National Insurance Company Ltd vs Gurbax Kaur And Ors

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The appellant/insurance company challenged an award dated 03.09.2019 passed by the Motor Accident Claims Tribunal, Shaheed Bhagat Singh Nagar, whereby compensation of Rs.23,50,000/- with interest at 7.5% per annum was awarded to the claimants/dependents of the deceased Vijay Singh Bhogal who died in a motor vehicular accident on 10.09.2018 due to rash and negligent driving of respondent No.5/driver. The insurance company contended that income tax paid by the deceased ought to have been deducted from his assessed income, that a multiplier of 3 instead of 5 should have been applied given the deceased's age of 71 years as per National Insurance Company Ltd. v. Pranay Sethi, and that liability could not be fastened on the insurer as the offending vehicle lacked a valid fitness certificate at the time of the accident.

The High Court examined the Income Tax Return of the deceased for assessment year 2017-18 which disclosed a gross taxable income of Rs.9,11,997/- per annum with a tax liability of Rs.2,96,735/- and additionally exempted/non-taxable income of Rs.68,37,594/- comprising agricultural and other income. Relying on Shyamvati Sharma v. Karam Singh and K. Ramya v. National Insurance Co. Ltd., the Court held that notwithstanding the devolution of exempted income upon the dependents, the loss of the deceased's managerial skills warranted inclusion of a portion of such income. The Court further held that failure to maintain a valid fitness certificate did not breach the terms of the insurance policy so as to absolve the insurer of liability.

The appeal filed by the insurance company for reduction of compensation was dismissed, affirming the award of the Tribunal in favour of the claimants.

Catchwords: motor accident claim · compensation · loss of dependency · multiplier · income tax deduction · fitness certificate · insurance liability · managerial skills · exempted income · agricultural income · rash and negligent driving