2019 (12) TMI 1692 - SC - Indian Laws

Motor Vehicles Act Section 166 compensation awarded Rs 42,29,534 for 49-year-old deceased with 25% future prospects addition

Malarvizhi & Ors. Versus United India Insurance Company Limited & Anr.

Malarvizhi & Ors. Versus United India Insurance Company Limited & Anr. - 2019 INSC 1341, (2020) 4 SCC 228 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court are:(a) What is the correct annual income of the deceased for the purpose of computing compensation under Section 166 of the Motor Vehicles Act, 1988Rs.(b) Whether the income tax returns filed by the deceased should take precedence over other documentary evidence in determining the annual incomeRs.(c) Whether income from various sources including agricultural land, business, and contractual work should be aggregated for the purpose of compensation calculationRs.(d) Whether depreciation costs on fixed assets reflected in income tax returns should be added back to the annual incomeRs.(e) What is the appropriate multiplier and deduction for personal expenses to be applied in the calculation of loss of dependencyRs.(f) What heads of damages are payable to the appellants and the quantum thereofRs.2. ISSUE-WISE DETAILED ANALYSIS(a) Determination of Annual Income of the DeceasedRelevant legal framework and precedents: The Court relied on the Motor Vehicles Act, 1988, particularly Section 166, which governs compensation claims arising from motor accidents. The Court also referred to precedents including the Constitution Bench judgment in National Insurance Company Limited v Pranay Sethi and the decision in Sarla Verma v Delhi Transport Corporation for principles relating to future prospects, personal expenses deductions, and multiplier application.Court's interpretation and reasoning: The Tribunal initially computed the deceased's annual income by aggregating income from agricultural land, business, real estate, and contract work, arriving at Rs 4,60,298 and adding 30% for future prospects. The High Court, however, relied primarily on the income tax returns filed by the deceased for the financial year 1997-1998, which reflected an income of Rs 2,11,131, and added Rs 40,000 for future prospects to arrive at Rs 2,50,000.The Court held that income tax returns are statutory documents and should be the primary basis for determining annual income when available. The Tribunal's method of superimposing income from agricultural land contrary to income tax returns was held unsustainable. The Court also noted that the High Court's choice of the assessment year 1997-1998, which reflected the highest income in the relevant period, was reasonable and beneficial to the appellants.Key evidence and findings: The income tax return for 1997-1998 showed income from house property (Rs 1,920), business profit (Rs 1,21,071), and net agricultural income (Rs 88,140), totaling Rs 2,11,131. The appellants submitted over 52 documents indicating other income sources, but the Court found these insufficient to override the statutory income tax returns.Application of law to facts: The Court applied the principle that income tax returns, being statutory and formal declarations, are reliable indicators of income. It rejected the Tribunal's averaging method of agricultural income and held that the High Court's approach was correct.Treatment of competing arguments: The appellants argued for considering additional income sources and contractual work, but the Court found these claims unsupported by adequate evidence. The respondents supported reliance on tax returns, which the Court accepted.Conclusions: The Court fixed the annual income at Rs 2,11,131 based on tax returns and further added Rs 1,04,987, representing prepaid license fees from the deceased's wine business, as this was a prepaid expense covering future periods and thus part of income.(b) Treatment of Depreciation CostsRelevant legal framework and precedents: The Court referred to the accounting principle that depreciation is a deduction for the decline in asset value and does not constitute tangible income.Court's interpretation and reasoning: The appellants contended that depreciation costs reflected in the tax returns should be added back to the income. The Court rejected this, holding that depreciation is not income but a deduction and cannot be treated as income for compensation calculation.Key evidence and findings: Depreciation amounts of Rs 21,642, Rs 74,685, and Rs 7,701 were reflected in the tax returns but were not accepted as income.Application of law to facts: The Court applied accounting principles and precedent to exclude depreciation from income.Treatment of competing arguments: The appellants' argument was dismissed as contrary to accepted accounting and legal principles.Conclusions: Depreciation costs cannot be added to annual income for compensation purposes.(c) Calculation of Future Prospects and Deduction for Personal ExpensesRelevant legal framework and precedents: The Court applied the Constitution Bench judgment in National Insurance Company Limited v Pranay Sethi, which mandates a 25% addition for future prospects for self-employed persons. It also applied Sarla Verma for deduction of personal expenses, prescribing a 20% deduction for a married person with four to six dependents.Court's interpretation and reasoning: The Court added 25% to the annual income of Rs 3,16,118 (which included prepaid license fee) to arrive at Rs 3,95,147.5. It then deducted 20% for personal expenses, resulting in a net income of Rs 3,16,118 for compensation calculation.Key evidence and findings: The deceased was 49 years old, self-employed, with a wife and four daughters as dependents.Application of law to facts: The Court applied the prescribed percentages for future prospects and personal expenses as per binding precedents.Treatment of competing arguments: The appellants did not contest these percentages; the Court followed established principles.Conclusions: Future prospects were fixed at 25% addition and personal expenses at 20% deduction from annual income.(d) Application of Multiplier and Calculation of CompensationRelevant legal framework and precedents: The Court applied the multiplier of 13 as per Sarla Verma for the age group 46-50.Court's interpretation and reasoning: Multiplying the net annual income of Rs 3,16,118 by 13 yielded Rs 41,09,534 as loss of dependency.Key evidence and findings: The deceased's age was 49, justifying the multiplier of 13.Application of law to facts: The Court applied the multiplier to net income after future prospects and personal expenses adjustments.Treatment of competing arguments: No dispute on multiplier; the Court followed binding precedent.Conclusions: Loss of dependency was fixed at Rs 41,09,534.(e) Heads of Damages and QuantumRelevant legal framework and precedents: The Court referred to Pranay Sethi for heads of damages including funeral expenses, loss of estate, loss of consortium, and loss of love and affection.Court's interpretation and reasoning: The Court awarded Rs 15,000 each for funeral expenses and loss of estate, Rs 40,000 for loss of consortium, and Rs 50,000 for loss of love and affection.Key evidence and findings: The appellants included claims for these heads, which the Court accepted.Application of law to facts: The Court applied standard amounts as per precedent.Treatment of competing arguments: No contest on these heads; the Court awarded accordingly.Conclusions: Total additional damages amounted to Rs 1,20,000.(f) Interest Rate on CompensationRelevant legal framework and precedents: The Court fixed interest at 9% per annum from the date of filing the claim till payment, consistent with recent jurisprudence enhancing interest rates to compensate for delay.Court's interpretation and reasoning: The Court increased interest from the Tribunal's 7.5% to 9% per annum.Key evidence and findings: The claim was filed in 2001, and compensation was delayed.Application of law to facts: The higher interest rate was applied to justly compensate appellants for delay.Treatment of competing arguments: Not specifically contested.Conclusions: Interest fixed at 9% per annum on the awarded compensation.3. SIGNIFICANT HOLDINGS'The income tax return is a statutory document on which reliance may be placed to determine the annual income of the deceased.''Depreciation is the deduction allowed for the decline in the real value of tangible or intangible assets over its useful life. Its value varies over time and cannot amount to tangible income for the purposes of computing annual income in a claim before the MACT.''In accordance with the Constitution Bench judgment of this Court in National Insurance Company Limited v Pranay Sethi, 25% of the annual income is to be added for future prospects where the deceased is self-employed.''In accordance with paragraph 30 of the decision of this Court in Sarla Verma, the deduction for personal expenses for a married person where the dependents are between four to six people is 1/5th or 20%.''The multiplier to be applied when the deceased is between the age group 46 to 50 is 13.''The appellants shall be entitled to compensation under the heads of loss of dependency, funeral expenses, loss of estate, loss of consortium, and loss of love and affection.'Final determination on compensation: Rs 42,29,534 with interest at 9% per annum from the date of filing till payment.