MACT | Courts Cannot Arbitrarily Downscale Assessed Income — Compensation Must Reflect Realistic Earning Capacity of Deceased: Supreme Court

“Judicial Guesswork Is No Substitute for Evidentiary Assessment”, In a compelling affirmation of judicial responsibility in assessing compensation claims, the Supreme Court of India on 9th September 2025, came down heavily on the High Court for reducing the assessed monthly income of a deceased accident victim without any reasoning or material on record. The Court held that such arbitrary reductions amount to denial of just compensation, especially when the deceased was an educated individual engaged in professional and entrepreneurial activities.

The Bench comprising Justice B.V. Nagarathna and Justice Augustine George Masih declared: “There was absolutely no reasoning and no reliance on any material by the High Court to reduce the assessed monthly income of the deceased from Rs.6,000/- to Rs.5,500/-.”

“A Pharmacist, Director and Business Partner Cannot Be Assessed Like a Daily Labourer — Courts Must Account for Educational and Occupational Background”

The deceased, a 43-year-old man from Bijapur, died in a tragic motor vehicle accident in 2010 while travelling to Shirdi. He left behind a wife, a minor daughter, and aged parents. During the Motor Accident Claims Tribunal proceedings, the claimants produced documents to show that the deceased held a Diploma in Pharmacy, had earlier run a medical shop, was involved in a pharmaceutical distributorship partnership, and was also a Director in a Cooperative Bank. Although no definitive income proof was provided, the Tribunal assessed his monthly income at Rs.6,000/-, based on his educational and professional profile.

The High Court, however, while affirming the rest of the Tribunal’s findings, reduced the monthly income to Rs.5,500/- without any explanation, a move the Supreme Court found unacceptable.

The Court observed: “The Tribunal referred to the various documents produced by the claimants... The High Court on the other hand has not referred to any material in fixing the monthly income.”

“Not Proving Income to the Last Rupee Does Not Mean Earning Capacity is Negated — Courts Must Apply Realistic Estimation in the Absence of Concrete Proof”

The deceased’s claim was that he earned around Rs.2.25 lakh per annum, but given the lack of business records and documentary evidence, the Tribunal adopted a conservative income of Rs.6,000 per month. The Supreme Court took a broader and realistic view, holding that even a manual labourer (coolie) would be earning Rs.7,500 per month in 2010, as per established precedent in Ramachandrappa v. Royal Sundaram Alliance Insurance Co. Ltd..

Referring to that decision, the Court remarked: “It was held that even in 2004, a Coolie would earn Rs.4,500/month... With incremental increases, by 2010, the income would be Rs.7,500/month.”

Reassessing the circumstances of the deceased, the Court firmly declared: “It can be safely assumed that the deceased would have obtained a monthly remuneration of Rs.12,000/- to look after the family of five comprising himself, his wife, minor daughter and two parents.”

“High Court Cannot Act as an Income Arbitrator in the Absence of Proof — Deviation from Tribunal’s Finding Requires Cogent Reasoning”

The Court found the High Court’s conduct to be plainly arbitrary, as it offered no justification for altering the Tribunal’s income assessment, nor did it engage with the deceased’s professional background or dependents' financial needs.

Holding that appellate courts have a duty to provide reasons when interfering with well-reasoned findings of a lower court, the Supreme Court ruled: “The High Court's interference without any basis is contrary to settled principles of compensation jurisprudence and the mandate under the Motor Vehicles Act.”

Supreme Court Restores Enhanced Compensation with Realistic Income Based on Skills, Age, and Circumstances

Applying the guidelines laid down in the five-judge Constitution Bench decision in National Insurance Co. Ltd. v. Pranay Sethi and recognising the claimants’ entitlement to loss of dependency, consortium, estate, and funeral expenses, the Supreme Court reworked the compensation to a total of Rs.20,80,000, directing the insurance company to pay the differential amount with 6% interest from the date of application.

The Court concluded emphatically: “Considering the overall circumstances, the deceased’s monthly income must be fixed at Rs.12,000. The appellate order stands modified accordingly.”

The ruling stands as a clear warning against mechanical reductions in compensation awards and reinforces the principle that justice in accident claims must reflect both the human loss and the economic reality.

Date of Decision: 09th September 2025