Supreme Court of India
RESHMA KUMARI AND OTHERSversusMADAN MOHAN AND ANOTHER
- Citation
- 2009 INSC 942
- Decided
- 23 July 2009
- Disposal
- Matter referred to larger bench
- Bench
- S B SINHA
Holding
The Court held that the multiplier in the Second Schedule is only a guide, not a mandatory rule, and that the lack of legislative clarification on its application warrants referral to a larger bench.
Summary
The Supreme Court examined the method of calculating compensation under the Motor Vehicles Acts of 1939 and 1988, focusing on whether the multiplier in the Second Schedule must be applied rigidly and what criteria should guide the determination of the multiplicand (future earnings). The Court noted that earlier decisions applied a structured formula but warned against a mechanical application that could lead to unjust enrichment. It observed divergent judicial opinions on the use of the multiplier, especially in cases under Section 166 (fault liability) versus Section 163‑A (no‑fault liability). The Court highlighted the need to consider future prospects, inflation, and the specific facts of each case rather than a fixed multiplier. Finding that Parliament had not clarified the issue despite prior recommendations, the Court decided to refer the matter to a larger bench for authoritative guidance.
Issues considered
- Whether the multiplier specified in the Second Schedule to the Motor Vehicles Act must be scrupulously applied in all compensation cases.
- Whether the Act provides any specific criterion for determining the multiplicand, particularly concerning future earnings prospects.
Legislation cited
- Motor Vehicles Act, 1939s. 110-A, s. 110-B, s. 92-A
- Motor Vehicles Act, 1988s. 163-A, s. 166, s. 168, s. Second Schedule
- Motor Vehicles (Amendment) Act, 1994
Subjects
Motor Vehicles ActCompensationMultiplierSecond ScheduleFuture earningsInflationTort lawSection 163-ASection 166Larger Bench
Judgment
[2009] 11 S.C.R. 305
RESHMA KUMARI AND OTHERS A
v.
MADAN MOHAN AND ANOTHER
(Civil Appeal No. 4646 of 2009)
I JULY 23, 2009
B.
(S.B. SINHA AND CYRIAC JOSEPH, JJ.]
-. MOTOR VEHICLES ACT, 1939/MOTOR VEHICLES
ACT, 1988:
c
Section 110-8/Sections 163-A, 166, Second Schedule -
Structured formula for determination of amount of
compensation - Future earnings on the basis of life
expectancy - Taking inflation into consideration - Having
regard to the divergence of opinion and certain aspects not D
having been considered in the earlier decisions of the
~- Supreme Court and particularly in the absence of clarification
from Parliament despite recommendations made by this
Court in Trilok Chandra's case, matters referred to Larger
Bench.
E
The common questions which arose for
consideration in the present appeals were:
1. Whether the multiplier specified in the Second'
Schedule appended to the Act should be scrupulously F
applied in all the cases?
2. Whether for determination of the multiplicand, the
Act provides for any criterion, particularly as regards
determination of future prospects?
G
Referring the matter to a larger Bench, the Court
HELD: 1.1. Even prior to the enactment of the
provision, viz. Section 163A of the Motor Vehicles Act,
305 H
306 SUPREME COURT REPORTS [2009] 11 S.C.R.
')""
A 1988, this Court following the decisions of the English
Courts applied structured formula for determination of the
amo.unt of compensation. [Para 9] [315-E-F]
1.2. So far as the question of loss of future earnings
on the basis of average life expectancy is concerned, this
B
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. [Para 10] [315-G-
c H; 316-A]
General Manager, Kera/a State Road Transport
Corporation, Trivandrum v. Susamma Thomas and others, ~-
~
(1,994) 2 SCC 176; l).P. State Road Transport Corporation.
D v. Trilok Chandra, (1996) 4 SCC 362; Kaushnuma Begum ,...
v. New India Assurance Co. Ltd., (2001) 2 SCC 9; United ~
India Insurance Co. Ltd. v. Patricia Jean Mahajan, (2002) 6
sec 281; Jyoti Kaul v. State of M.P., (2002) 6 sec 306 and
New India Assurance Co. Ltd. v. Shanti Pathak, (2007) 10
E sec 1, referred to.
-'
Mallett's case (1970) AC 166 : (1969) 2 All ER 178,
referred to.
2. The compensation which is required to be
-,,
F determined must be just. While the claimants are required "'
to be compensated for the loss of their 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
G example death of only son to a mother, she can never be
compensated in monetary terms. [Para 20] [324-C-D]
~
3. 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
H .....
RESHMA KUMARI AND ORS. v. MADAN MOHAN AND 307
ANR.
possible should be based on certain principles. A person A
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 cont.intmd in service; his chance of B
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 C
guess work may be inevitable. That may be so. [Para 21]
[324-E-G]
Sar/a Dixit v. Ba/want Yadav, (1996) 3 SCC 179; Abati
Bezbaruah v. Dy. Director General, Geological Survey of
India, (2003) 3 SCC 148 and Bhagwandas v. Mohd. Arif, AIR D
~ 1988 A.P. 99, referred to.
Davies v. Powell Duffregn Associaed Colliers Ltd. 1942
AC 601 and Wells v. Wells [1998] 3 W.L.R. 329, referred to.
E
4. 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 F
he had not sustained the wrong. [Para 30] [335-G-H; 336-
A]
Livingstone v. Rawyards Coal Co. (1880) 5 AC 25,
refu~d~. G
5.1. 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
H
308 SUPREME COURT REPORTS [2009] 11 S.C.R.
A him must be ascertained; the position of each dependent ........
in each case may have to be considered separately.
[Para 31) (336-B-C]
5.2. An element of sentiment of the deceased was
also introduced while determining compensation payable
B
to the dependent. One of the factors which had been
taken into consideration in Davis was that the widow
might be again married and ceases to be dependent; in
India, one cannot proceed on such presumption. In the j... ,
Indian context several other factors should be taken into
c consideration including education of the dependents and
the. nature of job. In the wake of changed soc;etal
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
D 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. [Para
33 and 34) (338-C-E]
E General Manager, Kera/a State Road Transport
Corporation, Trivandrum v. Susamma Thomas and others,
(1994) 2 SCC 176; Gobald Motor Service Ltd., Allahabad v.
F·
R.M.K. Veluswami, AIR 1962 SC 1; Nance v. British
Columbia Electric Railway Co, Ltd. 1951 AC 601 and Oriental
Insurance Company Ltd. v. Jashuben and others, (2008) 4 's"
...
sec 162, referred to.
Davis v. Powell Duffrya Associated Collieries Ltd. (1942)
AC 601, referred to.
• r " • ' ' ., ~:. "
•. ' ,.. '' t \l.-• ..... I
G 6. One of the incidental issues which has also to be
taken into consideration is inflation. Unfortunately, unlike
other.·'developed 'coi.Jntries in India there has been no
1
r-
scientific.,study;·'lt is ·e'xpected that with the rising inflation
the rate of interest would go up.~ ·irf Ind fa ·it 'does not
H, happen. It, therefore, -may be a releva'nt factor which may
RESHMA KUMARI AND ORS. v. MADAN MOHAN AND 309
ANR.
.....-- · be. taken into consideration for determining the actual .A.
ground reality. No hard and fast rule, however, can be laid ·
down therefor. [Paras 35 and 36] [338-G-H; 339-A]
7. The Second Schedule refers to Section 163-A of
the 1988 Act, which, provides for quantum of 8
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/
represe~tatives pf the deceased in the case of fatal
accident and the claimants in the case of injuries suffered C
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? ~Para 38] [339- D
D-E]
8.1. In Patricia Jean Mahajan and Abati Bezbaruah and
the other cases following them multiplier specified in the
Second Schedule has been taken to be guiding factor for E
calculation of the amount of compensation even in a case
under Section 166 of the Act. However, in Shanti Pathak
this Court advocated application of lesser multiplier,
although no legal principle has been laid therein. [Para
39] [339-F-G] F
8.2. In Trilok Chandra this Court has pointed out
certain purported calculation mistakes in the Second
Schedule. It, however, appears 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 G
lower amount can be said to be the quantum. of
---..,{
compensation upon applying the multiplier.system. [Para
40] [339-H; 340-A-B]
United India Insurance Co. Ltd. v. Patricia Jean Mahajan, H
310 SUPREME COURT REPORTS [2009] 11 S.C.R.
A (2002) 6 SCC 281; Abati Bezbaruah v. Dy. Director General, ,,...,.
Geological Survey of India, (2003) 3 SCC 148; New India
Assurance Co. Ltd. v. Shanti Pathak, (2007) 10 SCC 1 and
U.P. State Road Transport Corporation .. v. Trilok Chandra,
('1996) 4 sec 362, referred to.
8
9.1. 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 )'-- '
C 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.
D 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
wherefor the multiplier is not to be applied at all but in a
case involving permanent total disability or permanent
E 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 th.e compensation
and in the .case of permanent partial disablement such
F percentage 'of compensation which would have been
payable in the case of permanent total disablement as
specified. under item (a) of the Second Schedule. [Para
41) [340-C-F]
G 9.2. The Parliament in its wisdom thought to provide
for a higher amo4nt 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.
H [Para 42] [340-G]
RESHMA KUMARI AND ORS. v. MADAN MOHAN AND 311
ANR.
10.1. Prima facie, it appears that the multiplier A
mentioned in the Second Schedule, although in a given
case, may be taken to be a guide but the same is not
decisive. Although a probable amount of compensation
as specified in the Second Schedule in the eve11t the age
of victim is 17 or 20 years and his annual income is B
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 c
determined on the basis of 'no fault liability' and in the
later on 'fault liability' In the aforementioned situation the
Courts are required to lay down certain principles. [Para
43] [340-H; 341-A-C]
10.2. This Court is not unmindful of the Statement of D
Objects and Reasons to Act 54 of 1994 for introducing
Section 163-A so as to provide for a new 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 E:
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 should also bear that F
factor in mind. 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, G
the issue, shall be decided by a Larger B_ench. [Paras 44
and 45] [341-0-F]
U.P. State Road Transport Corporation. v. Trilok
H
312 SUPREME COURT REPORTS [2009] 11 S.C.R.
>y
A Chandra, (1996) 4 SCC 362, referred to.
'
(1994) 2 sec 116 referred to Para 9
(1970) AC 166 :
(1969) 2 All ER 178 referred to Para 9
B
(1996) 4 sec 362 referred to · Para 14
(2001) 2 sec 9 referred to Para 17 ~
(2002) 6 sec 281 referred to Para 17
c (2002) 6 sec 306 referred to Para 17
(2001) 1o sec 1 referred to Para 18
(1996) 3 sec 119 referred to Para 22
D (2003) 3 sec 148 referred to Para 22
-4.
1942 AC 601 referred to Para 23
AIR 1988 A.P. 99 referred to Para 25
E
[1998] 3 W.L.R. 329 referred to Para 28
(1880) 5 AC 25 referred to Para 30
AIR 1962 SC 1 referred to Para 31
1F-
~
1951 AC 601 referred to Para 32
F
(2008) 4 sec 162 referred to Para 34
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
4646 of 2009.
G From the Judgment & Order dated 08.02.2007 of the. High
Court of Delhi at New Delhi in FAQ No.184 of 1992. ,_._,
Ashok K. Mahajan, O.P. Goyal, S.N. Kalra, Yash Pal
Dhingra, Atul Nanda (for M/s. Law Associates & Co)., Anil
H
RESHMA KUMARI AND ORS. v. MADAN MOHAN AND 313
ANR.
-y
Kumar Sharma, Dr. Sushil Balwada, A. Subhashini, Sameer A
Nandwani, K.L. Nandwani, S.K. Mishra and Debasis Misra for
the appearing parties.
The Judgment of the Court was delivered by
5.8. SINHA, J. Leave granted . B
.....
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 c
question we may notice the fact of the matters involved in each
case.
Civil A1meal arising out of SLP {C} N0.8205/2007
2. Madan Mohan Singh Saini met with an accident on 3rd D
~
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. E
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.
F
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 G
.... .,;
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 H
314 SUPREME COURT REPORTS [2009] 11 S.C.R.
A 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.
8 4 and 5, died in an accident with a D.T.C. bus.
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.
c 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 FAQ before
D the Allahabad High Court. A Division Bench of the said Court
by its judgment and order dated 26th May, 2006 enhanced the -J..
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.
E
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 ).
F No.1. Respondent Nos. 2 and 3 are the owner and insurance
company respectively.
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
G and 1.40 of the 1988 Act for grant of compensatio11 of
Rs.15,00,000/-. The Motor Accident Claims Tribunal by its ')p--- -
award dated 26th June, 2000 awarded a sum of Rs.2,49,600/
-with 12% interest on the said amount by way of compensation.
H 7. Feeling dissatisfied, appellants filed an FAQ before the
RESHMA KUMARI AND ORS. v. MADAN MOHAN AND 315
ANR. [S.8.SINHA, J.]
High Court of Punjab and Haryana at Chandigarh and by the A
j
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.
B
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? C
(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 D
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, Kera/a State Road Transport E
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 F
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 G
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 H
316 SUPREME COURT REPORTS [2009] 11 S.C.R.
Y"'
A 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
B
be not depart~d from save in rare and extraordinary
circumstances and very exceptional cases. The rationale for
applying the said principle was laid down stating :-
'f- '
"17. The multiplier represents the number of years'
c 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
D 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 oJ years' purchase of 20 will yield
the annual dependency perpetually. Then allowance to
E scale down the multiplier would have to be made taking
into account the uncertainties of the future, the allowances
for immediate lump sum payment, the period over which
the dependency is to last being shorter and the capital feed
.
also to be spent away over the period of dependency is ~
F 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
G the relevant point of time the rate of bank interest was about
· 12% per annum to whic.h reference has also been made by the --~
High Court at some length.
12. In Susamma Thomas (supra) apart from applying the :>
H structured formula with regard to the determination of the amount
RESHMA KUMARI AND ORS. v. MADAN MOHAN AND 317
ANR. [S.B.SINHA, J.]
~
of compensation as regards the future prospect, it was opined:- A
"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
B
multiplicand. While the chance of the multiplier is
deter.mined by two factors, nam~ly, 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
c
evaluate the contingencies of 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 D
>- 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 E
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 F
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 G
....... -·-.¥' 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 H
318 SUPREME COURT REPORTS [2009] 11 S.C.R.
A of consortium and loss of the estate each in the
conventional sum of Rs 15,000."
1~- Parliament thereafter inserted Section 163A and the
Second Schedule in the Acf. One of the features thereof which
8 we may immediately notice is 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
c ( 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 oase of death
or permanent disablement due to accident arising out of
D · the use of motor vehicle, compensation, as indicated in the
Second Schedule, to the legal heirs or the victim, as the -I.
case may be.
Explanation.-For the purposes of this sub-section,
"permanent disability" shall have the same meaning and
E 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 )...
F death or permanent disablement in respect of which the
claim has been m.ade 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
G of living by notification in the Official G~zette, 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
H applicability of the structured formula once again in UP. State
RESHMA KUMAR! AND ORS. v. MADAN MOHAN AND 319
ANR. [S.B.SINHA, J.]
-~,
Road Transport Corporation. v. Trilok Chandra, [ (1996) 4 A
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
B
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
c
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. "
D
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 E
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 because, of late, we have F
noticed from the awards made by tribunals arid courts th~t
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 G
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 H
_;.
320 SUPREME COURT REPORTS [2009] 11 S.C.R.
A 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
B 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 ilh.istrate: X, male, aged
about 35 years, dies in an accident. He leaves behind his
c 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
D
each minor one unit Le. 3 units in all, totalling 7 units.Thus
the ·share per unit works out to Rs 3500/?=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
E estimated. In the present case we estimate the out-of-
J
pocket expense at Rs. 250. Thus the amount spent on the
deceased X works out to Rs 1250 per month leaving a
balance of Rs 3500-1250=Rs 2250 per month. This
amount can be taken as the monthly loss to X's
F dependants ..The annual dependency GOmes 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
G 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 regara to the fall
in ·tMe value of the rupee, it can be raised to a figure of not
H more than Rs 10,000. Thus the total comes to
RESHMA KUMARI AND ORS. v. MADAN MOHAN AND 321
ANR. [S.B.SINHA, J.]
-~ Rs 4,05,000+10,000= Rs 4, 15,000. A
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. B
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 s·aid principle in a large number of
cases. We would, however, notice only a few of them. c
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 D
,.. 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 E;
compensation in this case we lean ourselves to adopt the
structured formuf a 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 F
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 ttie G
victims is that they may not be suddenly deprived of ttie
---... 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 H
322 SUPREME COURT REPORTS [2009) 11 S.C.R.
A 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 applying the multiplier system, the
lesser multiplier may be applied. In such cases, the amount
B 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,
c but there may arise some cases, as the one in hand, which
may fall in the category having special features or facts
calling for 9eviation from the multiplier usually applicable."
It is evident from the above that this Court in the said
D 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
E 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
F lived for more than 80 years. The High Court reduced the
multiplier from 15 to 10 without taking into consideration
circumstances considered by the Tr.ibunal and thus
committed the error. We, accordingly, set aside the
findings of the High Court only to the extent of the
G application of 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
H paid b7 the respondent State shall be paid to the claimants
RESHMA KUMARI AND ORS. v. MADAN MOHAN AND 323
ANR. [S.B.SINHA, J.]
within a period of three months from today." A
- 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
8
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 C
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 D
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. E
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 F
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. G
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 H
324 SUPREME COURT REPORTS [2009] 11 S.C.R.
....,.
A 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
B
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
t
-
the Second Schedule appended to the Act.
c 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 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
D 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
E
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
F 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
G may be inevitable. That may be so.
~
. 22. As regards future prospects for determination of
compensation, some precedents may also be noticed by us.
In Sar/a Dixit v. Ba/want Yadav, [ (1996) 3 SCC 179 ], this
H
RESHMA KUMARI AND ORS. v. MADAN MOHAN AND 325
ANR. [S.B.SINHA, J.]
Court has held :- A
. "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 B
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
c
future. All contingencies of the future need not necessarily
be baneful. Applying these principles to the facts of the
(,aSe 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 D
j.
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 E
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 F
amount was added the conventional figure of Rs. 15,000
by way of loss of consortium and loss of estat~. 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 G
- ... ./ mathematical fo.rml48. Deceased in the present case, as
seen above, was earning gross salary ©f 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 H
326 SUPREME COURT REPORTS [2009] 11 S.C.R.
+
A 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
8 .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
...
't'
career till the time of superannuation. The average gross
future monthly income could be arrived at by adding the
c 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 ..... .,...
D
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
E liabilities like payment of income tax etc. That would roughly ';--
· work out to Rs 730 per month but even taking a higher
F
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 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
G 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
H months, at the time of his death the proper multiplier in the
RESHMA KUMAR! AND ORS. v. MADAN MOHAN AND 327
ANR. [S.B.SINHA, J.]
t light of the aforesaid decision of this Court in G.M., Kera/a A
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 8
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 :- C
"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 D
.....
I 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 E
compensation should be just and fair in the facts and
circumstances of each case."
23. Learned Single Judge of the Delhi HJgh 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 F
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 G
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:-
(
f
H
328 SUPREME COURT REPORTS [2009] 11 S.C.R.
A S. Year Money Interest Loss of Excess
No. in (12% dependency of
Capital for 87- (Assuming interest
Account 95, 10% over
10% for increase de pen-
95-02, every year) dency
B 8% for
02-12)
1, 1987- 88 3,36,000 40,320 1344 x 12 - 16128 24,192 t
c 2. 1988-89 3,60,192 43,223 1478 x 12 =17736 25,487
3. 1989.- ~o 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
D
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
E 9. 1995 - 96 5,64,207 56,421 2874 x 12 =34,488 21,933
(
10. 996-97 5,86,140 58,614 3161 x 12 =37931 20,682.
F
11.
12.
1997 - 98
1998 - 99
6,06,822
6,25,792
60,682
62,579
3476 x 12 =41712
3823 x 12 =45,876
18,970
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
G
16. 2002 - 03 6,72,010 55,761 5595 x 12 =67140 "13,379
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
H
RESHMA KUMARI AND ORS. v. MADAN MOHAN AND 329
)
ANR. [S.B.SINHA, J.]
19. 2005- 06 6,07,224 48,579 7445 x 12 = 89340 40,881 A
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
B
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
c
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 D
_,,.
stands completely eroded in the 25th year.
+
...'
\
25. Mr. Nanda, le~rned counsel appearing for the
insurance company, however, submits that not only earning
growth but also inflation and uncertainty of life are taken care
E
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 AP. 99
"- wherein the learned Judge opined :-
...
"10. In the entire gamut of the law of tort damages, this is F
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 Actuaries, developed systems which are
today very near perfect." G
---~
As regards application of actuary's-multiplier, the learned
t
Judge stated :-
18A. What is the basis for the actuary's multiplier, what are
,,L the factors it takes into account, is the next question. In the H
330 SUPREME COURT REPORTS [20091 11 s. c.R
-+
A 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
8 the net future losses from date of death of the person (in
fatal cases) have to be estimated. This involves two
exercises:
'f
(I) Firstly, the mortality rates for the future years have to be
ascertained year by year to off-set the future uncertainties
c 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
D 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
E 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 multiplying each future Rs.
/
12,000/- by the probability of the victim living in each of
F the future years as taken from the mortality rates published * I
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
G
or disco~nting 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 I (1 +r)n /100 where Pn is the future annual
figures, r is the rate of interest n is the number of years
H
RESHMA KUMARI AND ORS. v. MADAN MOHAN AND 331
ANR. [S.B.SINHA, J.]
(between the date of trial and date relating to the year for A
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 convert~d).
Like that, the income for each future year, is reduced to
present value. Then these sums for each of the future years B .
are addeo up."
26. 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 C
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 would be appropriate in India and
what multiplier should be applied in this country. D
27. 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:-
E
S.No. Year Capital Formula
1. 1st year 0 150 x 12 = 1800
2. 2nd year 1800 1800x1.045-100= 1781 F
3. 3rd year 1781 1761.1.4
4. 4th year 1761.14 1740.39 G•
...... - 1 5. 5th year 1740.39 1718.71
/
6. 6th year 1718.71 1596.05
H
332 SUPREME COURT REPORTS [2009) 11 S.C.R.
A
7. 7th year 1596.05 1672.37
8. 8th year 1672.37 1647.62
B 9. 9th year 1647.62 1621.76
10. 10th year 1621.76 1594.74
-
c 11. 11th year 1594.74 1800x1 .045-
200=1566.51
12. 12th year 1466.51 1382.50
D 13. 13th year. 1332.50 1192.46
14. 14th year 1192.46 1046.13
E 15. 15th year 1046.46 893.20
16. 16th year 893.20 733.40
17. 17 year 733.40 566.40
F
18. 18th year 566.40 391.89
19. 19th year 391.89 209.52
G
20. 20th year 209.52 18.95
/ ,._- ......
Lord Diplock observed :-
"The starting point in any estimate of the amount of the
H
RESHMA KUMARI AND ORS. v. MADAN MOHAN AND 333
ANR. [S.B.SINHA, J.]
4r- "dependency" is the annual value of the material benefits A
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 B
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 c
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
D
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 E
.
_
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 F
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 G
--- ..
place until after ten years should have only a relatively
small effect in increasing or diminishing the "dependency"
used for the purpose of assessing the damages."
28. We may also notice a later decision of House of Lords H
334 SUPREME COURT REPORTS [2009] 11 S.C.R.
A 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
B the past. It was opined thatindex 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
c assessment of future lqss are made at the stage of arriving
a~ 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
D 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
E years in the future.
The measure of the discount is the rate of return which can
reasonably be expected on that sum if inyested in such a
way as to enable the plaintiff to meet the whole amount of
F 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
G
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
H
RESHMA KUMAR! AND ORS. v. MADAN MOHAN AND 335
ANR. [S.B.SINHA, J.]
the duty to minimise loss has anything to do with the A
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 tpe 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 B
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 c
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 D
-+ impact of capital gains tax if reliance has to be placed on
the capital gains which can be achieved to deal with
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 E
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
r of the lump sum."
F
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. cs
,,_ ~
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. -Vhe said principle provides .
that a person entitled to damages shbuld, as nearly as possible, H
336 SUPREME COURT REPORTS [2009] 11 S.C.R.
A 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 J.
31. The accident may result in death ; it may result in
injuries which may be of different counts. Wben a death occurs
8
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 . y·
have to be considered separately [ See Davis v. Powell Duffrya
C 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. Ve/uswami, [AIR 1962 SC 1 ] as also in
Susamma Thomas (supra)
32. The heads of pecuniary loss are basically two. One,
D 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 ;
E
(ii) lump sum method ; and
(iii) multiplier method.
-+
Whereas in the first and third method, interest method for
F
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:
G "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
H reasonable future probabilities. The starting point is the
RESHMA KUMARI AND ORS. v. MADAN MOHAN AND 337
ANR. [S.B.SINHA, J.]
-'"ii-·
amount of wages which the deceased was earning, the A
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 ~ive a datum or
basic figure which will generally be turned into a lump sum B
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 c
of 2501. 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
D
L.J. of 7501. 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 ElectricRailway Co, Ltd. { 1951 AC 601 } wherein E
it was observed :-
"The claim to damages in the present case falls under two
~·
.,_ separate heads. First, if the deceased had not been killed,
but had eked out the full span of life to which in the absence F
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
G
step-children were ali adults and self supportlng, 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
H
/
338 SUPREME COURT REPORTS [2009] 11 S.C.R.
A 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
B 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
C consideration iii pavis (supra) W.?$ that the widow might be
again marrie·d and ceases to be dependent; in India, we cannot
proceed on such presumption.
34. In the Indian context several other factors should be
D 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
E 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 sec 162 ] held that even -+
F 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
G
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
H go up. In India it does not happen. It, therefore, may be a
RESHMA KUMARI AND ORS. v. MADAN MOHAN AND 339
ANR. [S.B.SINHA, J.)
relevant factor which may be taken into consideration for A
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
B
taken into consideration at all. While the reasonings 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 c
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 D
./
party in case of fatal accident or injuries suffered. It provides
't
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 by
them depending upon his age and annual income as specified E
therein. The question which arises for consideration is as to
whether the multiplier specified in the second schedule should
be tak~n to be a guide for calculation of amount of
compensation payable in a case falling under Section 166 of
-r
the 1988 Act?
F
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. G
·- .._,,..
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 H
340 SUPREME COURT REPORTS (2009] 11 S.C.R.
A 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
B 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
"f
-
multiplier, in terms of the Second Schedule, is required to be
c 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-a-vis the amount of
compensation payable in a case of permanent total disability
and permanent partial disability in terms of the Second
D 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 wherefor the multiplier is not to be
applied at all but in a case involving permanent total disaoility
E 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
F 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
G
disable:ment and proportionate amount of compensation. in
c~se of permanent partial disablement depending upon the ,._,......,.
percentage of disability.
43. Thus, prima facie, it appears that the multiplier
H mentioned in the Second Schedule, although in a given case,
RESHMA KUMARI AND ORS. v. MADAN MOHAN AND 341
ANR. [S.B.SINHA, J.]
may be taken to be a guide but the same is not decisive. To A
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 B
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 c
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 predetermined formula for payment of
compensation to road accident victims on the basis of age/ D
'f 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 E
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 F
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 G
Hon'ble Chief Justice of India for appropriate orders for
constituting a Larger Bench.
G.N. Matter referred to Larger Bench
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