The Supreme Court, in a significant ruling on motor accident compensation, has held that income tax returns filed by a claimant for periods prior to an accident cannot be disregarded as fabricated. The bench, comprising Justices K. Vinod Chandran and N. V. Anjaria, enhanced the compensation for a claimant who suffered a leg amputation from Rs. 23.09 lakhs awarded by the High Court to Rs. 48.44 lakhs, emphasizing the distinction between medical disability and functional disability for calculating loss of earning capacity.
The judgment was delivered in an appeal filed by Anoop Maheshwari, the claimant, seeking enhancement of the compensation awarded by the Motor Accidents Claims Tribunal and the High Court for injuries sustained in a motor accident.
Background of the Case
The case originates from a road accident on April 9, 2007, where a motorcycle driven by the claimant, Anoop Maheshwari, was struck by a negligently driven truck. The claimant suffered severe injuries resulting in the amputation of one leg, a condition described in the medical certificate as a ‘hemipelvectomy’, which involves the amputation of the leg along with a portion of the pelvic bone. The Tribunal had already established that the truck driver’s negligence caused the accident, a finding that became final after the insurance company’s appeal was dismissed by the High Court.
The dispute before the Supreme Court was confined to the quantum of compensation. The Tribunal had assessed the claimant’s disability at 45%, misinterpreting the Employees’ Compensation Act, 1923, and had rejected his income tax returns, deeming his business a “ruse to save income tax” since his parents ran a large business. Consequently, the Tribunal awarded a total of Rs. 13,23,831.
The High Court partially allowed the claimant’s appeal, increasing the functional disability to 50% and the monthly income to Rs. 8,000. It found the Tribunal’s reasoning for rejecting the ITRs to be based on “mere surmises and conjectures.” The High Court awarded a total compensation of Rs. 23,09,600.
Arguments of the Parties
Appearing for the appellant, Senior Counsel Mr. G.V. Rao argued that the 90% disability certified by the Medical Board should have been accepted. He contended that both the Tribunal and the High Court erred in not accepting the income declared in the income tax returns. He further submitted that no provision was made for future medical expenses related to the periodic replacement and servicing of the claimant’s prosthetic leg.
Counsel for the respondent insurance company defended the High Court’s award, arguing that the income tax returns showed “cooked up income” as the claimant was an undergraduate at the time. It was also argued that awarding future prospects was inappropriate in disability cases where compensation for loss of income is already calculated based on the disability percentage.
Court’s Analysis and Decision
The Supreme Court meticulously analyzed each component of the claim to arrive at a “just compensation.”
On Functional Disability: The Court upheld the High Court’s assessment of 50% functional disability. It clarified the principle for such assessments, observing, “The disability to be assessed for the purpose of awarding compensation arising from a motor accident is the functional disability which reduces the earning capacity of the claimant and not strictly the medical disability.” The Court found 50% to be a reasonable assessment of functional disability, given that the claimant could continue his business with the help of a prosthetic limb.
On Income Assessment: The Court agreed with the High Court that the Tribunal’s rejection of the income tax returns was based on “mere surmises and conjectures.” It found compelling evidence that the returns were genuine, stating, “…the registration of the firm of the claimant took place on 06.03.2006 and the income tax returns produced are also for the assessment years 2005-2006 and 2006-2007… which are prior to the accident which occurred on 09.04.2007. It cannot be said that the claimant apprehended an accident and got registration of a firm and filed his income tax returns two years prior to the accident.” Accordingly, the Court accepted the gross income of Rs. 1,96,000 for the financial year 2007-2008, arriving at a net annual income of Rs. 1,91,000 after deducting taxes.
On Future Prospects: However, the Supreme Court set aside the 40% addition for future prospects granted by the High Court. The bench reasoned that such an enhancement was “improper, especially in the context of 50% disability having been reckoned for the purpose of loss of earning capacity and the claimant enabled to continue his business.”
On Medical and Other Expenses: The Court awarded the full claim of Rs. 12,54,985 for medical expenses, noting the lack of clarity in the insurance company’s verification process. It also restored the amounts of Rs. 1,00,000 for attendant expenses and Rs. 4,70,805 for the initial purchase of the prosthetic limb, which the High Court had not considered. Recognizing the future needs of the claimant, the Court awarded a lump sum of Rs. 10,00,000 for “future medical expenses and servicing of the prosthetic limb/purchase of accessories of the artificial limb.”
Final Award
The Supreme Court recalculated the total compensation as follows:
| Head | Amount (Rs.) |
| Loss of income | 17,19,000 |
| Medical expenses | 12,54,985 |
| Pain and suffering | 1,00,000 |
| Loss of amenities | 2,00,000 |
| Attendant expenses | 1,00,000 |
| Expenses for artificial limb | 4,70,805 |
| Future medical expenses | 10,00,000 |
| Total Amount | 48,44,790 |
The Court directed the insurance company to pay the awarded amount with 6% annual interest from the date of the application within three months, after deducting any amounts already paid.
