The Oriental Insurance Co. Ltd. vs P. Sakunthala and Others

G.M. Akbar Ali, J.—One Palanichamy, S/o Ramasamy Gounder, aged 36 years who was the proprietor of M/s Spear Tex, a Hosiery

Manufacturing Unit, died in a road accident on 17.7.97. The accident occurred in the following manner.

On 17.7.1977, around 1.45 p.m., the deceased was proceeding from West to East in the Thirupur Ramnagar I Street, driving his motorcycle

bearing Registration No. TN39A 6800. He was proceeding in a normal speed. One Chandrasekaran was travelling as a pilliar rider. While so, a

lorry bearing Registration No. TDQ 2854, driven in a rash and negligent manner, by one Iman Singh, came behind the motor cycle and dashed. In

the result of which, both the driver and the pillian driver fell down and the lorry ran over the said Palanichamy causing multiple injuries. He was

taken to a private hospital, Thirupathur and then to Government Hospital, where he was declared dead. A case was registered against the driver of

the lorry and he admitted the offence.

The 1st respondent, being the wife and the respondents 2 and 3 being the minor children and the respondents 4 and 5 being the parents of the

deceased, made a claim stating that the deceased was carrying on business in manufacturing hosiery garments and his annual income was between

Rs. 2,50,000/- and Rs. 3,00,000/- and claimants have lost their only bread winner, the wife has lost her husband in young age and minor children

have lost their caring father and the parents have lost their only hope in the old age and therefore have claimed Rs. 60,00,000/- as compensation

against the owner and the Insurance Company.

The claim was resisted by the Insurance Company denying the liability and also opposing the quantum.

The Tribunal, namely, the Fast Track Court-IV, on detailed enquiry found that the driver of the lorry had driven the vehicle in a rash and

negligent manner and fixed the statutory liability on the Insurance Company.

On quantum, the Tribunal relied on the report of the Auditor relating to Spear Tex Hosiery Unit. The Tribunal considered the Auditors Report

for the year 1994 to 1997 which were marked as Exs.A.5 to A.9 and relied on Ex.A.8 which would show that the annual profit of the Company

was Rs. 4,14,278.45. A sum of Rs. 50,000/- was deducted towards personal expenses and the income was fixed at Rs. 3,64,278/-. Considering

the age of the deceased as 36 years, the Tribunal had adopted multiplier 16 and awarded Rs. 58,28,448/- towards loss of dependency. Under the

conventional heads, the Tribunal had awarded Rs. 10,000/- to the 1st respondent towards consortium, Rs. 10,000/- each towards loss of love

and affection, in total the Tribunal had awarded Rs. 58,68,500/- at 9% interest.

Aggrieved by the quantum, the Insurance Company has prepared the present appeal on various grounds and more particularly, on the ground

that the Tribunal had grossly erred in relying upon Exs.A.5 to A.9 and A.12 to 18 without adequate proof and without corroborative proof of

income tax assessment and has fixed the annual income at Rs. 4,14,278/-. It was also submitted that necessary income tax deduction has to be

made in the annual income.

The points that arise for consideration in this appeal are,

whether the compensation awarded by the Tribunal is just and reasonable?

Whether a deduction of 30% from the annual income is to be made towards incometax?

Mr. N. Vijayaragahavan, learned Counsel for the Insurance Company at the outset pointed out that the Tribunal had awarded a staggering sum

of Rs. 58,58,500/- as against a claim of Rs. 60,00,000/- and that too for the deceased person who was not shown to be an incometax assessee.

The learned Counsel pointed out that the Tribunal had relied on Exs.A.5 to A.9 which are the audit report u/s 44(a)(b) of Income Tax Act 1961

and has relied on the balance sheet of the business concerned M/s Spear Tex, Thirupur. The learned Counsel pointed out that all these exhibits

would show the annual turnover and the net profit of the Company and the Tribunal had taken into consideration the highest profit for the year

31.3.1997 and has fixed the same as the income of the deceased which is totally wrong. The learned Counsel further pointed out that even

according to the pleadings, the claimants have stated that the income of the deceased was between Rs. 2,00,000/- and Rs. 3,00,000/- and after

deducting 1/3, the income would be between Rs. 1,50,000/- and Rs. 2,00,000/- and applying the multiplier 16. The loss of income to the

claimants would be only Rs. 32,00,000/-.

The learned Counsel submitted that the Tribunal had not even deducted 1/3 towards personal expenses while considering the annual income.

The learned Counsel further stated that after arriving of the annual income, the Tribunal ought to have deducted s 30% towards incometax.

The learned Counsel relied on a decision reported in National Insurance Company Ltd. Vs. Indira Srivastava and Others, , in which the Apex

Court has held as follows:

The amounts, therefore, which were required to be paid to the deceased by his employer by way of perks, should be included for computation

of his monthly income as that would have been added to his monthly income by way of contribution to the family as contradistinguished to the ones

which were for his benefit. We may, however, hasten to add that from the said amount of income, the statutory amount of tax payable thereupon

must be deducted.

If the dictionary meaning of the word ''income'' is taken to its logical conclusion, it should include those benefits, either in terms of money or

otherwise, which are taken into consideration for the purpose of payment of income tax or profession tax although some elements thereof may or

may not be taxable or would have been otherwise taxable but for the exemption conferred thereupon under the statute.

The learned Counsel further relied on a decision reported in The Oriental Insurance Co. Ltd., Regional Office, 8, Esplanade Road, Chennai-

108 Vs. Kousalya Kawar and 7 others, , wherein the Division Bench of this Court has held as follows:

The Tribunal failed to see that anybody can pay income tax by challan and get a statement prepared, after the accident, for the previous three

years. The Tribunal ought to have seen whether the claim is genuine and the document is reliable without any other supporting, direct evidence. The

Supreme Court, in Petlad Turkey Red Dye Works Co. Ltd. Vs. Dyes and Chemical Workers'' Union, Petlad and Another, , administered a

warning for relying on balance sheet prepared by companies. Their Lordships observed as follows:

It has to be borne in mind that in many cases, the directors of companies may feel inclined to make incorrect statements in the balance sheets for

ulterior purpose. While that is no reason to suspect every statement made in these balance sheets, the position is clear that we cannot presume that

statement made therein to be always correct. The burden is on the party who asserts a statement to be correct to prove the same by relevant and

acceptable evidence. The mere statement of balance sheet is of no assistance....

This principle of law fully applies to this case. The mere filing of the statement and challan is of no assistance without proof. They cannot be

presumed to be correct, especially when it is a document prepared after the accident in reference to an earlier period. Obviously, this is with a

mind to show the income and, therefore, the Tribunal ought to have appraised it judicially.

The learned Counsel produced a copy of the order in C.M.A 5316 of 2010 arising out of SLP (C). No. 668 of 2008. The Hon''ble Supreme

Court while answering the contention whether the High Court ought not have made deduction of 30% from the salary towards taxes etc., held as

follows:

The submission of the respondents that the deduction of 30% from the salary is not warranted in view of the decision in Sarla Verma, is not

sound. In Sarla Verma, the monthly salary of the deceased was only Rs. 4004/- and the annual income even after taking note of future prospects

was Rs. 72072/-. The income was in a range which was exempt from tax, if the permissible deductions were applied. Therefore, this Court did not

make any deduction towards Income Tax. But this Court made it clear that where the annual income is in the taxable range, appropriate deduction

should be made towards tax. In this case as the annual income has been worked out as Rs. 2,48,292/- appropriate deduction has to be made

towards Income Tax. The rate of income tax is a varying figure, with reference to taxable income after permissible deductions and the year of

assessment. The High Court has assessed the deduction as 30% and on the facts. WE do not propose to disturb it. We however make it clear that

while ascertaining the income of the deceased, any deductions shown in the salary certificate as deductions towards GPF, life insurance premium,

repayments of loans etc., should not be excluded from the income. The deduction towards incometax surcharge alone should be considered to

arrive at the net income of the deceased.

On the contrary, Mr. D. Balachander, the learned Counsel for the respondent would submit that at the time of filing claim petition, the claimants

were not aware of the actual income of the deceased and therefore, they gave statement to the effect that the income of the deceased would be

between Rs. 2,00,000/- and Rs. 3,00,000/-. The learned Counsel pointed out that during the examination, proper explanation was given to that

effect and the accounts of proprietorship concern was produced from the year 31.3.1994 to 17.7.1997 under Exs.A.5 to A.9. The learned

Counsel pointed out that the respondents are now filing the income tax assessment for the year 1995-96, 1996-97 and 1997-98 as additional

evidence under Order 41 Rule 7 CPC. The learned Counsel urged that the additional evidence has to be admitted which will substantiate the

annual income of the deceased.

The learned Counsel pointed out that Exs.A.5 to A.9 and the additional documents would show that the annual income of the deceased was

Rs. 4,14,278.45 immediately prior to his death, which occurred on 17.7.97.

In AIR 2010 SCW 1615 (Meenaben Pankajkumar Joshi and Ors. v. New India Assurance Co. Ltd.), wherein in the similar circumstances of

production of additional evidence before the Hon''ble Supreme Court, the Supreme Court opined that the interest of justice would be subserved if

the matter relating to award of compensation is considered afresh by the Tribunal and taking additional documents placed before us as additional

evidence.

The learned Counsel urged that the matter may be remitted back to the Tribunal to adduce evidence on the additional documents to

substantiate that the annual income of the deceased.

We have carefully considered the rival contentions of either side. As stated earlier, the quantum of compensation is alone challenged before us.

The deceased one Palanichamy was stated to be a Proprietor of Hosiery Unit of Tirupur and was running a business in a proprietorship of

Ms/Spear Tex, Tirupur. When he was 36 years, he died in a road accident and the claimants are wife, children and parents. Though the claimants

have pleaded that the deceased was earning a sum of Rs. 3,00,000/-p.a in the claim petition, while adducing evidence, they have produced Ex.A.5

to A9, the audit report along with balance sheet of the proprietary concern. Exs. A.5 to A.9 show as follows:

=====================================================E

Exhibits Turn Over Profit

Ex.A.5 Rs. 16,48,169.33 Rs. 1,60,527.12

31.03.1994

Ex.P.6 Rs. 31,42,703.56 Rs. 2,22,348.56

31.03.1995

Ex.P.7 Rs. 23,21,105.84 Rs. 3,63,929.37

31.03.1996

Ex.P.8 Rs. 23,01,009.88 Rs. 4,14,278.45

31.03.1997

Ex.P.9

01.04.1997 to Rs. 10,28,406.00 Rs. 1,41,096.05

17.07.1997

3 1/2 months)

=====================================================

The accident occurred on 17.7.1997. Therefore, the Tribunal considered Ex.A.8 dated 31.3.1997 which would show a business turnover of

Rs. 23,01,009.88 and a profit of Rs. 4,14,278.45.

As elaborated by the learned Counsel for the appellant, the Tribunal had deducted only Rs. 50,000.00 towards personal expenses and fixed

Rs. 3,64,278.00 as loss of income to the claimants. It had applied the multiplier 16 and arrived at Rs. 58,28,448.00.

The award is challenged on the following contentions:

(a) The claimants have stated that the annual income of the deceased was Rs. 3,00,000/-p.a.

(b) Exs.A.5 to A.9 are not supported by the income tax assessment which alone will reflect the annual income of the deceased.

(c) Statutory 1/3 deduction towards personal expenses has not been made.

(d) 30% tax has to be deducted.

Though the claimants have made a statement in the pleadings that the deceased was earning up to Rs. 3,00,000/-p.a, in the course of evidence

there is an acceptable explanation stating that the same was made without knowing the actual income. Therefore, the subsequent oral and

documentary evidence can be accepted to arrive at the actual income of the deceased.

Before the Tribunal, the claimants have produced Exs.A.5 to A.9 which are audited accounts along with the balance sheet and relevant

annexures relating to M/s Spear Tex. These documents relate to the financial year 1994-95, 1995-96 and 1996-97. Ex.A.8 is for the year 1996-

As stated earlier, the total turnover was shown as Rs. 23,01,009.88 and the profit was shown Rs. 4,14,278.45

Reliance on these documents is opposed by the Insurance Company on the ground that the income tax return was not filed. In CMP No. 1169

of 2010, the respondents have now produced the incometax return for the three years.

Whenever additional evidence is sought to be produced before the appellate court under Order 41 Rule 27 of the Civil Procedure Code, the

appellate court has to follow the provision given under Rule 28 which reads as follows:

Order 41 Rule 28

Mode of taking additional evidence: Wherever additional evidence is allowed to be produced, the Appellate Court may either take such

evidence, or direct the Court from whose decree the appeal is preferred, or any other subordinate Court, to take such evidence and to send it

when taken to the Appellate Court.

In In AIR 2010 SCW 1615 (Meenaben Pankajkumar Joshi and Ors. v. New India Assurance Co. Ltd.), (cited supra) the Apex Court has

remitted the matter to the Tribunal for considering additional documents.

In our considered view, that will not be necessary as the accounts and income produced under Exs.A.5 to A.9 reflects the same statement as

in the additional documents produced before this Court. The respondents have produced the income tax returns along with the accounts. Except

that no purpose will be served by entertaining the additional evidence and therefore, the application filed under Order 41 Rule 27 of C.P.C. is

liable to be dismissed.

The accident had occurred on 17.7.1997. Therefore, the income of the deceased during the period 1996 and 1997 alone has to be

considered. Ex.A.8 is the balance sheet and accounts of the Company along with Auditor statement. Therefore what reflects as annual profit of the

proprietary concern can be taken into account to arrive at the annual income of the deceased proprietor. However, necessary deduction for his

personal expenses and also deduction towards the incometax have to be made.

The Oriental Insurance Co. Ltd., Regional Office, 8, Esplanade Road, Chennai-108 Vs. Kousalya Kawar and 7 others, , and in C.M.A 5316

of 2010 arising out of SLP (C). No. 668 of 2008 (cited supra) the Hon''ble Supreme Court has held that the incometax deduction has to be made

in the annual income.

As far as the deduction towards personal income is concerned, the Tribunal had deducted only Rs. 50,000/- without any basis. The Tribunal

ought to have deducted 1/3 towards personal expenses of the deceased. In Bilkish Vs. United India Insurance Co. Ltd. and Another, , the

Supreme Court held that the deceased would have spent one-third towards personal expenses and contributed two-third of his income to his

family. Deduction of one third for personal expenses is the consistent view taken by the Hon''ble Supreme Court and we deduct one third for

personal expenses. As far as the deduction of income tax is concerned, the annual income of the deceased is taken in to consideration on the net

profit of the business he was running. This net profit was arrived on the basis of the annual turnover of the business. When the net profit is shown in

the accounts and if it is taken to be the personal income of the deceased, the tax payable on such income has to be deducted. A faint attempt was

made by the claimants/respondents that he had suffered incometax only on the taxable income of Rs. 1,26,680/- after the deduction of

depreciation admissible as per depreciation statement.

We are not persuaded by such argument. As stated earlier, the incometax return sought to be produced as additional evidence is not taken into

consideration. Therefore, out of the annual income of the individual, to arrive at the actual income after deduction of the income tax, in our

considered view that 30% tax has to be deducted at the first instance and thereafter, 1/3 has to be deducted towards personal expenses.

Since the annual income is fixed at Rs. 4,14,278.00, 30% income tax deduction will be Rs. 1,24,283.00. The balance will be Rs.

2,89,994.00. Out of Rs. 2,89,994.00, 1/3, Rs. 96,665.00, is to be deducted towards personal expenses and the balance will be Rs. 1,93,329.00.

Therefore, the annual contribution to the family would be Rs. 1,93,329.00. By adopting multiplier 16, the amount will be Rs. 30,93,264.00

(1,93,329 x 16). The compensation is reassessed as follows:

Loss of Income .... Rs. 30,93,264.00

Loss of Consortium

(for the 1st petitioner) .... Rs. 50,000.00

Loss of Love and affection

(for the petitioners 2 & 3)

(each Rs. 50,000.00) .... Rs. 1,00,000.00

Loss of love and affection

(for parents each Rs. 25,000.00) .... Rs. 50,000.00

Funeral Expenses .... Rs. 5,000.00

--------------------

Rs. 32,98,264.00

--------------------

The Tribunal has awarded rate of interest 9%. The accident occurred in the year 1997 and therefore the interest at the rate of 9%, awarded by

the Tribunal is maintained.

In the result, the order of the Tribunal in MCOP No. 405 of 1998 is modified and the civil miscellaneous appeal is partly allowed.

35(A). For the reasons stated in paragraph No. 28, C.M.P. No. 1169 of 2010 is dismissed. The compensation amount is reduced to Rs.

32,98,264.00 payable with interest at the rate of 9%. The reduced compensation of Rs. 32,98,264.00 is ordered to be apportioned as under:

1st petitioner (wife) .... Rs. 14,98,264.00

2Nd & 3rd petitioner

(minor children) .... Rs. 15,00,000.00

(each Rs. 7.50,000/-)

4th & 5th petitioner

(parents)

(each Rs. 1,50,000/-) .... Rs. 3,00,000.00

At the time when we have passed the order, a memo was filed stating that the fourth respondent/fourth claimant - father of the deceased died

on 23.7.2008. In the memo, it was stated that there are no other legal heirs other than the fifth respondent/fifth claimant. The compensation amount

of Rs. 1,50,000/- apportioned to the fourth respondent/fourth claimant is ordered to be paid to the fifth respondent/fifth claimant.

The appellant Insurance Company is directed to deposit the compensation amount along with accrued interest within a period of eight weeks

from the date of receipt of copy of this order. On such deposit, the 1st claimant/wife and the claimants 4 and 5 are permitted to withdraw their

respective share of compensation amount.

Minor claimants are also permitted to withdraw their respective share of compensation amount on obtaining necessary orders from the Tribunal

declaring them as major. No costs.