Supreme Court Restores MACT Award, Holds ITR a Valid Basis for Assessing Income in Motor Accident Claims

The Supreme Court in Nidhi Bhargava & Ors. Vs National Insurance Company Ltd. & Ors. (Supreme Court of India) has clarified an important issue in motor accident compensation matters: whether an Income Tax Return (ITR) filed after the date of accident for a past Assessment Year can be relied upon to determine the income of the deceased. The Court held that when the ITR pertains to a Financial Year that has concluded prior to the accident, it cannot be rejected merely because it was filed after the accident date.

By doing so, the Supreme Court set aside the reduction of compensation ordered by the High Court of Delhi and restored the higher compensation originally granted by the Motor Accident Claims Tribunal (MACT). This decision further solidifies the principle that the Motor Vehicles Act, 1988 is a beneficial and welfare-oriented legislation, and income tax returns are reliable and legally admissible evidence of income for the purpose of determining compensation.

Background of the Dispute

The Accident and Initial Claim

On 12.08.2008, a serious road accident took place involving:

• A Blue Line bus bearing Registration No. DL-1PB-0035, driven by one Javed Aftar, allegedly in a rash and negligent manner; and
• A motorcycle bearing Registration No. DL-6SX-6483, driven by Kapil Bhargava (the deceased), with his wife (Appellant No.1) riding pillion.

As a result of the impact, Kapil Bhargava succumbed to his injuries in hospital, while his wife survived but sustained grievous injuries.

The deceased’s wife and other legal heirs instituted a claim petition before the Motor Accident Claims Tribunal, Delhi, under Section 166 read with Section 140 of the Motor Vehicles Act, 1988, seeking compensation of Rs.40,00,000/-. They asserted that the deceased was engaged in business and was the primary earning member supporting the family.

MACT Award in Favour of the Claimants

After considering the pleadings and evidence, the MACT-1 (Central), Delhi delivered its judgment on 20.03.2018 in MACT No.357515/2016. The Tribunal:

• Assessed the income of the deceased based primarily on his ITRs;
• Computed the total compensation at Rs.31,41,000/-; and
• Directed payment of interest at 9% per annum from 27.09.2008 (date of filing of the claim petition) until realization.

The Tribunal also passed a separate award in MACT No.357259/2016 relating to other aspects and claimants, granting compensation under different heads.

Appeals Before the High Court

Cross-Appeals Filed

Both sides challenged the Tribunal’s decision before the Delhi High Court:

1. The appellants (claimants) filed MAC. APP. No.796/2018, contending that the compensation should be enhanced, particularly by assessing the deceased’s income on the basis of the Income Tax Return for Assessment Year 2008-2009.

2. Respondent No.1 – National Insurance Company Ltd. filed MAC. APP. No.589/2018 and MAC. APP. No.592/2018, questioning, inter alia:

   • The income computation adopted by the Tribunal, and
   • The rate and quantum of compensation and interest.

High Court’s Approach and Reduction of Compensation

By a common judgment dated 20.09.2018 / 01.10.2018 (the ‘Impugned Order’), the High Court of Delhi decided all three appeals together. The key features of its reasoning were:

• The High Court observed that the Income Tax Return for Assessment Year 2008-2009 had been filed on 10.09.2008, i.e., after the accident date (12.08.2008).
• Solely on this ground, it excluded the ITR for Assessment Year 2008-2009 from consideration.
• It instead relied upon the ITR for Assessment Year 2007-2008 and reassessed the deceased’s income based on that year alone.
• While applying the multiplier and future prospects in line with Sarla Verma (Smt.) v. Delhi Transport Corporation (2009) 6 SCC 121 and National Insurance Company Ltd. v. Pranay Sethi (2017) 16 SCC 680, the High Court recomputed the “loss of dependency” and drastically cut down the total compensation payable.

The computation as per the Tribunal and as modified by the High Court was as follows: