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CASE NO.: Appeal (civil)  4267 of 2002

PETITIONER: U.P. State Road Transport Corpn.                         

RESPONDENT: Krishna Bala & Ors.                                              

DATE OF JUDGMENT: 13/07/2006

BENCH: ARIJIT PASAYAT & ALTAMAS KABIR

JUDGMENT: J U D G M E N T

ARIJIT PASAYAT, J.

       Challenge in this Appeal is to the judgment of a Division  Bench of the Allahabad High Court which dismissed the First  Appeal filed by the appellant against the Award passed by a  Motor Accident Claims Tribunal (XII Additional District Judge,  Meerut) (in short the ’Tribunal’.)

       By the Award made, the Tribunal awarded compensation  of Rs.5,12,000/- to the respondents (hereinafter referred to as  the ’Claimants’). One Rajveer Singh (hereinafter referred to as  the ’deceased’) died in a motor accident on 29.11.1990.  The  claimants filed a claim petition under the Motor Vehicles Act,  1988 (in short the ’Act’).  Age of the deceased was around 36  years and he is earning monthly salary of Rs.2300/- per  month.  Though claim of agricultural income was made, the  Tribunal did not accept the same.  It adopted multiplier of 22  on the ground that the deceased had 22 years of service left.   It was further noted that thereafter the deceased would have  got pension.  The widow of the deceased and children were  awarded Rs.20,000/- towards love and affection, and  Rs.5,000/- for funeral rites.  After adopting a multiplier of 22  the amount was fixed Rs.6,07,200/-.  After taking note of  personal expenses the loss of dependency was fixed at  Rs.1600 per month.  In addition interest at the rate of 12%  from the date of application was granted.

       The Corporation questioned correctness of the award  before the High Court.  It, inter alia, submitted that the  multiplier adopted and the rate of interest therein was high.   The High Court dismissed the appeal almost summarily  holding that the award was not excessive.

       In support of the appeal, learned counsel for the  appellant\026Corporation submitted that the multiplier of 22  adopted by the Tribunal and maintained by the High Court is  high considering the age of deceased. Similarly rate of interest  is 12% per annum as awarded by the trial court and  maintained by the High Court is characterized as high.

       Learned counsel for the respondents submitted that the  multiplier and the interest have been correctly applied.  It is  further submitted that the amount awarded is very small and  hence this Court should not interfere.

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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 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.

       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

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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  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

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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 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. (See: New India Assurance Co. Ltd. v. Charlie  and Another [2005 (10) SCC 720].

       Considering the principles as set out above the multiplier  as adopted by the Tribunal and maintained by the High Court  is clearly indefensible. Considering the age of the deceased the  aforesaid multiplier would be 13.  Calculated on that basis by  taking monthly loss of dependency at Rs.2.000/- (after

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adjusting for personal expenses and likelihood of increase in  salary) the compensation to be awarded would be  Rs.3,12,000/-. To the aforesaid sum would be added  Rs.25,000/- awarded by the Tribunal for deprivation of love  and affection and funeral expenses and, therefore, entitlement  of the claimants is Rs.3,37,000/-. The accident took place on  29.11.1990.  Therefore, the rate of interest would be 9% from  the date of filing of the claim petition.  Claimants would be  entitled accordingly.  Appeal is allowed to the aforesaid extent.   No orders as to costs.