Court’s Decision
The Supreme Court allowed the appeal filed by the dependants of a deceased accident victim, setting aside the High Court’s arbitrary reduction of monthly income from ₹6,000 to ₹5,500. The Court held that the deceased’s income should be fixed at ₹12,000 per month considering his qualifications, business engagements, and the year of the accident. Applying the multiplier of 14, 25% addition for future prospects, and deductions in line with Pranay Sethi, the Court enhanced the compensation to ₹20,80,000 with 6% interest, directing payment within three months.
Facts
In July 2010, four friends travelling from Bijapur to Shirdi met with a tragic accident when their car was hit by a lorry driven rashly on NH-13. All passengers died instantly. Their families filed motor accident claims before the Tribunal.
In the present appeal, the claimants challenged the High Court’s reduction of the deceased’s monthly income. The Tribunal had fixed it at ₹6,000, based on documents showing he held a diploma in pharmacy, had run a medical shop, was a partner in a pharmaceutical distributorship, and served as a director of a cooperative bank. While some claims were not fully substantiated, the Tribunal considered his diverse engagements to adopt ₹6,000 as notional income.
The High Court, without assigning reasons, reduced it to ₹5,500, even while applying the Pranay Sethi formula for future prospects. Dissatisfied, the claimants appealed to the Supreme Court.
Issues
- Whether the High Court was justified in reducing the monthly income fixed by the Tribunal without evidence.
- Whether the deceased’s educational qualifications, business involvement, and professional activities warranted a higher income assessment.
- What should be the correct computation of compensation applying the principles laid down in Pranay Sethi and subsequent judgments.
Petitioner’s Arguments
The appellants argued that the deceased was a multifaceted professional, managing a medical shop, engaged in pharmaceutical distributorship, and serving as a cooperative bank director. His annual income was claimed to be ₹2,25,000.
They contended that the High Court’s arbitrary reduction was unsustainable, as no contrary evidence had been produced. They urged that the deceased’s monthly income be fixed higher, reflective of his capacity and the prevailing economic standards in 2010.
Respondent’s Arguments
The insurance company countered that the claimants failed to prove actual earnings. The medical shop licence was cancelled in 2008, two years before the accident. The pharmaceutical distributorship documents lacked authentication and partners were not examined. The cooperative bank directorship and sitting fees were not substantiated either.
It was submitted that the Tribunal’s assessment of ₹6,000 was itself generous, and the claimants’ higher claims were exaggerated. They argued that the High Court rightly moderated the figure, and the appeal deserved dismissal.
Analysis of the Law
The Court examined standards for determining notional income in motor accident cases. It recalled Ramachandrappa v. Royal Sundaram Alliance Insurance Co. Ltd. (2011), which held that even a manual labourer in 2004 earned about ₹4,500 monthly. By 2010, this could reasonably be taken as ₹7,500 with incremental increases.
Since the deceased had a diploma in pharmacy and had participated in business ventures, the Court reasoned that his potential income must be placed substantially above that of an unskilled worker. Considering the overall circumstances, it fixed his monthly income at ₹12,000, balancing qualifications, engagements, and the need to avoid speculation.
Precedent Analysis
- National Insurance Co. Ltd. v. Pranay Sethi (2017) 16 SCC 680 – Constitution Bench laid down the framework for future prospects, conventional heads, and multipliers. Applied here for 25% addition and ₹15,000 for loss of estate and funeral expenses.
- Ramachandrappa v. Royal Sundaram (2011) 13 SCC 236 – Held that in 2004 even a coolie earned ₹4,500; extrapolated to ₹7,500 in 2010. Used here to justify higher income assessment.
- New India Assurance Co. Ltd. v. Somwati (2020) 9 SCC 644 – Recognised consortium rights for wife, children, and parents at ₹40,000 each. Applied to award consortium to all four dependants.
These precedents guided the Court in enhancing compensation fairly and ensuring just relief to the dependants.
Court’s Reasoning
The Court held that the High Court’s arbitrary reduction of income to ₹5,500, without evidence or reasoning, was impermissible. It emphasised that compensation must reflect the deceased’s potential, not be pegged at bare subsistence.
The Court reasoned: “Considering the deceased’s pharmacy diploma, distributorship, and banking role, it can be safely assumed he would have earned at least ₹12,000 per month to support his family of five.”
It affirmed the High Court’s application of multiplier (14) and deduction for personal expenses (1/4th), but corrected the income figure and conventional heads. The recalculated award was ₹20,80,000, payable with 6% interest.
Conclusion
The appeal was allowed. The compensation was enhanced to ₹20,80,000, payable within three months after adjusting prior payments. The ruling reaffirmed that courts must adopt realistic assessments of income, guided by qualifications and prevailing standards, to ensure just compensation.
Implications
This judgment reinforces the principle that compensation in motor accident claims should be just, fair, and reflective of real potential. It discourages arbitrary reductions without evidence and emphasises reliance on reasonable presumptions guided by precedents.
It also extends the recognition of consortium rights beyond the spouse to children and parents, strengthening the social justice purpose of compensation law. The ruling assures victims’ families that courts will not undervalue the contributions of professionals and small business owners.
FAQs
Q1. Why did the Supreme Court fix income at ₹12,000 per month?
Because the deceased had a pharmacy diploma, ran businesses, and was better placed than unskilled labourers, who in 2010 could earn ₹7,500.
Q2. What formula was applied for compensation?
The Pranay Sethi framework: multiplier of 14, 25% addition for future prospects, deduction of 1/4th for personal expenses, and conventional heads.
Q3. Who is entitled to consortium under this ruling?
Not only the wife but also children and parents, each awarded ₹40,000, as per Somwati.