India Assurance Company Limited Vs. Smt. Kalpana & Others  Insc 47 (17 January 2007)
Arijit Pasayat & S.H. Kapadia (Arising Out Of Slp (C) No. 7450 of 2005) Dr.
Arijit Pasayat, J. Leave Granted.
in this appeal is to the order passed by a Division Bench of the Uttaranchal
High Court holding that the respondents were entitled to compensation of Rs.8,16,000/-
with interest @ 6% p.a. from the date of filing of the claim petition till the
date of actual payment. Before the High Court the claimants had questioned the
judgment passed by the Motor Accident Claims Tribunal/Addl. District Judge,
District Nainital (in short 'MACT').
scenario in a nutshell is as follows:
7.6.1999 at about 9.50
p.m. Vijay Singh Dogra
(hereinafter referred to as the 'deceased') was coming from Nandpur to Haldwani
on his vehicle No. UP 01-3962. He was driving the said vehicle. When the
vehicle reached near the Block Office, Haldwani, it dashed with a Truck No.URN
9417 which was parked on the road in violation of the traffic rules.
accident the deceased sustained grievous injuries and he was taken to the Base Hospital, Haldwani
from where he was referred to Bareilly for
better treatment. But he died on 9.6.1999. He was about 33 years of age at the
time of accident. Claimants i.e. respondents 1 to 4 filed claim petition
claiming compensation under Section 173 of the Motor Vehicles Act, 1988 (in
short the 'Act'). It was indicated in the claim petition that the deceased was
earning Rs.8,000/- per month by driving a taxi and also had agricultural
income. On that basis a sum of Rs.14,88,000/- was claimed as compensation. The
opposite party in the claim petition i.e. the present appellant (hereinafter
referred to as the 'Insurer')
the claim. The MACT on consideration of the
brought on record dismissed the claim petition on the ground that the accident
took place on account of negligence of the deceased. An appeal was filed before
the High Court by the claimants. It was stated that the vehicle was loaded with
logs of Eucalyptus trees and these logs were protruding outside the truck.
There was no indicator on the truck to indicate that the truck was parked so
that any person coming from behind could be cautious. It was, therefore,
contended that there was negligence on the part of the driver of the vehicle.
With reference to Section 81 of the Act, it was indicated that the necessary
care and caution was not taken.
High Court found that the vehicle was the subject matter of insurance with the
insurer. It was not a case where the vehicle was stationary. On the contrary it
was parked on a running condition without any indicator. The High Court,
therefore, held that the insurer is liable to pay compensation.
as the income of the deceased is concerned, taking into account the fact that
there was no definite material to throw light on the actual income of the
deceased, it was taken at Rs.4,000/- per month and multiplier of 17 was applied
and accordingly the compensation was fixed.
support of the appeal, learned counsel for the appellant submitted that the
High Court has erroneously fixed compensation by applying multiplier of 17. It
was pointed out
the MACT itself noted that no evidence was led to show as
was the actual income of the deceased. In any event, the multiplier is high.
Learned counsel for the respondents on the other hand supported the order of
the High Court.
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
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:
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
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.
(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. 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 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
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.
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:
the multiplier is a figure considerably less than the number of years taken as
the duration of the expectancy.
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 G.M., Kerala
SRTC v. Susamma Thomas (1994 (2) SCC 176) and U.P. State Road Transport Corpn. v. Trilok Chandra (1996 (4) SCC 362) 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.
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.
the appropriate highest multiplier was held to be 18.
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, as the former is the normal
retirement age. (See: New India Assurance Co. Ltd. v.
and Another [2005 (10) SCC 720].
the age of the deceased it would be
to fix the multiplier at 13. The MACT itself found
the income was not established. At some point of time it was stated that the
income of the deceased was Rs.6,000/- per month. In the absence of any definite
material about the income, monthly contribution to the family, after deduction
for personal expenses is fixed at Rs.3,000/- per month i.e.
Rs.36,000/-. Applying the multiplier of 13, the compensation works out to Rs.4,68,000/.
The same shall carry interest @ 6% p.a. from the date of claim till the date of
actual payment. It is stated that a sum of rupees four lakhs has been deposited
pursuant to the order dated 4.4.2005.
shall be deposited along with interest within two months from today. Out of the
total amount, 80% shall be kept in fixed deposit in a nationalised bank
initially for a period of five years. But no withdrawal shall be permitted
before the expiry of period. However, monthly interest shall be paid to the
minor respondents shall be represented by their mother. Separate fixed deposits
shall be made for respondent no.1, respondents 2 and 3 represented by the
mother (respondent no.1) and the respondent no.4. The percentage of fixed
deposit shall be as follows:- Respondent No.1 - 20% Respondent Nos. 2 & 3 -
35% (each) Respondent No.4 - 10% The appeal is allowed to the aforesaid extent.
There will be no order as to costs.