/2022 INSC 0890/
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.7046 OF 2022
[Arising out of Special Leave Petition (C) No. 31931 of 2017]
K. Ramya & Ors. … Appellant(s)
                                             VERSUS
National Insurance Co. Ltd. & Anr. … Respondent(s)
JUDGMENT
Surya Kant, J.
1. Leave Granted.
2. The   present   appeal   is   directed   against   the   judgment   dated
30.06.2017   passed   by   the   High   Court   of   Judicature   at   Madras,
Madurai   Bench   whereby   the   appeal   preferred   by   the   National
Insurance   Co.   Ltd.   (Respondent   No.1;   hereinafter,   “Insurance
Company”)   against   the   award   dated   06.10.2012   passed   by   Motor
Vehicle   Accident   Claims   Tribunal,   Tiruchirappalli   (hereinafter,
“Tribunal”)   was   allowed   and   the   compensation   granted   to   Apellants
was   reduced   from   Rs.   4,29,37,700/­   to   Rs.   57,90,000/­   along   with
requisite   interest.   The   factual   matrix   is   succinctly   discussed   below
before   delving   into   the   issue   of   law   regarding   determination   of
quantum of compensation which requires adjudication before us.
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A.     F ACTS     
3. S.   Kumareshan   (hereinafter,   “Deceased”)   was   a   resident   of
Tiruchirappalli, Tamil Nadu. On the fateful day, at about 4 PM in the
evening,   he  was   travelling   alone   in  a  Lancer   Car   bearing  Registration
No.   TN   45   S   9199   and   met   with   an   unfortunate   accident   with   an
Ambassador   Car   bearing   Registration   No.   TN   59   E   9288   along   the
stretch of road between Sethathupatti and Soriampattti. The collision
was   so   powerful   that   the   drivers   of   both   vehicles   passed   away   before
any   medical   assistance   could   reach   them.   The   sole   survivors   of   the
collision   were   occupants   of   the   Ambassador   Car,   who   miraculously
escaped death but were saddled with multiple injuries. 
4. The Deceased was aged above 31 years at the time of death and
was an income tax assessee. He was a businessman who held diverse
interests   in   arenas   such   as   jewellery,   textiles,   exports   and   transport.
Furthermore,   he   also   drew   income   from   his   agricultural   lands   and
leased   out   real   estate.   At   the   time   of   his   demise,   he   left   behind   a
widow,   two   minor   children   and   parents   who   were   stated   to   be
dependent on him. It is to be noted that among these dependents, the
father of the Deceased passed away during the proceedings before the
High Court.
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5. The   Deceased’s   dependents   filed   a   claim   petition   for   Rs.
7,00,00,000/­   in   August   2004,   alleging,   inter   alia ,   that   he   died   as   a
result   of   the   injuries   suffered   in   the   abovementioned   accident   of
10.06.2004,   which   occurred   due   to   the   rash   and   negligent   driving   of
the   Ambassador   Car   which   the   Insurance   Company   had   insured.
Before the Tribunal ,   the Insurance Company   took the stance that the
Deceased  was  the one  who  was  responsible  for  the accident and that
the compensation sought by the Deceased was exorbitant. It is worth
noting   that   the   injured   occupants   of   the   Ambassador   Car   who
survived the crash also filed their respective claim petitions.
6. In   reaching   its   verdict,   the   Tribunal   relied   upon   the   statements
of   the   abovementioned   injured   occupants   to   conclude   that   it  was   the
driver of the  Ambassador Car who was solely responsible for the crash
and   therefore   assigned   liability   for   the   accident   to   him,   which
ultimately was to be borne by the Insurance Company. As a result, the
claim   petition   of   the   Deceased’s   dependents   was   allowed   partly,   and
compensation  of  Rs 4,29,37,700/­ was granted  along  with  interest at
the   rate   of   7.5%   per   annum.   The   Tribunal   relied   on   the   Deceased’s
income   tax   returns   and   other   financial   documents,   which   were
supported   by   the   testimonies   of   the   chartered   accountant,   auditor,
and wife of the deceased (Appellant No. 1).
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7. The   aggrieved   Insurance   Company   filed   its   appeal   which   was
decided through the impugned judgement dated  30.06.2017 .  The High
Court although being in total agreement with the Tribunal’s reasoning
in   finding   that   the   Ambassador   Car   driver   was   solely   liable   for   the
accident, disagreed with the approach of the Tribunal in respect to the
computation   of   compensation,   primarily   under   the   head   of   ‘loss   of
income’.   It   emphasized   that   the   Deceased   before   his   death   had
transferred   his   interest   in   some   of   the   partnership   firms   in   favour   of
his   minor   children.   Furthermore,   it   highlighted   that   almost   all   of   the
Deceased’s   income   consisted   of   returns   he   received   on   his   capital
assests. Even after his death, the same assets were transferred to his
legal heirs who continued to enjoy the benefits derived from them. The
impugned   judgement’s   reasoning   was   hinged   on   the   premise   that
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.  Consequently,  the High  Court concluded  that the  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.   Furthermore,   it
also   made   minor   alterations   under   other   conventional   heads   and
accordingly,   the   compensation   was   reduced   to   Rs   57,90,000/­   along
with interest of 7.5% per annum.
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B. C ONTENTIONS     
8. We   have   heard   the   learned   counsel   for   parties   and   perused   the
documents   produced   on   record.   It   must   be   noted   that   Learned
counsels   for   both   sides   have   not   disputed   the   finding   concerning   the
Insurance   Company’s   liability   to   pay   the   compensation.   The   only
limited   question   that   remains   disputed   before   us   in   the   present
proceedings pertains to concerning the quantum of compensation that
is to be granted to the Appellants.
9. Mr. K. Radhakrishnan, learned senior counsel for the Appellants
contended that –   Firstly,   High Court via impugned decision has erred
by   computing   the   compensation   on   the   basis   of   notional   income
despite   the   fact   that   the   Appellants   adduced   specific   evidence   to
ascertain   the   income   earned   by   Deceased.   He   strongly   asserted   that
the   Tribunal   rightly   relied   on   the   income   tax   returns   and   the   audit
reports   of   the   Deceased   to   compute   the   amount   under   the   head   of
‘loss   of   income’   and   stated   that   relevant   testimonies   supported   the
same;  Secondly,  he contended that the Deceased was actively involved
in   running   multiple   businesses   and   even   undertook   specialized
courses   to   achieve   success.   Hence,   the   High   Court   has   unjustly
concluded that the Deceased has earned no income from his personal
skills;   Thirdly,   it   is   argued   that   the   only   deduction   allowed   while
computing  an   individual’s  income  is  the  tax   payable  by  him   in  terms
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of the decision of the Constitution Bench in   National Insurance Co.
Ltd. v Pranay Sethi . 1
;   Finally , he contended that the computation of
compensation   under   Section   168   of   Motor   Vehicles   Act,   1988
(hereinafter,  “The Act”)   must be  ‘just’  and the  same  must co­relate to
the   standard   of   ‘fairness,   reasonableness   and   equitability’   as   per   the
decision in  Pranay Sethi . 2
10. On   the   contrary,   learned   counsel   for   the   Insurance   Company
argued that High Court has rightly reduced the compensation in view
of the fact that the income tax returns and the audit reports highlight
that the Deceased’s income essentially constituted of returns from his
capital   assets   which   have   been   duly   bequeathed   to   the   Deceased’s
dependents.   It   was   argued   that   loss   of   income   must   be   equivalent   to
only that portion which corresponds to the skill of the deceased, as a
consequence   of   which   there   has   been   no   loss   of   income   to   the
Appellants in the present case. High Court has rightly taken notional
income as the basis of determination of compensation under the head
of ‘loss of income’. The learned counsel has placed substantial reliance
on   the   decision   of   this   court   in   Rani   Gupta   v   United   India
Insurance   Limited 3
  to   advance   the   argument   that   in   the   case   of
accidental  death of people in business, the genuine determination for
1   National Insurance Co. Ltd. v Pranay Sethi  (2017) 16 SCC 680, para 59.3.
2  ibid, para 55.
3   Rani Gupta v United India Insurance Limited  (2009) 13 SCC 498, para 24.
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loss of income depends on ascertaining the Deceased’s contribution in
running  the  business and  the same is  a factual  enquiry  which varies
on the facts and circumstances of each case.
C. A NALYSIS      
C.1 D ETERMINATION   OF  ‘J UST ’ C OMPENSATION   UNDER   A  S OCIAL  W ELFARE   
S TATUTE     
11. At   the   outset,   it   is   pertinent   to   reiterate   the   concept   of   ‘just’
compensation under Section 168 of the Act. It is a settled proposition,
now through a catena of decisions 4
  including the one rendered by the
Constitution Bench in  Pranay Sethi 5
  that compensation must be fair,
reasonable and equitable. Further, the determination of quantum is a
fact­dependent  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 broad­based approach unlike
damages   as   noted   by   this   court   in   Yadava   Kumar   v   Divisional
Manager,   National   Insurance   Co.   Ltd 6
.   The   discussion   in   the
abovementioned cases highlights that  Tribunals   under   the   Act   have
4   Helen   C.   Rebello   v   Maharashtra   State   Road   Transport   Corporation   (1999)   1   SCC
90;  United India Insurance Co. Ltd. v Patricia Jean Mahajan  (2002) 6 SCC 281;  New
India Assurance Co. Ltd. v Charlie  (2005) 10 SCC 720;  National Insurance Co. Ltd. v
Indira Srivastava  (2008) 2 SCC 763.
5   Pranay Sethi  (n 1), para 55.
6   Yadava   Kumar   v  Divisional   Manager,   National   Insurance  Co.   Ltd.   (2010)   10   SCC
341, para 17.
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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. Hence, any
interference by the Appellate Courts should ordinarily be allowed only
when the compensation is ‘exorbitant’ or ‘arbitrary’.    
12. Furthermore,   Motor   Vehicles   Act   of   1988   is   a   beneficial   and
welfare   legislation 7
  that   seeks   to   provide   compensation   as   per   the
contemporaneous   position   of   an   individual   which   is   essentially
forward­looking. 8
  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. 9
  Keeping   the
abovementioned   principles   in   the   backdrop,   we   now   move   on   to   the
facts at hand.
C.2   R ELIABILITY   ON   I NCOME   T AX   R ETURNS   AND   A UDIT   R EPORTS   TO   
D ETERMINE  ‘L OSS   OF  I NCOME ’    
13. The   Deceased   in   the   present   case   was   a   businessman   and
during   the   proceedings   before   the   Tribunal,   the   Appellants   produced
the   relevant   income   tax   returns,   audit   reports   and   other   relevant
7   Ningamma v United India Insurance Co. Ltd.   (2009) 13 SCC 710, para 34.
8   Peter   Cane,   Atiyah’s   Accidents,   Compensation   and   the   Law   (7 th
  edn,   Cambridge
University Press 2006) 411­412.
9  ibid.
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documents   pertaining   to   the   commercial   ventures   of   the   Deceased   to
prove the loss of income attributable on account of his sudden demise.
The  Tribunal  relied  on  the  same  and  computed  the  income  by  taking
an   average   of   the   income   recorded   in   three   prior   financial   years   (FY
2000­2001,   FY   2001­2002   and   FY   2002­2003)   to   determine   the
compensation under the head of ‘loss of income’.
14. In   contrast,   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,   in   our   opinion,   is   erroneous   in   view   of   the
decisions of this court in   Amrit Bhanu Shali v National Insurance
Co. Ltd. 10
  and   Kalpanaraj v Tamil Nadu State   Transport Corpn. 11
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.   Hence,   we   are   obliged   to   modify   the
compensation,   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
10   Amrit Bhanu Shali v National Insurance Co. Ltd.  (2012) 11 SCC 738, para 17.
11   Kalpanaraj v Tamil Nadu State Transport Corpn.  (2015) 2 SCC 764, para 8.
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stand taken by the Insurance  Company  that the said  reports inflated
the income.
15. At   this   stage,   to   facilitate   our   analysis,   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.   It   should   be
emphasized   that   these   audit   reports   only   showcase   amounts   which
specifically stem from the shares and interest held by the Deceased in
the   businesses   and   it   is   not   a   case   wherein   the   entire   turnover   of
businesses   are   depicted   as   Deceased’s   income.   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 interest paid  on  loans and  expenses
incurred by the deceased. 
C.2.1   –   Treatment   of   Income   from   Business   Ventures   and   other
Investments
16. As per the audit report and other documents, the income under
this part was attributable to the amounts earned from the deceased’s
multiple business ventures, which included the partnership firms and
other   investments   such   as   shares   and   bank   interests.   On   perusal   of
the   documents   on   record,   it  is   to   be  noticed   that  almost   all   business
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ventures were the result of the initiatives taken by the Deceased, and
he   was   actively   involved   in   the   day­to­day   management   of   these
entities.   In   fact,   the   testimony   of   the   Deceased’s   wife   points   out   that
the   Appellants   had   to   sell   the   buses   which   were   utilized   in   the
transport   business   because   they   were   not   able   to   take   care   of   the
vehicles on account of the demise of the Deceased and even the export
business was shut down due to the same reason.
17. The   mere   fact   that   the   Deceased’s   share   of   ownership   in   these
businesses ventures was transferred to the Deceased’s minor children
just   before   his   death   or   to   the   dependents   after   his   death   is   not   a
sufficient   justification   to   conclude   that   the   benefits   of   these
businesses   continue   to   accrue   to   his   dependents.   On   the   contrary,   it
has   come   on   record   that   the   Deceased   was   actively   involved   in   the
day­to­day   administration   of   these   businesses   from   their   stage   of
infancy, had undergone specialized training to administer his business
and that the audit reports neatly delineate Deceased’s share of income
from   the   businesses.   These   facts   necessitate   that   the   entire   amount
from   the   business   ventures   is   treated   as   income.   Similarly,   the
amount   earned   from   the   bank   interests   and   remaining   investments
must also be included as income. 
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18. The   Appellants   have   produced   audit   reports   for   the   last   four
financial   years   which   highlight   the   amounts   under   ‘Income   from
Business Ventures and other Investments’ which is as per follows – (i)
for   FY   2000­2001   is   Rs.   8,95,812/­   (ii)   for   FY   2001­2002   is   Rs.
10,31,091/­ (iii)  for  FY  2002­  2003  is  Rs. 14,65,060/­  and (iv)  for  FY
2003­2004 is Rs. 9,79,099/­. The average of these amounts comes up
to Rs. 10,92,765.50/­, which is rounded off to Rs 10,93,000/­ and the
same   is   awarded   to   the   Appellants   as   loss   of   income   derived   under
‘Income from Business Ventures and other Investments’. 
C.2.2 – Treatment of Income from House Property and Agricultural Land
19. As per the audit reports, the Deceased used to draw all his rental
income   from   the   share   he   held   in   a   commercial   building   known   as
‘Lakshmi   Complex’   and   the   remaining   income   was   from   his
agricultural   lands,   which   have   been   bequeathed   to   his   legal   heirs   on
his   death.   The   audit  reports   indicate   the   amounts   under   the   ‘Income
from House Property and Agricultural Land’ as per follows   – (i) for FY
2000­2001   is   Rs.   6,90,396/­   (ii)   for   FY   2001­2002   is   Rs.   6,47,127/­
(iii)  for  FY  2002­  2003  is  Rs. 6,14,329/­  and  (iv) for FY  2003­2004 is
Rs.   4,78,240/­.   The   average   of   these   amounts   comes   up   to   Rs.
6,07,523/­.
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20. At   this   juncture,   we   must   note   the   decision   in   Shashikala   v
Gangalakshmamma 12
  whereby   this   court   deducted   the   entire
amount earned as income from house property while determining the
compensation under the Act. The decision in  Shashikala 13
  was a split
decision   because   of   disagreement   between   the   bench   on   whether
future   prospects   are   to   be   considered   for   awarding   compensation
when the deceased is a self­employed person. Accordingly, the matter
was tagged and heard along with   Pranay Sethi 14
  ,   wherein this court
had   conclusively   decided   the   abovementioned   issue   regarding   future
prospects.   After   that,   the   matter   was   remitted   back   to   a   three­judge
bench   for   redetermination   of   compensation,   wherein   this   court   again
deducted the entire amount earned as income from house property. 15
 
21. Now,   the   sole   issue   which   remains   before   this   court   is   whether
the   entire   amount   under   ‘Income   from   House   Property   and
Agricultural   Land’   should   be   deducted   or   not.   In   this   respect,   we   are
guided   by   the   observations   of   this   court   in   State   of   Haryana   v
Jasbir Kaur 16
 wherein it was noted that – 
8. x­x­x­x 
12   Shashikala v Gangalakshmamma  (2015) 9 SCC 150.
13  ibid.
14   Pranay Sethi  (n 1).
15   Shashikala   v   Gangalakshmamma   (Civil   Appeal   No   2836   of   2015,   14   February
2019).
16   State of Haryana v Jasbir Kaur  (2003) 7 SCC 484.
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The   land   possessed   by   the   deceased   still   remains   with   his
legal heirs.  There is however a possibility that the claimants
may be required to engage persons to look after agriculture.
Therefore,   the   normal   rule   about   the   deprivation   of   income
is not strictly applicable to cases where agricultural income
is   the   source.   Attendant   circumstances   have   to   be
considered. 
(Emphasis Applied)
In our opinion, the abovementioned observations, though made in the
context of agricultural  land, would also be applicable to  rent received
from leased out properties as the loss of dependency arises mainly out
of   loss   of   management   capacity   or   efficiency.   As   a   rule   of   prudence,
computation   of   any   individual’s   managerial   skills   should   lie   between
10 to  15  per  cent  of  the  total  rental  income but the  acceptable  range
can   be   increased   in   light   of   specific   circumstances.   The   appropriate
approach,   therefore,   is   to   determine   the   value   of   managerial   skills
along with any other factual considerations. 
22. In the instant case, documents produced on record indicate two
salient aspects with respect to ‘Lakshmi Complex’, which was the sole
source of rental income for the deceased. The partition deed related to
the land on which the commercial building is situated, highlights that
the building was constructed on account of the joint investment made
by   the   Deceased   and   his   partners.   Furthermore,   as   per   the   rental
records, ‘Lakshmi Complex’ was leased out to more than ten different
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commercial   entities.   Hence,   keeping   in   mind   that   –   first,   the   rental
amount   which   is   sought   to   be   deducted   partakes   the   character   of
investment;   and   second,   that   the   managerial   skills   required   for
supervising   the   said   building   would   require   sophisticated   contract
management skills and goodwill among the business community, it is
necessary   that   we   determine   the   value   of   managerial   skills   of   the
Deceased on the higher side.
23. Accordingly,   we   deem   it   appropriate   to   award   Rs   2,50,000/­   as
the amount for the Deceased’s managerial skills. It is clarified that the
said amount would also include the amount for the managerial  skills
in   respect   of   the   Deceased’s   agricultural   lands.   It   is   further   clarified
that   the   remaining   amount   which   has   been   deducted   by   us   includes
the tax which has to be deducted in terms of the decision in   Pranay
Sethi 17
. 
D. C ONCLUSION       
24. In   light   of   the   above   discussion,   income   of   the   Deceased   is
computed   by   adding   the   amount   awarded   under   the   two   parts   (   Rs
10,93,000/­   +   Rs   2,50,000/­) ,   which   comes   to   Rs   13,43,000/­.   In
terms of  Pranay Sethi 18
,  forty per cent of the income has to be added
towards future prospects, which would come to Rs 18,80,200/­. After
17   Pranay Sethi  (n 1), para 59.3.
18   Pranay Sethi  (n 1), para 59.3.
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deducting   one­fourth   towards   personal   expenses   as   per   Sarla
Verma 19
,   the   net   amount   comes   to   Rs   14,10,150/­   per   annum.
Applying the multiplier of 16, the total loss of dependency on account
of the Deceased’s income is calculated at Rs 2,25,62,400/­. We further
grant   compensation   under   the   remaining   conventional   heads   as   per
the decisions in  Pranay Sethi 20
  and   Satinder Kaur 21
.
25. Hence, the compensation is determined as per follows ­
Head Amount
1. Loss   of   Income   =   [(Income   +   Future
Prospects   computed   at   40%)   –   1/4 th
Deduction   for   Personal   Expense]   x
Multiplier  Rs 2,25,62,400/­
2. Funeral Expenses 
Rs 15,000/­
3. Loss of Estate 
Rs 15,000/­
4. Loss of Spousal Consortium
Rs 40,000/­
5. Loss of Parental Consortium  (Rs 40,000 x 2) =  
Rs 80,000/­
Total compensation  (1+2+3+4+5) Rs 2,27,12,400/­
26. We   also   direct   that   the   interest   at   the   rate   of   7.5%   per   annum
shall   be   payable   on   the   aforesaid   amount   from   the   date   of   filing   the
claim   petition   till   the   date   of   realization.   The   enhanced   amount   shall
be paid to the claimants within three months from today. Needless to
19   Sarla Verma v DTC  (2009) 6 SCC 121.
20   Pranay Sethi  (n 1), para 59.8.
21   United Insurance Company Ltd. v Satinder Kaur   (2021) 11 SCC 780, para(s) 33­
37.
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say, that the amount already paid or deposited shall be adjusted while
depositing the enhanced compensation awarded by this court. 
27. Hence, the judgment under appeal of the High Court is set aside
and   the   Appellants   are   held   entitled   to   enhanced   compensation   as
determined above. 
28. The   appeal   stands   disposed   of   along   with   any   pending
applications in above terms.
………..………………… J.
(SURYA KANT)
…………………………...J.
(V. RAMASUBRAMANIAN)
NEW DELHI
DATED: 30.09.2022
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