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2026 Supreme(SC) 731
SUPREME COURT OF INDIA
SANJAY KAROL, NONGMEIKAPAM KOTISWAR SINGH, JJ.
Rashmirekha Tripathy And Anr. – Appellant
Versus
The Branch Manager (Legal Claims), Sriram General Insurance Company Limited And Ors. – Respondents
Civil Appeal No. 8735 of 2026 (Arising out of SLP(C) No. 27220 of 2024)
Decided On : 01-07-2026
For the Petitioner(s):Mr. Aditya Narayan Tripathy, Adv. Mr. Kedar Nath Tripathy, AOR Mr. Chand Qureshi, AOR Ms. Preeti Chauhan, Adv. Mrs. Arpana Soni, Adv. Mr. Mohit Yadav, Adv. Mrs. Aarti Pal, Adv. Mr. Md.imran Siddiqui, Adv. Mr. Saaket Jain, Adv. Ms. Shivangi Anand, Adv. Mr. Siddhartha Iyer, AOR
For the Respondent(s): Mr. Kshitij Mittal, Adv. Mr. Anand Sukumar, AOR Mr. Salil Paul, Adv. Ms. Manjeet Chawla, AOR Mr. Sahil Paul, Adv. Mr. Sandeep Dayal, Adv. Ms. Jyoti, Adv. Mr. Harmeet Singh Phillip, Adv. Mr. Raghav Nagar, Adv.
IMPORTANT POINT
Compensation under Motor Vehicles Act – There must be bifurcation made between salaried individuals and self-employed individuals when it comes to assessment of annual income.
Headnote:
Motor Vehicles Act, 1988 – Section 168 – Compensation – Computation of – Death in motor accident – Objective behind claim process in Motor Vehicles Act, 1988 is to grant just and fair compensation – There can be no hard and fast formula for computing annual income of deceased person/claimant – Determination of compensation is not an exact science and exercise involves an assessment based on estimation and conjectures – ITRs being a statutory document are an important reference point when it comes to assessing one’s income, for the purposes of compensation under Motor Vehicle Act – There must be bifurcation made between salaried individuals and self-employed individuals when it comes to assessment of annual income – For salaried individuals, only ITR of previous year will be sufficient for showcasing annual income from salary – Date when ITRs are filed would also become a relevant consideration. (Paras 15, 17, 18 and 20)
Facts of the case:
The issue which arises before this Court is whether for assessing annual income of a deceased person or claimant under Motor Vehicles Act 1988, ITRs for previous year is appropriate or average of the past two/three years is to be taken into consideration?
Findings of Court:
High Court took average of these two years to assess annual income of the deceased as Rs. 13,33,226/-. There was no reference made to other factors relating to the nature of business. It is borne from record that deceased was running his own construction business. Therefore, with a view to awarding just and fair compensation, his annual income fixed as Rs. 14,00,000/-.
Result : Civil Appeal allowed.
Key Points: - There is no universal formula for assessing annual income; the method must be tailored to the nature of employment (!) (!) . - For salaried persons, only the previous year’s income tax return is sufficient to determine annual income (!) . - For self-employed individuals, the average of up to three years’ income tax returns should be taken, supplemented by business-specific factors (!) . - Compensation is intended as a rough estimate to ease financial burdens on dependents, and appellate courts must ensure amounts are neither arbitrary nor niggardly (!) (!) . - In cases involving business income, surrounding factors such as business nature, growth pattern, potential for future profit, and negative income must be considered (!) (!) (!) (!) . - The date of ITR filing is relevant, as inflated income may be showcased after death or injury, but such ITRs may still be considered if supported by financial statements (!) . - Courts must bifurcate the assessment between salaried and self-employed individuals when determining annual income for compensation purposes (!) (!) . - The objective of the Motor Vehicles Act claim process is to grant just and fair compensation (!) (!) (!) . - In this case, the deceased’s income was assessed by averaging two prior years and considering the business context, resulting in a revised annual income figure (!) (!) . - Compensation calculations must follow the mandated heads, including future prospects, deductions, multipliers, and other specified components (!) (!) .
How should annual income be assessed for compensation under the Motor Vehicles Act, 1988 — whether by previous year’s tax return, an average of multiple years, or a fixed formula?
What methodology is to be used for income assessment for salaried versus self-employed deceased persons?
What principles should govern the determination of just and fair compensation for fatal accident claims?
| Table of Content |
|---|
| 1. procedure for leave to appeal and jurisdictional history. (Para 1 , 2) |
| 2. summary of facts, previous tribunal/high court findings, and contested income assessments. (Para 3 , 4 , 5 , 6 , 7 , 8 , 9) |
| 3. framing the legal issue regarding periodic vs. average income assessment for compensation. (Para 10 , 11 , 12 , 13 , 14) |
| 4. defining 'just compensation' as restoration to the financial position prior to the accident. (Para 15 , 16) |
| 5. distinction in income assessment methods for salaried versus self-employed individuals. (Para 17 , 18 , 19 , 20) |
| 6. application of evidentiary benchmarks to determine fair annual income and total compensation. (Para 21 , 22) |
| 7. final adjudication, modification of award, and payment directives. (Para 23 , 24 , 25) |
JUDGMENT :
SANJAY KAROL, J.
1. Leave granted.
2. This appeal is directed against the judgment and order dated 25.04.2024 passed in MACA No. 452 of 2023 by the High Court of Orissa at Cuttack, which, in turn was preferred against the order dated 24.02.2023 in MAC Case No. 92/2019 by the Motor Accident Claims Tribunal1[Hereinafter ‘MACT’.], Behrampur2[Hereinafter ‘the Tribunal’.].
3. The brief facts giving rise to this appeal are that on 29.05.2018, the deceased, namely Mr. Manoranjan Pandey, aged 39 years, was travelling from Behrampur to Bhubaneswar in his vehicle bearing registration number OD-02H-7929. Near Kaliabali Chakka on the National Highway, the offending vehicle, a truck bearing registration number AP-05TD-2112, being driven in a rash and negligent manner, struck the vehicle of the deceased. As a result of the said accident, he suffered injuries and passed away during treatment.
4. In connection with the same, an FIR came to be registered at Chamakhandi Police Station, bearing number Case No. 55/2018, under Sections 279, 337, 338, 304-A of the Indian Penal Code, 1860.
5. An application seeking compensation was filed by the claimant-appellants, being the legal representatives of the deceased, before the Tribunal under Section 166 of the Motor Vehicle Act, 1988, to the tune of Rs.2,25,00,000/-. It was stated therein that the deceased was running his own construction business and earning Rs. 15,00,000/- per annum. He was the sole breadwinner of his family.
6. The Tribunal, vide its order dated 24th February, 2023, held Respondent No.2, Insurance Company, liable to pay a compensation of Rs. 2,27,00,064/- along with 6% interest per annum, to the claimant-appellants from the date of filing of the claim petition i.e., from 7th May 2019. The income of the deceased was ascertained as Rs. 15,00,000/- per annum considering his Income Tax Return3[Hereinafter ‘ITR’.] for the Assessment Year4[Hereinafter ‘AY’.] 2018-19. A deduction of 1/3rd was made considering 3 dependents and a multiplier of ‘16’ was applied, considering the age of the deceased. The Tribunal further awarded compensation towards conventional heads, in accordance with law.
7. Aggrieved thereof, Respondent No. 2 the Insurance Company filed an appeal before the High Court seeking reduction in compensation awarded by the Tribunal. It was submitted therein that the Tribunal erred in computing the income of the deceased and applied the wrong multiplier, as the age of the deceased was 39 as per his PAN card.
8. The High Court, vide, the impugned judgment, allowed the appeal and reduced the compensation awarded by an amount of Rs. 39,24,914/- to Rs. 1,87,75,150/- along with 6% interest per annum. The Court reduced his annual income as Rs. 13,33,226/-. For this purpose, the Court took the average of the previous two ITRs which were on record, instead of only the previous ITR, which was taken into consideration by the Tribunal. Furthermore, the Court applied a multiplier of 15.
9. Dissatisfied, the claimant-appellants are now before us. The significant ground of challenge taken is that the Courts below, have erred in assessing the income of the deceased.
10. We have heard the learned counsel for the parties.
11. The issue which arises
