Reshma
Kumari & Ors. Vs. Madan Mohan & ANR. [2009] INSC 1274 (23 July 2009)
Judgment
IN THE
SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. __________
of 2009 (Arising out of SLP ( C ) No 8205 of 2007).
Reshma
Kumari and others ... Appellants Versus Madan Mohan and another ... Respondents
WITH CIVIL APPEAL NO. __________ of 2009 (Arising out of SLP ( C ) No 21649 of
2006).
Smt.
Puneet Kaur and others ... Appellants Versus Delhi Transport Corporation ...
Respondents AND 1 CIVIL APPEAL NO. __________ of 2009 (Arising out of SLP ( C )
No 6791 of 2006).
Anjani
Singh and others ... Appellants Versus Salauddin and others ... Respondents
S.B.
SINHA, J.
1.
Application of the principles for grant of compensation under the
Motor Vehicles Act, 1939 (for short `the 1939 Act') and the Motor Vehicles Act,
1988 (for short `the 1988 Act') is the question involved herein. Before,
embarking on the said question we may notice the fact of the matters involved
in each case.
Civil
Appeal arising out of SLP (C) NO.8205/2007
2.
Madan Mohan Singh Saini met with an accident on 3rd September,
1987, when the scooter on which he was riding, collided with a Maruti van,
driven by respondent No.1. Respondent No.2 is the insurer. He was admitted to
Ram Manohar Lohia Hospital where he succumbed to his injuries on 8th September,
2006.
2
Appellants herein who are, wife, children and mother of the deceased filed a
claim petition before the Motor Accident Claims Tribunal, New Delhi, under
Sections 110-A and 92-A of the Act.
By an
award dated 13th July, 1992 the Tribunal awarded a sum of Rs.3,36,000/- by way
of compensation with 12% interest from the date of filing of the claim
petition.
3.
Aggrieved by and dissatisfied with the said amount, appellants
filed an appeal being FAO before the High Court of Delhi. A learned Single
Judge of the High Court by reason of the impugned judgment and order dated 8th
February, 2007 enhanced the compensation by Rs.17,000/-.
The
appellants still dissatisfied have filed the present appeal by obtaining
special leave.
Civil
Appeal arising out of SLP (C) No.21649 of 2006.
4.
Jagmohan Singh, (deceased), husband of appellant No.1; father of
appellant Nos. 2 and 3 and son of appellant Nos. 4 and 5, died in an accident
with a D.T.C. bus.
3 The
appellants filed a claim petition before the Additional District Judge/Motor
Vehicle Accident Tribunal, Ghaziabad claiming a sum of Rs.27,50,000/- by way of
compensation.
By its
order dated 21st May, 1996 a sum of Rs.2,88,000/- with 12% interest thereon
from the date of filing of the claim petition, was awarded.
5.
Feeling dissatisfied, the appellants filed an FAO before the
Allahabad High Court. A Division Bench of the said Court by its judgment and
order dated 26th May, 2006 enhanced the amount of compensation to Rs. 4,08,000/-.
Aggrieved
by and dissatisfied with the said judgment, the appellants have preferred this
appeal by special leave.
Civil
Appeal arising out of SLP (C) No.6791 of 2007.
6.
Sergeant Dalbir Singh died in a road accident on 17th September,
1997 with a truck which was driven by respondent No.1. Respondent Nos. 2 and 3
are the owner and insurance company respectively.
4 The
appellants, who are the legal heirs, i.e. wife, children and mother of the deceased,
filed a claim petition before the Motor Accident Claims Tribunal, Faridabad
under Sections 166 and 140 of the 1988 Act for grant of compensation of
Rs.15,00,000/-. The Motor Accident Claims Tribunal by its award dated 26th
June, 2000 awarded a sum of Rs.2,49,600/-with 12% interest on the said amount
by way of compensation.
7.
Feeling dissatisfied, appellants filed an FAO before the High
Court of Punjab and Haryana at Chandigarh and by the impugned judgment and
order, a learned Single Judge of the High Court partly allowed the appeal and
enhanced the amount compensation by Rs.1,20,600/- besides interest @ 6% per
annum on the enhanced compensation.
8.
The common questions which arise for our consideration in these
appeals are :- 1) Whether the multiplier specified in the Second Schedule
appended to the Act should be scrupulously applied in all the cases? 5 2)
Whether for determination of the multiplicand, the Act provides for any
criterion, particularly as regards determination of future prospects? Before
we, however, advert to the said questions we may notice that Section 163-A of
the Act was inserted on or about 14th November, 1994.
9.
Even prior to the enactment of the said provision, this Court in
General Manager, Kerala State Road Transport Corporation, Trivandrum v. Susamma
Thomas and others, [ (1994) 2 SCC 176 ] following the decisions of the English
Courts applied structured formula for determination of the amount of
compensation. The principle with regard to the determination of the amount of
compensation on the basis of the structured formula in Susamma Thomas (supra)
was considered having regard to the decision of Diplock, J in his speech in
Mallett's case [ (1970) AC 166 :
(1969) 2
All ER 178 178 ]. We would refer to Mallett (supra) a little later but we may
at this stage notice that the principle laid down therein has been stated to be
logically sound and legally well established.
10.
So far as the question of loss of future earnings on the basis of
average life expectancy is concerned, this Court, having regard to the
phraseology used in Section 110-B of the Motor Vehicles Act, 1939 envisaging payment of just compensation to the victims
and/or the successors of the deceased, stated that any application of a rigid
formula may not be applied.
In
Susamma Thomas (supra) it was observed that the multiplier method is the appropriate
one which should ordinarily be not departed from save in rare and extraordinary
circumstances and very exceptional cases.
The
rationale for applying the said principle was laid down stating :- "17.
The multiplier represents the number of years' purchase on which the loss of
dependency is capitalised. 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 capitalise 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 7 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
dependants, whichever is higher) goes up,"
11.
It is, however, of some significance to notice that at the
relevant point of time the rate of bank interest was about 12% per annum to
which reference has also been made by the High Court at some length.
12.
In Susamma Thomas (supra) apart from applying the structured
formula with regard to the determination of the amount of compensation as
regards the future prospect, it was opined :- "19. In the present case the
deceased was 39 years of age. His income was Rs 1032 per month. Of course, the
future prospects of advancement in life and career should also be sounded in
terms of money to augment the multiplicand. While the chance of the multiplier
is determined by two factors, namely, the rate of interest appropriate to a
stable economy and the age of the deceased or of the claimant whichever is
higher, the ascertainment of the multiplicand is a more difficult exercise.
Indeed, many factors have to be put into the scales to evaluate the contingencies
of 8 the future. All contingencies of the future need not necessarily be
baneful. The deceased person in this case had a more or less stable job. It
will not be inappropriate to take a reasonably liberal view of the prospects of
the future and in estimating the gross income it will be unreasonable to
estimate the loss of dependency on the present actual income of Rs 1032 per
month. We think, having regard to the prospects of advancement in the future
career, respecting which there is evidence on record, we will not be in error
in making a higher estimate of monthly income at Rs 2000 as the gross income.
From this has to be deducted his personal living expenses, the quantum of which
again depends on various factors such as whether the style of living was
spartan or bohemian. In the absence of evidence it is not unusual to deduct
one-third of the gross income towards the personal living expenses and treat
the balance as the amount likely to have been spent on the members of the
family and the dependents. This loss of dependency should capitalize with the
appropriate multiplier. In the present case we can take about Rs 1400 per month
or Rs 17,000 per year as the loss of dependency and if capitalized on a
multiplier of 12, which is appropriate to the age of the deceased, the
compensation would work out to (Rs 17,000 x 12 = Rs 2,04,000) to which is added
the usual award for loss of consortium and loss of the estate each in the
conventional sum of Rs 15,000."
13.
Parliament thereafter inserted Section 163A and the Second
Schedule in the Act. One of the features thereof which we may immediately
notice is 9 that it provides for claim of compensation in a case involving no
fault, stating :- "163A. Special provisions as to payment of compensation
on structured formula basis (1) Notwithstanding anything contained in this Act
or in any other law for the time being in force or instrument having the force
of law, the owner of the motor vehicle or the authorised insurer shall be
liable to pay in the case of death or permanent disablement due to accident
arising out of the use of motor vehicle, compensation, as indicated in the
Second Schedule, to the legal heirs or the victim, as the case may be.
Explanation.-For
the purposes of this sub- section, "permanent disability" shall have
the same meaning and extent as in the Workmen's Compensation Act, 1923 (8 of
1923).
(2) In
any claim for compensation under sub- section (1), the claimant shall not be
required to plead or establish that the death or permanent disablement in
respect of which the claim has been made was due to any wrongful act or neglect
or default of the owner of the vehicle or vehicles concerned or of any other
person.
(3) The
Central Government may, keeping in view the cost of living by notification in the
Official Gazette, from time to time amend the Second Schedule."
14.
After the aforementioned provision was brought in the Statute
Book, this Court had the occasion to consider the applicability of the
structured 10 formula once again in U.P. State Road Transport Corporation. v.
Trilok Chandra, [ (1996) 4 SCC 362]. Ahmadi, C.J. noticed certain discrepancies
therein and inter alia pointed out :-, "18. 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 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 3000x15=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. "
15.
However, it is pertinent to notice that the Bench categorically
laid down that those mistakes are limited to actual calculations only and not
in respect of other items. It was emphasized that the multiplier cannot exceed
18 years' purchase factor. It noticed that the same was an improvement over the
earlier position that ordinarily it should not exceed 16.
This
Court stated the law thus :- "15. We thought it necessary to reiterate the
method of working out `just' compensation 11 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 by Lord Wright in
Davies, the loss has to be ascertained by first determining the monthly income
of the deceased, then deducting therefrom the amount spent on the deceased, and
thus assessing the loss to the dependants 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 3500.
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 works out to Rs
3500/7=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 expenses 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 12 Rs 3500-1250=Rs 2250 per month. This amount can be taken as the monthly
loss to X's dependants. The annual dependency comes to Rs 2250x12=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 dependants.
Take the appropriate multiplier to be 15. The compensation comes to Rs
27,000x15=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 Rs10,000. Thus the total comes to Rs
4,05,000+10,000= Rs 4,15,000.
16.
We may place on record that despite the recommendations made by
this Court in Trilok Chandra (supra) the Parliament did not amend the Second Schedule.
17.
We must also place on record that according to Mr. Atul Nanda,
learned counsel appearing on behalf of the Insurance Company, the Second
Schedule does not contain any such mistake. Be that as it may this Court even
in subsequent decisions reiterated the said principle in a large number of
cases. We would, however, notice only a few of them.
18.
13 In Kaushnuma Begum v. New India Assurance Co. Ltd., [ (2001) 2
SCC 9 ] this Court observed:- 22. The appellants claimed a sum of Rs 2,36,000.
But PW 1
widow of the deceased said that her husband's income was Rs 1500 per month. PW
4 brother of the deceased also supported the same version. No contra-evidence
has been adduced in regard to that aspect. It is, therefore, reasonable to
believe that the monthly income of the deceased was Rs. 1500. In calculating
the amount of compensation in this case we lean ourselves to adopt the
structured formula provided in the Second Schedule to the MV Act. Though it was
formulated for the purpose of Section 163-A of the MV Act, we find it a safer
guidance for arriving at the amount of compensation than any other method so
far as the present case is concerned."
In United
India Insurance Co. Ltd. v. Patricia Jean Mahajan, [ (2002) 6 SCC 281 ] this
Court held :- "21. The purpose to compensate the dependants of the victims
is that they may not be suddenly deprived of the source of their maintenance
and as far as possible they may be provided with the means as were available to
them before the accident took place. It will be a just and fair compensation.
But in cases where the amount of compensation may go much higher than the
amount providing the same amenities, comforts and facilities and also the way
of life, in such circumstances also it may be a case where, while 14 applying
the multiplier system, the lesser multiplier may be applied. In such cases, the
amount of multiplicand becomes relevant. The intention is not to
overcompensate.
22. We
therefore, hold that ordinarily while awarding compensation, the provisions
contained in the Second Schedule may be taken as a guide including the
multiplier, but there may arise some cases, as the one in hand, which may fall
in the category having special features or facts calling for deviation from the
multiplier usually applicable."
It is
evident from the above that this Court in the sand decision had taken a
departure from the Second Schedule.
In Jyoti
Kaul v. State of M.P., [ (2002) 6 SCC 306 ] multiplier of 15 was adopted,
stating :- "The aforesaid decision makes it clear that the principle of
multiplier would depend on the facts and circumstances of each case. Looking to
the facts of this case we find that the Tribunal has given good reasons for
applying the multiplier of
15. This
was in addition of taking into consideration that the predecessors of the
deceased all lived for more than 80 years. The High Court reduced the
multiplier from 15 to 10 without taking into consideration circumstances
considered by the Tribunal and thus committed the error. We, accordingly, set
aside the findings of the High Court only to the extent of the application of
15 multiplier and uphold other findings including reduction of interest. The
present appeal, accordingly, succeeds in part. The computation of compensation
now shall be made on the basis of multiplier of 15. The difference of enhanced
amount which has yet not been paid by the respondent State shall be paid to the
claimants within a period of three months from today."
18. The
said decisions have not yet been overruled. We may, however, immediately notice
that recently this Court had advocated application of a lower multiplier in
cases involving Section 166 of the Act, but no legal principles have been laid
down therein. In New India Assurance Co. Ltd. v. Shanti Pathak, (2007) 10 SCC
1, this Court held :-
6.
Considering the income that was taken, the foundation for working out the
compensation cannot be faulted with. The monthly contribution was fixed at Rs
3500. In the normal course we would have remitted the matter to the High Court
for consideration on the materials placed before it.
But
considering the fact that the matter is pending since long, it would be
appropriate to take the multiplier of 5 considering the fact that the mother of
the deceased was about 65 years at the time of the accident and age of the
father was more than 65 years. Taking into account the monthly contribution at
Rs 3500 as held by the Tribunal and the High Court, the entitlement of the
claim would be Rs 2,10,000. The same shall bear interest @ 7.5% p.a. from the
date of the application for compensation. Payment already made shall be
adjusted from the amount due.
8. In the
instant case the age of the deceased was 52 years as per the post-mortem
report, and the multiplier thus has to be 8 instead of 13 as adopted by the
Tribunal and upheld by the High Court. The rate of interest awarded does not
need any interference. The monthly income has to be taken as Rs 11,684 and one-third
has to be deducted therefrom for personal expenses. Thus, the annual loss of
income comes to Rs 93,939.
The same
is rounded to Rs. 93,000. The entitlement for loss of income comes to Rs
7,44,000. The other amounts awarded by the Tribunal totalling Rs 29,500 remain
unaltered.
Thus, the
claimant is entitled to Rs 7,73,500 along with interest at the rate fixed by
the Tribunal. The payment already made shall be adjusted."
19.
Learned counsel for the appellants contended that later decisions
should not be followed keeping in view the binding precedents of this Court in
the earlier cases. It was urged that the prospective loss of future earnings by
way of career advancement as also revision in the scale of pay must be taken
into consideration for the purpose of determination of the multiplicand while
applying the structured formula contained in the Second Schedule appended to
the Act.
20.
The compensation which is required to be determined must be just.
While the
claimants are required to be compensated for the loss of their 17 dependency,
the same should not be considered to be a windfall. Unjust enrichment should be
discouraged. This Court cannot also lose sight of the fact that in given cases,
as for example death of only son to a mother, she can never be compensated in
monetary terms.
21.
The question as to the methodology required to be applied for
determination of compensation as regards prospective loss of future earnings,
however, as far as possible should be based on certain principles.
A person may
have a bright future prospect; he might have become eligible to promotion
immediately; there might have been chances of an immediate pay revision,
whereas in another the nature of employment was such that he might not have
continued in service; his chance of promotion, having regard to the nature of
employment may be distant or remote. It is, therefore, difficult for any court
to lay down rigid tests which should be applied in all situations. There are
divergent views. In some cases it has been suggested that some sort of
hypotheses or guess work may be inevitable. That may be so.
22.
As regards future prospects for determination of compensation,
some precedents may also be noticed by us.
18 In
Sarla Dixit v. Balwant Yadav, [ (1996) 3 SCC 179 ], this Court has held :-
"7. So far as the adoption of the proper multiplier is concerned, it was
observed that the future prospects of advancement in life and career should
also be sounded in terms of money to augment the multiplicand. While the chance
of the multiplier is determined by two factors, namely, the rate of interest
appropriate to a stable economy and the age of the deceased or of the claimant
whichever is higher, the ascertainment of the multiplicand is a more difficult
exercise. Indeed, many factors have to be put into the scales to evaluate the
contingencies of the future. All contingencies of the future need not
necessarily be baneful.
Applying
these principles to the facts of the case before this Court in the aforesaid
case it was observed that the deceased in that case was of 39 years of age. His
income was Rs 1032 per month. He was more or less on a stable job and
considering the prospects of advancement in future career the proper higher
estimate of monthly income of Rs 2000 as gross income to be taken as average
gross future income of the deceased and deducting at least 1/3rd therefrom by
way of personal living expenses, had he survived the loss of dependency, could
be capitalised by adopting the multiplicand of Rs 1400 per month or Rs 17,000 per
year and that figure could be capitalised by adopting multiplier of 12 which
was appropriate to the age of deceased being 39 and to that amount was added
the conventional figure of Rs 15,000 by way of loss of consortium and loss of
estate. Adopting the same scientific yardstick as laid down in the aforesaid
judgment, the computation of compensation in the present case can almost be
subjected to a well-settled 19 mathematical formula. Deceased in the present
case, as seen above, was earning gross salary of Rs 1543 per month. Rounding it
up to figure of Rs 1500 and keeping in view all the future prospects which the
deceased had in stable military service in the light of his brilliant academic
record and performance in the military service spread over 7 years, and also
keeping in view the other imponderables like accidental death while discharging
military duties and the hazards of military service, it will not be
unreasonable to predicate that his gross monthly income would have shot up to
at least double than what he was earning at the time of his death, i.e., up to
Rs 3000 per month had he survived in life and had successfully completed his
future military career till the time of superannuation. The average gross
future monthly income could be arrived at by adding the actual gross income at
the time of death, namely, Rs 1500 per month to the maximum which he would have
otherwise got had he not died a premature death, i.e., Rs 3000 per month and
dividing that figure by two. Thus the average gross monthly income spread over
his entire future career, had it been available, would work out to Rs 4500
divided by 2, i.e., Rs 2250. Rs 2200 per month would have been the gross
monthly average income available to the family of the deceased had he survived
as a breadwinner. From that gross monthly income at least 1/3rd will have to be
deducted by way of his personal expenses and other liabilities like payment of
income tax etc.
That
would roughly work out to Rs 730 per month but even taking a higher figure of
Rs 750 per month and deducting the same by way of average personal expenses of
the deceased from the average gross earning of Rs 2200 per month balance of Rs
1450 which can be rounded up to Rs 1500 per month would have been the average
amount available to the family of the 20 deceased, i.e., his dependants,
namely, appellants herein. It is this figure which would be the datum figure
per month which on annual basis would work out to Rs 18,000. Rs 18,000
therefore would be the proper multiplicand which would be available for
capitalisation for computing the future economic loss suffered by the
appellants on account of untimely death of the breadwinner. As the age of the
deceased was 27 years and a few months, at the time of his death the proper
multiplier in the light of the aforesaid decision of this Court in G.M., Kerala
SRTC2 would be 15.
Rs 18,000
multiplied by 15 will work out to Rs 2,70,000. To this figure will have to be
added the conventional figure of Rs 15,000 by way of loss of estate and
consortium etc. That will lead to a total figure of Rs 2,85,000. This is the
amount which the appellants would be entitled to get by way of compensation
from Respondents 1 and 2 subject to our decision on Point No. 2."
In Abati
Bezbaruah v. Dy. Director General, Geological Survey of India, [ (2003) 3 SCC
148 ] it was observed :- "11. It is now a well-settled principle of law
that the payment of compensation on the basis of structured formula as provided
for under the Second Schedule should not ordinarily be deviated from. Section
168 of the Motor
Vehicles Act lays down the guidelines for
determination of the amount of compensation in terms of Section 166 thereof.
Deviation from the structured formula, however, as has been held by this Court,
may be resorted to in exceptional cases. Furthermore, the amount of
compensation should be just and fair in the facts and circumstances of each
case."
23.
Learned Single Judge of the Delhi High Court in the appeal filed against
the Award which is subject matter of SLP (C) No. 8205 of 2007 opined that one
of the two methods adopted to determine the amount of compensation in fatal
accident actions is the multiplier method adopted in Davies v. Powell Duffregn
Associaed Colliers Ltd. [ 1942 AC 601 ].
According
to learned Judge it takes care of future prospects. A statement has been
appended, which we intend to reproduce hereinafter for consideration as to
whether the assumption made by him that the Second Schedule takes care of
inflation of interest, loss of future prospects, is correct. The statement
reads, thus:- S.No. Year Money in Interest (12% Loss of dependency Excess of
Capital for 87-95, (Assuming 10% interest over Account 10% for 95- increase
every eyar) dependency 02, 8% for 02- 12) 1, 1987- 88 3,36,000 40,320 1344 x 12
- 16128 24,192
2. 1988 -
89 3,60,192 43,223 1478 x 12 = 17736 25,487
3. 1989 -
90 3,85,679 46,281 1625 x 122 = 19500 26,781
4. 1990 -
91 4,12,461 49,495 1787 x 12 = 21444 28,051
5. 1991 -
92 4,69, 793 52,861 1965 x 12 = 25932 29,281
6. 1992 -
93 4,69,793 56,375 2161 x 12 = 25932 30,443
7. 1993 -
94 5,00,236 60,028 2376 x 12 = 28512 31,516
8. 1994 -
95 5,31,753 63,810 2613 x 12 = 31356 32,454
9. 1995 -
96 5,64,207 56,421 2874 x 12 = 34,488 21,933
10. 1996
- 97 5,86,140 58,614 3161 x 12 = 37931 20,682
11. 1997
- 98 6,06,822 60,682 3476 x 12 = 41712 18,970
12. 1998
- 99 6,25,792 62,579 3823 x 12 = 45,876 16,703
13. 1999
- 00 6,42,495 64,250 4205 x 12 = 50460 13,790
14. 2000
- 01 6,56,285 65,628 4625 x 12 = 55500 10,128
15. 2001
- 02 6,66,413 66,641 5087 x 12 = 61044 5,597
16. 2002
- 03 6,72,010 55,761 5595 x 12 = 67140 13,379 22
17. 2003
- 04 6,58,631 52,960 6154 x 12 - 73848 21,558
18. 2004
- 05 6,37,474 50,998 6769 x 12 = 81228 30,230
19. 2005
- 06 6,07,224 48,579 7445 x 12 = 89340 40,881
20. 2006
- 07 5,66,363 45,309 8189 x 12 = 98268 52,959
21. 2007
- 08 5,12,404 41,072 9007 x 12 = 108084 67,012
22. 2008
- 09 4,46,393 35,711 9907 x 12 = 118884 83,173
22. 2009
- 10 3,63,220 29,058 10897 x 12= 130764 1,01,706
24. 2010
- 11 1,61,514 20,291 11986 x 12=143832 1,22,911
25. 2011
- 12 1,38,603 11,088 13184x12=158208 1,47,120
24. An
attempt has been made by the learned Judge to show that till the 15th year,
there will be an excess of interest over dependency. The excess interest can be
capitalized for the next year and after 15 years, the capital is eroded and
stands completely eroded in the 25th year.
24.
Mr. Nanda, learned counsel appearing for the insurance company, however,
submits that not only earning growth but also inflation and uncertainty of life
are taken care of by applying the structured formula. In support of the
aforementioned proposition reliance has been placed upon the decision of
Bhagwandas v. Mohd. Arif, AIR 1988 A.P. 99 wherein the learned Judge opined :-
"10. In the entire gamut of the law of tort damages, this is the most
difficult problem. However, over the years, the Courts have, with the aid of
modern techniques in the field of Demography, Statistics and the Mathematical
Theory of Probability and 23 Actuaries, developed systems which are today very
near perfect."
As
regards application of actuary's-multiplier, the learned Judge stated :- 18A.
What is the basis for the actuary's multiplier, what are the factors it takes
into account, is the next question. In the judgment in A.P.S.R.T.C. v. Shafiya
Khatoon (AIR 1985 Andh Pra 83) the mathematical and actuarial background was,
perhaps for the first time, explained at considerable length. The net future
losses from date of trial for the remaining expected period of life (in
accident cases) and the net future losses from date of death of the person (in
fatal cases) have to be estimated.
This
involves two exercises :
(I)
Firstly, the mortality rates for the future years have to be ascertained year
by year to off-set the future uncertainties of life. The annual loss for each
future year is to be multiplied by the chance of living up to the end of the
year. If the chance of an injured person living from 20 to 21st year is 0.99
(from mortality tables), and the actual loss is Rs. 12,000/-, the real loss is
Rs. 12,000/-x 0.99.
For the
next year, if the probability of living up to 22nd year is (say) 0.90, the real
loss would be Rs.
12,000 x
0.90. Like this, the real losses for all the future years, say up to 58 or 60
years (in the case of those in service) or up to 70 years or so (in the case of
non-salarised persons) have to be computed, the future annual probabilities of
living decreasing. The sum total is not, therefore, the gross sum arrived at by
adding the Rs. 12000/- for all the future years, but a gross sum arrived at by
24 multiplying each future Rs. 12,000/- by the probability of the victim living
in each of the future years as taken from the mortality rates published by the
Government.
(II) The
next exercise consists of taking each of the figures for the future years i.e.,
Rs. 12,000 x 0.99., Rs. 12,000 x 0.90; and so on and converting them to their
present value or discounting them for accelerated payment. The simple,
mathematical formula were for purpose is the reverse of the compound interest
formula. (See Munkman 1985, page 57) Po= Pn / (1+r)n /100 where Pn is the
future annual figures, r is the rate of interest n is the number of years
(between the date of trial and date relating to the year for which the income
is being converted into present value; in fatal accident cases it will be the
date of death and the relevant future year whose income is being converted).
Like that, the income for each future year, is reduced to present value. Then
these sums for each of the future years are added up."
25.
Decisions of English, Australian, Canada, U.S.A., Switzerland as
also the Netherland Courts were liberally applied. The learned Judge applied
Mallet case (supra) in the Indian context and the decisions of the different
High Courts where principles were either applied taking into consideration the
rate of interest, inflation etc There has been no decision rendered either by
the High Court or this Court as to what is the real rate of interest which 25
would be appropriate in India and what multiplier should be applied in this
country.
26.
We may at this juncture refer back to Mallet case (supra). We may
at once notice the formula applied therein which is to the following effect :-
S.No. Year Capital Formula
1. 1st
year 0 150 x 12 = 1800
2. 2nd
year 1800 1800x1.045-100= 1781
3. 3rd
year 1781 1761.14
4. 4th
year 1761.14 1740.39
5. 5th
year 1740.39 1718.71
6. 6th
year 1718.71 1596.05
7. 7th
year 1596.05 1672.37
8. 8th
year 1672.37 1647.62
9. 9th
year 1647.62 1621.76
10. 10th
year 1621.76 1594.74
11. 11th
year 1594.74 1800x1.045- 200=1566.51
12. 12th
year 1466.51 1382.50
13. 13th
year 1332.50 1192.46
14. 14th
year 1192.46 1046.13
15. 15th
year 1046.46 893.20
16. 16th
year 893.20 733.40
17. 17
year 733.40 566.40
18. 18th
year 566.40 391.89
19. 19th
year 391.89 209.52
20. 20th
year 209.52 18.95 Lord Diplock observed :- 26 "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, quite apart from inflation with which I
have already dealt, 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 per cent. 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 *178 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 27 the "dependency" used
for the purpose of assessing the damages."
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
We may also notice a later decision of House of Lords in Wells v. Wells
[ [1998] 3 W.L.R. 329 ]. It was a case where the plaintiff had sustained
serious injuries classified as injuries of maximum severities. The question
before the House was whether a lump-sum award could be made which takes into
account all of the elements of future loss as well as the loss for the past. It
was opined that index linked government securities should be accepted as the
best guide to calculate the appropriate discount rate. Lord Hope of Craighead
supplemented the reasonings of Denning, L.J., stating :- "Some of the
assumptions which have to be made in the assessment of future loss are made at
the stage of arriving at the multiplicand for each head of the claim. The
selection of the right multiplier requires that further assumptions be made, so
that the calculation can be related to the period of the annual loss or expense
which is to be compensated for. The general point of principle which is raised
in all three cases relates to the final stage in the selection of the
multiplier. This is the choice of the interest rate, which represents the
discount for the payment now of a lump sum to compensate for loss to be
sustained over a period of years in the future.
28.
28 The measure of the discount is the rate of return which can
reasonably be expected on that sum if invested in such a way as to enable the
plaintiff to meet the whole amount of the loss during the entire period which
has been assumed for it by the expenditure of income together with capital. It
was suggested for the defendants in the course of the argument that the
plaintiff was under a duty to minimise the loss to be borne by the defendants
by investing the lump sum prudently, that is to say with a view to obtaining a
reasonable return for it.
The duty
to invest prudently was an important part of the reasoning which was designed
to show that this meant a duty to invest in equities, and that the discount
rate to be applied was that appropriate to the return to be expected on
equities. But I do not think that the duty to minimise loss has anything to do
with the selection of the appropriate discount rate. The stage at which the
duty to minimise loss is to be applied is at the earlier stage when the court
has to identify the amount of the annual sum to be compensated for and the
period over which it is to be compensated. That exercise is over and done with
when the time comes to select and apply the discount rate."
It was
furthermore observed :- "There is much to be said for the view that a
better return can be obtained by the ordinary investor who invests his money in
equities. But the rises and falls in the market value of equities are
unpredictable both as to their timing and as to their amount. Further problems
are presented by the cost of investment advice and by the possible impact of
capital gains tax if reliance has to be placed on the capital gains which can
be achieved to deal with 29 inflation and to supplement the income return by
way of dividend. Moreover the plaintiff who is receiving the amount of his
future loss in the form of a lump sum is not an ordinary investor. The amount
awarded under each head of his claim is calculated on the assumption that this
part of his loss will have to be met entirely out of the relevant portion of
the lump sum."
29.
The Parliament enacted the Actuaries Act, 2006.
However, its activities are little known. We do not know whether any Actuarial
Society has come into effect. It is also not clear what sort of service is
being rendered by it. Not much assistance, therefore, can be derived from
referring to the said Act to which our attention has been drawn by Mr. Nanda.
30.
Indisputably, grant of compensation involving an accident is
within the realm of law of torts. It is based on the principle of restitution
in integrum. The said principle provides that a person entitled to damages
should, as nearly as possible, get that sum of money which would put him in the
same position as he would have been if he had not sustained the wrong.
[See
Livingstone v. Rawyards Coal Co. [ (1880) 5 AC 25 ].
31.
The accident may result in death ; it may result in injuries which
may be of different counts. When a death occurs the benefit accruing to the
dependent must be taken into account ; the balance of loss and gain to him must
be ascertained ; the position of each dependent in each case may have to be
considered separately [ See Davis v. Powell Duffrya Associated Collieries Ltd.
[ 1942) AC 601 ].. The said principle has been applied by this Court in Gobald
Motor Service Ltd., Allahabad v. R.M.K. Veluswami, [ AIR 1962 SC 1 ] as also in
Susamma Thomas (supra)
32.
The heads of pecuniary loss are basically two. One, loss of
earnings upto the date of trial and the other, loss of future earnings.
Principally we are concerned with the second issue herein. For calculating
future earning, the following factors are taken into consideration:- (i)
interest method ;
(ii) lump
sum method ; and (iii) multiplier method.
Whereas
in the first and third method, interest method for all intent and purport has
not been applied in India. Multiplier method was applied as a mode of
estimating the present value as a loss of benefit to the dependent in Davis
(supra) wherein it was observed:
31 "
In the case of the appellant, Mrs. Williams, I think the judge has awarded a
wholly inadequate sum. There is no question here of what may be called
sentimental damage, bereavement or pain and suffering. It is a hard matter of
pounds, shillings and pence, subject to the element of reasonable future
probabilities. 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. It
seems as if the award of 250l. was based on something like three- and-a-half
years' purchase of the basic figure. This appears to me to be out of all
proportion and much too low. I should, after allowing for all reasonably
probable chances of the diminution of the loss, accept the figure taken by
Luxmoore L.J. of 750l.
as being
not unfair, and I should increase the damages recoverable by the appellant,
Mrs. Williams, accordingly. In that respect I should allow her appeal."
The said
principle was reiterated in Nance v. British Columbia Electric Railway Co, Ltd.
{ 1951 AC 601 } wherein it was observed :- " The claim to damages in the
present case falls under two separate heads. First, if the 32 deceased had not
been killed, but had eked out the full span of life to which in the absence of
the accident he could reasonably have looked forward, what sums during that
period would be probably have applied out of his income to the maintenance of
his wife and family? (Under this head in the present case the wife or widow
need alone be considered, since his children and step-children were all adults
and self supporting, and at the time of his death he contributed nothing
material to their maintenance.) Secondly, in addition to any sum arrived at
under the first head, the case has been argued on the assumption, common to
both parties, that according to the law of British Columbia it would be proper
to award a sum representing such portion of any additional savings which he
would or might have accumulated during the period for which, but for his
accident, he would have lived, as on his death at the end of this period would
probably have accrued to his wife and family by devolution either on his
intestacy or under his will, if he made a will."
33.
An element of sentiment of the deceased was also introduced while
determining compensation payable to the dependent. One of the factors which had
been taken into consideration in Davis (supra) was that the widow might be
again married and ceases to be dependent; in India, we cannot proceed on such
presumption.
34.
In the Indian context several other factors should be taken into
consideration including education of the dependents and the nature of job.
In the
wake of changed societal conditions and global scenario, future prospects may
have to be taken into consideration not only having regard to the status of the
employee, his educational qualification; his past performance but also other
relevant factors, namely - the higher salaries and perks which are being
offered by the private companies these days. In fact while determining the multiplicand
this Court in Oriental Insurance Company Ltd. v. Jashuben and others,_[ (2008)
4 SCC 162 ] held that even dearness allowance and perks with regard thereto
from which the family would have derived monthly benefit, must be taken into
consideration.
35.
One of the incidental issues which has also to be taken into
consideration is inflation.
36.
Is the practice of taking inflation into consideration wholly
incorrect? Unfortunately, unlike other developed countries in India there has
been no scientific study. It is expected that with the rising inflation the
rate of interest would go up. In India it does not happen. It, therefore, may
be a relevant factor which may be taken into consideration for determining the
actual ground reality. No hard and fast rule, however, can be laid down
therefor.
37.
A large number of English decisions have been placed before us by
Mr. Nanda to contend that inflation may not be taken into consideration at all.
While the reasoning’s adopted by the English courts and its decisions may not
be of much dispute, we cannot blindly follow the same ignoring ground
realities.
38.
We have noticed the precedents operating in the field as also the
rival contentions raised before us by the learned counsel for the parties with
a view to show that law is required to be laid down in clearer terms. The
Second Schedule refers to Section 163-A of the 1988 Act, which, as noticed
hereinbefore, provides for quantum of compensation to a third party in case of
fatal accident or injuries suffered. It provides for a table. It specifies the
amount required to be paid to the legal heirs/representatives of the deceased
in the case of fatal accident and the claimants in the case of injuries
suffered 35 by them depending upon his age and annual income as specified
therein.
The
question which arises for consideration is as to whether the multiplier
specified in the second schedule should be taken to be a guide for calculation
of amount of compensation payable in a case falling under Section 166 of the
1988 Act?
39.
We have noticed hereinbefore that in Patricia Jean Mahajan (supra)
and Abati Bezbaruah and the other cases following them multiplier specified in
the Second Schedule has been taken to be guiding factor for calculation of the
amount of compensation even in a case under Section 166 of the Act.
However,
in Shanti Pathak (supra) this Court advocated application of lesser multiplier,
although no legal principle has been laid therein.
40.
In Trilok Chandra (supra) this Court has pointed out certain
purported calculation mistakes in the Second Schedule. It, however, appears to
us that there is no mistake therein. Amount of compensation specified in the
Second Schedule only is required to be paid even if a higher or lower amount
can be said to be the quantum of compensation upon applying the multiplier
system.
41.
Section 163-A of the 1988 Act does not speak of application of any
multiplier. Even the Second Schedule, so far as the same applies to fatal
accident, does not say so. The multiplier, in terms of the Second Schedule, is
required to be applied in a case of disability in non fatal accident.
Consideration
for payment of compensation in the case of death in a `no fault liability' case
vis-`-vis the amount of compensation payable in a case of permanent total
disability and permanent partial disability in terms of the Second Schedule is
to be applied by different norms. Whereas in the case of fatal accident the
amount specified in the Second Schedule depending upon the age and income of
the deceased is required to be paid where for the multiplier is not to be
applied at all but in a case involving permanent total disability or permanent
partial disability the amount of compensation payable is required to be arrived
at by multiplying the annual loss of income by the multiplier applicable to the
age of the injured as on the date of determining the compensation and in the
case of permanent partial disablement such percentage of compensation which
would have been payable in the case of permanent total disablement as specified
under item (a) of the Second Schedule.
42.
The Parliament in its wisdom thought to provide for a higher
amount of compensation in case of permanent total disablement and proportionate
amount of compensation in case of permanent partial disablement depending upon
the percentage of disability.
43.
Thus, prima facie, it appears that the multiplier mentioned in the
Second Schedule, although in a given case, may be taken to be a guide but the
same is not decisive. To our mind, although a probable amount of compensation
as specified in the Second Schedule in the event the age of victim is 17 or 20
years and his annual income is Rs.40,000/-, his heirs/ legal representatives is
to receive a sum of Rs.7,60,000/-, however, if an application for grant of
compensation is filed in terms of Section 166 of the 1988 Act that much amount
may not be paid, although in the former case the amount of compensation is to
be determined on the basis of `no fault liability' and in the later on `fault
liability' In the aforementioned situation the Courts, we opine, are required
to lay down certain principles.
44.
We are not unmindful of the Statement of Objects and Reasons to
Act 54 of 1994 for introducing Section 163-A so as to provide for a new 38
predetermined formula for payment of compensation to road accident victims on
the basis of age/income, which is more liberal and rational. That may be so,
but it defies logic as to why in a similar situation, the injured claimant or
his heirs/legal representatives, in the case of death, on proof of negligence
on the part of the driver of a motor vehicle would get a lesser amount than the
one specified in the Second Schedule. The Courts, in our opinion, should also
bear that factor in mind.
45.
Having regard to divergence of opinion and this aspect of the
matter having not been considered in the earlier decisions, particularly in the
absence of any clarification from the Parliament despite the recommendations
made by this Court in Trilok Chandra (supra), the issue, in our opinion, shall
be decided by a Larger Bench. It is directed accordingly.
46.
The Registry is directed to place the matter before the Hon'ble
Chief Justice of India for appropriate orders for constituting a Larger Bench.
.............................J. [S.B. Sinha]
.............................J.
Back
Pages: 1 2 3