U.P. State
Road Transport Corporation & Ors Vs. Trilok Chandra & Ors [1996] INSC
666 (7 May 1996)
Ahmadi
A.M. (Cj) Ahmadi A.M. (Cj) Singh N.P. (J) Mukherjee M.K. (J) Ahmadi,Cji
CITATION:
1996 SCC (4) 362 JT 1996 (5) 356 1996 SCALE (4)522
ACT:
HEAD NOTE:
THE
7TH DAY OF MAY, 1996 Present:
Hon'ble
the Chief Justice Hon'ble Mr.Justice N.P. Singh Hon'ble Mr.Justice M.K.Mukherjee
Raju Ramachandran and Ms.S.Ramachandran, Advs. for the appellants. R.A.Mishra,
Adv. for K.K.Gupta, Adv. for the Respondent Nos.1-4 M.H.Baig, Sr.Adv,(Mrs.P.S.Shroff)
Adv. for S.A.Shroff and Mukul Mudgal, Advs. with him for the Respondent No.5
The
following Judgment of the Court was delivered:
U.P.
State Road Transport Corporation and others V. Trilok Chandra & Others
Special
leave granted.
The
short question which we are called upon to consider in this appeal relates to
the use of the correct multiplier for determination of compensation to be
awarded to the legal representatives of a victim of a road accident. The
question arises in the backdrop of the following facts.
Prem
Chandra, aged about 26 years, met with a fatal accident on 1st August, 1977. He was knocked down by an omnibus
bearing Registration No.UTW 1802 belonging to the U.P. State Road Transport
Corporation. His legal representatives preferred a claim for compensation.
Taking his earning capacity at Rs.300/- per month, it was estimated that he
spent Rs.200/- per month on his family members.
Fixing
the life expectancy at 60 years, the Tribunal deducted 36 years and held that the
family was deprived of his earning for 24 years. The compensation was thus
worked out at Rs.57,600/- (200x12x24). This amount was raised to Rs.81,600/- as
it was realised that the tribunal had wrongly taken the age of the deceased at
36 instead of 26 years and had, therefore, committed an error in employing the
multiplier of 24 years purchase factor instead of 34 years purchase factor.
Thus the compensation came to Rs.200x12x34 = 81,600/-. The question then is
whether the Tribunal was right in employing the multiplier of 24 or the High
Court was right in employing the multiplier of 34? India is one of the countries with the
highest number of road accidents. Motor accidents are every day affairs. A
large number of claims for compensation for injury caused by road accidents are
pending in various Motor Accident Claims Tribunal. In a fatal accident the
dependents of the deceased are entitled to compensation for the loss suffered
by them on account of the death. The most commonly practised method of
assessing the loss suffered is to calculate the loss for a year and then to capitalise
the amount by a suitable multiplier. To that is added the loss suffered on
account of loss of expectation of life and the like. The Tribunals and High
Courts have adopted divergent methods to determine the suitable multiplier.
Even this Court has not been uniform;
May be
because the principle on which this method came to be evolved has been
forgotten. It has, therefore, become necessary to examine the law and to state
the correct principles to be adopted.
The
topic of compensation for causing death by negligent driving came up for
serious discussion before this Court in Gobald Motor Services Limited & Anr.
vs. R.M.K. Veluswami and others AIR 1962 SC 1. The Court referred to the House
of Lords decision in Davies vs. Powell Duffryn Associated Collieries Ltd. 1942
AC 601 and quoted the following passage from the judgment:
"The
damages are to be based on the reasonable expectation of pecuniary benefit or
benefit reducible to money value. In assessing the damages all circumstances
which may be legitimately pleaded in diminution of the damages must be
considered.
.....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 source comes to him by reason of the death." The Court also
referred to the judgment by Viscount Simon in Nance vs. British Columbia
Electric Railways Co.Ltd. 1951 AC 601 in which the same principles were
enunciated for estimating the damages, the method adopted however differed.
Various factors that would enter the calculation as per Viscount Simon were set
out in the judgment as under:
"..........
at first the deceased man's expectation of life has to be estimated having
regard to his age, bodily health and the possibility of pre-mature
determination of his life by later accidents; secondly, the amount required for
the future provision of his wife shall be estimated having regard to the
amounts he used to spend on her during his lifetime, and other circumstances;
thirdly, the estimated annual sum is multiplied by the number of years of the
man's estimated span of life, and the said amount must be discounted so as to
arrive at the equivalent in the form of a lump sum payable on his death;
fourthly, further deductions must be made for the benefit accruing to the widow
from the acceleration of her interest in his estate, and, fifthly, further
amounts have to be deducted for the possibility of the wife dying earlier if
the husband had lived the full span of life; and it should also be taken into
account that these is the possibility of the widow remarrying much to the
improvement of her financial position. It would be seen from the said mode of
estimation that many imponderables enter into the calculation." The same
principles were recalled by this Court in the case of Municipal Corporation of Delhi vs. Subhagwanti & Ors., AIR
1966 SC 1750. In this case the claim for compensation arose on account of loss
of life caused by the collapse of the Clock Tower abutting a highway. The Court
referred to both the aforementioned judgments, and extracted the following
passage from the judgment in, the case of Davies:
"The
starting point is the amount of wages which the deceased was earning, the
ascertainment of which to some extent may depend upon 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 dictum 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." In the case before the Court the
deceased was Ram Prakash aged 30 years. The High Court found it proper to
estimate the amount that the deceased would have spent on his wife and children
in a year and Capitalised that for a period of 15 years and observed that the
Trial Court's calculation was not excessive.
The
compensation to be awarded has two elements. One is the pecuniary loss to the
estate of the deceased resulting from the accident, the other is the pecuniary
loss sustained by the members of his family for his death. The Court referred
to these two elements in the Gobald Motor Service's case. These two elements
were to be awarded under Section 1 and Section 2 of the Fatal Accidents Act,
1855 under which the claim in that case arose. The Court in that case cautioned
that while making the calculations no part of the claim under the first or the
second element should be included twice. The Court gave a very lucid
illustration, which can be quoted with profit:
"An
illustration may clarify the position. X is the income of the estate of the
deceased, Y is the yearly expenditure incurred by him on his dependents (we
will ignore the other expenditure incurred by him). X-Y i.e. Z. is the amount
he saves every year. The capitalized value of the income spent on the
dependents, subject to relevant deductions, is the pecuniary loss sustained by
the members of his family through his death. The capitalized value of his
income, subject to relevant deductions, would be the loss caused to the estate
by his death. If the claimants under both the heads are the same, and if they
get compensation for the entire loss caused to the estate, they cannot claim
again under the head of personal loss the capitalized income that might have
been spent on them if the deceased were alive.
Conversely,
if they got compensation under S.1, representing the amount that the deceased
would have spent on them, if alive, to that extent there should be deduction in
their claim under S.2 of the Act in respect of compensation for the loss caused
to the estate. To put it differently if under S.1 they got capitalized value of
Y, under S.2 they could get only the Capitalized value of Z, for the capitalised
value Y+Z=X would be the capitalized value of his entire income." The High
Court of Gujarat in the case of M/s. Hirji Virji Transport & Ors. vs. Basiranbibi
(1971) 12 Gujarat Law Reporter 783 referred to all the three judgments of this
Court mentioned above, considered the principle laid down in Davies and Nance
and explained the law to be applied for ascertaining the damages in such cases.
Reference was also made to the judgment of Lord Reid in Taylor vs. O'Conor 1970(1) All England
Reports 365 and the High Court reiterated Lord Reid's words which we extract:
"In
ordinary cases which do not involve special factors, as one in Taylor's case as
regards the questions of income tax and surtax, the wealth of experience of
Judges and Counsels would be an adequate guide to the selection of this
multiplier without any necessity of any expert evidence, so that on this method
by adopting a common multiplier the loss of pendency over a period of years can
be worked out a lump sum to be given to the dependents." The Gujarat High
Court also pointed out that the principles laid down in the case of Davies and
that in the case of Nance led to the same end-results because, although, as per
Viscount Simon the dependency amount is required to be multiplied by the figure
of the expected useful life of the deceased, the sum has to be discounted
because equivalent amount in lump sum has to be worked out keeping in view the
fact that the sum was to be spread over a period of years and secondly,
allowance had to be made for uncertainties like the possible pre-mature death
of the dependents or of the deceased had he been alive, remarriage of the
widow, acceleration over other interest of the estate, etc. The Gujarat High
Court expressed the opinion that if proper discount is done after arriving at
the lump sum equivalent to this dependency, spread over for a period of years
the end-result will be the same as that calculated by using a proper multiplier
to the annual loss. This multiplier is the year's purchase factor. Referring to
the decision of Lord Diplock in Mallett vs. McMonagle, 1969 (2) All England
Reports 178 at 191, wherein an annuity table was worked out, the High Court
observed that 12 to 15' years' should be the normal multiplier and for the case
before the court the outer multiplier of 15 years purchase would be proper. The
same view in regard to the range for a healthy young man was expressed by this
Court in C.K.S.Iyer vs. T.K.Nair (AIR 1970 SC 376).
For
concluding the analysis it is necessary now to refer to the judgment of this
Court in the case of General Manager, Kerala State Road Transport, Trivandrum vs. Susamma Thomas 1994(2) SCC 176.
In that case this Court culled out the basic principles governing the
assessment of compensation emerging from the legal authorities cited above and
reiterated that the multiplier method is the sound method of assessing
compensation. The Court observed :
"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 yeild 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 principle was explained and
illustrated by a mathematical example:
"The
multiplier represents the number of Years' purchase on which the loss of
dependency is capitalized. Take for instance a case where annual loss of
dependency is Rs.10,000. If a sum of Rs.1,00,000 is invested at 10% annual
interest, the interest will take care of the dependency, perpetually. The
multiplier in this case works out to 10. If the rate of interest is 5% per
annum and not 10% then the multiplier needed to capitalize the loss of the
annual dependency at Rs.10,000 would be
20.
Then the multiplier i.e., the number of years' purchase of 20 will yield the
annual dependency perpetually. Then allowance to scale down the multiplier
would have to be made taking into account the uncertainties of the future, the
allowances for immediate lump sum payment, the period over which the dependency
is to last being shorter and the capital feed also to be spent away over the
period of dependency is to last etc. Usually in English Courts the operative
multiplier rarely exceeds 16 as maximum. This will come down accordingly as the
age of the deceased person (or that of the dependents, whichever is higher)
goes up." It was rightly clarified that there should be no departure from
the multiplier method on the ground that Section 110-B Motor Vehicles Act, 1939
(corresponding to the present provision of Section 168 Motor Vehicles Act,
1988) envisaged payment of 'just' compensation since the multiplier method is
the accepted method for determining and ensuring payment of just compensation
and is expected to bring uniformity and certainty of the awards made all over
the country.
In the
facts of that case the Court said that 12 years was the correct multiplier to
be applied for assessing compensation for the death of the victim of the road
accident who was 39. Further it was observed that in the absence of evidence it
is not unusual to deduct one third of the gross income towards the personal
living expenses of the deceased. The court further awarded a conventional sum
towards loss of consortium and loss of estate.
We
thought it necessary to reiterate the method of working out 'just' compensation
because, of late, we have noticed from the awards made by Tribunals and Courts that
the principle on which the multiplier method was developed has been lost sight
of and once again a hybrid method based on the subjectivity of the
Tribunal/Court has surfaced, introducing uncertainty and lack of reasonable
uniformity in the matter of determination of compensation. It must be realised
that the Tribunal/ Court has to determine a fair amount of compensation
awardable to the victim of an accident which must be proportionate to the
injury caused.
The
two English decisions to which we have referred earlier provide the guidelines
for assessing the loss occasioned to the victims. Under the formula advocated
my Lord Wright in Davies, the loss has to be ascertained by first determining
the monthly income of the deceased, then deducting there from the amount spent
on the deceased, and thus assessing the loss to the dependents of the deceased.
The annual dependency assessed in this manner is then to be multiplied by the
use of an appropriate multiplier. Let us illustrate :
X,
male, aged about 35 years, dies in an accident. He leaves behind his widow and
3 minor children. His monthly income was Rs.3,500/-. First, deduct the amount
spent on X every month. The rough and ready method hitherto adopted where no
definite evidence was forthcoming, was to break up the family into units,
taking two units for an adult and one unit for a minor. Thus X and his wife
make 2 + 2 = 4 units and each minor one unit i.e. 3 units in all, totalling 7
units. Thus the share per unit storks out to Rs.3,500/7 = Rs.500 per month. It
can thus be assumed that Rs.1000 was spent on X. Since he was a working member
some provision for his transport and out-of pocket expense has to be estimated.
In the
present case we estimate the out-of-pocket expense at Rs.250/-. Thus the amount
spent on the deceased X works out to Rs.1250 per month leaving a balance of
Rs.3500-1250 = Rs.2250 per month. This amount can be taken as the monthly loss
to X's dependents. The annual dependenny comes to Rs.2250 X 12 = Rs.27,000.
This annual dependency has to be multiplied by the use of an appropriate
multiplier to assess the compensation under the head of loss to the dependents.
Take
the appropriate multiplier to be 15. The compensation comes to Rs.27,000 X 15 =
Rs.4,05,000. To this may be added a conventional amount by way of loss of
expectation of life.
Earlier
this conventional amount was pegged down to Rs.3000 but now having regard to
the fall in the value of the rupee, it can be raised to a figure of not more
than Rs.10,000/-.
Thus
the total comes to Rs.4,05,000+10,000 = Rs.4,15,000/-.
In the
method adopted by Viscount Simon in the case of Nance also, first the annual
dependency is worked out and then multiplied by the estimated useful life of
the deceased. This is generally determined on the basis of longevity. But then,
proper discounting on various factors having a bearing on the uncertainties of
life, such as, premature death of the deceased or the dependent, remarriage,
accelerated payment and increased earning by wise and prudent investments,
etc., would become necessary.
It was
generally felt that discounting on various imponderables made assessment of
compensation rather complicated and cumbersome and very often as a rough and
ready measure, one-third to one-half of the dependency was reduced, depending
on the lite-span taken. That is the reason why courts in India as well as
England preferred the Davies' formula as being simple and more realistic.
However, as observed earlier and as pointed out in Susamma Thomas' case,
usually English courts rarely exceed 16 as the multiplier. Courts in India too
followed the same pattern till recently when Tribunals/Courts began to use a
hybrid method of using Nance's method without making deduction for
imponderables.
The
situation has now undergone a change with the enactment of the Motor Vehicles
Act, 1988, as amended by Amendment Act, 54 of 1994. The most important change
introduced by the amendment insofar as it relates to determination of
compensation is the insertion of Sections 163A and 163B in Chapter XI entitled
'Insurance of Motor Vehicles against Third Party Risks'. Section 165A begins
with a non-obstante clause and provides for payment of compensation, as
indicated in the Second Schedule, to the legal representatives of the deceased
or injured, as the case may be. Now if we turn to the Second Schedule, we find
a table fixing the mode of calculation of compensation for third party accident
injury claims arising out of fatal accidents. The first column gives the age
group of the victims of accident, the second column indicates the multiplier
and the subsequent horizontal figures indicate the quantum of compensation in
thousand payable to tile heirs of the deceased victim. According to this table
the multiplier varies from 5 to 18 depending on the age group to which the
victim belonged. Thus, under this schedule the maximum multiplier can be upto
18 and not 16 as was held in Susamma Thomas' case.
We
must at once point out that the calculation of Compensation and the amount
worked out in the schedule suffer from several defects. For example, in item
No.1 for a victim aged 15 years, the multiplier is shown to be 15 years' and
the multiplicand is shown to be Rs.3000/-. The total should be 3000 x 15 =
45,000 but the same is worked out at Rs.60,000/-. Similarly, in the second item
the multiplier is 16 and the annual income is Rs.9000; the total should have
been Rs.1,44,000 but is shown to be Rs.1,71,000/-. To put it briefly, the table
abounds in such mistakes. Neither the Tribunals nor the courts can go by the
ready reckoner. It can only be used as a guide. Besides, the selection of
multiplier cannot in all cases be solely dependent on the age of the deceased.
For example, if the deceased, a bachelor, dies at the age of 45 and his
dependents are his parents, age of the parents would also be relevant in the
choice of the multiplier. But these mistakes are limited to actual calculations
only and not in respect of other items. What we propose to emphasise is that
the multiplier cannot exceed 18 years' purchase factor. This is the improvement
over the earlier position that ordinarily it should not exceed 16. We thought
it necessary to state the correct legal position as Courts and Tribunals are
using higher multiplier as in the present case where the Tribunal used the
multiplier of 24 which the High Court raised to 34, thereby showing lack of
awareness or the background of the multiplier system on Davies' case.
We had
indicated we would not interfere with the amount awarded, since in our view,
while the multiplier used is excessive, we are satisfied that a very low
multiplicand was used as the loss of dependency. If we were to correct the
multiplicand and use the correct multiplier, the compensation would words out
to near about the same figure.
Therefore,
while agreeing with the learned Advocate for the appellant, we are disinclined
to interfere with the figure of compensation. We, therefore, hold that the
Tribunal/Court fell into an error in the choice of the multiplier and allow the
appeal to that extent but we do not, in the circumstances of the case,
interfere with the quantum of compensation. No order as to costs.
The
copy of this Judgment may be sent to all the High Courts with a direction to
circulate it to the Courts/Tribunals dealing with the Motor Accident
compensation cases.
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