A) ABSTRACT / HEADNOTE

The present appeals arise from a challenge by the insurer to a Motor Accidents Claims Tribunal award that had granted substantial compensation to the daughters of deceased partners of Sri Ganga Mills who died in a road accident. The Tribunal accepted the claimants’ evidence, relied on the Partnership Deed and the Mill’s Income Tax Returns, fixed a notional monthly income of Rs.60,000 for each deceased, applied appropriate multipliers and awarded Rs.58,24,000 (father) and Rs.93,61,000 (mother). The High Court reduced those awards drastically on the premise that the appellants had stepped into the business and therefore did not suffer the loss claimed.

The Supreme Court restored the Tribunal’s award, holding that:

(i) stepping into ownership does not ipso facto negate the claim for loss of future earnings where lack of experience and maturity and probable reduction in profitability post-death are shown or reasonably inferable,

(ii) Income Tax Returns and audited documents are reliable records to assess notional income, and

(iii) appellate interference with a Tribunal’s liberal, fact-sensitive computation should be sparing and confined to cases of arbitrariness or manifest excess.

The Court relied on its precedents including K Ramya v. National Insurance Co. Ltd., Amrit Bhanu Shali, and Pranay Sethi doctrines emphasizing just compensation under Section 168 of the Motor Vehicles Act, 1988. The High Court’s approach was found inconsistent with settled law; the Tribunal’s methodology satisfied judicial conscience and was reinstated.

Keywords: Compensation; Notional income; Income Tax Returns; Loss of future earnings; Motor Vehicles Act, 1988.

B) CASE DETAILS

C) INTRODUCTION AND BACKGROUND OF JUDGMENT

The litigation stems from a fatal collision in which a bus (uninsured) collided with a Tempo Traveller carrying the parents of the appellants. Both parents, partners in Sri Ganga Mills, died. The appellants claimed large sums premised on the Mill’s profits and parents’ contribution to business. The Tribunal examined documentary proof including the Partnership Deed and the Mill’s Income Tax Returns for multiple assessment years, adopted a notional monthly income of Rs.60,000 for each deceased, applied appropriate multipliers based on age and dependency and awarded substantial compensation with interest. The insurer (R1) appealed to the High Court contending the awards were excessive; the High Court accepted the view that because the appellants had been inducted as partners and continued the business the pecuniary loss had not occurred, and it drastically reduced compensation. The Supreme Court granted leave to challenge that reduction.

The core background question presented was the appropriate approach to compute loss of future earnings where the deceased was an active partner-owner in a family business and the heirs continued in business after death. The context required reconciling factual evidence of decline in operations (reduced workers, admitted loss by the Mill’s accountant) with the High Court’s inference that continuation of ownership to the appellants nullified pecuniary loss. The Supreme Court framed its analysis against established precedents that caution appellate courts against substituting their view when Tribunal awards are reasoned and fact-based.

D) FACTS OF THE CASE

The parents (father aged 57; mother aged 50) were partners in Sri Ganga Mills under a Partnership Deed dated 01.06.2006. They were travelling in a vehicle insured with respondent insurer (R1) when a bus belonging to R3 (uninsured) dashed into the vehicle causing their deaths. The appellants (four daughters) filed separate M.C.O.Ps claiming Rs.1,00,00,000 each. Documentary proof included the Partnership Deed and Income Tax Returns for AYs 2007–08 through 2011–12. The Tribunal accepted the claimants’ evidence and fixed notional income at Rs.60,000 p.m. for each deceased, added conventional heads and solatium and awarded Rs.58,24,000 (father) and Rs.93,61,000 (mother) with interest. Evidence at trial indicated a post-death decline in workers from 202 to 138 and admissions by the Mill’s Chartered Accountant of losses approximating Rs.68,00,000, suggesting real downturn in operations after the deaths.

The appellants had been made partners at young ages (about 24, 22, 18, 18) and had limited prior active involvement. The insurer limited its challenge to a percentage of the award but the High Court reduced awards far beyond the relief sought by the insurer, treating the appellants’ succession to partnership as negating pecuniary loss. The Tribunal’s reliance on audited returns and contemporaneous records formed the evidentiary backbone of the original award.

E) LEGAL ISSUES RAISED

i. Whether mere transfer of ownership or share to dependents negates the claim for loss of future earnings where the deceased was actively running the business?
ii. Whether Income Tax Returns and audit reports are reliable evidence to fix notional income for computation of compensation under the Motor Vehicles Act?
iii. Whether an appellate court should interfere with a reasoned Tribunal award which has applied a liberal, fact-sensitive approach to determine just compensation?

F) PETITIONER / APPELLANT’S ARGUMENTS

The counsel for the appellants submitted that the High Court erred by reducing the award without proper appreciation of evidence indicating operational decline post-death. They argued that the appellants’ mere legal succession as partners does not equate to ability to run the Mill in the same manner; evidence (witnesses PW-3, PW-8, PW-10) showed reduction in workers and payments; the Mill’s Income Tax Returns demonstrated reduced profits; and the multiplier and notional income fixed by the Tribunal were justified. Reliance was placed on precedents recognizing that dependents stepping into ownership does not automatically preserve the deceased’s commercial expertise or goodwill.

G) RESPONDENT’S ARGUMENTS

The insurer contended that the Tribunal’s awards were excessive and that the High Court correctly pruned the quantum after considering trial testimony. It argued the appellants continued the business and thus the claimed loss of future earnings was not wholly made out; reductions by the High Court were a justified exercise of appellate scrutiny.

H) JUDGMENT 

The Supreme Court restored the Tribunal award. It held that a dependent’s succession to the deceased’s business or share does not automatically mean the loss of future earning is unreal; courts must examine experience, maturity and likely effect on profitability. The Tribunal’s adoption of Rs.60,000 p.m. as notional income for each deceased was reasonable, especially given the Mill’s tax returns and auditor statements. The Court reiterated the settled principle that compensation under the Motor Vehicles Act is forward-looking and welfare-oriented, requiring a broad, liberal approach rather than mechanical arithmetic.

Appellate interference is warranted only where a Tribunal award is arbitrary or exorbitant; here the Tribunal’s reasoning, documentary basis and alignment with precedent (for example K Ramya, Amrit Bhanu Shali, Pranay Sethi) satisfied judicial conscience. The Court found the High Court’s reliance on selective statements and its treatment that the appellants “stepped into the shoes” as insufficient—it ignored evidence of operational decline and admissions by the firm’s accountant. Consequently the Supreme Court set aside the High Court’s judgment and directed the insurer to pay the Tribunal award after adjustment of amounts already paid.

a. RATIO DECIDENDI

The central ratio is that for computing compensation where the deceased was a working partner-owner, courts must assess not only formal transfer of ownership but real capacity of successors to generate equivalent future earnings; Income Tax Returns and audited records are reliable markers of income; appellate courts must not supplant a reasoned Tribunal award unless it is arbitrary or manifestly excessive. The decision reinforces that the compensatory scheme under Section 168 is liberal and forward-looking and that factual indicators of post-death decline (fewer workers, admitted losses) justify awarding notional income to reflect actual pecuniary loss.

b. OBITER DICTA 

The Court observed that just compensation must be fair and equitable and reiterated that transfer of ownership alone is insufficient to deny loss of earnings. The bench cited authorities warning against parsimonious reductions and emphasized the utility of tax returns as contemporaneous evidence observations intended to guide tribunals and appellate courts in similar fact patterns.

c. GUIDELINES

Use documentary records (Income Tax Returns, audit reports) as primary evidence to fix notional income. Assess successor capability (age, experience) and business health (worker strength, admitted losses) before denying future earnings. Restrict appellate interference to cases of arbitrariness or manifestly exorbitant awards. Apply multipliers consistent with age and dependency norms while being liberal in approach under the Act.

I) CONCLUSION & COMMENTS

The Supreme Court’s restoration of the Tribunal award reaffirms the compensatory thrust of the Motor Vehicles Act, 1988 and the evidentiary value of tax/audit records. The decision clarifies that legal succession in business does not automatically erase pecuniary loss where successors lack capacity or where the business demonstrably declined after the deceased’s death. The judgment strengthens the restraint principle on appellate courts and provides practical guidance to tribunals on balancing documentary proof with ground realities. For claimants, the case underscores meticulous reliance on contemporaneous financial records; for insurers and appellate courts it imposes the duty to engage holistically with trial evidence rather than adopt reductive inferences.

J) REFERENCES

a. Important Cases Referred

1. S. Vishnu Ganga & Ors. v. M/s Oriental Insurance Company Limited Rep. by Its Divisional Manager & Ors., Civil Appeals No(s). 1162–1163 of 2025, Supreme Court (Jan. 29, 2025) [2025] 1 S.C.R. 1163.

2. K Ramya v. National Insurance Co. Ltd., 2022 SCC OnLine SC 1338. (cited in judgment).

3. Amrit Bhanu Shali v. National Insurance Co. Ltd., (2012) 11 SCC 738.

4. National Insurance Co. Ltd. v. Pranay Sethi, (2017) 16 SCC 680.

5. Sushma H.R. & Anr. v. Deepak Kumar Jha & Ors., Civil Appeal Nos.6671–6672 of 2022 (2022 SCC OnLine SC 2166).

b. Important Statutes Referred

1. Motor Vehicles Act, 1988, Section 168 (computation of compensation).