Supreme Court Enhances Compensation in Motor Accident Case: Sangita Arya vs. Oriental Insurance Co. Ltd. (2020)

Date of the Judgment: June 16, 2020

Citation: (2020) INSC 463

Judges: R. Banumathi, J., Indu Malhotra, J., Aniruddha Bose, J.

Can a High Court disregard Income Tax Returns (ITRs) when calculating compensation in a motor accident claim? The Supreme Court addressed this question in a recent judgment, setting aside a High Court order that had significantly reduced the compensation awarded to the family of a deceased individual. The Supreme Court bench comprising Justices R. Banumathi, Indu Malhotra, and Aniruddha Bose, overturned the High Court’s decision, emphasizing the importance of considering all relevant financial documents and applying established legal principles for fair compensation. This case highlights the critical role of the judiciary in ensuring just outcomes for victims of motor vehicle accidents.

Case Background

On June 18, 2007, Harish Singh Arya, aged 35, was fatally injured in a motor vehicle accident. He had been accompanying his uncle, Govind Lal Arya, an Enforcement Officer for Passenger Tax, for an inspection. While Harish Singh Arya was attending to nature’s call on the side of the road, a speeding Tata Sumo hit him from the wrong side of the road. The accident occurred near Village Chandini, along the Tanakpur-Khatema Road in Uttarakhand. Harish Singh Arya succumbed to his injuries while being transported to a hospital in Bareilly. Govind Lal Arya filed the First Information Report (F.I.R.) at P.S. Banbasa.

The claimants, including the widow, two minor daughters, and parents of the deceased, filed a claim petition before the Motor Accident Claims Tribunal (MACT) at Haldwani, seeking compensation. They argued that the deceased owned two taxis and earned approximately Rs. 1,00,000 per annum after expenses. The claimants submitted Income Tax Returns (ITRs) for the years 2002-03, 2003-04, 2004-05, and 2006-07, with the 2006-07 ITR showing an annual income of Rs. 98,500. The MACT awarded a total compensation of Rs. 12,55,000, which included loss of dependency, loss of consortium, loss of love and affection, and funeral expenses.

Timeline:

Course of Proceedings

The Oriental Insurance Company, Respondent No. 1, appealed the MACT award to the High Court of Uttarakhand at Nainital. The High Court, in its judgment dated July 22, 2016, erroneously assumed that the deceased was a government servant and that he was running a parallel business by plying taxis. The High Court disregarded the ITR for the year 2006-07, which showed an income of Rs. 98,500, stating that it was filed almost one year after the death of the deceased. The High Court instead took the average income from the ITRs of 2002-03, 2003-04, and 2004-05, which was Rs. 52,635 per annum, and reduced the compensation to Rs. 5,81,440. The High Court also reduced the amounts awarded for loss of consortium and loss of love and affection.

Aggrieved by the High Court’s judgment, the claimants filed a civil appeal before the Supreme Court. The Supreme Court, while issuing notice to the respondents, noted that the deceased was not a government employee, as erroneously assumed by the High Court.

Legal Framework

The case primarily involves the interpretation and application of principles for determining compensation in motor accident claims. The relevant legal framework includes:

• The principles laid down in National Insurance Company Limited v. Pranay Sethi & Ors. [(2017) 16 SCC 680], which provides guidelines for determining future prospects and conventional heads of compensation.
• The principle of deduction for personal expenses as laid down in Sarla Verma & Ors. v. Delhi Transport Corporation & Anr. [(2009) 6 SCC 121], which states that in the case of five dependents, 1/4th of the income should be deducted towards personal expenses.
• The Supreme Court’s power under Article 142 of the Constitution of India to do complete justice between the parties.

Arguments

Claimants’ Arguments:

• The claimants argued that the High Court had erred in assuming that the deceased was a government employee. They submitted that the deceased owned two taxis and earned approximately Rs. 1,00,000 per annum from them.
• The claimants also contended that the High Court was wrong in disregarding the ITR for the year 2006-07, which showed an income of Rs. 98,500, and that the ITR was filed before the death of the deceased.
• The claimants relied on the judgment of the Constitution Bench in National Insurance Company Limited v. Pranay Sethi & Ors. [(2017) 16 SCC 680], to argue that future prospects should be added to the income of the deceased while calculating compensation.

Insurance Company’s Arguments:

• The Insurance Company argued that the High Court had correctly assessed the income of the deceased by taking the average of the ITRs for the years 2002-03, 2003-04, and 2004-05.
• The Insurance Company contended that the High Court was right in disregarding the ITR for the year 2006-07 as it was filed almost one year after the death of the deceased.

Issues Framed by the Supreme Court

The Supreme Court addressed the following issues:

1. Whether the High Court was correct in assuming that the deceased was a government employee and that his income from his taxi business should be disregarded for determining the compensation.
2. Whether the High Court was justified in disregarding the ITR for the year 2006-07 while assessing the income of the deceased.
3. Whether the claimants are entitled to future prospects as per the judgment in National Insurance Company Limited v. Pranay Sethi & Ors. [(2017) 16 SCC 680].

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court considered the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• The Supreme Court followed the principles laid down in National Insurance Company Limited v. Pranay Sethi & Ors. [(2017) 16 SCC 680]* to award future prospects at 40% of the income of the deceased.
• The Supreme Court followed the principle laid down in Sarla Verma & Ors. v. Delhi Transport Corporation & Anr. [(2009) 6 SCC 121]* to deduct 1/4th of the income towards personal expenses.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• Factual Accuracy: The Court emphasized that the High Court’s judgment was based on factually incorrect assumptions, particularly regarding the deceased’s employment status and the timing of the ITR filing.
• Income Assessment: The Court relied on the Income Tax Returns for the assessment years 2005-06 and 2006-07, which were filed before the death of the deceased, to determine the income of the deceased. It also relied on the assessment of the MACT.
• Application of Legal Principles: The Court applied the principles laid down in National Insurance Company Limited v. Pranay Sethi & Ors. [(2017) 16 SCC 680], to award future prospects and also the principles laid down in Sarla Verma & Ors. v. Delhi Transport Corporation & Anr. [(2009) 6 SCC 121], to determine the deduction towards personal expenses.
• Complete Justice: The Court exercised its jurisdiction under Article 142 of the Constitution of India to enhance the compensation and do complete justice between the parties.

The Supreme Court held that the High Court’s judgment was factually incorrect. The Court emphasized that the deceased was not a government employee, and the High Court had erred in disregarding the ITR for the year 2006-07. The Court noted that the ITR was filed before the death of the deceased. The Supreme Court also held that the claimants were entitled to future prospects as per the judgment in National Insurance Company Limited v. Pranay Sethi & Ors. [(2017) 16 SCC 680]. The Court stated, “We find that the Courts below have not awarded any amount towards future prospects, as mandated by the judgment of the Constitution Bench in National Insurance Company Limited v. Pranay Sethi & Ors.”. The Court also observed that the deduction towards personal expenses should be 1/4th as per the judgment in Sarla Verma & Ors. v. Delhi Transport Corporation & Anr. [(2009) 6 SCC 121]. The Court stated, “Given the fact that the deceased left behind five dependents, the deduction towards his personal expenses would be 1/4th as per the judgment of this Court in Sarla Verma & Ors. v. Delhi Transport Corporation & Anr.”. The Supreme Court exercised its jurisdiction under Article 142 of the Constitution of India to enhance the compensation and do complete justice between the parties. The court stated, “Even though the Claimants/Appellants herein did not file an Appeal against the Award dated 22.12.2009 passed by the MACT before the High Court, we deem it appropriate to enhance the compensation by exercising our jurisdiction under Article 142 of the Constitution of India in order to do complete justice between the parties.”

Key Takeaways

• High Courts must ensure factual accuracy when assessing compensation in motor accident claims.
• Income Tax Returns (ITRs) filed before the death of the deceased should be considered when determining the income of the deceased.
• Future prospects should be added to the income of the deceased as per the judgment in National Insurance Company Limited v. Pranay Sethi & Ors. [(2017) 16 SCC 680].
• The deduction towards personal expenses should be as per the judgment in Sarla Verma & Ors. v. Delhi Transport Corporation & Anr. [(2009) 6 SCC 121].
• The Supreme Court can exercise its jurisdiction under Article 142 of the Constitution of India to do complete justice between the parties.

Directions

The Supreme Court directed the Insurance Company to pay the enhanced compensation of Rs. 17,50,000 to the appellants within twelve weeks from the date of the judgment, after adjusting any amount that may have been paid. The amount payable to the appellants shall carry interest at 7.5% per annum from the date of filing the claim petition till the date of realization.

Development of Law

The ratio decidendi of this case is that the High Court should not make factually incorrect assumptions and should consider all relevant documents, including ITRs, while assessing compensation in motor accident claims. This case also reinforces the principle that future prospects should be added to the income of the deceased as per the judgment in National Insurance Company Limited v. Pranay Sethi & Ors. [(2017) 16 SCC 680]. The Supreme Court has reaffirmed its position that it can exercise its jurisdiction under Article 142 of the Constitution of India to do complete justice between the parties. There is no change in the previous position of law, but the case serves as a reminder to lower courts to diligently follow the established principles of law.

Conclusion

The Supreme Court allowed the appeal, setting aside the High Court’s judgment and enhancing the compensation awarded to the claimants to Rs. 17,50,000. The Court emphasized the importance of factual accuracy and the application of established legal principles in determining compensation in motor accident claims. The judgment underscores the Supreme Court’s commitment to ensuring justice for victims of motor vehicle accidents and their families.