Rajani & Ors. Vs Mukesh & Ors. (Supreme Court of India)
The Supreme Court allowed a civil appeal filed by the legal representatives of a deceased insurance agent and enhanced the motor accident compensation to Rs.87,09,282, holding that the annual income of a self-employed person should be assessed by taking the average of the previous three Income Tax Returns (ITRs), having regard to the nature of the profession. The Court held that the High Court erred in taking the average income reflected in the last four ITRs and applied the principles laid down in Rashmirekha Tripathy and Anr. v. The Branch Manager (Legal Claims), Sriram General Insurance Company Limited and Ors.
The appeal arose from a motor vehicle accident dated 8 January 2017. The deceased, Sushil, aged 49 years, was travelling with two other persons from Indore towards Manawar in a vehicle bearing registration number MP 11 CC 2555. An offending dumper, bearing registration number MP 09 HG 9690 and driven by Respondent No.1, dashed into the deceased’s vehicle from the opposite side in a rash and negligent manner. The deceased suffered serious injuries to his head, chest and other parts of the body and died on the spot.
The claimant-appellants, being the legal representatives of the deceased, filed a compensation claim under Section 166 of the Motor Vehicles Act, 1988 before the Motor Accident Claims Tribunal (MACT), Manawar, Dhar, Madhya Pradesh. They sought compensation of Rs.2,41,00,000, stating that the deceased was carrying on business as an insurance agent, earning Rs.1,50,000 per month, and was the sole breadwinner of the family.
The MACT, by award dated 19 January 2022, assessed the deceased’s monthly income at Rs.40,000 and awarded total compensation of Rs.49,77,000, along with interest at 9% per annum from the date of filing of the claim petition.
Aggrieved by the quantum of compensation, the claimant-appellants approached the Madhya Pradesh High Court at Indore seeking enhancement. The High Court, by its order dated 24 September 2024 in Miscellaneous Appeal No.1832 of 2022, enhanced the deceased’s monthly income to Rs.62,500 and increased the total compensation by Rs.26,32,500, thereby determining the aggregate compensation at Rs.76,09,500.
Still dissatisfied with the amount awarded, the claimants approached the Supreme Court, contending that the compensation remained inadequate and required further enhancement in accordance with law.
The principal issue before the Supreme Court concerned the proper method of assessing the annual income of a self-employed person on the basis of ITRs. The Court proceeded to examine the matter in light of the principles laid down in Rashmirekha Tripathy and Anr. v. The Branch Manager (Legal Claims), Sriram General Insurance Company Limited and Ors.
The Supreme Court found that the High Court had erred in taking the average income of the last four ITRs. The Court observed that the deceased was working as an insurance agent and that it was entirely plausible for his income to increase in a particular financial year depending on his performance. Such variation in income did not justify taking an additional ITR into consideration for computing his annual income.
On examining the ITRs available on record, the Court noted that the deceased had disclosed annual income of Rs.4,03,180 for Assessment Year 2015-16, Rs.9,59,665 for Assessment Year 2016-17 and Rs.7,00,559 for Assessment Year 2017-18. Taking into consideration the average income of these previous three years and the nature of the deceased’s profession, the Supreme Court assessed his annual income at Rs.6,87,802.
The Court thereafter recalculated the compensation payable to the claimants. Since the deceased was 49 years old, 25% was added towards future prospects, increasing the income from Rs.6,87,802 to Rs.8,59,752. A deduction of one-fourth, amounting to Rs.2,14,938, was then made towards personal expenses, leaving Rs.6,44,824. Applying a multiplier of 13, the loss of income was calculated at Rs.83,82,582.
In addition, the Court awarded Rs.18,150 towards loss of estate and Rs.18,150 towards funeral expenses. Loss of consortium was calculated at Rs.48,400 for each of six claimants, aggregating to Rs.2,90,400. For these components, the Court referred to the principles in National Insurance Co. Ltd. v. Pranay Sethi, (2017) 16 SCC 680; United India Insurance Co. Ltd. v. Satinder Kaur, (2021) 11 SCC 780; and Rajwati alias Rajjo and Ors. v. United India Insurance Company Ltd. and Ors., 2022 SCC OnLine SC 1699.
On this basis, the Supreme Court determined the total compensation payable at Rs.87,09,282. Thus, while the MACT had awarded Rs.49,77,000 and the High Court had enhanced the amount to Rs.76,09,500, the Supreme Court further enhanced the compensation to Rs.87,09,282.
Accordingly, the Supreme Court allowed the civil appeal and modified the MACT award dated 19 January 2022, as previously modified by the Madhya Pradesh High Court at Indore. The Court directed that interest on the enhanced compensation be paid at the rate awarded by the Tribunal.
The Supreme Court further directed that the compensation amount be remitted directly into the bank accounts of the claimant-appellants. The claimants’ counsel was directed to immediately furnish the necessary bank account particulars to the respondents’ counsel, and the amount was ordered to be remitted within four weeks thereafter. All pending applications were disposed of.
Conclusion: The Supreme Court held that, for assessing the income of a self-employed insurance agent, the average of the previous three ITRs should be considered rather than the average of four ITRs. Applying this method and considering the nature of the deceased’s profession, the Court assessed annual income at Rs.6,87,802 and enhanced the total motor accident compensation to Rs.87,09,282.
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