SARLA VERMA
A LEADING JUDGEMENT TO BRING UNIFORMITY IN AWARDING JUST COMPENSATION FOR MOTOR ACCIDENT VICTIMS
In a situation where no uniformity and consistency is practiced in MACT awards the award pronounced in Sarla Verma vs DTC sets a rules of the game. The details of the award can be read with the features and scenario in Auto liability in India. This judgement held that Justice and justness emanate from equality in treatment,consistency and thoroughness in adjudication, and fairness and uniformity in the decision making process and the decisions. It held that the just compensation should be proportionate to the injury. It emphasized that the proper method of computation is the multiplier method. Any departure, except in exceptional and extra-ordinary cases, would introduce inconsistency of principle. It adopted Davies method and the same is now considered by Lower courts.
The Apex court stated that if additions/deductions to be made for arriving at the income; the deduction to be made towards the personal living expenses of the deceased; and the multiplier to be applied with reference of the age of the deceased are standardized than there will be uniformity and consistency in the decisions. These determinants were decided by the court and now the lower courts pronounce the awards on these set standards.
To know these determinants in detail the award should be read in detail. And to have a better idea of Auto accident claims one should also know about the legal position of Motor owner, his vicarious liability for his drivers and the legal position of the Insurers being the one who undertakes to own this liability once a accident takes places on a place the victim had the access.
COMPENSATION FOR MOTOR ACCIDENTS- SCENARIO IN INDIA
- M.V. Act in India is beneficial legislation. It recognize deep pocket concept and 'Pay and Recover' cases are pronounced by the courts.
- Victim or his heirs are entitled to claim compensation for bodily injury suffered due to accident arising out of use of motor vehicle in public place.
- Motor Vehicle accident claim is a tortuous claim. It is directed against tort feasors who are insured & driver of vehicle.
- Insurer comes to scene as a result of statutory liability created under M.V. Act.
- Insurer has limited defense as defined in Sec 149(2) of Act.
- INDIA is a common law country. Any one who has suffered injuries or damage through negligence of vehicle owner or his driver can be brought before the law of courts for an action to recover damages and sufferings sustained.
- It is not usual for the claims to be lodged against the insurers in the first instance and to go to the courts only in event of disputes.
- There is no bar, however, to compromise dispute out of court. Compromises are made in Lok-adalats.
- The Motor Third Party insurance is compulsory class of insurance
- No vehicle shall ply in a public place without a valid insurance. Compulsory Insurance for Motor Liability – MV Act.
- Liability Section – Product & Pricing is Regulation driven.
- Liability unlimited by Law.
- Unlike victims of Industrial accident, Rail Accidents or Air crashes the automobile liability against bodily injury is unlimited by law. However property damage liability has statutory limit.
- Mixed System of Compensation for road victims or their heirs. “ADD-ON-NO-FAULT”
- No time limit for filing application for compensation by road victims
- (Time limit deleted under M.V. (Amendment Act) 1994
- Lack of Uniformity & Consistency.
- Tribunals calculating compensation differently on the same facts.
- Declined Risk Pool
- Advocates Practicing on “CONTINGENCY FEE”it has further encouraged litigation.
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DETAILS OF JUDGEMENT BY THE APEX COURT
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IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO 3483 OF 2008
(Arising out of SLP [C] No.8648 of 2007)
Smt. Sarla Verma & Ors. ... Appellants
Vs.
Delhi Transport Corporation & Anr. .. Respondents
ORDER R.V.RAVEENDRAN, J.
The claimants in
a motor accident claim have filed this appeal by special leave seeking increase in compensation.
One Rajinder
Prakash died on account of injuries sustained in a motor accident which occurred on 18.4.1988 involving a bus bearing
No.DLP 829 belonging to the Delhi Transport Corporation. At the time of
the accident and untimely death, the deceased was aged 38 years, and was
working as a Scientist in the Indian Council of Agricultural Research
(ICAR) on a monthly salary of Rs.3402/- and other benefits. His widow,
three minor children, parents and grandfather (who is no more) filed a
claim for Rs.16 lakhs before the Motor Accidents Claims Tribunal, New Delhi.
An officer of ICAR, examined as PW-4, gave evidence that the age of
retirement in the service of ICAR was 60 years and the salary received by the
deceased at the time of his death was Rs.4004/- per month.
Therefore it applied the multiplier of 22 and arrived at the
loss of dependency to the family as Rs.5,94,000/-. It awarded the
said amount with interest at the rate of 9% per annum from the date of
petition till the date of realization. After deducting Rs.15000/- paid as interim
compensation, it apportioned the balance compensation among the claimants,
that is, Rs.3,00,000/- to the widow, Rs.75000/- to each of the two
daughters,rs.50000/- to the son, Rs.19000/- to the grandfather and
Rs.30000/- to each of the parents.
Dissatisfied
with the quantum of compensation, the appellants filed an appeal. The Delhi High Court by its judgment dated
15.2.2007 allowed the said appeal in part. The High Court was of the view that
though in the claim petition the pay was mentioned as Rs.3,402 plus other
benefits, the pay should be taken as Rs.4,004/- per month as per the
evidence of PW-4. Having regard to the fact that the deceased had 22 years of
service left at the time of death and would have earned annual increments and
pay revisions during that period, it held that the salary would have at
least doubled (Rs.8008/- per month) by the time he retired. It therefore
determined the income of the deceased as Rs.6006/- per month, being the
average of Rs.4,004/- (salary which he was getting at the time of
death) and Rs.8,008/- (salary which he would have received at the time of
retirement). Having regard to the large number of members in the family, the
High Court was of the view that only one fourth should be deducted towards
personal and living expenses of the deceased, instead of the standard
one-third deduction. After such deduction, it arrived at the contribution to the
family as Rs.4,504/- per month or Rs.54,048/- per annum. Having regard
to the age of the deceased, the High Court chose the multiplier of 13.
Thus it arrived at the loss of dependency as Rs.702,624/-. By adding
Rs.15,000/- towards loss of consortium and Rs.2,000/- as funeral expenses, the total
compensation was determined as Rs.7,19,624/-. Thus it disposed of the
appeal by increasing the compensation by Rs.1,25,624/- with interest
at the rate of 6% P.A. from the date of claim petition.
Not being
satisfied with the said increase, the appellants have filed this appeal. They contend that the High Court erred in
holding that there was no evidence in regard to future prospects; and that
though there is no error in the method adopted for calculations, the High Court
ought to have taken a higher amount as the income of the deceased. They
submit that two applications were filed before the High Court on 2.6.2000
and 5.5.2005 bringing to the notice of the High Court that having regard
to the pay revisions, the pay of the deceased would have been
Rs.20,890/- per month as on 31.12.1999 and Rs.32,678/- as on 1.10.2005, had he
been alive. To establish the revisions in pay scales and consequential
re-fixation, the appellants produced letters of confirmation dated 7.12.1998
and 28.10.2005 issued by the employer (ICAR). Their grievance is that the
High Court did not take note of those indisputable documents to calculate
the income and the loss of dependency. They contend that the monthly income
of the deceased should be taken as Rs.18341/- being the average of
Rs.32,678/- (income shown as on 1.10.2005) and Rs.4,004/- (income at the
time of death). They submit that only one-eighth should have been
deducted towards personal and living expenses of the deceased. They
point out that even if only one fourth (Rs.4585/-) was deducted therefrom
towards personal and living expenses of the deceased, the
contribution to the family would have been Rs.13,756/- per month or Rs.1,65,072/- per
annum. They submit that having regard to the Second Schedule to the
Motor Vehicles Act, 1988 (`Act' for short), the appropriate multiplier for
a person dying at the age of 38 years would be 16 and therefore the total loss
of dependency would be Rs.26,41,152/-. They also contend that
Rs.1,00,000/- should be added towards pain and suffering undergone by the claimants.
They therefore submit that Rs.27,47,152/- should be determined as
the compensation payable to them.
The contentions
urged by the parties give rise to the following questions:
(i) Whether the
future prospects can be taken into account for determining the
income of the deceased ? If so, whether pay Revisions that
occurred during the pendency of the claim proceedings or appeals
therefrom should be taken into account ?
(ii) Whether the
deduction towards personal and living expenses of the deceased
should be less than one-fourth (1/4th) as contended by the appellants, or
should be one-third (1/3rd) as contended by the respondents
(iii) Whether the
High Court erred in taking the multiplier as 13 ?
(iv) What should be
the compensation ?
The General Principles
Before
considering the questions arising for decision, it would be appropriate to recall the relevant principles relating to
assessment of compensation in cases of death. Earlier, there used to be
considerable variation and inconsistency in the decisions of courts
Tribunals on account of some adopting the Nance method enunciated in Nance v.
British Columbia Electric Rly. Co. Ltd. [1951 AC 601] and some
adopting the Davies method enunciated in Davies v. Powell Duffryn
Associated Collieries Ltd., [1942 AC 601].
The difference between the two methods was considered and explained by this Court in General Manager, Kerala State Road Transport Corporation v. Susamma Thomas [1994 (2) SCC
The difference between the two methods was considered and explained by this Court in General Manager, Kerala State Road Transport Corporation v. Susamma Thomas [1994 (2) SCC
After exhaustive consideration, this Court preferred
the Davies method to Nance method. We extract below the principles laid
down in Susamma Thomas:"In fatal
accident action, the measure of damage is the pecuniary loss suffered and
is likely to be suffered by each dependent a result of the death. The assessment of damages to compensate the dependents is beset with difficulties because from the nature of things, it has
to take into account many imponderables, e.g., the life expectancy of the
deceased and the dependents, the amount that the deceased would have
earned during the remainder of his life, the amount that he would have
contributed to the dependents during that period, the chances that the deceased
may not have lived or the dependents may not live up to the estimated
remaining period of their life expectancy, the chances that the deceased
might have got better employment or income or might have lost his
employment or income altogether."
"The matter of arriving at the damages is to ascertain
the net income of the deceased available for the support of himself and his
dependents, and to deduct therefrom such part of his income as the deceased was
accustomed to spend upon himself, as regards both self-maintenance and
pleasure, and to ascertain what part of his net income the deceased was
accustomed to spend for the benefit of the dependents. Then that should be
capitalized by multiplying it by a figure representing the proper number of
year's purchase."
"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 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."
"It is necessary to reiterate that the multiplier
method is logically sound and legally well-established. There are some cases which
have proceeded to determine the compensation on the basis of aggregating
the entire future earnings for over the period the life expectancy was lost,
deducted a percentage therefrom towards uncertainties of future life
and award the resulting sum as compensation. This is clearly unscientific.
For instance, if the deceased was, say 25 year of age at the time of death
and the life expectancy is 70 years, this method would multiply the loss
of dependency for 45 years - virtually adopting a multiplier of 45 - and
even if one-third or one-fourth is deducted therefrom towards the uncertainties
of future life
and for immediate lump sum payment, the effective multiplier
would be between 30 and 34. This is wholly impermissible."
In UP State Road Transport Corporation vs. Trilok Chandra
[1996 (4) SCC 362], this Court, while reiterating the preference to
Davies method followed in Susamma Thomas, stated thus :
"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 life-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........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 dependents of the deceased. The annual dependency
assessed in this manner is then to be multiplied by the use of an
appropriate multiplier." [emphasis supplied]
The lack of
uniformity and consistency in awarding compensation has been a matter of grave concern. Every district has one or
more Motor Accident Claims Tribunal/s. If different Tribunals calculate
compensation differently on the same facts, the claimant, the litigant,
the common man will be confused, perplexed and bewildered. If there is
significant divergence among Tribunals in determining the quantum of
compensation on similar facts, it will lead to dissatisfaction and
distrust in the system. We may refer to the following observations in Trilok Chandra :
"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 realized 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."
It must be realized 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."
Compensation awarded does not become `just compensation'
merely because the Tribunal considers it to be just.
For example, if on the same or similar facts (say deceased aged 40 years having annual income of 45,000/- leaving him surviving wife and child), one Tribunal awards Rs.10,00,000/- another awards Rs.5,00,000/-, and yet another awards Rs.1,00,000/-, all believing that the amount is just, it cannot be said that what is awarded in the first case and last case, is just compensation.
Just compensation is adequate compensation which is fair and equitable, on the facts and circumstances of the case, to make good the loss suffered as a result of the wrong, as far as money can do so, by applying the well settled principles relating to award of compensation. It is not intended to be a bonanza, largesse or source of profit. Assessment of compensation though involving certain hypothetical considerations, should nevertheless be objective.
For example, if on the same or similar facts (say deceased aged 40 years having annual income of 45,000/- leaving him surviving wife and child), one Tribunal awards Rs.10,00,000/- another awards Rs.5,00,000/-, and yet another awards Rs.1,00,000/-, all believing that the amount is just, it cannot be said that what is awarded in the first case and last case, is just compensation.
Just compensation is adequate compensation which is fair and equitable, on the facts and circumstances of the case, to make good the loss suffered as a result of the wrong, as far as money can do so, by applying the well settled principles relating to award of compensation. It is not intended to be a bonanza, largesse or source of profit. Assessment of compensation though involving certain hypothetical considerations, should nevertheless be objective.
Justice and justness emanate from equality in treatment,
consistency and thoroughness in adjudication, and fairness and uniformity in
the decision making process and the decisions. While it may not be
possible to have mathematical precision or identical awards, in assessing
compensation, same or similar facts should lead to awards in the same
range. When the factors/inputs are the same, and the formula/legal
principles are the same, consistency and uniformity, and not divergence and
freakiness, should be the result of adjudication to arrive at just compensation.
In Susamma Thomas, this Court stated :
In Susamma Thomas, this Court stated :
"So the proper method of computation is
the multiplier method. Any
departure,
except in exceptional and extra-ordinary cases, would introduce
inconsistency of
principle, lack of uniformity and an element of
unpredictability, for the assessment of compensation."
Basically only
three facts need to be established by the claimants for assessing compensation in the case of death :
(a) Age of the
deceased;
(b)Income of the deceased; and the
(c) The number of
dependents.
The issues to be determined by the Tribunal to arrive at the loss of
dependency are
(i) Additions/deductions to be made for arriving at the income;
(ii) The deduction to be made towards the personal living expenses of
the deceased; and
(iii) The multiplier to be applied with reference of the
age of the deceased.
If these determinants are standardized, there will
be uniformity and consistency in the decisions. There will lesser need for
detailed evidence. It will also be easier for the insurance companies
to settle accident claims without delay. To have uniformity and consistency,
Tribunals should determine compensation in cases of death, by the following
well settled
STEPS:
Step 1
(Ascertaining the multiplicand)
The income of
the deceased per annum should be determined. Out of
the said
income a deduction should be made in regard to the amount
which the
deceased would have spent on himself by way of personal
and living expenses.
The balance, which is considered to be the
contribution
to the dependent family, constitutes the multiplicand.
Step 2
(Ascertaining the multiplier)
Having regard
to the age of the deceased and period of active career,
the
appropriate multiplier should be selected. This does not mean
ascertaining
the number of years he would have lived or worked but
for the
accident. Having regard to several imponderables in life and
economic
factors, a table of multipliers with reference to the age has
been
identified by this Court. The multiplier should be chosen from
the said
table with reference to the age of the deceased.
Step 3
(Actual calculation)
The annual
contribution to the family (multiplicand) when multiplied
by such
multiplier gives the `loss of dependency' to the family.
Thereafter, a
conventional amount in the range of Rs. 5,000/- to
Rs.10,000/-
may be added as loss of estate. Where the deceased is
survived by
his widow, another conventional amount in the range of
5,000/- to
10,000/- should be added under the head of loss of
consortium.
But no amount is to be awarded under the head of pain,
suffering or hardship caused to the legal
heirs of the deceased.
The funeral
expenses, cost of transportation of the body (if incurred)
and cost of
any medical treatment of the deceased before death (if
incurred)
should also added.
Question (i) Addition to income for future prospects
Generally the
actual income of the deceased less income tax should be the starting point for calculating the compensation. The
question is
Whether actual income at the time of death should be taken
as the income or whether any addition should be made by taking note of future
prospects.
In Susamma Thomas, this Court held that the future prospects of advancement in life and career should also be sounded in terms of money to augment the multiplicand (annual contribution to the dependents); and that where the ceased had a stable job, the court can take note of the prospects of the future and it will be unreasonable to estimate the loss of dependency on the
In Susamma Thomas, this Court held that the future prospects of advancement in life and career should also be sounded in terms of money to augment the multiplicand (annual contribution to the dependents); and that where the ceased had a stable job, the court can take note of the prospects of the future and it will be unreasonable to estimate the loss of dependency on the
actual income of the deceased at the time of death. In that
case, the salary of
the deceased, aged 39 years at the time of death, was
Rs.1032/- per month.
Having regard to the evidence in regard to future prospects,
this Court was of the view that the higher estimate of monthly income could
be made at Rs.2000/- as gross income before deducting the personal
living expenses.
The decision in Susamma Thomas was followed in Sarla Dixit
v. Balwant Yadav [1996 (3) SCC 179], where the deceased was getting a
gross salary of Rs.1543/- per month. Having regard to the future prospects
of promotions and increases, this Court assumed that by the time he
retired, his earning would have nearly doubled, say Rs.3000/-. This court took
the average of the actual income at the time of death and the projected
income if he had lived a normal life period, and determined the monthly
income as Rs.2200/- per month. In Abati Bezbaruah v. Dy. Director General,
Geological Survey of India [2003 (3) SCC 148], as against the actual salary
income of Rs.42,000/- per annum, (Rs.3500/- per month) at the time of
accident, this court assumed the income as Rs.45,000/- per annum, having
regard to the future prospects and career advancement of the deceased who
was 40 years of age.
In Susamma
Thomas, this Court increased the income by nearly 100%, in Sarla Dixit, the income was increased only by 50%
and in Abati Bezbaruah the income was increased by a mere 7%.
In view of imponderables and uncertainties, we are in favour of adopting as a rule of thumb,
An addition of 50% of actual salary to the actual salary income of the deceased towards future prospects, where the deceased had a permanent job and was below 40 years. [Where the annual income is in the taxable range, the words `actual salary' should be read as `actual salary less tax'].
The addition should be only 30% if the age of the deceased was 40 to 50 years.
There should be no addition, where the age of deceased is more than 50 years.
Though the evidence may indicate a different percentage of increase, it is necessary to standardize the addition to avoid different yardsticks being applied or different methods of calculations being adopted. Where the deceased was self-employed or was on a fixed salary (without provision for annual increments etc.), the courts will usually take only the actual income at the time of death. A departure therefrom should be made only in rare and exceptional cases involving special circumstances.
In view of imponderables and uncertainties, we are in favour of adopting as a rule of thumb,
An addition of 50% of actual salary to the actual salary income of the deceased towards future prospects, where the deceased had a permanent job and was below 40 years. [Where the annual income is in the taxable range, the words `actual salary' should be read as `actual salary less tax'].
The addition should be only 30% if the age of the deceased was 40 to 50 years.
There should be no addition, where the age of deceased is more than 50 years.
Though the evidence may indicate a different percentage of increase, it is necessary to standardize the addition to avoid different yardsticks being applied or different methods of calculations being adopted. Where the deceased was self-employed or was on a fixed salary (without provision for annual increments etc.), the courts will usually take only the actual income at the time of death. A departure therefrom should be made only in rare and exceptional cases involving special circumstances.
Question(ii) Deduction for personal and living
expenses
Therefore, it became necessary to standardize the deductions to be made under the head of personal and living expenses of the deceased. This lead to the practice of deducting towards personal and living expenses of the deceased, one-third of the income if the deceased was a married, and one-half (50%) of the income if the deceased was a bachelor.
This practice was evolved out of experience, logic and
convenience. In fact one-third deduction, got statutory recognition under Second
Schedule to the Act, in respect of claims under Section 163A of the Motor
Vehicles Act,1988 (`MV Act' for short).
But, such percentage of deduction is not an inflexible rule and offers merely a guideline.
In Susamma Thomas, 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 and treat the balance as the amount likely to have been spent on the members of the family/dependants. In UPSRTC v. Trilok Chandra [1996 (4) SCC 362], this Court held that if the number of dependents in the family of the deceased was large, in the absence of specific evidence in regard to contribution to the family, the Court may adopt the unit method for arriving at the contribution of the deceased to his family. By this method, two units is allotted to each adult and one unit is allotted to each minor, and total number of units are determined. Then the income is divided by the total number of units. The quotient is multiplied by two to arrive at the personal living expenses of the deceased. This Court gave the following illustration:
But, such percentage of deduction is not an inflexible rule and offers merely a guideline.
In Susamma Thomas, 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 and treat the balance as the amount likely to have been spent on the members of the family/dependants. In UPSRTC v. Trilok Chandra [1996 (4) SCC 362], this Court held that if the number of dependents in the family of the deceased was large, in the absence of specific evidence in regard to contribution to the family, the Court may adopt the unit method for arriving at the contribution of the deceased to his family. By this method, two units is allotted to each adult and one unit is allotted to each minor, and total number of units are determined. Then the income is divided by the total number of units. The quotient is multiplied by two to arrive at the personal living expenses of the deceased. This Court gave the following illustration:
"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 and adult and one unit
for a minor.
Thus X and his wire make 2+2=4 units and each minor one
unit i.e. 3
units in all, totaling 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 per month
leaving a
balance of Rs. 3500-1250=Rs.2250 per month. This amount can
be taken as the
monthly loss of X's dependents."
"What would
be the percentage of deduction for personal expenditure
cannot be
governed by any rigid rule or formula of universal application. It
would depend
upon circumstances of each case. The deceased
undisputedly was
a bachelor. Stand of the insurer is that after marriage, the
contribution to
the parents would have been lesser and, therefore, taking
an overall view
the Tribunal and the High Court were justified in fixing
the
deduction."
Though in some
cases the deduction to be made towards personal and living expenses is calculated on the basis of units
indicated in Trilok Chandra, the general practice is to apply standardized
deductions. Having considered several subsequent decisions of this court,
We are of the view that where the deceased was married,
The deduction towards personal and living expenses of the deceased, should be one-third (1/3rd)
Where the number of dependent family members is 2 to 3, one-fourth (1/4th)
Where the number of dependent family members is 4 to 6, and one-fifth (1/5th) where the number of dependent family members exceed six.
We are of the view that where the deceased was married,
The deduction towards personal and living expenses of the deceased, should be one-third (1/3rd)
Where the number of dependent family members is 2 to 3, one-fourth (1/4th)
Where the number of dependent family members is 4 to 6, and one-fifth (1/5th) where the number of dependent family members exceed six.
Where the
deceased was a bachelor and the claimants are the parents,the deduction follows a different principle. In regard to
bachelors, normally, 50% is deducted as personal and living expenses, because it
is assumed that a bachelor would tend to spend more on himself. Even
otherwise, there is also the possibility of his getting married in a short time,
in which event the contribution to the parent/s and siblings is likely to be
cut drastically.
Further, subject to evidence to the contrary, the father is
likely to have his own income and will not be considered as a dependent and the
mother alone will be considered as a dependent. In the absence of
evidence to the contrary, brothers and sisters will not be considered as
dependents, because they will either be independent and earning, or married, or
be dependent on the father. Thus even if the deceased is survived by parents
and siblings,only the mother would be considered to be a dependent, and
50% would be treated as the personal and living expenses of the bachelor
and 50% as the contribution to the family. However, where family of the
bachelor is large and dependent on the income of the deceased, as in a case
where he has a widowed mother and large number of younger non-earning
sisters or brothers, his personal and living expenses may be restricted
to one-third and contribution to the family will be taken as two-third.
Re :Question (iii) - Selection of Multiplier
In Susamma
Thomas, this Court stated the principle relating to multiplier thus:
"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 work 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 Rupees 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
lumpsum 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."
The table starts with a multiplier of 15, goes upto 18, and then
steadily comes down to 5. It also provides the standard deduction as one-third
on account of personal living expenses of the deceased. Therefore, where
the application is under section 163A of the Act, it is possible to
calculate the compensation on the structured formula basis, even where compensation is
not specified with reference to the annual income of the deceased, or is
more than Rs.40,000/-, by applying the formula : (2/3 x AI x M), that
is two-thirds of the annual income multiplied by the multiplier applicable to
the age of the deceased would be the compensation. Several principles of tortuous liability are excluded when the claim is under section 163A of MV Act.
There are however discrepancies/errors in the multiplier scale given
in the Second Schedule Table. It prescribes a lesser compensation for
cases where a higher multiplier of 18 is applicable and a larger compensation
with reference to cases where a lesser multiplier of 15, 16, or 17 is
applicable. From the quantum of compensation specified in the table, it is
possible to infer that a clerical error has crept in the Schedule and the
`multiplier' figures got wrongly typed as 15, 16, 17, 18, 17, 16, 15, 13, 11, 8, 5
& 5 instead of 20, 19, 18, 17, 16, 15, 14, 12, 10, 8, 6 and 5. Another
noticeable incongruity is, having prescribed the notional minimum income of non-earning
persons as Rs.15,000/- per annum, the table prescribes the compensation
payable even in cases where the annual income ranges between Rs.3000/-
and Rs.12000/-. This leads to an anomalous position in regard to
applications under Section 163A of MV Act, as the compensation will be higher in cases
where the deceased was idle and not having any income, than in cases
where the deceased was honestly earning an income ranging between
Rs.3000/- and Rs.12,000/- per annum. Be that as it may.
The principles
relating to determination of liability and quantum of compensation are different for claims made under section
163A of MV Act and claims under section 166 of MV Act. (See : Oriental
Insurance Co. Ltd. vs. Meena Variyal - 2007 (5) SCC 428).
Section 163A and Second Schedule in terms do not apply to determination of compensation in applications under Section 166. In Trilok Chandra, this Court, after reiterating the principles stated in Susamma Thomas, however, held that the operative (maximum) multiplier, should be increased as 18 (instead of 16 indicated in Susamma Thomas), even in cases under section 166 of MV Act, by borrowing the principle underlying section 163A and the Second Schedule. This Court observed:
Section 163A and Second Schedule in terms do not apply to determination of compensation in applications under Section 166. In Trilok Chandra, this Court, after reiterating the principles stated in Susamma Thomas, however, held that the operative (maximum) multiplier, should be increased as 18 (instead of 16 indicated in Susamma Thomas), even in cases under section 166 of MV Act, by borrowing the principle underlying section 163A and the Second Schedule. This Court observed:
"Section
163-A 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 the 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 up to 18 and not 16 as was held in Susamma Thomas case..... 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......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..."
In New India
Assurance Co. Ltd. vs. Charlie [2005 (10) SCC 720], this Court noticed that in respect of claims under section
166 of the MV Act, the highest multiplier applicable was 18 and that the
said multiplier should be applied to the age group of 21 to 25 years
(commencement of normal productive years) and the lowest multiplier would be
in respect of persons in the age group of 60 to 70 years (normal retiring
age). This was reiterated in TN State Road Transport Corporation Ltd. vs.
Rajapriya [2005 (6) SCC 236] and UP State Road Transport
Corporation vs. Krishna Bala [2006 (6) SCC 249]. The multipliers indicated in
Susamma Thomas, Trilok Chandra and Charlie (for claims under section 166 of
MV Act) is given below in juxtaposition with the multiplier mentioned in the
Second Schedule for claims under section 163A of MV Act (with appropriate
deceleration after 50 years) :
Age-Deceased Suhsama Thomas Trilok Chandra Trilok Chandra (charlie) II Schedule-as specified II schedule-Used
(1) (2) (3) (4) (5) (6)
Upto 15 yrs - - 15 20
15 to 20 yrs. 16 18 18 16 19
21 to 25 yrs. 15 17 18 17 18
26 to 30 yrs. 14 16 17 18 17
31 to 35 yrs. 13 15 16 17 16
36 to 40 yrs. 12 14 15 16 15
41 to 45 yrs. 11 13 14 15 14
46 to 50 yrs. 10 12 13 13 12
51 to 55 yrs. 9 11 11 11 10
56 to 60 yrs. 8 10 09 8 8
61 to 65 yrs. 6 08 07 5 6
Above 65
5 05 05 5 5
yrs.
Tribunals/courts
adopt and apply different operative multipliers. Some follow the multiplier with reference to Susamma Thomas
(set out in column 2 of the table above); some follow the multiplier
with reference to Trilok Chandra, (set out in column 3 of the table above);
some follow the multiplier with reference to Charlie (Set out in column (4)
of the Table above); many follow the multiplier given in second column of
the Table in the Second Schedule of MV Act (extracted in column 5 of the
table above);nd some follow the multiplier actually adopted in the
Second Schedule while calculating the quantum of compensation (set out in
column 6 of the table above).
For example if the deceased is aged 38 years,
the multiplier would be 12 as per Susamma Thomas, 14 as per Trilok Chandra,
15 as per Charlie, or 16 as per the multiplier given in column (2) of
the Second schedule to the MV Act or 15 as per the multiplier actually
adopted in the second Schedule to MV Act. Some Tribunals, as in this case,
apply the multiplier of 22 by taking the balance years of service with
reference to the retiring age. It is necessary to avoid this kind of
inconsistency. We are concerned with cases falling under section 166 and not under
section 163A of MV Act. In cases falling under section 166 of the MV Act,
Davies method is applicable.
We therefore hold that the multiplier to be used should be as mentioned in column (4) of the Table above (prepared by applying Susamma Thomas, Trilok Chandra and Charlie),
Which starts with an operative multiplier of 18 (for the age groups of 15 to 20 and 21 to 25 years),
Reduced by one unit for every five years, that is M-17 for 26 to 30 years, M-16 for 31 to 35 years, M-15 for 36 to 40 years, M-14 for 41 to 45 years, and M-13 for 46 to 50 years, then reduced by two units for every five years, that is, M-11 for 51 to 55 years, M-9 for 56 to 60 years, M-7 for 61 to 65 years and M-5 for 66 to 70 years.
We therefore hold that the multiplier to be used should be as mentioned in column (4) of the Table above (prepared by applying Susamma Thomas, Trilok Chandra and Charlie),
Which starts with an operative multiplier of 18 (for the age groups of 15 to 20 and 21 to 25 years),
Reduced by one unit for every five years, that is M-17 for 26 to 30 years, M-16 for 31 to 35 years, M-15 for 36 to 40 years, M-14 for 41 to 45 years, and M-13 for 46 to 50 years, then reduced by two units for every five years, that is, M-11 for 51 to 55 years, M-9 for 56 to 60 years, M-7 for 61 to 65 years and M-5 for 66 to 70 years.
The assumption
of the appellants that the actual future pay revisions should be taken into account for the purpose of calculating
the income is not sound. As against the contention of the appellants that if
the deceased had been alive, he would have earned the benefit of revised pay
scales, it is equally possible that if he had not died in the accident, he
might have died on account of ill health or other accident, or lost the
employment or met some other calamity or disadvantage. The imponderables in
life are too many.
Another significant aspect is the non-existence of such evidence at the time of accident. In this case, the accident and death occurred in the year 1988. The award was made by the Tribunal in the year 1993. The High Court decided the appeal in 2007. The pendency of the claim proceedings and appeal for nearly two decades is a fortuitous circumstance and that will not entitle the appellants to rely upon the two pay revisions which took place in the course of the said two decades. If the claim petition filed in 1988 had been disposed of in the year 1988-89 itself and if the appeal had been decided by the High Court in the year 1989-90, then obviously the compensation would have been decided only with reference to the scale of pay applicable at the time of death and not with reference to any future revision in pay scales. If the contention urged by the claimants is accepted, it would lead to the following situation: The claimants only could rely upon the pay scales in force at the time of the accident, if they are prompt in conducting the case. But if they delay the proceedings, they can rely upon the revised higher pay scales that may come into effect during such pendency. Surely,promptness cannot be punished in this manner.
We therefore reject the contention that the revisions in pay scale subsequent to the death and before the final hearing should be taken note of for the purpose of determining the income for calculating the compensation.
Another significant aspect is the non-existence of such evidence at the time of accident. In this case, the accident and death occurred in the year 1988. The award was made by the Tribunal in the year 1993. The High Court decided the appeal in 2007. The pendency of the claim proceedings and appeal for nearly two decades is a fortuitous circumstance and that will not entitle the appellants to rely upon the two pay revisions which took place in the course of the said two decades. If the claim petition filed in 1988 had been disposed of in the year 1988-89 itself and if the appeal had been decided by the High Court in the year 1989-90, then obviously the compensation would have been decided only with reference to the scale of pay applicable at the time of death and not with reference to any future revision in pay scales. If the contention urged by the claimants is accepted, it would lead to the following situation: The claimants only could rely upon the pay scales in force at the time of the accident, if they are prompt in conducting the case. But if they delay the proceedings, they can rely upon the revised higher pay scales that may come into effect during such pendency. Surely,promptness cannot be punished in this manner.
We therefore reject the contention that the revisions in pay scale subsequent to the death and before the final hearing should be taken note of for the purpose of determining the income for calculating the compensation.
The appellants
next contended that having regard to the fact that the family of deceased consisted of 8 members including himself
and as the entire family was dependent on him, the deduction on account
of personal and living expenses of the deceased should be neither the
standard one-third, nor one-fourth as assessed by the High Court, but
one-eighth.
We agree with the contention that the deduction on account of personal living expenses cannot be at a fixed one-third in all cases (unless the calculation is under section 163A read with Second Schedule to the MV Act).
The percentage of deduction on account personal and living expenses can certainly vary with reference to the number of dependant members in the family. But as noticed earlier, the personal living expenses of the deceased need not exactly correspond to the number of dependants. As an earning member, the deceased would have spent more on himself than the other members of the family apart from the fact that he would have incurred expenditure on travelling/transportation and other needs.
Therefore we are of the view that interest of justice would be met if one-fifth is deducted as the personal and living expenses of the deceased. After such deduction, the contribution to the family (dependants) is determined as Rs.57,658/- per annum. The multiplier will be 15 having regard to the age of the deceased at the time of death (38 years). Therefore the total loss of dependency would be Rs.57,658 x 15 = Rs.8,64,870/-.In addition, the claimants will be entitled to a sum of Rs.5,000/- under the head of `loss of estate' and Rs.5000/- towards funeral expenses. The widow will be entitled to Rs.10,000/- as loss of consortium. Thus, the total compensation will be Rs.8,84,870/-. After deducting Rs.7,19,624/- awarded by the High Court, the enhancement would be Rs.1,65,246/-. We allow the appeal in part accordingly. The appellants will be entitled to the said sum of Rs.165,246/- in addition to what is already awarded, with interest at the rate of 6% per annum from the date of petition till the date of realization. The increase in compensation awarded by us shall be taken by the widow exclusively.
We agree with the contention that the deduction on account of personal living expenses cannot be at a fixed one-third in all cases (unless the calculation is under section 163A read with Second Schedule to the MV Act).
The percentage of deduction on account personal and living expenses can certainly vary with reference to the number of dependant members in the family. But as noticed earlier, the personal living expenses of the deceased need not exactly correspond to the number of dependants. As an earning member, the deceased would have spent more on himself than the other members of the family apart from the fact that he would have incurred expenditure on travelling/transportation and other needs.
Therefore we are of the view that interest of justice would be met if one-fifth is deducted as the personal and living expenses of the deceased. After such deduction, the contribution to the family (dependants) is determined as Rs.57,658/- per annum. The multiplier will be 15 having regard to the age of the deceased at the time of death (38 years). Therefore the total loss of dependency would be Rs.57,658 x 15 = Rs.8,64,870/-.In addition, the claimants will be entitled to a sum of Rs.5,000/- under the head of `loss of estate' and Rs.5000/- towards funeral expenses. The widow will be entitled to Rs.10,000/- as loss of consortium. Thus, the total compensation will be Rs.8,84,870/-. After deducting Rs.7,19,624/- awarded by the High Court, the enhancement would be Rs.1,65,246/-. We allow the appeal in part accordingly. The appellants will be entitled to the said sum of Rs.165,246/- in addition to what is already awarded, with interest at the rate of 6% per annum from the date of petition till the date of realization. The increase in compensation awarded by us shall be taken by the widow exclusively.
Parties to bear respective costs.
(R V Raveendran) (Lokeshwar Singh Panta)
New Delhi;
April 15, 2009 New Delhi;
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You can post your views to the author of the article on his mail address: vinayverma@orientalinsurance.co.in
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