Leela Gupta & Ors vs State Of U.P. & Ors

Claims Tribunal, Mirzapur (for short, `the Tribunal') against the

respondents claiming compensation in the sum of Rs.

7,00,000/-. His gross salary on the date of accident was Rs.

2,680/- per month. The Tribunal held that deceased would

have contributed Rs. 2,200/- per month (Rs. 26,400/- per year)

to the family and by applying a multiplier of 18, reached the

finding that the pecuniary loss to widow and children would be

Rs. 4,75,200/- up to the age of his retirement. The Tribunal

then deducted 1/3rd of the above considering the amount being

paid in lump sum and uncertainty in life and by further

deducting a sum of Rs. 40,000/- towards group insurance

scheme, assessed compensation to the extent of Rs.

2,76,800/-. An amount of Rs. 15,000/- having been already

paid to the claimants towards no fault liability, the Tribunal in its

Award dated February 24, 1987 held that claimants are entitled

to a sum of Rs. 2,61,800/- and directed the respondents to pay

the said amount with pendente lite and future interest thereon

@ 9% per annum.

2. On appeal by the claimants, the High Court held

that the claimants were entitled to Rs. 4,70,000/- as 2 compensation along with 9% simple interest per annum from

the date of the claim petition until the actual payment was

made. The High Court considered the matter thus :

"......Taking income of deceased at Rs. 2,700/- per month, the same can be assumed safely as Rs. 2700 X 2 = 5,400/- had the deceased lived. Now, 1/3rd is to be deduced being the amount spent on deceased himself towards his personal expenses, it gives us a figure of Rs. 3,600/- per month. Thus, the expected benefit to be derived by the claimants comes to Rs. 3,600 X 12 = 43,200/- per annum as contribution towards his family. Taking into account the age of the deceased, we find that multiplier of 16 is available. The annual income of Rs. 43,200/- being multiplied by 16, comes to Rs. 6,91,200/-. However, considering imponderability and uncertainty of life, this amount is reduced by 1-3rd. It gives the figure of Rs. 4,70,000/- (on rounding)."

3. The conventional approach in England for over a

century has been that the damages are to be assessed on the

basis that the fundamental purpose of an award is to achieve

as nearly as possible full compensation to the plaintiff for the

injuries sustained. This rule has been accepted in fatal

accident actions as well. The House of Lords in Taff Vale

Railway Co. v. Jenkins1 laid down the test that award of

damages in fatal accident action is compensation for the

reasonable expectation of pecuniary benefit by the deceased's

1 [1913] AC 1 3 family. The purpose of award of compensation is to put the

dependants of the deceased, who had been bread-winner of

the family, in the same position financially as if he had lived his

natural span of life; it is not designed to put the claimants in a

better financial position in which they would otherwise have

been if the accident had not occurred. At the same time, the

determination of compensation is not an exact science and the

exercise involves an assessment based on estimation and

conjectures here and there as many imponderable factors and

unpredictable contingencies have to be taken into

consideration. The statutory rule enacted in Section 110B of

the 1939 Act (now Section 168 of the Motor Vehicles Act, 1988)

is award of `just compensation'.

4. In General Manager, Kerala State Road Transport

Corporation, Trivandrum v. Susamma Thomas (Mrs.) and Ors.2

this Court extensively considered the English decisions as well

as previous decisions of this Court and also the decisions of

various high courts and laid down that the multiplier method is

logically sound and legally well established and must be

followed; a departure from which can only be justified in rare

2 (1994) 2 SCC 176 4 and extraordinary circumstances and very exceptional cases.

In para 13 of the Report, this Court stated as follows :

"13. The multiplier method involves the ascertainment of the loss of dependency or the multiplicand having regard to the circumstances of the case and capitalizing the multiplicand by an appropriate multiplier. The choice of the multiplier is determined by the age of the deceased (or that of the claimants whichever is higher) and by the calculation as to what capital sum, if invested at a rate of interest appropriate to a stable economy, would yield the multiplicand by way of annual interest. In ascertaining this, regard should also be had to the fact that ultimately the capital sum should also be consumed-up over the period for which the dependency is expected to last."

In para 17, it was further stated:

"17. The multiplier represents the number of years' purchase on which the loss of dependency is capitalised. Take for instance a case where annual loss of dependency is Rs. 10,000. If a sum of Rs 1,00,000 is invested at 10% annual interest, the interest will take care of the dependency, perpetually. The multiplier in this case works out to 10. If the rate of interest is 5% per annum and not 10% then the multiplier needed to capitalise the loss of the annual dependency at Rs. 10,000 would be 20. Then the multiplier, i.e., the number of years' purchase of 20 will yield the annual dependency perpetually. Then allowance to scale down the multiplier would have to be made taking into account the uncertainties of the future, the allowances for immediate lump sum payment, the period over which the dependency is to last being shorter and the capital feed also to be spent away over the period of dependency is to last etc. Usually in English Courts the operative multiplier rarely exceeds 16 as maximum. This will come down accordingly as the age of the deceased person (or that of the dependants, whichever is higher) goes up."

5 While dealing with the aspect of multiplicand, the Court stated

that in ascertainment of the multiplicand many factors have to

be put into the scales to evaluate the contingencies of the

future.

5. The case of Susamma Thomas2 arose out of the

1939 Act and the appeal was decided by this Court on January

6, 1993. The 1939 Act stood repealed by the Motor Vehicles

Act, 1988 (for short, `the 1988 Act'). After decision of this Court

in Susamma Thomas2 , the 1988 Act was amended and, inter

alia, Section 163A was inserted along with the Second

Schedule w.e.f. November 14, 1994. Vide Section 163A, the

special provisions with regard to payment of compensation on

structured formula basis were introduced in the 1988 Act and

the Second Schedule provided for compensation for third party

fatal accident/injury cases claims. Under the Second Schedule,

the maximum multiplier could be upto 18 and not 16 as was laid

down in Susamma Thomas2 . In U.P. State Road Transport

Corporation and Ors. v. Trilok Chandra and Ors.3, a three-

Judge Bench of this Court considered change in statutory

3 (1996) 4 SCC 362 6 provisions, particularly, insertion of Section 163A and Second

Schedule in the 1988 Act and observed thus :

"17. The situation has now undergone a change with the enactment of the Motor Vehicles Act, 1988, as amended by Amendment Act 54 of 1994. The most important change introduced by the amendment insofar as it relates to determination of compensation is the insertion of Sections 163-A and 163-B in Chapter XI entitled "Insurance of Motor Vehicles against Third Party Risks".

Section 165-A begins with a non obstante clause and provides for payment of compensation, as indicated in the Second Schedule, to the legal representatives of the deceased or injured, as the case may be. Now if we turn to the Second Schedule, we find a table fixing the mode of calculation of compensation for third party accident injury claims arising out of fatal accidents. The first column gives the age group of the victims of accident, the second column indicates the multiplier and the subsequent horizontal figures indicate the quantum of compensation in thousand payable to the heirs of the deceased victim. According to this table the multiplier varies from 5 to 18 depending on the age group to which the victim belonged. Thus, under this Schedule the maximum multiplier can be up to 18 and not 16 as was held in Susamma Thomas case."

6. The short question presented in this appeal is

whether the High Court was in error in reducing by 1/3 rd the

compensation assessed after ascertainment of multiplicand

capitalized with the multiplier of 16. But before we pass to the

above question, we may notice two recent decisions of this

Court, namely, (1) Sarla Verma (Smt.) & Ors., v. Delhi

Transport Corporation & Anr.4 and (2) Reshma Kumari & Ors. v. 4 (2009) 6 SCC 121 7 Madan Mohan & Anr.5 In the case of Sarla Verma4, a two-

Judge bench of this Court considered Susamma Thomas2 and

Trilok Chandra3; few other decisions, namely, Abati Bezbaruah

v. Geological Survey of India6; Fakeerappa & Anr. v. Karnataka

Cement Pipe Factory & Ors.7; T.N. State Transport Corpn. Ltd.

v. S. Rajapriya & Ors.8; New India Assurance Co. Ltd. v.

Charlie & Anr.9; U.P.State Road Transport Corpn. v. Krishna

Bala & Ors.10 and Oriental Insurance Co. Ltd. v. Meena Variyal

& Ors.11 and also two English decisions - namely; Davies &

Anr. v. Powell Duffryn Associated Collieries Ltd.12 and Nance

v. British Columbia Electric Railway Co. Ltd.13 and laid down

certain principles relating to assessment of compensation in

cases of death. While dealing with the aspect of future

prospects, in paragraph 24 of the Report, it was stated as

follows:-

"In Susamma Thomas [(1994) 2 SCC 176] this Court increased the income by nearly 100%, in Sarla Dixit [(1996) 3 SCC 179] the income was increased only by 50% and in Abati Bezbaruah [(2003) 2 SCC 148] 5 (2009) 13 SCC 422 6 (2003) 2 SCC 148 7 (2004) 2 SCC 473 8 (2005) 6 SCC 236 9 (2005) 10 SCC 720 10 (2006) 6 SCC 249 11 (2007) 5 SCC 428 12 (1942) 1 All ER 657 13 (1951) 2 All ER 448 8 the income was increased by a mere 7%. In view of the imponderables and uncertainties, we are in favour of adopting as a rule of thumb, an addition of 50% of actual salary to the actual salary income of the deceased towards future prospects, where the deceased had a permanent job and was below 40 years. (Where the annual income is in the taxable range, the words "actual salary" should be read as "actual salary less tax"). The addition should be only 30% if the age of the deceased was 40 to 50 years.

There should be no addition, where the age of the deceased is more than 50 years. Though the evidence may indicate a different percentage of increase, it is necessary to standardise the addition to avoid different yardsticks being applied or different methods of calculation being adopted. Where the deceased was self-employed or was on a fixed salary (without provision for annual increments, etc.), the courts will usually take only the actual income at the time of death. A departure therefrom should be made only in rare and exceptional cases involving special circumstances."

As regards deduction for personal expenses, this Court stated

thus:

"Though in some cases the deduction to be made towards personal and living expenses is calculated on the basis of units indicated in Trilok Chandra [(1996) 4 SCC 362], the general practice is to apply standardised deductions. Having considered several subsequent decisions of this Court, we are of the view that where the deceased was married, the deduction towards personal and living expenses of the deceased, should be one-third (1/3rd) where the number of dependent family members is 2 to 3, one-fourth (1/4th) where the number of dependent family members is 4 to 6, and one-fifth (1/5th) where the number of dependent family members exceeds six."

9 With regard to multiplier in the cases falling under Section 166

of 1988 Act, this Court held that Davies12 method is applicable

and set out the following Table:

Age of the Multiplier Multiplier Multiplier Multiplier Multiplier Deceased Scale as scale as scale in Trilok specified in actually used in envisaged in adopted by Chandra as Second Second Susamma Trilok Chandra clarified in Column in the Schedule to the Thomas Charlie Table in MV Act (as seen Second from the Schedule to quantum of the MV Act compensation)

(1) (2) (3) (4) (5) (6) Upto 15 yrs - - - 15 20 15 to 20 yrs 16 18 18 16 19 21 to 25 yrs 15 17 18 17 18 26 to 30 yrs 14 16 17 18 17 31 to 35 yrs 13 15 16 17 16 36 to 40 yrs 12 14 15 16 15 41 to 45 yrs 11 13 14 15 14 46 to 50 yrs 10 12 13 13 12 51 to 55 yrs 9 11 11 11 10 56 to 60 yrs 8 10 09 8 8 61 to 65 yrs 6 08 07 5 6 Above 65 5 05 05 5 5 Yrs

After setting out the aforesaid Table, this Court stated as

follows:-

"Tribunals/courts adopt and apply different operative multipliers. Some follow the multiplier with reference to Susamma Thomas [(1994) 2 SCC 176] [set out in Column (2) of the table above]; some follow the multiplier with reference to Trilok ChandraI[(1996) 4 SCC 362], [set out in Column (3) of the table above]; some follow the multiplier with reference to Charlie [(2005) 10 SCC 720] [set out 10 in Column (4) of the table above]; many follow the multiplier given in the second column of the table in the Second Schedule of the MV Act [extracted in Column (5) of the table above]; and some follow the multiplier actually adopted in the Second Schedule while calculating the quantum of compensation [set out in Column (6) of the table above]. For example if the deceased is aged 38 years, the multiplier would be 12 as per Susamma Thomas, 14 as per Trilok Chandra, 15 as per Charlie, or 16 as per the multiplier given in Column (2) of the Second Schedule to the MV Act or 15 as per the multiplier actually adopted in the Second Schedule to the MV Act. Some tribunals, as in this case, apply the multiplier of 22 by taking the balance years of service with reference to the retiring age. It is necessary to avoid this kind of inconsistency. We are concerned with cases falling under Section 166 and not under Section 163-A of the MV Act. In cases falling under Section 166 of the MV Act, Davies method is applicable."

We therefore hold that the multiplier to be used should be as mentioned in Column (4) of the table above (prepared by applying Susamma Thomas, Trilok Chandra and Charlie), which starts with an operative multiplier of 18 (for the age groups of 15 to 20 and 21 to 25 years), reduced by one unit for every five years, that is M-17 for 26 to 30 years, M- 16 for 31 to 35 years, M-15 for 36 to 40 years, M-14 for 41 to 45 years, and M-13 for 46 to 50 years, then reduced by two units for every five years, that is, M-11 for 51 to 55 years, M-9 for 56 to 60 years, M-7 for 61 to 65 years and M-5 for 66 to 70 years."

7. In Reshma Kumari5, a two-Judge bench of this

Court again noticed a long line of Indian and English cases,

most of which were noticed in Sarla Verma4 (but Sarla Verma4

was not noticed) and in view of divergence of opinion to the

11 question whether the multiplier specified in the Second

Schedule should be taken to be a guide for calculation of the

amount of compensation payable in a case falling under

Section 166 of the 1988 Act referred the matter to the larger

bench.

8. The issue whether the multiplier specified in

Second Schedule for the purposes of Section 163A of 1988 Act

could be taken to be guide for computation of amount of

compensation in a motor accident claim case falling under

Section 166 of the 1988 Act is not yet authoritatively decided

and is pending consideration before the larger bench. Insofar

as present appeal is concerned it arises out of a motor accident

claim filed under Section 110-A of the 1939 Act and, therefore,

the Second Schedule that refers to Section 163A of the 1988

Act may not be of much guidance. To revert to the question

stated above, it must be stated immediately that deceased at

the time of accident had settled and stable job in the Irrigation

Department, Government of U.P. He was officiating as

Executive Engineer and had fair chance of regular promotion

to the post of Executive Engineer and Superintending Engineer

in due course of time; he had about 18 years of service left 12 before superannuation. He would have got annual increments

etc. besides promotion during this period of 18 years. But

vicissitudes of life cannot be ignored, he might not have lived

up to that age; he might have been dismissed from service. In

a fatal accident case, everything that might have happened to

the deceased after the date of death remains uncertain. That

his gross salary at the time of accident was Rs. 2680/-, is

reflected from his last pay certificate. Having regard to the

prospects of advancement and future career, the High Court

assumed the income of the deceased at Rs. 5400/- per month

by doubling the last gross salary and making it a round figure.

The High Court then deducted 1/3rd amount towards his

personal expenditure and arrived at a figure of Rs. 3600/- per

month as the expected contribution by the deceased to the

family and applying a multiplier of 16, assessed the

dependency at Rs. 6,91,200/- but, however, made a further

deduction by 1/3rd considering imponderability and uncertainty

of life and thereby awarded a sum of Rs. 4,70,000/- only as

compensation. We have seen that in Susamma Thomas2 100%

increase to the income which the deceased was having at the

time of accident was estimated as the gross income of the 13 deceased. On the other hand, in Sarla Verma4 this Court

prescribed the rule of thumb i.e., an addition of 50% towards

future prospects where the deceased had a permanent job and

was below 40 years. As regards deduction to be made towards

personal expenditure, in Sarla Verma4 this Court stated that

where the deceased was married and where the number of

dependant family members is 4 to 6 then 1/4th of the gross

income should be deducted while in Susamma Thomas2, the

conventional 1/3rd of the gross income was deducted on that

count in the absence of any evidence. Then as per Table set

out in Sarla Verma4, if the age of deceased is 36 to 40 years,

multiplier of 15 is applicable whereas in Susamma Thomas2

the loss of dependency was capitalized on a multiplier of 12

(the deceased was 39 years of age). The question is whether

value of dependency should be recalculated in this appeal. We

do not think so. The High Court ascertained the multiplicand or

in other words the value of dependency at Rs. 3600/- per month

keeping in view the judgment of this Court in Susamma

Thomas2. In our opinion, it is neither proper nor desirable to

recalculate the multiplicand at this distance of time in

jurisdiction under Article 136 of the Constitution by applying the 14 guidelines indicated in Sarla Verma4. The High Court has

taken into account in ascertaining the multiplicand the

guidelines laid down in Susamma Thomas2 which, in our view,

warrants no reconsideration. However, we think that

capitalization of multiplicand on a multiplier of 16 is on the

higher side and multiplier of 14 in the facts of the case such as

the present one would meet the ends of justice. In this way, the

appellants become entitled to Rs. 6,04,800/- as compensation

which, in our opinion, is fair, just and equitable. Before we

close, however, it has to be held and we hold that the High

Court was clearly in error in reducing by 1/3rd the compensation

assessed after ascertainment of multiplicand capitalized on a

particular multiplier since the very method of ascertainment of

multiplicand takes into consideration many factors of

imponderables and the contingencies of the future. Once the

multiplicand and multiplier are ascertained, the assessment of

damages to compensate the dependants is arrived at by

multiplying the two and no further deduction needs to be made

towards uncertainties and other contingencies.

9. In the result, the appeal is allowed in part and the

compensation awarded by the High Court in the sum of Rs. 15 4,70,000/- is enhanced to Rs. 6,04,800/-. The appellants shall

also be entitled to 9% simple interest per annum on the

enhanced amount from the date of filing of claim petition until

the date of its actual payment. The parties shall bear their own

costs.

.....................J. [AFTAB ALAM]

.....................J. [R.M. LODHA] New Delhi August 31, 2010.

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