Summary
A 31-year-old businessman with several business interests and rental and agricultural income died in a road accident caused by the insured vehicle. The Tribunal assessed his income from tax returns and audit reports. The High Court treated it as returns on capital that had passed to his heirs and used a notional Rs. 25,000 a month instead. The Supreme Court restored reliance on the audited figures (Amrit Bhanu Shali, Kalpanaraj). Income from businesses he built and actively ran counted in full, despite the transfer of shares to his children. For rent and farm income from assets the heirs kept, only his managerial contribution was lost: normally 10-15%, here fixed at Rs. 2.5 lakh. Applying 40% future prospects, a one-fourth personal deduction and a multiplier of 16, the Court enhanced the compensation.
Issues
- Whether, in assessing loss of dependency for a deceased businessman, the High Court could disregard income tax returns and audit reports and adopt notional income because his income came largely from business interests and assets that passed to his heirs.
- How income from business ventures actively managed by the deceased should be treated, as distinct from rent and agricultural income from assets inherited by the dependants.
- How just compensation under Section 168 of the Motor Vehicles Act should be computed on those findings.
Provisions considered
- Section 168, Motor Vehicles Act, 1988'Just' compensation must be fair, reasonable and equitable, assessed liberally and with a view to the future under beneficial legislation. Appellate courts should interfere only where an award is exorbitant or arbitrary. (¶¶ 11, 12)
Held
- Income tax returns and audit reports are reliable evidence of a deceased's income. With no contrary evidence and no suggestion that they were inflated, the High Court erred in replacing them with a notional figure based on educational qualifications. (¶¶ 13, 14)
- The deceased started and actively ran his businesses, which suffered or closed after his death. Transfer of his shares to his children did not mean the benefit continued. The average of four years' audited income from businesses and investments, about Rs. 10.93 lakh, was taken as lost income. (¶¶ 15, 16, 17, 18)
- Following Jasbir Kaur, where rent and agricultural income come from assets that remain with the heirs, the loss is the deceased's managerial contribution, ordinarily 10-15% of the income. Given a multi-tenant commercial building built with joint investment, it was valued at the higher figure of Rs. 2.5 lakh. (¶¶ 19, 20, 21, 22, 23)
- The annual income of Rs. 13.43 lakh was increased by 40% for future prospects (Pranay Sethi), reduced by one-fourth for personal expenses (Sarla Verma) and multiplied by 16. That gave a loss of dependency of about Rs. 2.26 crore, plus conventional heads, with interest at 7.5% from the date of the claim. (¶¶ 24, 26)
Result
Appeal disposed of. The High Court's judgment was set aside, and compensation was enhanced as computed by this Court with interest at 7.5% a year from the date of the claim petition, payable within three months after adjusting amounts already paid.