Prefer DC rates over minimum wages for just compensation: High Court

The Punjab and Haryana High Court has held that compensation in accident cases should be based on the District Collector (DC) rates rather than the minimum wages rate when claimants establish that the victim was a resident of a particular city and earned a livelihood as a daily wager there.

“It is held that wherever the claimants are able to prove that the claimant/deceased was a permanent resident of a particular city and was earning his livelihood as a daily wager in a particular city, the DC rates would be applicable and attracted, rather than the minimum wages rate…,” Justice Alok Jain asserted.

The Bench made it clear that minimum wages could not be the sole criterion for assessing income in motor accident claims, as they failed to account for regional economic variations. DC rates, being region-specific and reflecting localized employment conditions, provided a more accurate assessment of actual earnings.

The central issue before the court was whether the Motor Accident Claims Tribunal (MACT) had correctly computed the victim’s income using DC rates in a fatal accident case or whether it should have applied the Minimum Wages Act.

The insurance company contended that the victim’s income should have been assessed based on the state government’s fixed minimum wages. But Justice Jain rejected the argument, holding that DC rates better reflected actual earnings.

“In a situation where compensation has to be awarded and it is proved that a deceased was earning a living in a particular city, the DC rates would generally tend to give a better picture of the earning capacity of the deceased,” Justice Jain noted.

The court was of the opinion that the Minimum Wages Act provided statutory guidelines for scheduled industries, but DC rates served as a more realistic benchmark for informal and localized employment.

“The DC rates are tailored to be in tune with local economic conditions, considering factors like the cost of living, availability of labor, and district-specific industrial requirements, making them a more realistic benchmark for wage comparison within a region. The Minimum Wages Act, on the other hand, provides uniform statutory wages, but these may not adequately capture regional differences vis-à-vis informal employment,” Justice Jain observed.

The Bench added that DC rates, revised periodically to account for inflation and cost-of-living changes, offered a more precise reflection of actual earnings in motor accident cases.

“DC rates are reviewed annually to accommodate inflation and changes in cost of living so that they capture the real economic conditions prevailing when the incident occurred. They are, therefore, very appropriate to use in motor accident compensation cases, where income estimation should be both timely and reasonably accurate,” the Bench asserted.