Reliance General Insurance Company Ltd. vs Shalu Sharma and Ors.

The present appeal arises from the judgment of a Single Judge of the Delhi High Court in an appeal against an award of the Motor Accident

Claims Tribunal (MACT).

Narinder Sharma died in an accident which occurred on 14 September 2013. The accident involved a motor vehicle which was insured against

third party risks by the appellant. The dependents filed a claim for compensation before the MACT. The Tribunal held that the accident was

caused due to the negligence of the driver of the offending vehicle. Compensation of Rs. 30,26,810 was awarded together with interest at 9 per

cent per annum. The Tribunal factored in a component of 30 per cent towards the loss of future prospects in assessing the compensation.

The High Court has observed that the only issue which was raised by the insurer was in regard to the award of future prospects to the extent of

30 per cent. The deceased was conducting his own business in the name and style of M/s Mahak Cable Networks at East Punjabi Bagh, New

Delhi. He was 42 years old on the date of the accident. According to the appellant, the increase in his gross total income as shown in the income

tax returns for 2010-11, 2011-12 and 2012-13 would not justify the award of future prospects, or at least to that extent. The High Court

negatived the submission of the insurer and held that having due regard to the progressive increase in the income of the deceased, the award of

future prospects by the Tribunal could not be faulted.

The judgment of a Constitution Bench of this Court in National Insurance Company Limited v. Pranay Sethi, 2017(4) R.C.R.(Civil) 1009 :

(2017) 13 SCALE 12 settles the issue. The deceased was self-employed. In such a case, future prospects cannot be denied. The grant must be in

accordance with the following principle set down in the judgment:

(iv) In case the deceased was self-employed or on a fixed salary, an addition of 40% of the established income should be the warrant

where the deceased was below the age of 40 years. An addition of 25% where the deceased was between the age of 40 to 50 years and

10% where the deceased was between the age of 50 to 60 years should be regarded as the necessary method of computation. The

established income means the income minus the tax component.

Since the deceased was 42 years of age, an addition of 25% on the ground of future prospects would be warranted instead of 30% computed by

the Tribunal.

The Tribunal has held that the annual income of the deceased (on the basis of the income tax returns for 2010-11, 2011-12 and 2012-13)

would be Rs. 1,81,500. Adding a component of 25% for future prospects, the income would stand at Rs. 2,26,875. Deducting an amount of one

fourth towards personal expenses, the loss of dependency per annum works out to Rs. 1,70,156. Applying a multiplier of 14, the total loss of

dependency would work out to Rs. 23,82,187. The Tribunal has awarded a sum of Rs. 3,14,335 towards medical expenses. An addition of Rs.

70,000 would be required to be made in terms of the decision in Pranay Sethi (supra) on account of the conventional heads of loss of estate (Rs.

15,000), loss of consortium (Rs. 40,000) and funeral expenses (Rs. 15,000). Hence, the total compensation is quantified at Rs. 27,66,522 on

which the claimants would be entitled to interest @ 9% p.a. from the date of the filing of the claim petition. The apportionment shall be carried out

in terms of the award of the Tribunal. We order accordingly.

When the Special Leave Petition was entertained by this Court, the following order was passed on 12 August 2016:

Issue notice.

Since the objection in this special leave petition is mainly to enhancement of the income of the deceased by 30% as prospective earning

capacity, the petitioner shall deposit 75% of the awarded amount along with interest accrued thereupon before the Tribunal, within six

weeks.

If such deposit is made within the stipulated time, execution proceedings against the petitioner shall remain stayed.

The amount so deposited, shall be released to the respondent forthwith.

The appellant shall deposit the balance computed in terms of the present judgment within a period of eight weeks before the Tribunal which shall

be disbursed to the claimants upon due verification. If the amount withdrawn by the claimants in terms of the order of this Court dated 12 August

2016 exceeds the amount to which they are entitled under the present judgment, no recoveries shall be made. The appeal is accordingly disposed

of. There shall be no order as to costs.