm results to any one on account of hazardous or inherently dangerous nature of the activity which it has undertaken. The enterprise must be held to be under an obligation to provide that the hazardous or inherently dangerous activity in which it is engaged must be conducted with the highest standards of safety and if any harm results on account of such activity, the enterprise must be absolutely liable to compensate for such harm…”

For all these reasons, it is recommended that the current Fatal Accidents Act be repealed and replaced with a new law. So also, the Motor Vehicles Act, Railways Act, and Public Liability Insurance Act, be amended to bring about consistency and uniformity in the laws, as well as to remove gaps and align the laws with their social welfare function. However, it is more appropriate to frame and enact a comprehensive law providing for compensation for death and injury.

REFERENCE:

1. Similarly, under Section 357A, CrPC, victims of crime are entitled to differential rates of compensation, which varies from state to state. For e.g., under the Delhi Compensation Scheme 2015, the compensation for loss of life is between Rs. 3-10 lakhs. On the other hand, Orissa compensates Rs. 1.5 lakhs for the loss of life of an earning member and Rs. 75000/- for the loss of life of a non-earning member; and Tamil Nadu compensates upto Rs. 3 lakhs.

2. In Manjusri Raha v. B.L. Gupta, [1977] 2 SCR 944, the Hon’ble Supreme Court took strong objection to varying amounts of compensation for Motor Vehicle Accidents on the one hand, and aircraft accidents on the other, calling such an “invidious distinction…absolutely shocking on a judicial or social conscience..” The Law Commission in its 149th Report stated that “there is no valid justification for such disparity,” and therefore called for uniformity in compensation amounts provided under various laws. Law Commission of India, 149th Report on Removing Certain Deficiencies in the Motor Vehicles Act 10-11 (1994).

3. See generally Manjushri Raha v. B.L. Gupta, [1977] 2 SCR 944 (stating that “[H]uman lives lost in motor accidents leav[e] a trail of economic disaster in the shape of their unprovided for families [and] call for special attention of the law makers to meet this social need by providing for heavy and adequate compensation particularly through insurance companies..... [T]he death of a worker creates a serious economic problem for the family which he leaves behind. In these circumstances it is only just and fair that the Legislature should make a suitable provision so as to pay adequate compensation by properly evaluating the precious life of a citizen in its true perspective...”).

4. See Law Commission of India, 149th Report on Removing Certain Deficiencies in the Motor Vehicles Act 2 (1994).

5. Id.

6. Charan Lal Sahu, para. 167.

7. See Law Commission of India, 149th Report on Removing Certain Deficiencies in the Motor Vehicles Act 2 (1994) (discussing how an inadequate legal system forces claimants to settle disputes for small amounts).

8. Charan Lal Sahu, para. 167.

9. Charan Lal Sahu, para. 138.

10. Charan Lal Sahu, para. 167.

11. See Arun Kumar Agarwal v. National Insurance Co. Ltd., (2010) 9 SCC 218 (disapproving the practice of courts and tribunals of providing widely disparate amounts of compensation).

12. General Manager, Kerala S.R.T.C v. Susamma Thomas, AIR 1994 SC 1631.

13. The term “regressive” does not imply a value judgment but a factual description of the operation of the multiplier method. That is, the multiplier method operates to provide more compensation to the wealthy and lesser to the less well off, in contrast to, say, “progressive” taxation which taxes the higher incomes earners more than the lower income earners.

14. Tsachi Keren-Paz, Torts, Egalitarianism and Distributive Justice 67 (2007).

15. See e.g., Arun Kumar Agarwal v. National Insurance Co. Ltd., (2010) 9 SCC 218 (per Justice A. K. Ganguly, stating that “that time has come for Parliament to have a rethinking for properly assessing the value of homemakers and householder’s work and suitably amending the provisions of the Motor Vehicles Act and other related laws for giving compensation when the victim is a woman and a homemaker”).

16. Tsachi Keren-Paz, Torts, Egalitarianism and Distributive Justice 67 (2007); Richard Abel, A Critique of Torts, 37 UCLA L. Rev. 785 (1990).

17. This concern was raised by the Law Commission in its 149th Report as well. See Law Commission of India, 149TH Report on Removing Certain Deficiencies in the Motor Vehicles Act, 1988 (1994).

18. Charan Lal Sahu, para 167.

19. See also Law Commission of India, 111th Report on the Fatal Accidents Act 16 (1985) (recommending that the list of beneficiaries under the FAA be expanded keeping in mind the Indian scenario).

20. Id.

21. (2010) 2 SCC 607.

22. Id.

23. Second Schedule, cl. 1(b), Motor Vehicles Act, 1988.

24. (2004) 5 SCC 385.

25. As per Section 163B, which provides that “Where a person is entitled to claim compensation under Section 140 and Section 163-A, he shall file the claim under either of the said sections and not under both.”

26. (2004) 5 SCC 385.

27. (2009) 6 SCC 121.

28. Arun Kumar Agarwal v. National Insurance Co. Ltd., (2010) 9 SCC 218.

29. (2009) 6 MLJ 1005.

30. (1996) 4 SCC 362.

31. See also Sarla Verma v. Delhi Transport Corporation, (2009) 6 SCC 121.

32. Id.

33. Railways Accidents and Untoward Incidents (Compensation) Rules, 1997.

34. AIR 1987 SC 1086.

Received on 17.05.2018 Modified on 19.06.2018

Res. J. Humanities and Social Sciences. 2018; 9(2): 469-474.

DOI: 10.5958/2321-5828.2018.00079.7

Efficacy of Compensatory Laws

1. Fatal Accidents Act, 1855

2. Motor Vehicles Act, 1988