SC lays down guidelines to calculate notional income of homemakers for compensation

SC lays down guidelines to calculate notional income of homemakers for compensation

It is a step towards the constitutional vision of social equality and ensuring the dignity of life to all individuals, the Court said

A Supreme Court bench comprising of Justices Surya Kant and N.V. Ramana in the case of Kirti & Anr. Etc vs Oriental Insurance Company Ltd. on 5 January 2021 observed, "It signals to society at large that the law and the courts of the land believe in the value of the labour, services and sacrifices of homemakers. It is an acceptance of the idea that these activities contribute in a very real way to the economic condition of the family, and the economy of the nation, regardless of the fact that it may have been traditionally excluded from economic analyses. It is a reflection of changing attitudes and mindsets and of our international law obligations."

It is a step towards the constitutional vision of social equality and ensuring the dignity of life to all individuals, the Court further added.

The civil appeals were filed by three surviving dependents (who are two minor daughters and father) of the two deceased, impugning the judgment earlier passed by the Delhi High Court through which the motor accident compensation of Rs 40.71 lakh awarded by the Motor Accident Claims Tribunal under Section 168 of the Motor Vehicle Act, 1988 (MVA).

The Tribunal had awarded a total sum of Rs 40.71 lakh for both deceased to the claimants. This computation was challenged by the respondent-insurer before the High Court on the ground that the tribunals had erroneously relied upon the minimum wage as notified by Government of Delhi as there was no proof that the deceased were employed in Delhi.

The High Court thus brought down the total compensation payable to the claimants to Rs 22 lakh. This reduction was assailed before the apex court by counsel for the claimants.

Counsel for the respondent-insurer on the other hand sought to forestall an increase in compensation, including under the ground to future prospects. It claimed that the High Court's decision was a consent order and that the counsel for the appellants had conceded to a lower computation under the head of loss of dependency, which thus cannot be challenged before this Court.

The Court after hearing both the parties analysed its judgment in three parts. The Court first dealt with the question of 'Deduction for Personal Expenses'. The Court highlighted, "any concession in law made in this regard by either counsel would not bind the parties, as it is legally settled that advocates cannot throwaway legal rights or enter into arrangements contrary to law. Any compensation awarded by a court ought to be just, reasonable and consequently must undoubtedly be guided by compensation principles of fairness, equity and good conscience."

Second, the Court dealt with the 'Assessment of monthly income' and held, "preserving the existing standard of living of a deceased's family is a fundamental endeavour of motor accident compensation law. Thus, at the very least the minimum wage of Rs. 6,197 as applicable to skilled workers during April 2014 in the State of Haryana ought to be applied in this case."

Third, the question before the court was of 'Addition of Future Prospectus'. The Court opined that it was unfair on part of the respondent-insurer to contest the grant of future prospects considering their submission before the High Court that such compensation ought not to be paid. Nevertheless, the law on this point is no longer res integra and stands crystalized.

The Court asserted that one method of computing the notional income of a homemaker is by using the formula provided in the II Schedule to the MVA, 1988 which has now being omitted by the Motor Vehicle (Amendment) Act, 2019. The II Schedule provided that the income of a spouse could be calculated as one-third of the earning surviving spouse.

The apex court framed four general observation for the purpose of grant of compensation regarding the issue of calculation of notional income for homeworkers. First, the grant of compensation, on a pecuniary basis for a homemaker is settled proposition of law.

Second, taking into account the gendered nature of housework, with the percentage of women being engaged in the same as compared to men the fixing of notional income of a homemaker attains special significance.

Third, while fixing notional income the court should neither assess the compensation too conservatively nor too liberally and various method can be employed by the court depending on the facts and situation of the case.

Fourth, the granting of future prospects, on the notional income calculated in such cases, is a component of just compensation. The apex court allowed the appeals and the compensation to the appellants were enhanced by Rs. 33.20 lakh, along with interest @ 9% p.a. shall be paid within two months from the date of filing of the Detailed Accident Report.