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CASE NO.: Appeal (civil)  255 of 2007

PETITIONER: The New India Assurance Company Limited

RESPONDENT: Smt. Kalpana & Others

DATE OF JUDGMENT: 17/01/2007

BENCH: Dr. ARIJIT PASAYAT & S.H. KAPADIA

JUDGMENT: J U D G M E N T (Arising out of SLP (C) No. 7450 of 2005)

Dr. ARIJIT PASAYAT, J.

       Leave granted.

Challenge in this appeal is to the order passed by a  Division Bench of the Uttaranchal High Court holding that the  respondents were entitled to compensation of Rs.8,16,000/-  with interest @ 6% p.a. from the date of filing of the claim  petition till the date of actual payment.  Before the High Court  the claimants had questioned the judgment passed by the  Motor Accident Claims Tribunal/Addl. District Judge,  Haldwani, District Nainital (in short ’MACT’).   

Factual scenario in a nutshell is as follows:

On 7.6.1999 at about 9.50 p.m. Vijay Singh Dogra  (hereinafter referred to as the ’deceased’) was coming from  Nandpur to Haldwani on his vehicle No. UP 01-3962.  He was  driving the said vehicle.  When the vehicle reached near the  Block Office, Haldwani, it dashed with a Truck No.URN 9417  which was parked on the road in violation of the traffic rules.  In the accident the deceased sustained grievous injuries and  he was taken to the Base Hospital, Haldwani from where he  was referred to Bareilly for better treatment. But he died on  9.6.1999.  He was about 33 years of age at the time of  accident.  Claimants i.e. respondents 1 to 4 filed claim petition  claiming compensation under Section 173 of the Motor  Vehicles Act, 1988 (in short the ’Act’). It was indicated in the  claim petition that the deceased was earning Rs.8,000/- per  month by driving a taxi and also had agricultural income. On  that basis a sum of Rs.14,88,000/- was claimed as  compensation.  The opposite party in the claim petition i.e. the  present appellant (hereinafter referred to as the ’Insurer’)  disputed the claim.  The MACT on consideration of the  evidence brought on record dismissed the claim petition on the  ground that the accident took place on account of negligence  of the deceased.  An appeal was filed before the High Court by  the claimants. It was stated that the vehicle was loaded with  logs of Eucalyptus trees and these logs were protruding  outside the truck.  There was no indicator on the truck to  indicate that the truck was parked so that any person coming  from behind could be cautious. It was, therefore, contended  that there was negligence on the part of the driver of the  vehicle.  With reference to Section 81 of the Act, it was

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indicated that the necessary care and caution was not taken.   The High Court found that the vehicle was the subject matter  of insurance with the insurer.  It was not a case where the  vehicle was stationary.  On the contrary it was parked on a  running condition without any indicator. The High Court,  therefore, held that the insurer is liable to pay compensation.   So far as the income of the deceased is concerned, taking into  account the fact that there was no definite material to throw  light on the actual income of the deceased, it was taken at  Rs.4,000/- per month and multiplier of 17 was applied and  accordingly the compensation was fixed.

In support of the appeal, learned counsel for the  appellant submitted that the High Court has erroneously fixed  compensation by applying multiplier of 17.  It was pointed out  that the MACT itself noted that no evidence was led to show as  to what was the actual income of the deceased.  In any event,  the multiplier is high. Learned counsel for the respondents on  the other hand supported the order of the High Court.

Certain principles were highlighted by this Court in the  case of Municipal Corporation of  Delhi  v. Subhagwanti (1966  (3) SCR 649) in the matter of fixing the appropriate multiplier  and computation of compensation. In a fatal accident action,  the accepted measure of damages awarded to the dependants  is the pecuniary loss suffered by them as a result of the death.   "How much has the widow and family lost by the father’s  death?" The answer to this lies in the oft quoted passage from  the opinion of Lord Wright in Davies v. Powell Duffryn  Associated Collieries Ltd.  (All ER p.665 A-B) which says:

"The starting point is the amount of  wages which the deceased was earning, the  ascertainment of which to some extent may  depend on the regularity of his employment.   Then there is an estimate of how much was  required or expended for his own personal and  living expenses.  The balance will give a datum  or basic figure which will generally be turned  sum, however, has to be taxed down by having  due regard to uncertainties, for instance, that  the widow might have again married and thus  ceased to be dependent, and other like matters  of speculation and doubt."                                        

  There were two methods adopted to determine and for  calculation of compensation in fatal accident actions, the first  the multiplier mentioned in Davies case (supra) and the  second in Nance v. British Columbia Electric Railway Co. Ltd.  (1951 (2) All ER 448) .

       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.

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       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 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."

       In regard to the choice of the multiplicand the Halsbury’s  Laws of England in vol. 34, para 98 states the principle thus:

"98. Assessment of damages under the Fatal  Accident Act, 1976 \026 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

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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.

       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."

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

       In both G.M., Kerala SRTC v. Susamma Thomas (1994 (2)  SCC 176) and U.P. State Road Transport Corpn. v. Trilok  Chandra (1996 (4) SCC 362) the multiplier appears to have  been adopted taking note of the prevalent banking rate of  interest.

In Susamma Thomas’s case (supra) it was noted that the  normal rate of interest was about 10% and accordingly the

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multiplier was worked out. As the interest rate is on the  decline, the multiplier has to consequentially be raised.   Therefore, instead of 16 the multiplier of 18 as was adopted in  Trilok Chandra’s case (supra) appears to be appropriate. 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, as the former is the  normal retirement age. (See: New India Assurance Co. Ltd. v.  Charlie and Another [2005 (10) SCC 720].

Considering the age of the deceased it would be  appropriate to fix the multiplier at 13.  The MACT itself found  that the income was not established.  At some point of time it  was stated that the income of the deceased was Rs.6,000/- per  month.  In the absence of any definite material about the  income, monthly contribution to the family, after deduction for  personal expenses is fixed at Rs.3,000/- per month i.e.  annually Rs.36,000/-. Applying the multiplier of 13, the  compensation works out to Rs.4,68,000/.  The same shall  carry interest @ 6% p.a. from the date of claim till the date of  actual payment.  It is stated that a sum of rupees four lakhs  has been deposited pursuant to the order dated 4.4.2005.   Balance shall be deposited along with interest within two  months from today.  Out of the total amount, 80% shall be  kept in fixed deposit in a nationalised bank initially for a  period of five years.  But no withdrawal shall be permitted  before the expiry of period. However, monthly interest shall be  paid to the claimants.   

The minor respondents shall be represented by their  mother. Separate fixed deposits shall be made for respondent  no.1, respondents 2 and 3 represented by the mother  (respondent no.1) and the respondent no.4.  The percentage of  fixed deposit shall be as follows:-

Respondent No.1         - 20%        Respondent Nos. 2 & 3   - 35%   (each) Respondent No.4         - 10%                  The appeal is allowed to the aforesaid extent. There will  be no order as to costs.