In a significant ruling that reinforces the principles of just compensation, the Supreme Court of India has held that the mere continuation of a deceased person’s business by their dependants cannot be used as a ground to reduce motor accident compensation. The judgement was delivered in the case of S. Vishnu Ganga & Ors. vs. M/S Oriental Insurance Company Limited & Ors. (Civil Appeal Nos. 1162-1163 of 2025) by a bench comprising Justice Sudhanshu Dhulia and Justice Ahsanuddin Amanullah.
The apex court overturned the Madras High Court’s decision, which had substantially reduced the compensation originally awarded to the dependants of a couple who perished in a tragic road accident. The Motor Accident Claims Tribunal (MACT) had assessed and granted compensation based on the income and contributions of the deceased to their family and business, but the High Court later lowered this amount, reasoning that the appellants had inherited and continued running the deceased’s business, thus not suffering significant financial hardship.
Rejecting this reasoning, the Supreme Court reaffirmed that compensation under the Motor Vehicles Act, 1988 must be determined based on actual financial loss, the deceased’s role in their enterprise, and the dependants’ ability to sustain the business in their absence, rather than merely considering whether the business survived.
Background of the Case
The case pertained to a fatal road accident that occurred near Namakkal, Tamil Nadu, when the parents of the appellants—S. Vishnu Ganga, S. Sudha Maheswari, A. Aishwarya Ganga, and S. Sudha Rani—were travelling in a Tempo Traveller vehicle from Salem to Madurai. Their vehicle collided with a Tamil Nadu State Transport Corporation (TNSTC) bus, leading to their tragic demise.
The deceased were partners in Sri Ganga Mills, an actively managed business in which they played a crucial role. Their four daughters, being young and inexperienced, were not actively involved in the running of the business at the time of the accident.
The appellants filed two separate claims before the MACT, seeking ₹1 crore each as compensation for the loss of their parents. The Tribunal, after assessing the evidence, awarded:
– ₹58.24 lakh for the deceased father
– ₹93.61 lakh for the deceased mother
– Interest at the rate of 7.5% per annum
However, the Oriental Insurance Company Limited (Respondent No.1) challenged the Tribunal’s award before the Madras High Court, which drastically reduced the compensation to:
– ₹26.68 lakh for the father
– ₹19.22 lakh for the mother
The High Court justified its decision by stating that since the appellants had inherited their parents’ business and continued to operate it, they had not suffered a significant financial loss.
Aggrieved by this decision, the appellants approached the Supreme Court, challenging the reduction in compensation.
Key Legal Issues Considered
This case presented several important legal questions regarding the computation of motor accident compensation, specifically:
1. Can compensation be reduced if the deceased’s business continues to operate after their death?
2. Should courts only consider direct loss of income, or should they also factor in the loss of management, expertise, and leadership?
3. How should courts assess the future financial impact on dependants when the deceased was an active businessperson?
4. What role do Income Tax Returns and business profitability play in assessing loss of income?
The Supreme Court’s decision addressed these concerns in detail, emphasising a holistic and fair approach to determining just compensation.
Supreme Court’s Observations and Verdict
Restoring the Tribunal’s original award, the Supreme Court strongly criticised the High Court’s approach, stating that the takeover of the deceased’s business by their dependants does not imply that they have suffered no financial loss. The court observed that business continuation alone does not compensate for the absence of the deceased’s managerial expertise, experience, and leadership.
Key Observations from the Judgment:
“The mere fact that the deceased’s business was taken over by the dependants does not mean they suffered no financial loss. The lack of experience and expertise of the dependants must be factored in.”
“Compensation must be fair, reasonable, and equitable. The approach of the High Court militates against settled law.”
“The law recognises that financial dependence is not limited to direct income. The skills and leadership of a business owner are valuable assets that, when lost, lead to financial hardship.”
“Income Tax Returns are reliable evidence to assess the income of a deceased, and a broad-based approach must be taken in determining loss of earnings.”
The court referred to various precedents, including:
K. Ramya v. National Insurance Co. Ltd. (2022 SCC OnLine SC 1338)
Sushma H.R. v. Deepak Kumar Jha (2022 SCC OnLine SC 2166)
National Insurance Co. Ltd. v. Pranay Sethi (2017) 16 SCC 680
These judgements emphasise that courts must take a liberal and forward-looking approach in computing motor accident compensation, rather than merely adopting a restrictive, financial ledger-based analysis.
Final Decision and Directions
The Supreme Court set aside the Madras High Court’s ruling and restored the Tribunal’s compensation award in full. It directed Oriental Insurance Company Limited to disburse the pending compensation amount to the appellants within six weeks, after deducting any payments already made.
The bench also remarked that motor accident claims should be assessed based on the actual economic impact on the dependants and not on mere assumptions regarding the business’s continuity.
Important Extract from the Judgment:
“In the matter of determining the compensation, certain larger aspects have to be kept in perspective. Even if it is expected that the business will continue, the loss due to the death of the deceased and their expertise in such business must be assessed at least at 50% of the normal way in which the business was conducted.”
