State Transport Corporation Ltd Vs. S. Rajapriya and Two Others  Insc 261
(20 April 2005)
Pasayat & S.H. Kapadia
out of SLP(C) No.6144 of 2004) ARIJIT PASAYAT, J.
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').
facts in a nutshell are as follows:
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.
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.
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).
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:
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.
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
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 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.
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
that should be capitalized by multiplying it by a figure representing the
proper number of year's purchase.
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
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) .
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.
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:
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.
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.
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.
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:
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.
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.
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:
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.
contingencies of life such as illness, disability and unemployment have to be
taken into account.
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.
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.
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).
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.
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.
is allowed to the extent indicated. No costs.