Depreciation Cannot Be Deducted When New Spare Parts Are Used for Accident Repairs, Holds Andhra Pradesh High Court

The Andhra Pradesh High Court enhanced motor accident compensation from Rs 41,400 to Rs 1,21,266, ruling that depreciation deductions are impermissible when new parts are purchased to restore a damaged vehicle to road-worthiness.

The High Court of Andhra Pradesh at Amaravati has enhanced the compensation payable to a tractor-owner whose vehicle was damaged in a road accident in 2008, finding that the Motor Accidents Claims Tribunal erred in deducting depreciation from the repair bill when the evidence showed that new spare parts had been fitted. Justice A. Hari Haranadha Sarma, sitting singly, also awarded Rs 15,000 as incidental loss of income for the period the vehicle was off the road, a head that the Tribunal had refused entirely. The total compensation was raised from Rs 41,400 to Rs 1,21,266, payable with interest at 6 per cent per annum from the date of the petition till realisation.

The Accident and the Claim Before the MACT

On 19 April 2008, the petitioner G. Jayarami Reddy had parked his tractor and trailer (Registration Nos. AP 21 K 4127 and AP 21 K 4128) near Silpa Weigh Bridge on National Highway 18 at Nandyal. A lorry bearing No. AP 21 W 4758, coming from the Kurnool side, struck the parked vehicles in a rash and negligent manner, causing extensive damage. A criminal case, Crime No. 78 of 2008, was registered against the lorry driver under Sections 337 and 338 IPC.

Reddy filed M.V.O.P. No. 36 of 2010 before the Chairman, Motor Accidents Claims Tribunal-cum-V Additional District Judge (F.T.C.), Kurnool at Nandyal, claiming Rs 1,50,000. Respondent No. 1, the lorry owner, remained ex parte throughout. The Oriental Insurance Company Limited, Respondent No. 2, contested the claim, denying negligence and putting the petitioner to proof of damages.

The petitioner produced two repair bills: Ex. A4, a cash bill from M/s Rythu Tractors, Nandyal for Rs 70,566 covering tractor engine repairs, and Ex. A5, a bill from M/s Priya Engineering Works, Nandyal for Rs 35,700 covering trailer repairs. A licensed surveyor, P.W.5, had assessed the damage at Rs 1,07,000 before depreciation and arrived at Rs 41,400 after applying a depreciation deduction. The Tribunal relied on the surveyor’s final figure and awarded only Rs 41,400, rejecting the incidental income claim for want of proof.

The Depreciation Dispute

On appeal in M.A.C.M.A. No. 833 of 2012, the central question was whether the Tribunal was right to deduct depreciation when new spare parts had, on the evidence, been fitted to restore the vehicles.

Three witnesses supported the petitioner’s case on repairs. P.W.2, an ITI-trained motor mechanic, stated that new parts worth Rs 70,566 had been provided to the tractor. P.W.3, the proprietor of Priya Engineering Works, confirmed that spare parts worth Rs 35,700 had been used for the trailer. P.W.1, the claimant himself, denied suggestions during cross-examination that no parts had been replaced or that excessive bills had been submitted.

Critically, P.W.5 — the surveyor — admitted under cross-examination that he had deducted depreciation in his report and also admitted that depreciation need not be deducted when new spare parts are used. He further admitted that the Insurance Company was liable for loss of use, and that a tractor of this type could earn Rs 1,000 per day. He acknowledged that, without the depreciation deduction, his own assessment would exceed Rs 59,000.

The High Court found that Ex. A4 and Ex. A5 were both proved through the evidence of P.Ws. 2 and 3, that they covered separate and independent repairs with no overlap, and that P.W.5 had not disputed the spare parts listed in those bills. The learned MACT had given excessive weight to the surveyor’s depreciation-adjusted figure while overlooking his own admission about the inapplicability of depreciation in cases of new-part replacement.

How the Court Reasoned on Depreciation

Justice Sarma relied on the Full Bench decision of the Kerala High Court in M. M. Joseph v. Venkata Rao M and Ors., reported as AIR 2016 Kerala 101, which had directly addressed this point. The Full Bench observed that a person whose vehicle is damaged cannot be expected to repair it with old spare parts; necessarily, new parts must be purchased to restore road-worthiness. Reducing compensation by a depreciation factor in such a case amounts, in effect, to a reduction from the claimant’s actual loss. The Full Bench had accordingly set aside a 35 per cent depreciation deduction in that case.

The Court noted the Full Bench’s reasoning: “without effecting such repairs, it may not be possible for the claimant to put the vehicle on road.” Applying this principle to the evidence before it, the Court held that the petitioner was entitled to the full amounts covered by Ex. A4 (Rs 70,566) and Ex. A5 (Rs 35,700), totalling Rs 1,06,266, without any depreciation deduction.

Incidental Loss of Income During Repairs

The Tribunal had refused to award anything for the period the tractor and trailer were off the road, finding the claim unproved. The appellant argued that this refusal was erroneous.

The Court drew on the Division Bench decision of the erstwhile composite High Court of Andhra Pradesh in G. Md. Masoom v. S. K. Khader Vali and Another, reported as 2004 (2) ALD 324 (DB). That bench had held that the owner of a damaged vehicle is entitled to claim not only repair costs but also incidental loss of income for the period the vehicle remains unavailable due to repairs. The Division Bench had observed that such incidental income loss is part of the damages arising from the damage to the vehicle, that the Insurance Company is liable for it under the policy, and that the Motor Accidents Claims Tribunal has exclusive jurisdiction to award it — the Civil Court having no jurisdiction after the 1988 amendments to Sections 165 and 166 of the Motor Vehicles Act.

P.W.5, the surveyor, had himself admitted that a tractor of this kind could earn Rs 1,000 per day and that the Insurance Company was liable for non-usage during the repair period. The High Court held that incidental loss of income was therefore established in principle. Taking into account the facts, circumstances, and length of the repair period, the Court awarded Rs 500 per day for one month, amounting to Rs 15,000.

Liability of the Insurance Company

The policy of Oriental Insurance Company was in force on 19 April 2008, the date of the accident. Respondent No. 1, the lorry owner, had remained ex parte. The High Court confirmed that Respondent Nos. 1 and 2 are jointly and severally liable, but directed that Respondent No. 2 — the Insurance Company — is the primary paying party in view of the subsisting policy.

Order

M.A.C.M.A. No. 833 of 2012 was allowed in part by judgment dated 1 July 2026. The award made by the Tribunal in M.V.O.P. No. 36 of 2010 at Rs 41,400 was modified and enhanced to Rs 1,21,266. Interest at 6 per cent per annum runs from the date of the original petition before the Tribunal till the date of realisation.

On payment mechanics, the Court directed that if the claimant furnishes his bank account number within 15 days, the Insurance Company shall deposit the balance amount directly into that account and file proof before the learned MACT. If the claimant fails to do so within that period, the Insurance Company shall deposit the amount before the Tribunal, and the claimant is entitled to withdraw it immediately upon deposit. The time given for payment or deposit of the balance is one month. There is no order as to costs. Miscellaneous petitions, if any, pending in the appeal stand closed.