If Deceased In Motor Accident Was Self-Employed, Best Method For Assessing Loss Of Dependency Is Taking Median Income: Bombay HC [Read JT]

While hearing an insurance company’s first appeal against an order of Motor Accident Claims Tribunal (MACT), the Bombay High Court has held that in case the deceased was self-employed, appropriate method for calculating loss of dependency would be by taking his median income.

Justice GS Patel was hearing the appeal filed by New India Assurance against an order by the MACT awarding Rs. 26 lakhs as compensation to the family members of deceased Jitendra Mehtalia.

The precise issue to be decided by the court was where the victim is shown to be self-employed, what is the appropriate method or approach in assessing his income for calculating the loss of dependency.

Drawing a distinction between a salaried person and someone who has a definite source of income, the court noted that a self-employed person’s income may vary every year which may be attributable to various factors.

Justice Patel observed-

“In my view, where the deceased is shown to be a self-employed person either in a profession or having his own business and it is demonstrated that there are year-on-year variations in the income, the correct and moderate approach is to take the average.”

Case Background

Jitendra Mehtalia, a businessman, was travelling in a Tata Sumo in Jammu and Kashmir when the accident took place on June 6, 2004.

The driver was driving in a rash and negligent manner, so the car toppled and Jitendra was seriously injured. He was taken to the hospital where he succumbed to his injuries.

Jitendra was 54 years old. The applicants seeking compensation under Section 166 of the Motor Vehicles Act, were his widow, his three daughters, two of whom are unmarried, while one is still a minor, and his parents.

Submissions and Final Order

Counsel for the appellant insurance company, SS Jinsiwale submitted that there was a trend in the deceased’s income for years where in the first year it starts at a high, then there is a market drop, followed by an increase.

Citing judgments of the Supreme Court in support of his argument, Jinsiwale argued that in such a case, last reported income should be taken.

The highest reported income of the deceased was Rs. 4,45,269, while the lowest was Rs. 1,23,483.

Appearing for the respondent family members, AM Gokhale submitted that if an average is taken, the median annual income comes to Rs. 2,50,388. This, he said, would be the fair income amount to be taken into account as all fluctuations in income would be around this median.

Accepting Gokhale’s argument, the court said: “If the mandate of the Court is to award just compensation, then this has to be seen as something that is reasonable and moderate, neither fancifully high nor illusorily low. That requirement of income, in my view, is best met by taking the median income.”

The total compensation computed on the basis of the said median income was a rounded-off figure of Rs. 27 lakh, which was only Rs.10,000 short of the actual compensation awarded.

A 7.5 % interest per annum at Rs. 27 lakhs from the date of the claim petition was also added by the court.