Co. Ltd. Vs. Deo Patodi & Ors.  INSC 1038 (12 May 2009)
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. __3482______OF 2009
[Arising out of Special Leave Petition (Civil) No. 2997 of 2007] ORIENTAL
INSURANCE CO. LTD. ...APPELLANT VERSUS WITH CIVIL APPEAL NO. _3492_______OF
2009 [Arising out of Special Leave Petition (Civil) No. 3807 of 2007] 2 DEO
PATODI & ANR. ...APPELLANTS VERSUS
S.B. Sinha, J.
should be the appropriate multiplier as also the multiplicand in a case where a
student having a brilliant career and had an offer of employment from a U.S.
based Company is the question involved in these appeals.
They arise out of the
following factual matrix.
Deepak Patodi was 22
years of age on 12.6.2003 when the accident took place. He was the only son of the
claimants. The accident took place when he was going to Bhopal along with his
friends in a Tata Indica Car. He was immediately taken to "Chirayu
Hospital" at Bhopal and there after shifted to `Bhandari Hospital' in
Indore. On 18.6.2003, he succumbed to the head injury suffered by him in the
parents filed an application under Section 166 of the Motor Vehicles Act, 1988
(for short, "the Act") on or about 24.12.2003 inter alia claiming a
sum of Rs.75 lakhs as compensation on the premise that while he was doing his
Business Administration Course in U.K. he was also doing a part-time job with
World Bank on a monthly salary of Rs.80,000/- (UK # 1008.31) and he was offered
an employment in the capacity of EU Controller in GOA LLC, a company registered
in USA at an annual remuneration of Rs.18 lakhs per annum approx. ($41,600/-)
Indisputably, he did not accept the said offer. He intended to pursue his
higher studies in MBA at Central Queensland University in Australia.
learned Tribunal opined that keeping in view his capability he would have been
employed on a monthly salary of Rs.18,000/- per month.
2/3rd was deducted
from the said amount for working out the loss of dependency of the claimants at
1/3 rd. The multiplier of 13 was applied keeping in view the age of the
claimants. An amount of Rs.9,36,000/- by 4 way of compensation was awarded by
the Tribunal. A sum of Rs.2000/- was also granted towards funeral expenses.
claimants preferred an appeal there against in the High Court which was
registered as M.A. No. 1842 of 2005. Enhancement in the amount of compensation
was claimed inter alia on the premise that the dependency of the parents should
have been taken into consideration at 2/3 rd of the income of the deceased and furthermore
the expenses incurred during treatment should have also been awarded. The
insurance company filed cross objections in the said appeal in terms of Order
XLI Rule 22 of the Code of Civil Procedure on the ground that the income of the
deceased could not be taken at Rs.18,000/- per month in the absence of any
cogent evidence and that the claimants were not dependents on the deceased.
reason of the impugned judgment, the High court while maintaining the estimated
income of the deceased at Rs.18,000/- per month on a notional basis opined that
the dependency of the claimants should have been taken at 2/3rd of the income
of the deceased. The High court also noticed that although the Tribunal had
found that claimants must have spent a sum of Rs.2 lakhs towards treatment of
the deceased, but no compensation on that head was awarded by it. The High
Court, thus, awarded a sum of Rs.1,25,000/- towards the medical expenses.
Applying the multiplier of 13, the loss of dependency was calculated at Rs.18,72,000/-.
A sum of Rs.25,000/- was also granted towards the funeral expenses.
Both the insurance
company as also the claimants are before us.
M.K. Dua, learned counsel appearing on behalf of the insurance company would
contend that the deceased being a bachelor and for all intent and purport being
a dependant on his parents and as he intended to pursue his higher studies in
Australia, the Tribunal had rightly calculated the loss of dependency of
parents at 1/3rd of his income and not 2/3rd.
Sushil Kumar Jain, learned counsel appearing on behalf of the claimants, on the
other hand, would contend that the learned Tribunal could not have estimated
the income of the deceased only at Rs.18,000/- per month keeping in view the
background as also the salary he had obtained even as part-time employee as
also the offer which he received from an U.S. based Company..
question in regard to the calculation of loss of dependency, it is trite, would
vary from case to case. The fact that the deceased was a brilliant student is
not in dispute. He had graduated in Business Administration in U.K. Even as a
student, in a job on a part-time basis he was being paid a salary of
Rs.80,000/- per month ((UK # 1008.31). He paid his income-tax even in U.K. After
his graduation, he came back to India. He was offered a job as EU Controller by
GOA LLC, a company based in Chicago, USA at an annual salary of Rs.18 lakhs
(i.e. $ 41,600/-). However, when the accident took place he was not working;
having not accepted the said offer. He was still a student. It would have been
hazardous for the Tribunal to calculate the amount of compensation towards the
loss of dependency on that basis.
Tribunal and the High Court, however, in our opinion, keeping in view the
aforementioned backdrop might not be correct in holding that he would have
earned only Rs.18,000/- per month. It is true that the cost of living in the
western countries would be higher. The standard of living in the western
countries cannot be followed; in the absence of any material placed before this
Court it should not be followed in India. Even in a case where the victim of an
accident was earning salary in U.S. Dollars, this Court opined that a lower
multiplier should be applied.
In United India
Insurance Co. Ltd. & Ors. vs. Patricia Jean Mahajan & Ors. [(2002) 6
SCC 281], this Court held:
"19. In the
present case we find that the parents of the deceased were 69/73 years. Two
daughters were aged 17 and 19 years. The main question, which strikes us in
this case is that in the given circumstances the amount of multiplicand also
assumes relevance. The total amount of dependency as found by the learned
Single Judge and also rightly upheld by the Division Bench comes to 2,26,297
dollars. Applying multiplier of 10, the amount with interest and the conversion
rate of Rs 47, comes to Rs 10.38 crores and with multiplier of 13 at the
conversion rate of Rs.30 the amount comes to Rs 16.12 crores with interest.
These amounts are
huge indeed. Looking to the Indian economy, fiscal and financial situation, the
amount is certainly a fabulous amount though in the background of American
conditions it may not be so. Therefore, where there is so much of disparity in
the economic conditions and affluence of the two places viz. the place to which
the victim belongs and the place where the compensation is to be paid, a golden
balance must be struck somewhere, to arrive at a reasonable and fair mesne.
Looking by the Indian standards they may not be much too overcompensated and
similarly not very much undercompensated as well, in the background of the
country where most of the dependent beneficiaries reside. Two of the
dependants, namely, parents aged 69/73 years live in India, but four of them
are in the United States.
8 Shri Soli J.
Sorabjee submitted that the amount of multiplicand shall surely be relevant and
in case it is a high amount, a lower multiplier can appropriately be applied.
We find force in this submission....
20. The court cannot
be totally oblivious to the realities. The Second Schedule while prescribing
the multiplier, had maximum income of Rs. 40,000 p.a. in mind, but it is
considered to be a safe guide for applying the prescribed multiplier in cases
of higher income also but in cases where the gap in income is so wide as in the
present case income is 2,26,297 dollars, in such a situation, it cannot be said
that some deviation in the multiplier would be impermissible. Therefore, a
deviation from applying the multiplier as provided in the Second Schedule may
have to be made in this case. Apart from factors indicated earlier the amount
of multiplicand also becomes a factor to be taken into account which in this
case comes to 2,26,297 dollars, that is to say an amount of around Rs. 68 lakhs
per annum by converting it at the rate of Rs.
30. By Indian
standards it is certainly a high amount. Therefore, for the purposes of fair
compensation, a lesser multiplier can be applied to a heavy amount of
The said decision,
however, to some extent was clarified by this Court in Punjab National Bank v.
Indian Bank & Anr. [(2003) 6 SCC 79].
is in the aforementioned situation, we are of the opinion that the fair amount
of compensation should have been calculated at Rs.25,000/- per month being about
1/3rd of the amount which he was receiving in U.K.
next question which arose for our consideration for the purpose of loss of
dependency is whether 1/3rd from the said amount should be deducted or 2/3rd.
Dua relied on a decision of this Court in Donat Louis Machado & Ors. v. L.
Ravindra & Ors.  8 SCC 633] wherein it was opined:
the total amount would work out at Rs. 7500 per month during the whole span of
future career and taking an average at 50%, his future monthly income during
the rest of the life could have worked out at Rs. 3750. On that basis, 12
months' earning would have been Rs.45,000 and adopting a multiplier of 15
looking to the young age of the deceased the total economical gain to his
estate would work out at Rs. 6,75,000 at least. But taking a conservative
figure of Rs 6 lakhs it can easily be visualised that the claimants who are the
parents and unmarried sister and who are dependent on him would have got at
least 1/3 amount as he would have spent the rest of 2/3 amount of his earnings
on his own family which he would have raised and on himself. This would come to
a figure of Rs. 2 lakhs. This can easily be treated to be the appropriate
compensation payable to the claimants on account of economical loss 10
suffered by them as a result of the unfortunate accident to their
In Halkibai and Anr.
vs. Managing Director, Rajasthan State Road Trans. Corpn. and Anr.[2004 ACJ
481], the Division Bench of the High Court of Madhya Pradesh (Gwalior Bench)
held as under:
determining dependency of the mother of the deceased is concerned, this
question has already been settled by the Apex Court in the case of Donat Louis
Machado, 1999 ACJ 1400 (SC). This judgment was considered by this court in a
recent decision in the case of Parathsingh v. Sanjay Sharma, 2003 (1) TAC 103
(MP) and in Rajesh v. Rajesh alias Pappu, M.A. No. 291 of 2003; decided on
18.8.2003 and ratio has been laid down that in the case of parents of the
deceased, dependency will be 1/3rd of the income of the deceased at the time of
his death. The judgment of Supreme Court is binding upon this court and there
is no reason to differ from the said judgment.
Therefore, we hold
that the dependency of the parents of the deceased shall be 1/3rd of income of
the deceased. This view has been taken by various Division Benches and this
being consistent view, we do not wish to differ from it."
different view was taken by this Court in Fakeerappa & Anr. vs. Karnataka Cement
Pipe Factory & Ors. [(2004) 2 SCC 473], wherein it was held:
11 "6. Learned
counsel for Respondent 2, submitted that there cannot be any rigid formula as
to what would be the percentage or quantum of deduction. The Tribunal and the
High Court have taken note of the relevant aspects to hold that 50% deduction
would be appropriate. There is no scope for any interference with the
percentage of deduction as fixed. Further, before the High Court there was no
challenge to the rate of interest awarded by the Tribunal. Therefore, for the
first time before this Court such a grievance cannot be raised. It is also
submitted that multiplier of 18 as adopted is on the higher side.
xxx xxx xxx
8. It has to be noted
that the ages of the parents as disclosed in the claim petition were totally
unbelievable. If the deceased was aged about 27 years as found at the time of
post-mortem and about which there is no dispute, the father and mother could
not have been aged 38 years and 35 years respectively as claimed by them in the
claim petition. Be that as it may, taking into account special features of the
case we feel it would be appropriate to restrict the deduction for personal
expenses to one-third of the monthly income.
Though the multiplier
adopted appears to be slightly on the higher side, the plea taken by the
insurer cannot be accepted as there was no challenge by the insurer to the
fixation of the multiplier before the High Court and even in the appeal filed
by the appellants before the High Court, the plea was not taken."
12 In Bijoy Kumar
Dugar vs. Bidya Dhar Dutta & Ors. [(2006) 3 SCC 242] this court deducted
1/3rd from the earnings of the deceased inter alia holding:
"...It is by now
well settled that the compensation should be the pecuniary loss to the dependants
by the death of a person concerned. While calculating the compensation, annual
dependency of the dependants should be determined in terms of the annual loss,
according to them, due to the abrupt termination of life. To determine the
quantum of compensation, the earnings of the deceased at the time of the
accident and the amount, which the deceased was spending for the dependants,
are the basic determinative factors. The resultant figure should then be
multiplied by a "multiplier". The multiplier is applied not for the
entire span of life of a person, but it is applied taking into consideration
the imponderables in life, immediate availability of the amount to the
dependants, the expectancy of the period of dependency of the claimants and so
many other factors. Contribution towards the expenses of the family naturally
is in proportion to one's earning capacity. In the present case, the earning of
the deceased and consequently the amount which he was spending over the members
of his family i.e. dependency is to be worked out on the basis of the earnings
of the deceased at the time of the accident. The mere assertion of the
claimants that the deceased would have earned more than Rs.8000 to Rs.10,000
per month in the span of his lifetime cannot be accepted as legitimate income
unless all the relevant facts are proved by leading cogent and
before MACT. The claimants
have to prove that
the deceased was in a trade where he would have earned more from time to time
or that he had special merits or qualifications or opportunities which would
have led to an improvement in his income. There is no evidence produced on
record by the claimants regarding future prospects of increase of income in the
course of employment or business or profession, as the case may be. It is
stated that the deceased was about 24 years old at the time of the accident.
MACT has accepted
Rs.4000 per month, as the
earning of the
deceased and after deducting Rs .400 per month for his pocket expenses, the
remaining sum of Rs. 3600 has been divided into three equal shares, out of
which two shares i.e. Rs.2400 per month or Rs.28,800 (wrongly mentioned as
Rs.28,000 in the award), were assessed as loss to both the claimants, who were
the parents of the deceased. The ages of the claimants are stated to be between
45 and 50 years and accordingly multiplier of 12 was applied.
Thus, a sum of Rs
28,800 x 12 = Rs.3,45,600 was awarded as compensation."
In Bilkish vs. United
India Insurance Co. Ltd. [(2008) 4 SCC 259], this Court held:
hearing learned Counsel for the parties, we are of the opinion that the view
taken by the High Court & Tribunal is not correct. The incumbent was a
bachelor and he could not have spent more than 1/3rd of his total income for
personal use and rest of the amount earned by him would certainly go to the
family kitty. Therefore, determining the loss of dependency by 50% was not
correct. Therefore, we assess that he must be spending 1/3rd towards personal
use and contributing 2/3rd of his income to his family....."
Yet again in
Bangalore Metropolitan Transport Corporation vs. Sarojamma & Anr. [(2008) 5
SCC 142], this Court held:
"9. Whereas in
determining an application for grant of compensation under Section 166 of the
Act, the Tribunal may be entitled to find out actual loss of damages suffered
by the claimants, the formula having not envisaged such a contingency, we are
of the opinion that ordinarily one-third should be deducted from the income of
the deceased and not the half thereof......"
In Syed Basheer
Ahamed & Ors. vs. Mohammed Jameel & Anr. [(2009) 2 SCC 225], one-half
(50%) of the income was held to be deductible if the deceased was a bachelor.
deduction of 1/3rd towards personal expenses is the ordinary rule in India. We
think that in the facts and circumstances of the case, the same should be
applied. The concept of joint family unlike the western countries where it has
been wholly evaporated, although on the decline, should also be taken into
consideration. The deceased's father was a Doctor working in a Government
Hospital; he was aged about 51 years at the time of the accident; he would have
retired from the Government job after a few years. He might not, therefore, be
completely dependent upon his son. We, therefore, are of the opinion that
having regard to his age as also the age of his wife multiplier of 10 should be
applied. We do so keeping in view the fact that the Court has a duty to grant a
just and reasonable compensation. What would, however, be a just and reasonable
compensation depends upon the fact situation obtaining in each case. No hard
and fast rule there for can be laid down. The Court must also bear in mind that
compensation should not be treated to be wind-fall.
are not oblivious of the fact that the multiplier referred to in the Second
Schedule in the Act may not automatically be applied in a case initiated under
Section 166 of the Act. We have applied the aforementioned multiplier keeping
in view the fact that the multiplier specified in the Second Schedule would not
ordinarily be applicable in a case under Section 166 of the Act.
finding required to be arrived at by the choice of multiplicand as also the
multiplier would depend upon a large number of factors as this aspect of the
matter has been considered in various judgments, the same need not be
question, in an appropriate case, may require consideration by a larger Bench.
this view of the matter, the appeal filed by the insurance company is dismissed
and that of the appellant is allowed. Tribunal may draw a fresh award in the
light of the observations made hereinbefore. No costs.
[Dr. Mukundakam Sharma]
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