Air India Flight Crash At Ahmedabad : Law On Victim Compensation Explained

The tragic crash of an Air India plane, Boeing 787 Dreamliner, just minutes after takeoff from Ahmedabad airport last week, has claimed more than 260 lives. It has caused collateral damage to the lives of young medical students as the plane crashed into the B.J. Medical College Hostel's mess. It has also caused damage to the properties nearby. This event has reportedly triggered what could be India's largest aviation liability, exceeding 1,000 crores.

In this article, we understand what kinds of liability arise because of this plane crash, and under which law.

What is the law that governs the present air crash?

The Air India plane was London-bound, which means it was an international flight. Therefore, the liability would be covered under an International Convention. In this case, the damage caused to the passengers will be governed under the Montreal Convention, 1999 (officially known as the 'Convention for the Unification of Certain Rules for International Carriage by Air').

The Montreal Convention under Article 1, clause 2 defines international carriage as a carriage in which the place of departure and the place of destination are situated in the territories of two States Parties.  

India ratified the Montreal Convention in 2009, and to its effect enacted the Carriage by Air (Amendment) Act, 2009. Apart from this, the tort law will also apply.

What are the types of liability that could arise?

In this case, the liability could be generally categorised in three parts: the liability of passengers dead and injured, the liability arising due to fatalities on the ground and the collateral damage (since the plane crashed in the medical college) and the damage caused to the aircraft.

Under the Montreal Convention, the liability is limited to 'persons, baggage, and cargo'. It will not cover the liability that will arise due to the fatalities on the ground and any other liability.

As per Article 17 of the Montreal Convention, the carrier (Air India) would be liable for damage sustained in the case of death or bodily injury to a passenger in an aircraft. But this is only if the accident took place on board the aircraft or in the case of any of the operations of embarking or disembarking. It is read with Article 21, which specifies the amount of compensation paid in this case.

Any other liability would potentially be covered under tort law and domestic law, if any. Whereas, the damage caused to the aircraft, known as hull loss, is usually covered under Air India's hull-risk insurance, if any. Reportedly, the estimated cost of the aircraft insured was between Rs. 1,040 crore to Rs. 1,450 crores during acquisition.

Calculation of liability

For the death of passengers

Under the Montreal Convention, Air India's liability for the death of the passengers would be calculated as per the '100,000 Special Drawing Rights' (SDR) specified under Article 21. This is strict liability, and Air India is bound to pay the compensation even without there being a requirement to prove negligence. It should be noted that strict liability under the tort laws has exceptions, including third-party negligence (Article 21(2), Montreal Convention).

Another point is that the Convention makes no distinction in terms of liability between the dead and those who suffered bodily injury. This is relevant to state because in the present case, a British citizen has survived.

SDR is basically an international reserve asset created by the International Monetary Fund, used to make global payments fair. The IMF sets the value of 1 SDR based on the basket of 5 major currencies: US Dollars, Euro, Chinese Yuan, Japanese Yen and British Pound.

The value of 1 SDR depends on the daily exchange rate of each currency, calculated as a percentage, with the highest being the US dollar. It is then converted into any local currency after a local court decides the liability. The SDR value is then converted as per the nationality of the passenger and the currency in use by that country.

Article 24 provides that the SDR amounts are reviewed and adjusted every 5 years for inflation. Thereafter, the current SDR amount as updated by the International Civil Aviation Organisation in October 2024 stands at 1,28,821 to 151,880.

Since '1 SDR' amounts to approximately Rs. 120, the per passenger liability drawn by Air India would be: 1, 28 821 x Rs 120= 1.54 crores, and it could extend to Rs. 1.82 crores.

If negligence is proved, additional compensation may also arise. Also, if the passengers had insurance, this would trigger an insurance claim as well.

It should be noted that the carrier can make advance payments, if required by its national law, to meet the immediate economic needs of such persons, such as the family members of the deceased. But such an advance payment shall not constitute a recognition of liability and may be offset against any amounts subsequently paid as damages by the carrier (Article 28 of the Montreal Convention).

The announcement by TATA Group to provide Rs.1 crore compensation to each passenger, including those young medical students, may be largely under the advance payment and any final payment can be settled against this amount.

How have Indian courts computed compensation in such cases?

In 2011, division bench judgment of the Kerala High Court, compriisng Justices CN Ramachandran Nair and Justice PS Gopinath, dealing with the 2010 Mangalore air crash, held as follows :

(1) The liability of the carrier for damages payable for the loss suffered on account of death or injury of a passenger in an air accident is unlimited. However, the carrier is liable to pay only actual damages proved by the claimants in the case of death and by the victims in the case of injury. The liability so payable can be determined through negotiated settlement or by civil court of competent jurisdiction. (2) Rule 21(1) of the Third Schedule to the Act or any other provisions of the Act or Rules does not provide for payment of any minimum compensation by the air company for death or injury of a passenger in an air accident. However, we feel the carrier as a matter  of goodwill as in this case should offer a reasonable minimum, even if the actual damages payable in law may be low, so that unnecessary litigation is avoided through settlement.

(3) Actual damages payable has to be claimed and proved by the injured or by the claimants for the death of passengers before the Civil Court if no settlement is reached between the claimants and the Air Company.

(4) The carrier is entitled under Rule 20 to plead and prove that the accident is caused on account of contributory negligence of the passenger as defence against damages claimed under Rule 21(1) for injury or for death of such passenger, which of course does not apply to the claims arising from this air crash.

(5) Irrespective of whether the accident is due to the negligence of the carrier or their servants or agents or not, or the accident is caused by third party, the carrier is liable to pay actual proved damages upto 1 lakh SDRs to the claimants of the deceased passenger or to the passenger injured in the accident. Where damages claimed is above 1 lakh SDRs, the carrier can resist the claim in excess of 1 lakh SDRs by pleading and proving that the accident was not caused on account of the negligence of the carrier or their employees or agents or that the accident was caused by the negligence or other wrongful act or omission of a third party. This is subject to the further condition that burden of pleading and establishing this defence is on the carrier, in the absence of which, there will be a presumption of negligence against the carrier entitling the claimant for actual damages irrespective of limit.

In another case of an individual, Air India was ordered to pay a compensation of Rs.7.64 crore to the legal heirs of an individual, employed as a Regional Director for the Middle Eastern Region with GTL Overseas, killed in the crash.

The compensation was ordered by the Supreme Court in Trivedi Kodkany v. Air India Ltd, based on the principles of computation of compensation laid down in National Insurance Company Ltd v. Pranay Sethi, including the income of the employee based on the entitlement.

In Pranay Sethi's judgment, a five-judge bench issued guidelines on the fixation of future prospects for deciding compensation in motor accident claims.

In Pranay Sethi, the Supreme Court said that while determining the income, an addition of 50% of the actual salary to the income of the deceased towards future prospects should be considered. While calculating this, the Court should consider factors like that the deceased had a permanent job and was below the age of 40 years.

The addition becomes 30%, if the deceased was between 40 to 50 years. It would become 15% if the deceased was between 50 to 60 years. If the deceased was self-employed or on fixed salary, an addition of 40% of the established income should be warranted where the deceased was below the age of 40 years. The percentage becomes 25, if the deceased was between 40 to 50 years and 10% if the deceased was between 50 to 60 years.

Further, the Court said that reasonable figures such as on loss of estate, loss of consortium and funeral expenses should be Rs. 15,000, Rs 40,000 and Rs. 15,000 each. These amounts should be enhanced at the rate of 10% every 3 years.

Another head is the deduction towards personal and living expenses. The Pranay Sethi followed the judgment of Sarla Verma & Ors v Delhi Transport (2009), wherein it was started that where the deceased was married, the deduction towards personal and living expenses should be 1/3rd, and where the number of family dependent is 2 to 3, it should be 1/4th and where the dependents are 4 to 5, it should be 1/5th.

If the deceased was a bachelor, the deduction rates are different.

The Trivedi judgment interpreted the expression “permanent job” as not intending to include only those individuals who are in the service of the government or industrial workmen protected under a statute.

In this case, Air India had paid Rs. 40 Lakhs to the parents of the deceased, and 4 crores to the surviving spouses and the two children.

As for the Air India crew, they will be entitled to the compensation as per their contracts, including the carrier's insurance policy.

For ground fatalities and collateral damage

LiveLaw spoke to Associate Professor Dr. Sai Ramani Garimella of the South Asian University, New Delhi, who said that it could trigger “class-action” because such events are generally classified as “mass disasters” where large-scale destruction and damage are caused to people and property. She added that when a class-action is triggered, there would be no distinction between passengers and those who died on the ground. Therefore, the amount wouldn't vary much.

“This is a developing area in the West. When there is a mass disaster, it is more likely that a class action may not ask for a strict proof of negligence is required. I am actually looking at this one from that perspective.” Dr Garimella said.

One of the world's deadliest mass disasters was the 1984 Bhopal Gas tragedy, which triggered absolute liability without any exceptions. In the landmark Union Carbide Corporation v. UOI(1991), the Supreme Court observed that if an enterprise engages in hazardous or inherently dangerious nature of activity, which poses a potential threat to the health and safety of the persons in and around the area, it owes an absolute and non-delegable duty to ensure that no harm results. It the absence of that, it cannot take the excuse that all reasonable care was taken and that the harm occurred without any negligence on its part.

Conclusion

Aviation-related investigations and claims are often one of the most complex and take years to settle. While that may be the general case, the Montreal Convention says that the compensation claims should be brought within 2 years of the incident.