Section 44-AE & Compensation: Orissa HC Modifies Award in Motor Vehicle Accident Case

Pratibha Kumari Baral & Others Vs Janardan Pattnaik & Another (Orissa High Court)

In the case of Pratibha Kumari Baral & Others vs. Janardan Pattnaik & Another, heard by the Orissa High Court, the appeals stemmed from a common cause regarding an award issued in M.A.C. Case No. 63 of 2017. This case centered around a motor vehicle accident that occurred on July 28, 2016, resulting in the death of the deceased, who was riding a motorcycle (registration No. OR-06H-3819) when he was struck from behind by a tanker (registration No. OR-06G-8473) driven in a negligent manner. The deceased suffered fatal injuries and was pronounced dead upon arrival at DHH, Dhenkanal.

Appeals and Issues

There were two primary appeals:

1. M.A.C. No. 777 of 2023 (by Claimants): This appeal sought a modification of the compensation awarded under Section 173 of the Motor Vehicles Act, 1988 (M.V. Act). The claimants argued that the awarded compensation of Rs. 33,58,657/- was inadequate and should be increased to reflect the actual loss suffered due to the deceased’s death.
2. M.A.C. Case No. 857 of 2023 (by Insurance Company): The Insurance Company appealed the award, disputing both liability and the quantum of compensation. They contested the findings that held them liable for the accident and objected to the computation of compensation.

Arguments and Submissions

• Claimants’ Counsel: Mr. Mohanty contended that the tribunal erred in computing the compensation by inaccurately assessing the deceased’s income. He argued that the tribunal should have considered the income tax returns (ITR) of the preceding three years instead of four years, which inflated the deceased’s annual income figure. Mr. Mohanty also pointed out that the tribunal failed to apply a periodical increment on general damages, as mandated by Supreme Court precedent. Additionally, he argued that the interest rate applied on the compensation was lower than what should be standard, further justifying an increase in compensation.
• Owner’s Counsel: Mr. Das, representing the owner of the offending truck, emphasized that the vehicle was insured, placing liability on the Insurance Company to cover the accident’s consequences.
• Insurance Company’s Counsel: Mr. Dasmohapatra argued that the tribunal incorrectly attributed liability to the insured truck without sufficient evidence. He challenged the computation of the deceased’s income and raised issues about policy violations concerning the driver’s license and vehicle permits.

High Court’s Decision and Modifications

After considering the arguments and evidence presented:

• The High Court agreed with Mr. Mohanty’s contention regarding the computation of the deceased’s income. It recalculated the annual income based on the average of the preceding three years’ ITRs, resulting in a higher income figure.
• Regarding the income from heavy goods vehicles owned by the deceased, the court referred to Section 44-AE of the Income Tax Act, which establishes a presumptive income scheme. It adjusted the annual income calculation accordingly, although it did not fully adopt the claimant’s proposed amount.
• The court also addressed the issue of periodical increments on general damages, aligning the award with the principles laid down in previous Supreme Court rulings.
• On the issue of liability, the court found that the Insurance Company had not adequately disproved its liability, given the evidence on record. It dismissed the Insurance Company’s arguments regarding policy violations due to lack of conclusive evidence.

In conclusion:

• The Orissa High Court modified the award from M.A.C. Case No. 63 of 2017, increasing the compensation amount to Rs. 30,88,592/- along with 7% interest per annum from the date of the claim application.
• It rejected the appeals for further interest rate increases or penal interest, considering them unjustified under the circumstances.
• The court directed the Insurance Company to deposit the revised compensation amount within eight weeks, after which it would be disbursed to the claimants.

FULL TEXT OF THE JUDGMENT/ORDER OF ORISSA HIGH COURT

1. Since both the appeals arise out of a common cause of action with the impugned award in M.A.C. Case No.63 of 2017, the same are hereby disposed of by the following common order.

2. (i) M.A.C. No.777 of 2023: Instant appeal under Section 173 of the Motor Vehicles Act, 1988 (hereinafter referred to as ‘the M.V. Act’) is at the behest of the claimants for modification of the award dated 10th February, 2023 passed in M.A.C. Case No.63 of 2017 by learned Additional District Judge-cum-3^rdA.C.T., Dhenkanal with enhancement of compensation amount since the same is not just and proper commensurate to the loss suffered by them on account of death of the deceased in a motor vehicular accident dated 28^th July, 2016.

(ii) M.A.C. Case No.857 of 2023: Whereas the present appeal is filed by the Insurance Company assailing the correctness of the impugned award disputing the liability as well as the compensation allowed for an amount of Rs.33,58,657/- with interest at the rate of 7% per annum on the grounds inter alia that the learned Tribunal committed error in accepting the plea of the claimants and in the determination of the compensation, hence, the same deserves to be interfered with and set aside.

3. Heard Mr. Mohanty, learned counsel for the claimants, Mr. Das, learned counsel for the owner of the offending vehicle and Mr. Dasmohapatra, learned counsel for the Insurance Company.

4. Mr. Mohanty, learned counsel for the claimants would submit that though the learned Tribunal held that the accident has taken place involving the offending vehicle (Truck) bearing registration No. OR-06G-8473 but fell into gross error, while computing the amount of compensation. It is contended by Mr. Mohanty that the learned Tribunal instead of taking average of previous three years of Income Tax Return (ITR) considered four years as it was available on record and hence, a wrong approach was adopted at the time of determination of the monthly income of the deceased. Furthermore, Mr. Mohanty submits that the learned Tribunal assessed a sum of Rs.60,000/- per year as income in respect of the heavy goods vehicles owned by the deceased instead of a presumptive sum of Rs.7,500/- a month in view of Section 44-AE of the Income Tax Act and therefore, the amount on the said head is to be accordingly enhanced. It is also submitted by Mr. Mohanty that the learned Tribunal failed to award periodical increment of 10% on general damages payable every three years in view of the Supreme Court dictum in National Insurance Co. Ltd. Vrs. Pranay Sethi AIR 2017 SC 5157. Apart from above, it is contended that a lower rate of interest of 7% instead of normal lending rate @ 9% has been allowed on the amount of compensation, which is also required to be corrected. With the above submission, Mr. Mohanty claims for higher compensation than the assessed sum of Rs.33,58,657/-.

5. Mr. Das, learned counsel for the owner of the offending truck submits that the vehicle was insured with the insurer and hence, the Insurance Company is to cover the risk and indemnify him with respect to the accident dated 28^th July, 2016.

6. Mr. Dasmohapatra, learned counsel for Insurance Company referring to the facts pleaded in appeal filed from their side submits that the learned Tribunal, despite evidence on record that the deceased met with an accident involving an unknown vehicle, held it otherwise and saddled the liability on the insurer of the truck bearing registration No. OR-06G-8473, which is admittedly insured with them on the date of the accident. It is, hence, submitted by Mr. Dasmohapatra that there has been non- application of judicial mind to the facts of the case by the learned Tribunal, which would rather prove that the offending truck was not at all involved. Mr. Dasmohapatra further submits that even conceding for a moment about the accident having taken place, the learned Tribunal erred in adding Rs.60,000/- to the annual earning which was arrived at by taking average income as per the ITR for which the computation with respect to loss of dependency became higher and so the assessment. It is alleged that there has been violation of policy conditions as well which the learned Tribunal failed to take cognizance of and therefore, Mr. Dasmohapatra finally contends that the impugned award dated 10^th February, 2023 calls for interference.

7. As per the facts pleaded on record, the accident took place on 28^th July, 2016 at about 8 P.M. at a time when the deceased was returning to a place in a motor cycle bearing registration No.OR-06H-3819 and met with the accident near the spot as the offending tanker arrived there at a very high speed being driven in a rash and negligent manner and dashed him from back, as a result of which, he sustained multiple grievous injuries and though shifted to DHH, Dhenkanal but was declared brought dead. After the death of the deceased, the claimants filed the application under Section 166 of the M.V. Act for compensation which has led to the passing of the impugned award on 10^th February, 2023. The owner of the offending truck and the Insurance Company contested the claim application, which was disposed of allowing compensation of Rs.33,58,657/- with interest.

8. With the pleading of the claimants and materials on record, the learned Tribunal framed the following issues, such as, (i) whether the death of the deceased was on account of the accident and for rash and negligent driving of the driver of the offending tanker bearing registration No. OR-06G-8473 having taken place on 28^th July, 2016? (ii) whether the claimants are entitled to get compensation and if so, then to what extent? and (iii) whether the owner of the offending vehicle and Insurance Company is/are liable to pay the compensation? The parties to the proceeding adduced evidence and considering the same, both oral and documentary, learned Tribunal answered the issues framed and reached at a conclusion that the offending vehicle was involved and as it was validly insured on the date of accident, the Insurance Company is liable to pay the compensation indemnifying the owner and accordingly, computed a sum of Rs.33,58,657/-payable to the claimants with interest at the rate of 7% per annum from the date of filing of the claim application i.e. 8th March, 2017 till its realization. The aforesaid decision is under challenge by the claimants and also the Insurance Company, one seeking for enhancement and the other, denying the liability all together and the quantum of compensation, in case, the first plea failed.

9. Learned Tribunal calculated the annual income of the deceased at Rs.1,53,861/- taking into account the ITR of four years, such as, 2011-12, 2012-13, 2013-14 and 2014-15 marked as Exts.13, 13/1, 13/2 and 13/3, wherein, the gross total incomes were shown as Rs.85,960/-, Rs.1,45,630/-, Rs.1,98,235/- and Rs.1,85,620/-respectively, which according to Mr. Mohanty, ought to have been by considering the last of the three financial years only. It is contended that the annual income with the ITR deductions for the year 2012-13, 2013-14 and 2014-15 would have been at Rs.1,76,496/- which has been calculated by learned Tribunal for a sum of Rs.1,53,861/-. It is made to suggest that the learned Tribunal calculated the annual income with the income tax deductions for the years between 2011 and 2015, as a result of which, the annual income stood at Rs.1,53,861/- instead. It is not in dispute that in normal course, preceding three years ITRs are considered while assessing the annual income but in the instant case, one more assessment year of 2011-2012 was included. Adopting the normal course for the previous three consecutive financial years before the death, the Court is of the view that the annual income with such tax deduction should be accepted at Rs.1,76,496/-. In other words, the Court is inclined to accept the plea of Mr. Mohanty, learned counsel for the claimants and fix the annual income of the deceased at Rs.1,76,496/- allowing the tax deductions for the years 2012-13, 2013-14 and 2014-15.

10. With respect to the income towards the heavy goods vehicles, an amount of Rs.60,000/- has been added to the annual income. Mr. Mohanty refers to Section 44-AE of the Income Tax Act to claim that at least, an amount of Rs.7,500/- a month should have been assessed at instead of Rs.5,000/-. Mr. Dasmohapatra, learned counsel for the Insurance Company, while denying the liability, would contend that an amount of Rs.60,000/- a year added is outrightly a surplusage and hence, need not be enhanced further with a sum of Rs.7,500/- per month. The said provision of the Income Tax Act is in respect of presumptive taxation for ascertaining income for a particular financial year applicable to all types of assessees. According to Section 44-AE of the Income Tax Act, small business engaged in plying, hiring or leasing goods carriage having not more than ten goods carriages vehicle can adopt the presumptive taxation scheme to ascertain the taxable income in a particular assessment year. As per the calculation of income under Section 44-AE of the Income Tax Act, the net total taxable income for such business involving carriage vehicles shall be calculated at the rate of Rs.7,500/- a month or part thereof during which the assessees own the goods carriage in the previous year. Having considered the said provision, when a presumptive income is assessed at, for the purpose of tax as per Section 44-AE of the Income Tax Act, it may not be incorrect to demand a sum of Rs.7,500/- a month in respect of the hypothecated goods vehicles, the said amount being the presumptive monthly income previous year whereupon tax was payable but the irony is that both the vehicles were purchased barely few months before the death of the deceased. As regards the periodical increment at the rate of 10% vis-à-vis general damages in every three years, there is no quarrel over the legal position as held by the Apex Court in Pranay Sethi (supra), however, it shall be in respect of an amount of Rs.70,000/- instead of Rs.1,20,000/- which has been allowed by the learned Tribunal on the heads of consortium @ Rs.40,000/- for each for the claimants.

11. As regards the plea of Mr. Dasmohapatra, learned counsel for Insurance Company that there was violation of policy conditions, it is pleaded that the tanker was involved in transporting hazardous substance, which was not in terms of the DL of the driver, who had no such authorization to ply the alleged vehicle. In fact, there has been no specific evidence brought on record from the side of the Insurance Company challenging the DL of the driver of the offending tanker to claim that any such policy condition is violated. Though, the Insurance Company examined O.P.W.1 and claimed that at the relevant point of time, the driver had no such valid license and also the offending vehicle had no permit but the learned Tribunal, in absence of any such rebuttal evidence, considering Ext. C, such as, DL of driver and Exts. D and E, namely, permit and fitness certificate of the tanker, rejected such plea, which in the considered view of the Court, does not require any intervention. It is further concluded that absence of any such endorsement in the DL, without any specific evidence on record, the plea as to violation of policy condition is not to be accepted. In any case, Exts. D and E proved such claim to be incorrect. Hence, it is held that the contention of Mr. Dasmohapatra with such a plea is liable to be rejected. But, as already held, the plea that the amount on conventional heads for an amount of Rs.1,20,000/- should be Rs.70,000/- is acceptable and to which, the Court is in complete agreement.

12. With such conclusion, the amount of compensation is to be accordingly recalculated. The annual income of the deceased is to be reassessed at Rs.1,76,496/- taking into account average income of previous three years, such as, 2012-13, 2013-14 and 2014-15. Over and above, the said amount, assuming the income from the heavy goods vehicles of the deceased, the Court is inclined to add an amount of Rs.22,500/- only (not counting for the entire year) since the hypothecated TATA ACE and JCB had been purchased shortly before the accident. No evidence is on record either to ascertain, if both the vehicles are still with the claimants or in the meantime, disposed of after the death of the deceased. Anyways, the income with an additional sum of Rs.22,500/- becomes Rs.1,99,996/-. Since the deceased died living behind the dependents, deduction towards personal and living expenses should be 1/3^rd and hence, loss of dependency is calculated at Rs.1,33,330/- and with a multiplier of 16 (as the deceased was aged about 31 years) applicable in view of the decision of the Apex Court in Smt. Sarla Verma and others Vrs. Delhi Transport Corporation and Another (2009) 43 OCR (SC) 349, the amount is arrived at Rs.21,33,280/-. Besides the above, the claimants are also entitled to 40% on the said sum towards loss of future prospects as the deceased was below 40 years at the time of death, hence, the amount becomes Rs.29,86,592/-. With the addition of Rs.77,000/- on general damages inclusive of periodical increment every three years and other additional expenses allowed by learned Tribunal on the heads of transportation of dead body for Rs.5,000/-, funeral and obsequies expenses at the rate of Rs.20,000/-, the amount of compensation is reached at Rs.30,88,592/- (instead of Rs.33,58,657/-) which is payable along with interest @ 7% per annum usually being the lending rate. Hence, the Court is not in favour of enhancing the interest to 9% per annum so claimed by the appellants. The Court is also not in favour of any penal interest @ 9% per annum allowed by the learned Tribunal as the same is unwarranted. In other words, no justifiable reason lies to allow default interest on the amount of compensation.

13. Hence, it is ordered.

14. In the result, appeals stand disposed of. As a logical sequitur, the impugned award dated 10^th February, 2023 passed in M.A.C Case No.63 of 2017 by learned Additional District Judge-cum-3^rdA.C.T, Dhenkanal is hereby modified to the extent as aforesaid with a direction to the Insurance Company to deposit a sum of Rs.30,88,592/- along with interest at the rate of 7% per annum from the date of claim application filed till its realization within eight weeks from today, whereafter, it shall immediately be disbursed in favour of the claimants. It is further directed that on proof of such deposit of compensation within the above stipulated period, the statutory deposit along with accrued interest shall be refunded to the appellant Insurance Company forthwith.