The Supreme Court of India, in its judgment dated December 15, 2025, in Civil Appeal arising out of SLP (C) No. 19462 of 2025, delivered a crucial ruling on the principles governing the assessment of income and compensation in motor accident claim cases.
The judgment in M/s National Insurance Co. Ltd. v. Neeru Devi & Ors. addresses a recurring and sensitive issue under the Motor Vehicles Act, namely, whether compensation can be based on assumptions and conjectures or must strictly rest on evidence and reasonable probability.
Background of the Case
The case arose from a fatal road traffic accident that occurred on 29.08.2017. The deceased was driving a vehicle that was hit by another vehicle driven in a rash and negligent manner.
The deceased left behind his wife and three children, who approached the Motor Accident Claims Tribunal seeking compensation.
The Tribunal framed two issues. One was whether the death was caused due to injuries sustained in the accident.
The second issue is related to the quantum of compensation payable to the legal representatives.
On the question of negligence and cause of death, there was no dispute. The controversy was confined only to the computation of income and the resulting compensation.
Core Issue Before the Supreme Court
The Supreme Court records at the very outset:
“The Insurance Company has in the above case raised only the question of the exorbitant award made on an unconscionable computation of the income of the deceased.”
The Tribunal had assessed the monthly income of the deceased at Rs.95,000 and awarded compensation accordingly.
This computation was affirmed by the High Court. The Insurance Company challenged this finding before the Supreme Court.
Objection Raised by the Insurance Company
The Insurance Company argued that the monthly income of Rs.95,000 was wholly unsupported by evidence.
The Court noted the crucial objection that:
“A person who had an income of Rs.95,000 per month would definitely be liable to pay income tax. There were no income tax returns produced by the claimants.”
The claimants attempted to justify the income by producing loan documents showing that the deceased was paying EMIs of approximately Rs.42,500 per month for two trucks owned by him.
On that basis, the Tribunal assumed that the income must have been double the EMI amount.
The Supreme Court rejected this approach, observing:
“There is no basis for such an assumption, and the computation of annual income is on mere surmises and conjectures.”
Significance of Loan Defaults
An important factual aspect noticed by the Supreme Court was that the bank records produced by the claimants themselves revealed repeated defaults. The judgment records that:
“A perusal of the accounts produced by the claimants itself would indicate that there were 15 defaults committed by the deceased which would clearly indicate that he was not getting a regular income to even pay up the EMIs in time.”
This factual finding directly undermined the assumption of a stable and high monthly income.
The Court treated this as a material circumstance that could not be ignored by the Tribunal.
Distinguishing the Gurpreet Kaur Judgment
The claimants relied heavily on the Supreme Court decision in Gurpreet Kaur v. United India Insurance Company Ltd. to justify the assessment of income based on loan repayments. However, the Supreme Court categorically rejected this comparison, stating:
“Looking at Gurpreet Kaur, we are not convinced that the reasoning on the facts therein has any application to the present case.”
The Court explained that in Gurpreet Kaur, the deceased was a young contractor whose tractor loan was fully repaid within a short period, clearly demonstrating consistent income.
In contrast, the present case involved repeated defaults and no documentary proof of high earnings.
Income from Business After Death
One of the most important legal observations in this judgment relates to business continuity. The claimants argued that after the death of the deceased, the trucks remained idle and income stopped completely.
The Supreme Court did not accept this assertion and made a realistic assessment, holding:
“In the very circumstance of the deceased having owned two trucks, he would have been engaging a driver to run at least one of them.”
The Court further observed:
“The death of the victim in our opinion would not have put a stop to the income that could be generated from his business; especially from the two trucks he owned.”
This finding is legally significant because it draws a clear distinction between salaried employment and income generating business assets while computing loss of dependency.
Application of Pranay Sethi Principle
The Supreme Court reiterated the foundational principle laid down by the Constitution Bench in National Insurance Co. Ltd. v. Pranay Sethi.
The judgment emphatically states:
“The legal representatives of the deceased in a motor vehicle accident cannot expect a windfall from a tragedy, nor can the amounts granted be a mere pittance, an apology for compensation.”
This statement reaffirms that compensation must be just, balanced, and evidence based.
Final Determination of Compensation
After considering all facts and circumstances, the Supreme Court adopted a practical approach.
Instead of remanding the matter or recalculating income afresh, it considered the amount already deposited pursuant to earlier directions.
The Court held:
“We are of the opinion that the amount of Rs.50,00,000 now deposited, on directions issued by this Court would suffice as compensation for loss of dependency.”
The Court clarified that this amount represented half of the loss of dependency calculated by the Tribunal, thereby correcting the excess without denying fair compensation.
Interest and Conventional Heads
The Supreme Court ensured that the claimants were not deprived of statutory benefits. It categorically held that:
“Interest at the rate of 9% per annum would definitely be entitled to the claimants.”
Further, relying on Magma General Insurance Co. Ltd. v. Nanu Ram & Ors., the Court reaffirmed that children are entitled to filial consortium. Accordingly, it awarded:
“A total of Rs.1,60,000 over and above the amount deposited.”
The entire award was directed to carry interest at 9 percent per annum from the date of the claim petition, with the balance amount to be paid within one month.
Conclusion
The Supreme Court ultimately allowed the appeal filed by the Insurance Company and set aside the excessive computation made by the Tribunal and affirmed by the High Court.
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