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CASE NO.: Appeal (civil)  2765 of 2005

PETITIONER: Tamil Nadu State Transport Corporation Ltd

RESPONDENT: S. Rajapriya and two others

DATE OF JUDGMENT: 20/04/2005

BENCH: ARIJIT PASAYAT & S.H. KAPADIA

JUDGMENT: J U D G M E N T

(Arising out of SLP(C) No.6144 of 2004)

ARIJIT PASAYAT, J.

       Leave granted.

       Tamil Nadu State Transport Corporation Ltd. (hereinafter referred  to as the ’Corporation’) calls in question legality of the judgment  rendered by a Division Bench of the Madras High Court dismissing the  appeal filed by the Corporation.  By the impugned order the Division  Bench confirmed the compensation awarded to the respondents by the  Motor Vehicle Accident Compensation Claim Tribunal, Principal District  Judge, Thanjur (in short the ’Tribunal’).

       Background facts in a nutshell are as follows:           On 30.8.2001 one Sathyamurthy (hereinafter referred to as the  ’deceased’) lost his life in an automobile accident.  His widow  (respondent no.1) and minor son (respondent no.2) filed petition  claiming compensation under the Motor Vehicles Act, 1988 (in short the  ’Act’). Deceased’s mother was impleaded as respondent no.2 in the claim  petition, while the Corporation was impleaded as respondent no.1. It  was stated in the claim petition that the accident occurred due to rash  and negligent driving of the Corporation’s driver. Claim of Rs.20 lakhs  was made.  Tribunal noted that the deceased was about 38 years of age  and was getting monthly salary of Rs.4688/- (annually Rs.56,208/-) from  the Corporation. After deductions one-third for personal expenses  contribution of the deceased was fixed at Rs.37,472/- per annum.  As  the deceased was about 38 years of age, multiplier of 16 was applied.   Accordingly, the compensation was worked out at Rs.6,09,552/-.  The  award was questioned in appeal before the Madras High Court and the  Division Bench as noted above, dismissed the same.

       In support of the appeal, learned counsel for the appellant  submitted that quantum as arrived at by applying multiplier of 16 is  high.  There is no appearance on behalf of the respondents in spite of  the notice. While issuing notice on 22.3.2004 the dispute was  restricted to the appropriate multiplier to be adopted. The question  regarding appropriate multiplier has been considered by this Court in  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 Ors. v. Trilok Chandra and Ors. 1996 (4) SCC  362).

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       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 Duffregn  Associated Collieries Ltd. (1942 AC 601) 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 into a  lump sum by taking a certain number of years’  purchase. That 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."                                  

       The rule in common law in Baker v.  Bolton (1979 (1) All ER 774)  enunciated by Lord Ellenborough was that "in a Civil Court, the death  of a human being could not be complained of as a injury,". Indeed, the  maxim action personalis moritur cum persona, had the effect that all  actions in tort, with very few exceptions, also became extinguished  with that person. Great changes were brought about by the Fatal  Accidents Act, 1846 (now Fatal Accidents Act, 1976) and the Law Reforms  (Miscellaneous Provisions) Act, 1934.  Under the statute, as indeed  under the Indian Statute as well, there are two separate and distinct  cause of action, which are maintainable in consequence of a person’s  death.  There were the dependant’s claim for the financial loss  suffered and acclaim for injury, loss or damage, which the deceased  would have had, had he lived, and which survives for the benefit of his  estate.

       The measure of damage is the pecuniary loss suffered and is  likely to be suffered by each dependant.  Thus "except where there is  express statutory direction to the contrary, the damages to be awarded  to a dependant of a deceased person under the Fatal Accidents Acts must  take into account any pecuniary benefit accruing to that dependant in  consequence of the death of the deceased.  It is the net loss on  balance which constitutes the measure of damages."  Lord Wright in the  Davies’s case (supra) said, "The actual pecuniary loss of each  individual entitled to sue can only be ascertained by balancing on the  one hand the loss to him of the future pecuniary benefit, and on the  other any pecuniary advantage which from whatever sources comes to him  by reason of the death."  These words of Lord Wright were adopted as  the principle applicable also under the Indian Act in Gobald Motor  Service Ltd. v. R.M.K. Veluswami  (1962 (1) SCR 929)  where this Court  stated that the general principle is that the actual pecuniary loss can  be ascertained only by balancing on the one hand the loss to the  claimant of the future pecuniary benefit and on the other any pecuniary  advantage which from whatever sources comes to them by reason of the  death, that is, the balance of loss and gain to a dependant by the  death, must be ascertained.

       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

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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.

       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 capitalized by multiplying it by a figure  representing the proper number of year’s purchase.

       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.

       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.

       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

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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  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.  

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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 Susamma Thomas and Trilok Chand’s cases (supra) 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 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, which is  the normal retirement age.  

       Considering the age of the deceased and the principles indicated  above, the appropriate multiplier would be 12 and not 16 as adopted by  the Tribunal and affirmed by the High Court. By applying multiplier 12,  amount of compensation is fixed at Rs.4,50,000/- (in round figures).   The Tribunal has fixed interest @ 9% per annum from the date of the  claim petition.  Taking note of the prevailing rate of interest in bank  deposits, the same is fixed at 7.5% per annum. It is stated that a sum  of Rs.4,00,000/- has been deposited pursuant to the order dated  22.3.2004.  The balance amount shall be deposited with the Tribunal  within four weeks from today.  Out of the total deposit 90% of the  amount shall be kept in fixed deposit in the name of widow (respondent  no.1), minor child (respondent no.2) and the mother (respondent no.3)  in the proportion of 35%, 40% and 15% respectively.  Rest 10% shall be  paid in cash equally to the widow and the mother.  Fixed deposits shall  be made initially for a period of five years and no withdrawal  permitted and only monthly interest will be paid, so far as the fixed  deposits in the names of the widow and the mother are concerned. So far  as the minor child is concerned, fixed deposit shall be made initially  for a period of five years and shall be renewed till the child attains  majority.  The monthly interest on the deposit shall also be released  to the mother as the guardian of the minor.

         No loan advance of any kind and/or pre-mature encashment shall  be permitted in respect of the fixed deposits.  However, on an  application being made to the Tribunal and it being satisfied about the  urgency of any need and absence of financial resources to meet any  urgent financial need may permit loan or advance or pre-mature  encashment by a reasoned order.   

       Appeal is allowed to the extent indicated. No costs.