Allahabad High Court overrules Railway Tribunal’s 90% compensation hold

The court did not strike down Rule 5 in its entirety but read down the contentious provisions to enable claimants to receive the compensation from the railways while retaining specific protections for minors and persons of unsound mind.

Justice Rohit Ranjan Agarwal read down the provisions governing the release and protection of railway accident compensation. (Image enhanced using AI)

90 per cent compensation held back

The dispute arose from Rule 5 of the Railway Claims Tribunal Rules, 1990, introduced through a June 3, 2020 notification of the Union Ministry of Railways following directions issued by the Delhi High Court concerning the protection and disbursement of compensation.

Rule 5.1 empowered the RCT to protect an awarded sum, having regard to illiteracy or other disabling factors, by directing payment through annuities, fixed deposits or another suitable mode. Rule 5.4.1 also required the tribunal to examine a claimant’s financial condition and needs and decide the mode of disbursement and amount to be kept in fixed deposit.

The rule further imposed restrictions on bank accounts, including directions concerning cheque books and debit cards. In the cases before the High Court, the RCTs had relied on these provisions to release only 10 per cent of the compensation and keep the remaining 90 per cent in an interest-bearing account in a nationalised bank.

The court noted that the compensation under the relevant provision could go up to Rs 8 lakh in cases of death or injuries of such a nature that a passenger was deprived of the capacity to work. It pointed out that applying the 10 per cent formula to an Rs 8 lakh award would mean releasing only Rs 80,000 and keeping Rs 7.20 lakh in a fixed deposit for three years.

‘Reading down’ of legal provisions

Reading down is interpreting a legal provision in a restricted or narrower manner to limit its scope or application.

The court held that Rule 5.1 and Rule 5.4.1 effectively created a distinction between claimants based on literacy and financial position. It said railways are used by both rich and poor and by literate and illiterate people, and a rule could not be framed on the assumption that an illiterate claimant would necessarily be exploited by lawyers, agents or middlemen.

The court also referred to the widespread availability of bank accounts and noted that people with weaker financial backgrounds manage their financial affairs through banking facilities. It found no material before it to establish that illiterate or financially weak claimants could not manage the compensation awarded to them.

The court was also critical of the tribunal assessing a claimant’s need after an award had already been made. “Need of a claimant cannot be gauged by RTC,” it said. It held that the restrictions on cheque books and debit cards were excessive. The tribunal could direct a claimant who did not have an appropriate bank account to open one, but the mere fact that a claimant belonged to a weaker financial section could not justify curtailing access to the compensation.

Rules can’t curb benefit granted by Act

The court said the Railways Act provides compensation for death or injury arising from an untoward incident, and subordinate rules cannot curtail the benefit granted by the legislation.

“Once the Act provides for the compensation on account of an untoward incident, it cannot through subordinate legislation like the Rules of 1990 curtail the benefit extended by the tribunal to a claimant. The rules are there to facilitate the Act and not to curb its power,” the order said.

The court found that withholding 90 per cent of the awarded amount created a barrier between claimants and that the distinction based on literacy and financial position was inconsistent with Article 14 of the Constitution. It also noted that the legislation governing railway compensation is beneficial in nature and that its object is to extend the benefit to claimants in cases involving death or injury of passengers.