Pranav B Prem

The Supreme Court has ruled that compensation in motor accident claims cannot be reduced merely because the dependents of the deceased have taken over their business. The Court emphasized that the contribution of the deceased in establishing and running the business must be considered when assessing compensation claims.

Supreme Court's Ruling

A Bench comprising Justices Sudhanshu Dhulia and Ahsanuddin Amanullah granted relief to the daughters of a deceased couple who owned a business and lost their lives in a road accident. The appellants had initially sought Rs. 1 crore each as compensation. The Motor Accidents Claims Tribunal (MACT) awarded Rs. 58.24 lakh for the father and Rs. 93.61 lakh for the mother, along with 7.5% annual interest. However, the Madras High Court reduced the compensation to Rs. 26.68 lakh for the father and Rs. 19.22 lakh for the mother, citing minimal financial loss as the daughters had taken over the business. The appellants then challenged this reduction before the Supreme Court. The Court examined whether the High Court was justified in reducing the compensation granted by the MACT solely based on the fact that the appellants had taken over the deceased's business, resulting in minimal financial loss.

High Court's Error

The Supreme Court, in a judgment authored by Justice Amanullah, overturned the High Court’s decision. The Court noted that the High Court overlooked the deceased persons’ role in establishing the business. It emphasized that, due to the appellants' lack of experience and maturity, they would have faced difficulties in sustaining the business at a young age, which could have led to a decline in profitability. The Court observed: "in our opinion, rightly so, that merely because the appellants stepped into the shoes of the deceased, by such factum itself, the appellants would not be capable of running the Mill. It would be of relevance as to whether due to their lack of experience and maturity, real/expected downfall in the profitability of the firm or the business would ensue. Such factor, while considering a claim pertaining to loss of future income/earnings, would have to be dealt with."

Reference to Precedents

The Court referred to the case of K Ramya and others versus National Insurance Co Ltd., where it was held that motor accident compensation cannot be reduced merely because the claimants inherited the business or properties of the deceased. Additionally, it cited Sushma H.R. & Anr. v Deepak Kumar Jha & Ors., in which the Court observed that the loss of a key figure in a business operation impacts its efficiency and profitability. The Supreme Court further reaffirmed the principle established in Amrit Bhanu Shali v National Insurance Co. Ltd. and Kalpanaraj v Tamil Nadu State Transport Corporation, that income tax returns serve as reliable evidence to determine the income of a deceased individual.

Reinstatement of Compensation

Considering these legal principles, the Supreme Court found that the MACT’s decision was well-reasoned and that the High Court had erroneously reduced the compensation. The Court restored the MACT’s award, directing the insurance company to pay the original compensation amounts, deducting any amounts already paid, within six weeks. The ruling reaffirms that dependents inheriting a deceased’s business does not diminish their entitlement to full and fair compensation under the Motor Vehicles Act.

Cause Title: S. VISHNU GANGA & ORS. Vs. M/S ORIENTAL INSURANCE COMPANY LIMITED

Case No: CIVIL APPEAL NOs. 1162 - 1163 OF 2025 

Date: January-29-2025

Bench: Justice Sudhanshu Dhulia, Justice Ahsanuddin Amanullah 

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