REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. __3482______OF 2009 [Arising out of Special Leave Petition (Civil) No. 2997 of 2007]

ORIENTAL INSURANCE CO. LTD. …APPELLANT

VERSUS

DEO PATODI & ORS.         … RESPONDENTS

WITH  

CIVIL APPEAL NO. _3492_______OF 2009 [Arising out of Special Leave Petition (Civil) No. 3807 of 2007]

DEO PATODI & ANR.  …APPELLANTS

VERSUS

DEVENDRA ARORA & ANR.        … RESPONDENTS

J U D G M E N T

S.B. Sinha, J.

1. Leave granted.

2. What should be the appropriate multiplier as also the multiplicand in  

a  case  where  a  student  having  a  brilliant  career  and  had  an  offer  of  

employment from a U.S. based Company is the question involved in these  

appeals.   

They arise out of the following factual matrix.  

Deepak Patodi was 22 years of age on 12.6.2003 when the accident  

took place.  He was the only son of the claimants.  The accident took place  

when he was going to Bhopal along with his friends in a Tata Indica Car. He  

was  immediately  taken  to  “Chirayu  Hospital”  at  Bhopal  and  thereafter  

2

shifted to ‘Bhandari Hospital’ in Indore.  On 18.6.2003, he succumbed to  

the head injury suffered by him in the said incident..

3. His  parents  filed  an  application  under  Section  166  of  the  Motor  

Vehicles Act, 1988 (for short, “the Act”) on or about 24.12.2003 inter alia  

claiming a sum of Rs.75 lakhs as compensation on the premise that while he  

was doing his Business Administration Course in U.K. he was also doing a  

part-time job with World Bank on a monthly salary of Rs.80,000/- (UK £  

1008.31)  and  he  was  offered  an  employment  in  the  capacity  of  EU  

Controller  in  GOA  LLC,  a  company  registered  in  USA  at  an  annual  

remuneration of Rs.18 lakhs per annum approx. ($41,600/-)

Indisputably, he did not accept the said offer.  He intended to pursue  

his higher studies in MBA at Central Queensland University in Australia.   

4. The learned Tribunal opined that keeping in view his capability he  

would have been employed on a monthly salary of Rs.18,000/- per month.  

2/3rd was  deducted  from  the  said  amount  for  working  out  the  loss  of  

dependency of  the  claimants  at  1/3rd.   The  multiplier  of  13  was applied  

keeping in view the age of the claimants.  An amount of Rs.9,36,000/- by  

3

way of compensation was awarded by the Tribunal.  A sum of Rs.2000/-  

was also granted towards funeral expenses.   

5. The  claimants  preferred  an  appeal  thereagainst  in  the  High  Court  

which  was  registered  as  M.A.  No.  1842  of  2005.   Enhancement  in  the  

amount  of  compensation  was  claimed  inter  alia  on  the  premise  that  the  

dependency of the parents should have been taken into consideration at 2/3rd  

of the income of the deceased and furthermore the expenses incurred during  

treatment  should  have  also  been awarded.   The insurance  company filed  

cross objections in the said appeal in terms of Order XLI Rule 22 of the  

Code of  Civil  Procedure  on  the  ground that  the  income of  the  deceased  

could not be taken at Rs.18,000/- per month in the absence of any cogent  

evidence and that the claimants were not dependents on the deceased.    

6. By  reason  of  the  impugned  judgment,  the  High  court  while  

maintaining the estimated income of the deceased at Rs.18,000/- per month  

on a notional basis opined that the dependency of the claimants should have  

been taken at  2/3rd of  the income of the  deceased.   The High court  also  

noticed that although the Tribunal had found that claimants must have spent  

a sum of Rs.2 lakhs towards treatment of the deceased, but no compensation  

4

on that head was awarded by it.  The High Court, thus, awarded a sum of  

Rs.1,25,000/- towards the medical expenses. Applying  the  multiplier  

of 13, the loss of dependency was calculated at Rs.18,72,000/-. A sum of  

Rs.25,000/- was also granted towards the funeral expenses.   

Both the insurance company as also the claimants are before us.   

7. Mr. M.K. Dua, learned counsel appearing on behalf of the insurance  

company  would  contend  that  the  deceased  being  a  bachelor  and  for  all  

intent and purport being a dependant on his parents and as he intended to  

pursue his higher studies in Australia,  the Tribunal had rightly calculated  

the loss of dependency of parents at 1/3rd of his income and not 2/3rd.   

8. Mr. Sushil  Kumar Jain, learned counsel  appearing on behalf of the  

claimants, on the other hand, would contend that the learned Tribunal could  

not  have  estimated  the  income of  the  deceased  only  at  Rs.18,000/-  per  

month keeping in view the background as also the salary he had obtained  

even as part-time employee as also the offer which he received from an U.S.  

based Company..

5

9. The question in regard to the calculation of loss of dependency, it is  

trite, would vary from case to case.   

The fact that the deceased was a brilliant student is not in dispute.  He  

had graduated in Business Administration in U.K.  Even as a student, in a  

job on a part-time basis he was being paid a salary of Rs.80,000/- per month  

((UK £ 1008.31).  He paid his income-tax even in U.K.  

After his graduation, he came back to India.  He was offered a job as  

EU Controller  by  GOA LLC,  a  company  based  in  Chicago,  USA at  an  

annual salary of Rs.18 lakhs (i.e. $ 41,600/-).  However, when the accident  

took place he was not working; having not accepted the said offer. He was  

still a student.  It would have been hazardous for the Tribunal to calculate  

the amount of compensation towards the loss of dependency on that basis.   

10. The Tribunal and the High Court, however, in our opinion, keeping in  

view the aforementioned backdrop might not be correct in holding that he  

would have earned only Rs.18,000/- per month.  It is true that the cost of  

living in the western countries would be higher.  The standard of living in  

the western countries cannot be followed; in the absence of any material  

placed before this Court it should not be followed in India. Even in a case  

6

where the victim of an accident  was earning salary in  U.S.  Dollars,  this  

Court opined that a lower multiplier should be applied.   

In United India Insurance Co. Ltd. & Ors.  vs.  Patricia Jean Mahajan  

& Ors. [(2002) 6 SCC 281], this Court held:

“19. In the present case we find that the parents  of the deceased were 69/73 years. Two daughters  were  aged  17  and  19  years.  The  main question,  which strikes us in this case is  that  in the given  circumstances  the  amount  of  multiplicand  also  assumes  relevance.  The  total  amount  of  dependency as found by the learned Single Judge  and  also  rightly  upheld  by  the  Division  Bench  comes to 2,26,297 dollars. Applying multiplier of  10,  the  amount  with  interest  and the  conversion  rate of Rs 47, comes to Rs 10.38 crores and with  multiplier of 13 at the conversion rate of Rs.30 the  amount  comes  to  Rs 16.12  crores  with  interest.  These  amounts  are  huge  indeed.  Looking  to  the  Indian economy, fiscal and financial situation, the  amount is certainly a fabulous amount though in  the background of American conditions it may not  be  so.  Therefore,  where  there  is  so  much  of  disparity in the economic conditions and affluence  of the two places viz. the place to which the victim  belongs and the place where the compensation is  to  be  paid,  a  golden  balance  must  be  struck  somewhere,  to  arrive  at  a  reasonable  and  fair  mesne. Looking by the Indian standards they may  not  be  much  too  overcompensated  and  similarly  not  very much undercompensated  as well,  in the  background  of  the  country  where  most  of  the  dependent  beneficiaries  reside.  Two  of  the  dependants, namely, parents aged 69/73 years live  in India, but four of them are in the United States.  

7

Shri Soli J. Sorabjee submitted that the amount of  multiplicand shall surely be relevant and in case it  is  a  high  amount,  a  lower  multiplier  can  appropriately  be  applied.  We  find  force  in  this  submission….

20. The court cannot be totally oblivious to the  realities.  The Second Schedule  while  prescribing  the multiplier, had maximum income of Rs. 40,000  p.a. in mind, but it is considered to be a safe guide  for applying the prescribed multiplier in cases of  higher income also but in cases where the gap in  income is so wide as in the present case income is  2,26,297 dollars, in such a situation, it cannot be  said that some deviation in the multiplier would be  impermissible.  Therefore,  a  deviation  from  applying the multiplier as provided in the Second  Schedule may have to be made in this case. Apart  from  factors  indicated  earlier  the  amount  of  multiplicand also becomes a factor to be taken into  account  which  in  this  case  comes  to  2,26,297  dollars, that is to say an amount of around Rs. 68  lakhs per annum by converting it at the rate of Rs.  30.  By  Indian  standards  it  is  certainly  a  high  amount.  Therefore,  for  the  purposes  of  fair  compensation, a lesser multiplier can be applied to  a heavy amount of multiplicand.”  

The  said  decision,  however,  to  some  extent  was  clarified  by  this  

Court in  Punjab National Bank v. Indian Bank & Anr. [(2003) 6 SCC 79].

8

11. It is in the aforementioned situation, we are of the opinion that the  

fair amount of compensation should have been calculated at Rs.25,000/- per  

month being about 1/3rd of the amount which he was receiving in U.K.   

12. The next question which arose for our consideration for the purpose  

of  loss  of  dependency  is  whether  1/3rd from the  said  amount  should  be  

deducted or 2/3rd.

13. Mr. Dua relied on a decision of this Court in Donat Louis Machado &  

Ors. v. L. Ravindra & Ors. [1998] 8 SCC 633] wherein it was opined:

“Consequently, the total  amount would work out  at  Rs. 7500 per month during the whole span of  future  career  and  taking  an  average  at  50%,  his  future monthly income during the rest of the life  could have worked out at Rs. 3750. On that basis,  12  months’  earning  would  have  been  Rs.45,000  and  adopting  a  multiplier  of  15  looking  to  the  young  age  of  the  deceased  the  total  economical  gain to his estate would work out at Rs. 6,75,000  at least. But taking a conservative figure of Rs 6  lakhs it can easily be visualised that the claimants  who are the parents and unmarried sister and who  are dependent on him would have got at least 1/3  amount  as  he  would  have  spent  the  rest  of  2/3  amount of his earnings on his own family which  he would have raised and on himself. This would  come to a figure of Rs. 2 lakhs. This can easily be  treated to be the appropriate compensation payable  to  the  claimants  on  account  of  economical  loss  

9

suffered  by  them as  a  result  of  the  unfortunate  accident to their breadwinner.”

In  Halkibai  and Anr. vs.  Managing Director,  Rajasthan State Road  

Trans.  Corpn.  and Anr.[2004 ACJ 481],  the  Division  Bench of the High  

Court of Madhya Pradesh (Gwalior Bench) held as under:

“As  regards  determining  dependency  of  the  mother of the deceased is concerned, this question  has already been settled by the Apex Court in the  case  of  Donat  Louis  Machado,  1999  ACJ  1400  (SC). This judgment was considered by this court  in a recent decision in the case of Parathsingh v.  Sanjay Sharma, 2003 (1)  TAC 103 (MP) and in  Rajesh  v.  Rajesh  alias  Pappu,  M.A.  No.  291  of  2003; decided on 18.8.2003 and ratio has been laid  down that in the case of parents of the deceased,  dependency  will  be  1/3rd  of  the  income  of  the  deceased at the time of his death. The judgment of  Supreme  Court  is  binding  upon  this  court  and  there is no reason to differ from the said judgment.  Therefore,  we  hold  that  the  dependency  of  the  parents of the deceased shall be 1/3rd of income of  the deceased. This view has been taken by various  Division Benches and this being consistent view,  we do not wish to differ from it.”

However,  somewhat  different  view  was  taken  by  this  Court  in  

Fakeerappa & Anr.  vs.  Karnataka Cement Pipe Factory & Ors. [(2004) 2  

SCC 473], wherein it was held:

10

“6. Learned  counsel  for  Respondent  2,  submitted that there cannot be any rigid formula as  to  what  would  be  the  percentage  or  quantum of  deduction. The Tribunal and the High Court have  taken note of the relevant aspects to hold that 50%  deduction would be appropriate. There is no scope  for  any  interference  with  the  percentage  of  deduction as fixed. Further, before the High Court  there  was  no  challenge  to  the  rate  of  interest  awarded by the Tribunal.  Therefore,  for  the  first  time before this Court such a grievance cannot be  raised. It is also submitted that multiplier of 18 as  adopted is on the higher side.

xxx xxx xxx

8. It has to be noted that the ages of the parents  as  disclosed  in  the  claim  petition  were  totally  unbelievable.  If the deceased was aged about 27  years  as  found  at  the  time  of  post-mortem and  about  which  there  is  no  dispute,  the  father  and  mother could not have been aged 38 years and 35  years respectively as claimed by them in the claim  petition.  Be  that  as  it  may,  taking  into  account  special  features  of  the  case  we feel  it  would  be  appropriate  to  restrict  the  deduction  for  personal  expenses  to  one-third  of  the  monthly  income.  Though  the  multiplier  adopted  appears  to  be  slightly on the higher side, the plea taken by the  insurer  cannot  be  accepted  as  there  was  no  challenge  by  the  insurer  to  the  fixation  of  the  multiplier before the High Court and even in the  appeal  filed  by  the  appellants  before  the  High  Court, the plea was not taken.”

11

In  Bijoy Kumar Dugar vs.  Bidya Dhar Dutta & Ors. [(2006) 3 SCC  

242] this court deducted 1/3rd from the earnings of the deceased inter alia  

holding:

“…It is by now well settled that the compensation  should be the pecuniary loss to the dependants by  the death of a person concerned. While calculating  the  compensation,  annual  dependency  of  the  dependants should be determined in terms of the  annual loss, according to them, due to the abrupt  termination of life. To determine the quantum of  compensation, the earnings of the deceased at the  time  of  the  accident  and  the  amount,  which  the  deceased was spending for the dependants, are the  basic  determinative  factors.  The  resultant  figure  should then be multiplied by a “multiplier”.  The  multiplier is applied not for the entire span of life  of  a  person,  but  it  is  applied  taking  into  consideration the imponderables in life, immediate  availability of the amount  to the dependants,  the  expectancy  of  the  period  of  dependency  of  the  claimants and so many other factors. Contribution  towards the expenses of the family, naturally is in  proportion  to  one’s  earning  capacity.  In  the  present  case,  the  earning  of  the  deceased  and  consequently the amount which he was spending  over the members of his family i.e. dependency is  to be worked out on the basis of the earnings of  the deceased at the time of the accident. The mere  assertion of the claimants that the deceased would  have earned more than Rs.8000 to Rs.10,000 per  month  in  the  span  of  his  lifetime  cannot  be  accepted  as  legitimate  income  unless  all  the  relevant  facts  are  proved  by leading  cogent  and  reliable  evidence  before  MACT.  The  claimants  have  to  prove  that  the  deceased  was  in  a  trade  

12

where he would  have  earned more from time to  time or that he had special merits or qualifications  or  opportunities  which  would  have  led  to  an  improvement in his income. There is no evidence  produced  on  record  by  the  claimants  regarding  future  prospects  of  increase  of  income  in  the  course of  employment or business  or profession,  as the case may be. It is stated that the deceased  was about 24 years old at the time of the accident.  MACT has  accepted  Rs.4000  per  month,  as  the  earning  of  the  deceased  and  after  deducting  Rs .400  per  month  for  his  pocket  expenses,  the  remaining sum of Rs. 3600 has been divided into  three  equal  shares,  out  of  which  two  shares  i.e.  Rs.2400  per  month  or  Rs.28,800  (wrongly  mentioned  as  Rs.28,000  in  the  award),  were  assessed as loss to both the claimants, who were  the  parents  of  the  deceased.  The  ages  of  the  claimants are stated to be between 45 and 50 years  and  accordingly  multiplier  of  12  was  applied.  Thus, a sum of Rs 28,800 x 12 = Rs.3,45,600 was  awarded as compensation.”

In  Bilkish  vs.  United India Insurance Co. Ltd. [(2008) 4 SCC 259],  

this Court held:

“4. After hearing learned Counsel for the parties,  we are of the opinion that the view taken by the  High  Court  &  Tribunal  is  not  correct.  The  incumbent was a bachelor and he could not have  spent  more  than  1/3rd  of  his  total  income  for  personal use and rest of the amount earned by him  would certainly go to the family kitty. Therefore,  determining the loss of dependency by 50% was  not correct. Therefore, we assess that he must be  

13

spending  1/3rd  towards  personal  use  and  contributing 2/3rd of his income to his family…..”

Yet  again  in  Bangalore  Metropolitan  Transport  Corporation vs.  

Sarojamma & Anr. [(2008) 5 SCC 142], this Court held:

“9. Whereas  in  determining  an application  for  grant  of  compensation  under  Section  166  of  the  Act, the Tribunal may be entitled to find out actual  loss  of  damages  suffered  by  the  claimants,  the  formula having not envisaged such a contingency,  we  are  of  the  opinion  that  ordinarily  one-third  should  be  deducted  from  the  income  of  the  deceased and not the half thereof……”

In  Syed  Basheer  Ahamed  &  Ors.  vs.  Mohammed  Jameel  &  Anr.  

[(2009)  2  SCC  225],  one-half  (50%)  of  the  income  was  held  to  be  

deductible if the deceased was a bachelor.  

14. Indisputably,  deduction  of  1/3rd towards  personal  expenses  is  the  

ordinary rule in India.  We think that in the facts and circumstances of the  

case, the same should be applied.  The concept of joint family unlike the  

western  countries  where  it  has  been wholly  evaporated,  although  on  the  

decline, should also be taken into consideration.  The deceased’s father was  

a Doctor working in a Government Hospital; he was aged about 51 years at  

the time of the accident;  he would have retired from the Government job  

14

after a few years. He might not, therefore, be completely dependent upon his  

son.  We, therefore, are of the opinion that having regard to his age as also  

the age of his wife multiplier of 10 should be applied.  We do so keeping in  

view  the  fact  that  the  Court  has  a  duty  to  grant  a  just  and  reasonable  

compensation.   What  would,  however,  be  a  just  and  reasonable  

compensation depends upon the fact situation obtaining in each case.  No  

hard and fast rule therefor can be laid down.  The Court must also bear in  

mind that compensation should not be treated to be wind-fall.   

15. We are not oblivious of the fact that the multiplier referred to in the  

Second  Schedule  in  the  Act  may not  automatically  be  applied  in  a  case  

initiated under Section 166 of the Act.  We have applied the aforementioned  

multiplier  keeping  in  view  the  fact  that  the  multiplier  specified  in  the  

Second Schedule would not ordinarily be applicable in a case under Section  

166 of the Act.  

16. The finding required to be arrived at by the choice of multiplicand as  

also  the  multiplier  would depend upon a large  number of  factors  as  this  

aspect  of the matter has been considered in various  judgments,  the same  

need not be reiterated.   

15

17. The question, in an appropriate case, may require consideration by a  

larger Bench.

18. In this view of the matter, the appeal filed by the insurance company  

is dismissed and that of the appellant is allowed.  Tribunal may draw a fresh  

award in the light of the observations made hereinbefore.  No costs.   

……………………………….J. [S.B. Sinha]

..…………………………..…J.     [Dr. Mukundakam Sharma]

New Delhi; May 12, 2009

16