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CASE NO.: Appeal (civil)  1272 of 2008

PETITIONER: Oriental Insurance Company Ltd.

RESPONDENT: Jashuben & Ors.

DATE OF JUDGMENT: 14/02/2008

BENCH: S.B. Sinha & V.S. Sirpurkar

JUDGMENT: J U D G M E N T (Arising out of SLP (C) No.7304 of 2007)

S.B. Sinha, J.

       Leave granted.

1.      Appellant is before us aggrieved by and dissatisfied with a judgment  and order dated 22.11.2006 passed by the Division Bench of the High Court  of Gujarat at Ahmedabad in First Appeal No.4586 of 2006 dismissing the  appeal preferred by him. 2.       Claimants-Respondents herein are heirs and legal representatives of  Davjibhai Kushalbhai Rathod.  He, while travelling in a mini luxury bus as a  passenger from Surat to Mehsana, met with a road accident which took place  on 23.6.1994.  The accident occurred due to rash and negligent driving on  the part of the driver of the said mini bus is not question.   3.      The deceased, Devjibhai, at that time, was aged about 35 years.  He  was working as an Assistant in the Oil and Natural Gas Commission.  A sum  of Rs.12,00,000/- was initially claimed by way of compensation which was  subsequently raised to 25,00,000/-.  The Tribunal, as per the certificate  issued by the Senior Personnel and Administrative Officer, ONGC, noticed  that the deceased had been receiving the following salaries and perks in the  month of June 1994 :  \0231. Basic Pay                               Rs.3295/- 2.      DA @ 18.5%                      Rs.  610/- 3.      DSCA 20% of basic               Rs.  650/- 4.      HRA @ 18% of basic Pay  Rs.  593/- 5.      Productivity allowance          Rs.  450/- 6.      Washing allowance               Rs.    45/- 7.      Conveyance Allowance            Rs.  375/- 8.      Child Education Allowance         (for two children)                      Rs.  240/- 9.      Child Bus fare (for children)   Rs.  160/-

                       Total :         Rs.6418/-                                                 ________\024

4.      However, the Tribunal also took into consideration the salary which  might have been payable to the said deceased as in August, 2002; had he  continued in service which was stated to be as under : \0231.  Basic Pay                               Rs.10698.00 2.      DA @ 35.5%                              Rs.  3892.00 3.      DSCA 20% of basic         (maximum Rs.3100)                       Rs.  2193.00 4.      HRA @ 22.5% of basic Pay                Rs.  2406.00 5.      Productivity allowance          Rs.    500.00

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6.      Tribal allowance                        Rs.    200.00 7.      Conveyance Allowance            Rs.    740.00 8.      Child Education Allowance         (for two children)                      Rs.    500.00 9.      Child Bus fare (for children)           Rs.    250.00 10.     Canteen Sub.                            Rs.    164.80

                       Total :                 Rs.21803.80                                                         _________\024

5.      The Tribunal, clubbed the income of the deceased which he might  have got at the time of his retirement, i.e., Rs.3,295/- + Rs.17453/-, totaling  a sum of Rs.20,748/- and divided the same by figure two to arrive the figure  of at Rs.10,374/- per month.  Adopting a multiplier of 16, the amount of  compensation was determined at Rs.13,27,872/-.  Besides the compensation  amount, amount of gratuity, conventional amount and funeral expenses were  calculated as follows : \023Rs.13,27,872/- towards dependency loss Rs.       10,000/- towards conventional amount Rs.         3,000/- towards funeral expenses Rs.    3,02,468/- towards gratuity Rs. 16,43,340/-\024

6.      Interest on the said amount sum at the rate of 12 per cent was also  awarded. 7.      On an appeal preferred by the appellant thereagainst, a Division  Bench of the High Court opined that as a revision of pay had been effected  by ONGC from 1.1.1997 and in August 2002, the employees in the same  cadre would have received a sum of Rs.10,693/- per month with Dearness  Allowance at the rate of 35.5% amounting to Rs.3892/- and other  allowances.  The net income of the deceased was found to be at least a sum  of Rs.16,000/- so as to enable the Tribunal to come to the conclusion that the  loss of dependency benefit would come to Rs.16,000/- from January 1997  onwards.  The High Court stated : \023In view of the above settled legal position, we do  not find any difficulty in accepting the submission  of Mr. Nanavati for the original claimants that the  Tribunal was justified in looking at the pay  revision of employees of the ONGC for the  purpose of assessing prospective income of the  deceased.  The accident in question took place in  September 1994.  The basic pay of the deceased at  that time was Rs.3295/- and with dearness  allowance and other allowances, his total pay- packet was Rs.6,418/-.  Even proceeding on the  basis that the deductions made by the employer  may be taken into account, basic pay, dearness  allowance, drill site compensation allowance and  house rent allowance granted to the deceased  would almost come to Rs.5,000/- per month.   Within less than three years from the date of the  accident, pay revision was made by the ONGC  with effect from 1.1.97 and in August 2002, basic  pay of the employees in the same cadre in which  the deceased was working was Rs.10,693/- per  month with dearness allowance at the rate of  35.5% being Rs.3892/-; drill site compensatory  allowance and HRA were also substantially  revised and they were 20% and 22.5% of the basic  pay in August 2002.  These four items aggregated  to Rs.19,184/- per month.  Over and above these  heads, there were also other allowances like  productivity allowance, conveyance allowance,

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child education allowance, child bus welfare  allowance, etc. making it a total figure of  Rs.21,808/-.  Even after taking into account all  deductions including the income tax liability, the  net income available to the deceased and his  family would have been at least Rs.16000/- from  January 1997 onwards.\024

8.      The High Court, however, not only adopted the multiplier of 13  instead of 16 to arrive at the conclusion that the loss of dependency would  be about Rs.16,000/-, but also interfered with the rate of interest to hold that  reasonable interest payable would be 8% per annum.  Appellant was directed  to deposit the said amount with proportionate costs and interest at the rate of  8% per annum from the date of filing of the claim petition till its realization. 9.      Mr. Pankaj Seth, learned counsel appearing on behalf of the appellant,  would submit that the Tribunal as also the High Court committed a serious  error in passing the impugned judgment in so far as they failed to take into  consideration that computation for loss of income should have, in a situation  of this nature, been determined only by doubling the amount of the salary  received by the deceased at the relevant time.  Future prospects, according to  the learned counsel, could not have been taken into consideration. 10.     Mr. Karia, learned counsel appearing for the respondent, on the other  hand, urged that future prospect including the revision in the scale of pay  should be taken into consideration for the purpose of determination of the  amount of compensation.   11.     The amount of compensation payable to the heirs and legal  representatives of a deceased victim of an accident must be a fair and  reasonable one.  The estimate of the amount of loss of dependency  may be  arrived at by adopting various methods, application of structured formula  being one of them.  Such a formula has also been provided for in Schedule II  appended to the Motor Vehicles Act, 1988.  While determining the amount  of compensation, certain well known principles must be kept in mind.   12.     It is not a case where, as on the date of death, the salary of the  deceased was revised with retrospective effect from 1994.  Salary would be  revised or not was not known at that part of time.  Only because such salary  was revised at a later point of time, the same by itself would not have been a  factor which could have been taken into consideration for determining the  amount of compensation.  The Tribunal, therefore, committed a serious  illegality in taking into consideration the latter aspect.   13.     The amount of compensation indisputably should be determined  having regard to the pecuniary loss caused to the dependents by reason of  the death of the victim.  It was necessary to consider the earnings of the  deceased at the time of the accident.  Of course, further prospect is not out of  bound for such consideration.  But the same should be founded on some  legal principle. 14.     In General Manager, Kerala State Road Transport Corporation,  Trivendrum v.  Susamma Thomas [(1994) 2 SCC 176], this Court held : \023The 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.\024

15.     The legal principle in this behalf has been laid down in the following

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terms : \02319. In the present case the deceased was 39 years  of age. His income was Rs. 1032/- per month. Of  course, the future prospects of advancement in life  and career should also be sounded in terms of  money to augment the multiplicand. While the  chance of the multiplier is determined by two  factors, namely, the rate of interest appropriate to a  stable economy and the age of the deceased or of  the claimant whichever is higher, the  ascertainment of the multiplicand is a more  difficult exercise. Indeed, many factors have to be  put into the scales to evaluate the contingencies of  the future. All contingencies of the future need not  necessarily be baneful. The deceased person in this  case had a more or less stable job. It will not be  inappropriate to take a reasonably liberal view of  the prospects of the future and in estimating the  gross income it will be unreasonable to estimate  the loss of dependency on the present actual  income of Rs. 1032/- per month. We think, having  regard to the prospects of advancement in the  future career, respecting which there is evidence  on record, we will not be in error in making a  higher estimate of monthly income at Rs. 2000/- as  the gross income. From this has to be deducted his  personal living expenses, the quantum of which  again depends on various factors such as whether  the style of living was spartan or bohemian. In the  absence of evidence it is not unusual to deduct  one-third of the gross income towards the personal  living expenses and treat the balance as the amount  likely to have been spent on the members of the  family and the dependents. This loss of  dependency should capitalise with the appropriate  multiplier. In the present case we can take about  Rs. 1,400/- per month or Rs. 17,000/- per year as  the loss of dependency and if capitalized on a  multiplier of 12 which is appropriate to the age of  the deceased, the compensation would work out to  (Rs. 17,000/- x 12= 2,04,000/- rupees) to which is  added the usual award for loss of consortium and  loss of the estate each in the conventional sum of  Rs. 15,000/.\024

    This Court in Sarla Dixit & Anr. v. Balwant Yadav & Ors. [(1996) 3  SCC 179] opined : \023The average gross future monthly income could  be arrived at by adding the actual gross income at  the time of death, namely, Rs.1,500/- per month to  the maximum which he would have otherwise got  had he not died a premature death, i.e., Rs.3,000/-  per month and dividing that figure by two.  Thus,  the average gross monthly income spread over his  entire future career, had it been available, would  work out to Rs.4,500/- divided by 2, i.e.,  Rs.2,200/-.  Rs.2,200/- per month would have been  the gross monthly average income available to the  family of the deceased had he survived as a bread  winner.\024

16.     In Rathi Menon v. Union of India [(2001) 3 SCC 714], this Court,  upon considering the dictionary meaning of compensation held : \023In this context a reference to Section 129 of the

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Act appears useful. The Central Government is  empowered by the said provision to make rules by  notification "to carry out the purposes of this  Chapter". It is evident that one of the purposes of  this chapter is that the injured victims in railway  accidents and untoward incidents must get  compensation. Though the word "compensation" is  not defined in the Act or in the Rules it is the  giving of an equivalent or substitute of equivalent  value. In Black’s Law Dictionary , "compensation"  is shown as  \021equivalent in money for a loss  sustained; or giving back an  equivalent in either money which is  but the measure of value, or in actual  value otherwise conferred; or  recompense in value for some loss,  injury or service especially when it is  given by statute.\022 It means when you pay the compensation in terms  of money it must represent, on the date of ordering  such payment, the equivalent value.\024             17.     In N. Sivammal and Ors. v. Managing Director, Pandian Roadways  Corporation and Ors. [(1985) 1 SCC 18], this Court took into consideration  the pay packet of the deceased. 18.     We may also notice that in T.N. State Transport Corporation Ltd. v. S.  Rajapriya and Ors. [(2005) 6 SCC 236], this Court held : \0238. The assessment of damages to compensate the  dependants is beset with difficulties because from  the nature of things, it has to take into account  many imponderables e.g. the life expectancy of the  deceased and the dependants, the amount that the  deceased would have earned during the remainder  of his life, the amount that he would have  contributed to the dependants during that period,  the chances that the deceased may not have lived  or the dependants may not live up to the estimated  remaining period of their life expectancy, the  chances that the deceased might have got better  employment or income or might have lost his  employment or income together. 9. The manner of arriving at the damages is to  ascertain the net income of the deceased available  for the support of himself and his dependants, and  to deduct therefrom such part of his income as the  deceased was accustomed to spend upon himself,  as regards both self-maintenance and pleasure, and  to ascertain what part of his net income the  deceased was accustomed to spend for the benefit  of the dependants. Then that should be capitalised  by multiplying it by a figure representing the  proper number of years’ purchase. 10. Much of the calculation necessarily remains in  the realm of hypothesis "and in that region  arithmetic is a good servant but a bad master"  since there are so often many imponderables. In  every case "it is the overall picture that matters",  and the court must try to assess as best as it can the  loss suffered.\024

19.     The same view was reiterated in New India Assurance Co. Ltd. v.  Charlie and Anr. [(2005) 10 SCC 720]. However, therein although the words  ’net income’ has been used but the same would ordinarily mean gross income

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minus the statutory deductions. We must also notice that the said decision  has been followed in New India Assurance Co. Ltd. v. Kalpana (Smt.) and  Ors. [(2007) 3 SCC 538].  20.     In Bijoy Kumar Dugar v. Bidya Dhar Dutta & Ors. [(2006) 3 SCC  242], this Court, in a case where the salary of the deceased was found to be  Rs.3600/- after deduction and wherein multiplier of 12 was applied where  the age of the parents of the deceased was between 45 and 50 years, held  that no further enhancement was warranted.   21.     In U.P. State Road Transport Corporation v. Krishna Bala & Ors.  [(2006) 6 SCC 249], it was held : \023The 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 over the period for which  the dependency is expected to last.\024

22.     Therein a multiplier of 13 was adopted in a case where the age of the  deceased was around 36. 23.     Almost to the same effect is the decision of this Court in The  Managing Director, TNSTC v. Sripriya & Ors. [2007 (4) SCALE 222]. In  that case, a multiplier of 12 was applied in a case where the age of the  deceased was 37 years. 24.     Even certain allowances payable to the deceased could have been  taken into consideration in the changing social scenario.  In National  Insurance Company Ltd. v. Indira Srivastava & Ors. [2007 (14) SCALE  461], it is useful to notice, this Court observed : \02317. 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.\024

       Noticing the dictionary meaning of \021income\022, it was held : \02319. 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.\024

25.     We, therefore, are of the opinion that what would have been the  income of the deceased on the date of retirement was not a relevant factor in  the light of peculiar facts of this case and, thus, the approach of the Tribunal  and the High Court must be held to be incorrect.  It is impermissible in law  to take into consideration the effect of revision in scale of pay w.e.f.  1.1.1997 or what would have been the scale of pay in 2002.   26.     The loss of dependency, in our opinion, should be calculated on the

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basis as if the basic pay of the deceased been Rs. 3295/- X 2 = Rs. 6,590/-,  thereto should be added 18.5% dearness allowance which comes to  Rs.1219/-, child education allowance for two children @ Rs.240/- X 2 =  Rs.480 and child bus fair Rs.160 X 2 = Rs.320/- should have been added  which comes to Rs.8,609/-. 27.     From the aforementioned figure 1/3rd should be deducted.  After  deduction, the amount of income comes to Rs.5,738/- per month [Rs.8609/-  \026 Rs.2871/-] and the amount of compensation should be determined by  adopting the multiplier of 13, which comes to Rs.8,95,128/- 28.     In the present case, the High Court itself has applied the multiplier of  13.  We are of the opinion that no interference therewith is warranted.  We  furthermore do not intend to interfere with the rate of interest in the facts and  circumstance of the case.   29.     The appeal is allowed in part and to the extent mentioned  hereinbefore.  In the facts and circumstances of the case, there shall be no  order as to costs.