K. RAMYA versus NATIONAL INSURANCE CO. LTD. & ANR.

Citation: [2022] 18 S.C.R. 238 · Decided: 30-09-2022 · Supreme Court of India · Bench: SURYA KANT · Disposal: Disposed off

Cited by 2 judgment(s) · cites 11 · see the full citation network in Lexace

Judgment (excerpt)

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238
SUPREME COURT REPORTS
[2022] 18 S.C.R.
K. RAMYA
v.
NATIONAL INSURANCE CO. LTD. & ANR.
(Civil Appeal No. 7046 of 2022)
SEPTEMBER 30, 2022
[SURYA KANT AND V. RAMASUBRAMANIAN, JJ.]
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.
   [2022] 18 S.C.R. 238
238
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239
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]
K. RAMYA v. NATIONAL INSURANCE CO. LTD. & ANR.
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SUPREME COURT REPORTS
[2022] 18 S.C.R.
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 inte

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