New India Assurance Co Ltd v. Sunita Sharma
Background
The dependents of a deceased Haryana government employee received compensation under the Motor Vehicles Act, 1988 following his death in a road accident, and were separately entitled to compassionate financial assistance under the Haryana Compassionate Assistance to the Dependents of Deceased Government Employees Rules, 2006. The High Court, while calculating the Motor Vehicles Act award, deducted only 50% of the amount payable under the 2006 Rules, despite an existing three-judge Supreme Court ruling (Reliance General Insurance v. Shashi Sharma) that had already settled how such deductions should work, and instead followed a contrary judgment of its own High Court.
Decision Breakdown
The Supreme Court held that the full amount receivable under the "pay and allowances" head of the state's compassionate assistance scheme must be deducted from the compensation payable under the Motor Vehicles Act, since that portion is meant to replace the same lost income and cannot be paid to the family twice, while other separate benefits like family pension, life insurance, or provident fund are unaffected and not to be deducted. The Court expressed clear disapproval that the High Court had knowingly ignored a binding three-judge Supreme Court precedent in favour of its own contrary decision, calling this a violation of Article 141 of the Constitution (which makes Supreme Court rulings binding on all courts). The appeal was allowed and the High Court's order corrected accordingly, with a clarification that no refund would be sought from the family for what they had already received.
Lesson Learnt
High Courts and lower courts are constitutionally bound to follow Supreme Court precedent even over their own prior rulings; families claiming both a government compassionate payout and Motor Vehicles Act compensation should expect the "loss of income" portion of the payout to be deducted from the accident compensation, to avoid double payment for the same loss.