The division judge bench of Justice Surya Kant and Justice V. Ramasubramanium of the Supreme court of India in the case of K. Ramya & Ors. V. National Insurance Co. Ltd. & Anr held that the compensation cannot be reduced on the basis that the deceased’s income is essentially constituted of returns from his capital assets which have been duly bequeathed to the Deceased’s dependents.
BRIEF FACTS
The factual matrix of the case is that the deceased met with an unfortunate accident due to which he died on the spot before any medical assistance could reach them. Further, the deceased dependents filed the claim petition for Rs 7,00,00,000/. The tribunal granted compensation of Rs 4,29,37,700/ along with interest at the rate of 7.5% per annum after concluding that the driver of the Ambassador Car who was solely responsible for the crash and therefore assigned liability for the accident to him, which ultimately was to be borne by the Insurance Company. The insurance company filed the appeal before the high court. The high court emphasized the fact that the Deceased had assigned his interest in a few partnership firms to his minor children prior to his passing. Additionally, it made clear that returns on his capital assets made up almost all of the deceased's income. Even after his passing, the same assets were given to his legal heirs, who kept receiving the advantages associated with them. Further, the high court reduced the compensation to Rs 57,90,000/ along with the interest of 7.5% per annum.
The learned counsel appearing on behalf of the appellant contended that the high court has committed a grave error by computing the compensation on the basis of notional income despite the fact that the Appellants adduced specific evidence to ascertain the income earned by the Deceased. It was further contended that the high court has unjustly concluded that the deceased has earned no income from his personal skills as he was actively involved in running many businesses and had also undergone so many specialized courses to achieve success.
The counsel further relied upon the judgment titled National Insurance Co. Ltd. v Pranay Sethi and stated that the only reduction deduction allowed while computing an individual’s income is the tax payable by him.
The learned counsel appearing on behalf of the Insurance company has contended that the high court has rightly reduced the compensation after taking into consideration the income tax report and audit reports that the Deceased’s income essentially constituted of returns from his capital assets which have been duly bequeathed to the Deceased’s dependents. It was further contended that the loss of income must be equivalent to only that portion that corresponds to the skill of the deceased. The learned counsel further relied upon the judgment titled Rani Gupta v United India Insurance Limited.
COURT’S OBSERVATION
DETERMINATION OF ‘JUST’ COMPENSATION UNDER A SOCIAL WELFARE STATUE
The hon’ble court held that Tribunals under the 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. Hence, any interference by the Appellate Courts should ordinarily be allowed only when the compensation is ‘exorbitant’ or ‘arbitrary’. Furthermore, the 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 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.
RELIABILITY OF INCOME TAX RETURNS AND AUDIT REPORTS TO DETERMINE ‘LOSS OF INCOME’.
The hon’ble court relied upon the judgments titled Amrit Bhanu Shali v National Insurance Co. Ltd. and Kalpanaraj v Tamil Nadu State Transport Corpn in which it was held that documents such as income tax returns and audit reports are reliable evidence to determine the income of the deceased. Hence, we are obliged to modify the compensation, 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.
The audit report was further divided into two parts (a) Income from Business Ventures and other Investments and (b) Income from House Property and Agricultural Land.
- Treatment of income from business ventures and other investments
The hon’ble court held that 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 daytoday administration of these businesses from their stage of infancy, had undergone specialized training to administer his business, and that the audit reports neatly delineate the 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.
- Treatment of income from house property and agriculture land.
The hon’ble court relied upon the judgment titled State of Haryana v Jasbir Kaur in which it was held that
“The land possessed by the deceased still remains with his legal heirs. There is however a possibility that the claimants may be required to engage persons to look after agriculture. Therefore, the normal rule about the deprivation of income is not strictly applicable to cases where agricultural income is the source. Attendant circumstances have to be considered.”
The hon’ble court observed that in our opinion, though made in the context of agricultural land, would also be applicable to rent received from leased out properties as the 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.
The hon’ble apex court decided to grant compensation of Rs 2,27,12,400/ along with the interest at the rate of 7.5% per annum.
CASE NAME- K. Ramya & Ors. V. National Insurance Co. Ltd. & Anr
CITATION- CIVIL APPEAL NO.7046 OF 2022
CORUM- Justice Surya Kant and Justice V. Ramasubramanium
DATE- 30.09.2022
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