Motor Vehicles Act, 1988: s. 168 – Motor Accident – Quantum of Compensation – Determination of – Loss of Income – Notional Income – Reliability on income tax returns and audit reports – Death of a businessman in a motor accident – Grant of compensation to deceased’s dependants-appellants while relying on income tax returns and other financial documents – In appeal by the Insurance Company, the compensation reduced on the ground that the tribunal erred in calculating ‘loss of income’ – High Court held that deceased’s income consisted returns over capital assests, which were transferred to his legal heirs who continued to enjoy the benefits derived from them; income derived from capital assets cannot be said to be income earned out of the deceased’s personal skills as there was no real contribution by him; deceased’s dependants suffered no loss of income and instead computed the compensation by fixing his salary at Rs 25,000/- per month on a notional basis as per his educational qualification – On appeal, held: Compensation must be fair, reasonable, and equitable – Determination of quantum must be liberal and not parsimonious – Documents such as income tax returns and audit reports are reliable evidence to determine the income of the deceased – Entire amount from the business ventures must be treated as income, as deceased was actively involved in the day-to-day administration of the businesses from their stage of infancy – Computation under income from house property and agricultural land is related to loss of dependency arising mainly out of loss of managment capacity or efficiency – Value of managerial skills to be determined along with the other considerations – In view thereof, compensation modified to Rs.2,27,12,400/- with interest at the rate of 7.5% p.a.
Allowing the appeal, the Court
HELD: 1.1 Compensation must be fair, reasonable and equitable. Further, the determination of quantum is a fact-dependent exercise which must be liberal and not parsimonious. It must be emphasized that compensation is a more comprehensive form of pecuniary relief which involves a broad-based approach unlike damages. The Tribunals under the Motor Vehicles Act have been granted reasonable flexibility in determining ‘just’ compensation and are not bound by any rigid arithmetic rules or strict evidentiary standards to compute loss unlike in the case of damages. [Para 11][246-A-C]
1.2 Motor Vehicles Act of 1988 is a beneficial and welfare legislation that seeks to provide compensation as per the contemporaneous position of an individual which is essentially forward--looking. Unlike tortious liability, which is chiefly concerned with making up for the past and reinstating a claimant to his original position, the compensation under the Act is concerned with providing stability and continuity in peoples’ lives in the future. [Para 12][246-D]
1.3 The High Court set aside the same on the ground that the income earned was out of capital assets and cannot be said to have been earned out of personal skills of the deceased. It consequently went on to determine the income of the Deceased on a notional basis as per his educational qualification. Unfortunately, such an approach is erroneous in view of the decisions of this Court, wherein this Court has held that documents such as income tax returns and audit reports are reliable evidence to determine the income of the deceased. [Para 14][247-A-C]
1.4 Compensation must be modified, especially when neither any additional evidence has been produced to showcase that the income of the Deceased was contrary to the amount mentioned in the audit reports nor it is the stand taken by the Insurance Company that the said reports inflated the income. [Para 14][247-C]
1.5 It would be pertinent to divide the income as mentioned in the audit reports into two parts-(a) Income from Business Ventures and other Investments and (b) Income from House Property and Agricultural Land. Moreover, it deserves to be clarified that the income under the abovementioned two parts have been computed at gross value as per the audit reports and includes the deductions such as interest paid on loans and expenses incurred by the deceased. [Para 15][247-A-C]
1.6 The mere fact that the Deceased’s share of ownership in these businesses ventures was transferred to the Deceased’s minor children just before his death or to the dependents after his death is not a sufficient justification to conclude that the benefits of these businesses continue to accrue to his dependents. On the contrary, it has come on record that the Deceased was actively involved in the day-to-day administration of these businesses from their stage of infancy, had undergone specialized training to administer his business and that the audit reports neatly delineate Deceased’s share of income from the businesses. These facts necessitate that the entire amount from the business ventures is treated as income. Similarly, the amount earned from the bank interests and remaining investments must also be included as income. [Para 17][248-B-D]
1.7 For computation of income from house property and agricultural land, loss of dependency arises mainly out of loss of management capacity or efficiency. As a rule of prudence, computation of any individual’s managerial skills should lie between 10 to 15 per cent of the total rental income but the acceptable range can be increased in light of specific circumstances. The appropriate approach, therefore, is to determine the value of managerial skills along with any other factual considerations. [Para 21][249-F-G; 250-A]
1.8 The remaining amount which has been deducted by us includes the tax which has to be deducted in terms of the decision in Pranay Sethi’s case. [Para 23][250-E]
Amrit Bhanu Shali v National Insurance Co. Ltd., (2012)
11 SCC 738: (2012) 5 SCR 207; Kalpanaraj v Tamil Nadu State Transport Corpn, (2015) 2 SCC 764: (2014)
6 SCR 577; Sarla Verma v DTC (2009) 5 SCR 1098; National Insurance Co. Ltd. v Pranay Sethi, (2017) 16 SCC 680: (2017) 13 SCR 100; United Insurance Company Ltd. v Satinder Kaur, (2021) 11 SCC 780 – relied on.
Rani Gupta v United India Insurance Limited, (2009)
13 SCC 498: (2009) 5 SCR 721; Helen C. Rebello v Maharashtra State Road Transport Corporation (1999)
1 SCC 90: (1998) 1 Suppl. SCR 684; United India Insurance Co. Ltd. v Patricia Jean Mahajan (2002) 6 SCC 281: (2002) 3 SCR 1176; New India Assurance Co. Ltd. v Charlie (2005) 10 SCC 720: (2005) 2 SCR 1173; National Insurance Co. Ltd. v Indira Srivastava (2008) 2 SCC 763: (2007) 13 SCR 352; Yadava Kumar v Divisional Manager, National Insurance Co. Ltd, (2010) 10 SCC 341: (2010) 10 SCR 746; Shashikala v Gangalakshmamma, (2015) 9 SCC 150: (2015) 5 SCR 1; State of Haryana v Jasbir Kaur (2003) 7 SCC 484: (2003) 2 Suppl. SCR 245 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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