REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.                     OF 2009 (Arising out of SLP (C) No. 13452 of 2007)

United India Insurance Co. Ltd. …Appellant

Versus

Bindu and Ors.  …Respondents

J U D G M E N T

Dr. ARIJIT PASAYAT, J

1. Leave granted.

2. Challenge in this appeal is to the judgment of a Division Bench of the

Kerala High Court dismissing the appeal filed by the appellant questioning

correctness  of the award passed by the Motor Accident Claims Tribunal,

Paravur (in short the ‘MACT’).   

3. Background facts in a nutshell are as follows:

One  Anil  lost  his  life  in  a  vehicular  accident  on  17.6.1999.  The

respondents  filed a Claim Petition  in terms of Section 166 of the Motor

Vehicles Act, 1988 (in short the ‘Act’). It was stated in the claim petition

that  when  the  deceased  was  driving  a  motor  cycle,  a  tractor  owned  by

respondent no.5 which was being driven in rash and negligent manner by

respondent No.4 dashed against him and he suffered serious injuries. The

vehicle  was  the  subject  matter  of  insurance  with  the  present  appellant

(hereinafter  referred  to  as  the  ‘insurer’).  A  claim of  Rs.12,00,000/-  was

made. The stand taken by the insurer was that the accident took place only

due to the negligence of the deceased and there was no negligence on the

part  of  the  driver.   It  was  also  submitted  that  there  was  no  evidence

regarding the income of the deceased and, therefore, the claim was highly

exaggerated.  It  was  indicated  in  the  claim  petition  that  the  age  of  the

deceased was 32 years and that he was getting Rs.7,427/- as monthly salary.

The MACT found that the monthly income as claimed has been established.

Adopting  a  multiplier  of  17  the  entitlement  of  the  claim  was  fixed  at

Rs.10,61,000/-  with  9%  interest   from  the  date  of  filing  of  the  claim

petition.

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An  appeal  was  filed  before  the  High  Court  which  dismissed  the

appeal on the ground that the award made was in order.  

3. It was submitted by learned counsel for the appellant that not only the

claim  of  income  was  without  any  basis  but  also  the  multiplier  has  no

rational basis. It is also submitted that the rate of interest awarded is high.   

4. There  is  no  appearance  on  behalf  of  the  respondents  in  spite  of

service of notice.  

5. There were two methods adopted to determine and for calculation of

compensation  in  fatal  accident  actions.  The  first  multiplier  method

mentioned in  Davies v.  Powell Duffregn Associated Collieries Ltd. (1942

AC 601) and the second in Nance v. British Columbia Electric Railway Co.

Ltd. (1951 (2) All ER 448).

6. 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

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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.

7. The considerations generally relevant in the selection of multiplicand

and multiplier were adverted to by Lord Diplock in his speech in Mallett v.

Mc Mongle (1969 (2) All ER 178) where the deceased was aged 25 and left

behind his widow of about the same age and three minor children.  On the

question of selection of multiplicand Lord Diplock observed:

“The starting point in any estimate of the amount of the ‘dependency‘ is the annual value of the material benefits provided for  the dependants  out  of the earnings  of the deceased at the date of his death.  But....there are many factors which might have led to variations up or down in the future.  His earnings might have increased and with them the  amount  provided  by him for  his  dependants. They might have diminished with a recession in trade or he  might  have  had  spells  of  unemployment.   As  his children grew up and became independent the proportion of his earnings spent on his dependants would have been likely to fall.  But in considering the effect to be given in the  award  of  damages  to  possible  variations  in  the dependency there are two factors  to be borne in mind. The  first  is  that  the  more  remote  in  the  future  is  the anticipated change the less confidence there can be in the

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chances of its occurring and the smaller the allowance to be made for it in the assessment.  The second is that as a matter  of  the  arithmetic  of  the  calculation  of  present value, the later the change takes place the less will be its effect upon the total award of damages.  Thus at interest rates of  4- 1/2%  the present value of an annuity for 20 years of which the first ten years are at $ 100 per annum and the second ten years at  $ 200 per annum, is about 12 years’ purchase of the arithmetical average annuity of $ 150 per annum, whereas if the first ten years are at $200 per annum and the second ten years at $ 100 per annum the  present  value  is  about  14  years’  purchase  of  the arithmetical mean of $ 150 per annum.  If therefore the chances  of  variations  in  the  ‘dependency’  are  to  be reflected  in  the  multiplicand  of  which  the  years’ purchase is the multiplier, variations in the dependency which are not expected to take place until after ten years should have only a relatively small effect in increasing or diminishing  the  ‘dependency’  used  for  the  purpose  of assessing the damages.”

8. In  regard  to  the  choice  of  the  multiplicand,  Halsbury’s  Laws  of

England in vol. 34, para 98 states the principle thus:

“98.  Assessment  of  damages  under  the  Fatal  Accident Act,  1976  –  The  courts  have  evolved  a  method  for calculating  the  amount  of  pecuniary  benefit  that dependants  could  reasonably  expect  to  have  received from the deceased in the future.  First the annual value to the  dependants  of  those  benefits  (the  multiplicand)  is assessed.  In the ordinary case of the death of a wage- earner  that  figure  is  arrived  at  by  deducting  from the wages  the  estimated  amount  of  his  own  personal  and living expenses.

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The assessment is split  into two parts.   The first part comprises damages for the period between death and trial.   The multiplicand is  multiplied by the number of years  which  have  elapsed  between  those  two  dates. Interest at one-half the short-term investment rate is also awarded  on  that  multiplicand.   The  second  part  is damages for the period from the trial onwards.  For that period,  the  number  of  years  which  have  based  on  the number  of  years  that  the  expectancy  would  probably have  lasted;  central  to  that  calculation  is  the  probable length  of  the  deceased’s  working  life  at  the  date  of death.”

9. As to the multiplier, Halsbury states:

“However,  the  multiplier  is  a  figure  considerably  less than the  number  of  years  taken  as  the duration  of  the expectancy.   Since  the  dependants  can  invest  their damages, the lump sum award in respect of future loss must be discounted to reflect their receipt of interest on invested funds,  the intention being that  the dependants will  each  year  draw  interest  and  some  capital  (the interest  element  decreasing  and  the  capital  drawings increasing  with the  passage  of  years),  so  that  they are compensated each year for their annual loss, and the fund will be exhausted at the age which the court assesses to be  the  correct  age,  having  regard  to  all  contingencies. The contingencies of life such as illness, disability and unemployment have to be taken into account.  Actuarial evidence is admissible, but the courts do not encourage such evidence.  The calculation depends on selecting an assumed rate of interest.  In practice about 4 or 5 per cent is  selected,  and inflation is  disregarded.  It  is  assumed that the return on fixed interest bearing securities is so much higher than 4 to 5 per cent that rough and ready allowance for inflation is thereby made.  The multiplier may be increased where the plaintiff is a high tax payer.

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The multiplicand is based on the rate of wages at the date of trial.  No interest is allowed on the total figure.”

10. In both  General Manager, Kerala State Road Transport Corporation,

Trivandrum v. Susamma Thomas (Mrs.) and Ors.  

(1994 (2) SCC 176) and U.P. State Road Transport Corporation And Others

v.  Trilok Chandra and Ors. (1996 (4) SCC 362) the multiplier appears to

have been adopted by this Court taking note of the prevalent banking rate of

interest.

11. In  fact  in  Trilok  Chand’s case  (supra),  after  reference  to  Second

Schedule to the Act, it was noticed that the same suffers from many defects.

It was pointed out that the same is to serve as a guide, but cannot be said to

be invariable ready reckoner. However, the appropriate highest multiplier

was held to be 18.  The highest multiplier has to be for the age group of 21

years  to  25  years  when  an  ordinary  Indian  Citizen  starts  independently

earning and the lowest would be in respect of a person in the age group of

60 to 70, which is the normal retirement age.  

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12. Keeping  in  view  the  parameters  indicated  above  it  would  be

appropriate to fix the multiplier at 13 and the rate of interest at 6% p.a.  The

MACT shall work out the entitlements on the aforesaid basis. It is stated by

learned counsel for the appellant that pursuant to the order of this Court on

27.7.2007, a sum of Rs.7,00,000/- has been deposited. The balance amount

payable in terms of this Court’s order shall be deposited by the insurer with

the MACT within eight weeks. The MACT shall permit withdrawal of the

amount on such terms including the fixed deposit in a scheduled bank after

a deposit is made, as the circumstances warrant.

13. The appeal is allowed to the aforesaid extent.   

………………………………….J. (Dr. ARIJIT PASAYAT)

…………………………………..J. (ASOK KUMAR GANGULY)

New Delhi, February 05, 2009       

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