Supreme Court holds full deduction of Haryana compassionate assistance from motor-accident compensation; sets aside High Court's 50% approach

A bench of Justices Sudhanshu Dhulia and K. Vinod Chandran heard an appeal by New India Assurance Co. Ltd. challenging the manner in which the Punjab & Haryana High Court adjusted sums payable under the Haryana Compassionate Assistance to the Dependents of Deceased Government Employees Rules, 2006 while computing compensation under the Motor Vehicles Act, 1988. The core question concerned whether amounts payable under the Rules of 2006 ought to be wholly excluded from compensation awarded under the Motor Vehicles Act or only partially deducted.

The Court allowed the insurer's appeal and held that the High Court erred in deducting only fifty per cent of the compensation receivable under the Rules of 2006. The Supreme Court held that the relief granted to dependents under the Rules of 2006, being in the nature of pay and allowances, could not be paid twice and must be taken into account while fixing compensation under the Motor Vehicles Act; however, it clarified that no recovery would be ordered where such amounts had already been paid to the claimants. The Court relied on and applied its earlier precedents, including Reliance General Insurance Co. Ltd. v. Shashi Sharma and National Insurance Co. Ltd. v. Birender. The Court, in its reasoning, observed: “26. …The Claims Tribunal has to adjudicate the claim and determine the amount of compensation which appears to it to be just. The amount receivable by the dependents/claimants towards the head of pay and allowances in the form of ex-gratia financial assistance, therefore, cannot be paid for the second time to the claimants. True it is, that the Rules of 2006 would come into play if the Government employee dies in harness even due to natural death. At the same time, the Rules of 2006 do not expressly enable the dependents of the deceased Government employee to claim similar amount from the tortfeasor or Insurance Company because of the accidental death of the deceased Government employee. The harmonious approach for determining a just compensation payable under the Act of 1988, therefore, is to exclude the amount received or receivable by the dependents of the deceased Government employee under the Rules of 2006 towards the head financial assistance equivalent to “pay and other allowances” that was last drawn by the deceased Government employee in the normal course. This is not to say that the amount or payment receivable by the dependents of the deceased Government employee under Rule 5 (1) of the Rules, is the total entitlement under the head of “loss of income”. So far as the claim towards loss of future escalation of income and other benefits, if the deceased Government employee had survived the accident can still be pursued by them in their claim under the Act of 1988. For, it is not covered by the Rules of 2006…” The Court further observed that the High Court's departure from binding precedent amounted to a breach of Article 141: “we are surprised that the High Court … failed to follow the dictum … which is per-se in violation of Article 141 of the Constitution of India.”

Background The dispute arose from a claim petition under the Motor Vehicles Act filed by dependents of a deceased government employee. The Claims Tribunal awarded compensation, and the High Court reduced the award by only fifty per cent of the financial assistance payable under the Haryana Rules of 2006. The insurer challenged that approach before the Supreme Court, relying on the three-Judge Bench decision in Reliance General Insurance Co. Ltd. v. Shashi Sharma (2016) 9 SCC 627 which held that amounts falling under pay and allowances granted under compassionate assistance rules must be excluded from motor-accident compensation to avoid double recovery. The insurer also relied on the later decision in National Insurance Co. Ltd. v. Birender, where the Court allowed awards subject to adjustment if financial assistance under the Rules of 2006 became payable and required disclosure or an affidavit-cum-declaration before withdrawal of compensation. The Supreme Court recorded the insurer’s undertaking that it would not seek refund from claimants who had already received compensation from the High Court. The Court allowed the appeal, set aside the impugned judgment insofar as it deducted only 50% of the Rules of 2006 amount, and held that full consideration of sums receivable under the Rules must be made while computing motor-accident compensation; it clarified that no recovery would be ordered where such amounts had already been paid. Pending applications stood disposed of.

Case Details: Case No.: Civil Appeal @ SLP (C) No.9515 of 2020; 2025 INSC 469 Case Title: New India Assurance Co. Ltd. v. Smt. Sunita Sharma and Ors. Appearances: For the Petitioner(s): Counsel for New India Assurance Co. Ltd. (name not recorded in the judgment) For the Respondent(s): None appeared / no counsel on record for respondents as noted in the order