Holding

The appropriate multiplier for a 38‑year‑old deceased is 12, not 16, and the compensation must be fixed accordingly.

Summary

The Tamil Nadu State Transport Corporation appealed a Motor Vehicles Accident Compensation Claim Tribunal award that granted Rs.6,09,552 to the widow and child of a 38‑year‑old employee who died in a road accident, using a multiplier of 16 under Section 166 of the Motor Vehicles Act, 1988. The corporation argued that the multiplier was excessive and that a lower multiplier should be applied. The Supreme Court examined the principles for fixing the appropriate multiplier, emphasizing factors such as the deceased's age, life expectancy, expected earnings, and prevailing bank interest rates. Relying on earlier decisions, the Court held that the highest multiplier applies to the 21‑25 age group and that for a 38‑year‑old the correct multiplier is 12. Consequently, the compensation was reduced to Rs.4,50,000 with interest fixed at 7.5% per annum, and the appeal was allowed.

Issues considered

Whether the multiplier of 16 applied by the Tribunal for a deceased aged 38 years under Section 166 of the Motor Vehicles Act, 1988 is appropriate

Legislation cited

Motor Vehicles Act, 1988s. 166

Subjects

Motor Vehicles ActSection 166MultiplierCompensationFatal accidentDependency lossInterest rateQuantum of damages

Judgment

TAMIL NADU STATE TRANSPORT CORPORATION LTD. A
v.
S. RAJAPRIY A AND ORS.

APRIL 20, 2005

[ARIJIT PASAYAT AND S.H. KAPADIA, JJ.] B

Motor Vehicles Act, 1988 :

Section 166-Quantum of Compensation-Assessment of-Adopting
appropriate multiplier-Deceased aged 38 years-Jn the facts and C
circumstances of the case multiplier of 12 would be appropriate and not 16
as adopted by Courts below.

Multiplier-Fixation of appropriate multiplier.!-Determining factors-
Discussed
D
The question which arose for consideration in the present appeal is
whether the multiplier of 16 was appropriate while assessing the quantum
of compensation payable on the death of a person aged 38 years in an
automobile accident.

Allowing the appeal, the Court E
HELD : 1. While assessing the damages to compensate the
dependants many imponderables have to be taken into account e.g., the
life expectancy of the deceased and the dependants, the amount that the
deceased would have earned during the remainder of his life, the amount
that he would have contributed to the dependants during that period, the F
chances that the deceased may not have lived or the dependants 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 together etc. The manner
of arriving at the damages is to ascertain the net income of the deceased G
available for the· support of himself and his dependants, 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 dependants. (741-D-G)
737 H
738 SUPREME COURT REPORTS [2005] 3 S.C.R.

A Municipal Corporation of Delhi v. Subhagwanti, 11966) 3 SCR 649;
Gobald Motor Service Ltd. v. R.MK. Vel':'swami, 1196211 SCR 929, referred
to.

Davies v. Powell Duffregn Associated Collieries Ltd, (1942) AC 601;
Baker v. Bolton, 11979) l All ER 774; Nance v. British Columbia Electric
B Railway Co. Ltd., 11951) 2 All ER 448 and Mallett v. Mc Mong/e, (1969) 2 I
I

All ER 178, referred to.
'
2. The multiplier method involves the ascertainment of the loss of \
dependency or the multiplicand having regard to the circumstances of
C the case and capitalizing the multiplicand by an approprfate 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, r.egard should also be had to the fact that ultimately the
D capital sum should also be consumed-up over the period for which the
dependency is expected to last. The multiplier has to be adopted taking
note of the prevalent banking rate of interest. 1742-A-C; 744-C-D)

General Manager, Kera/a State Road Transport Corporation,
Trivandrum v. Susamma Thomas (Mrs.) and Ors., 11994) 2 SCC 176; U.P.
E State Road Transport Corporation and Ors. v. Trilok Chandra and Ors.,
(1996) 4 sec 362, relied on.

Ha/sbury's Laws of England, referred to.

3. Th·e highest multiplier has to be for the age group of 21 years to
F 25 years when an ordinary Indian Citiun starts independently earning
and the lowest would be in respect of a person in the age group of 60 to
70, which is the normal retirement age. Considering the age of the deceased
and the principles indicated above, the appropriate multiplier would be
12 and not 16 as adopted by the Tribunal and affirmed by the High
G Court. By applying multiplier 12, amount of compensation is fixed at
Rs.4,50,000. The Tribunal has fixed interest @ 9% per annum from the
date of the claim petition. Taking note of the prevailing rate of interest in
bank deposits, the same is fixed at 7.5% per annum. (744-F-G)

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2765 of 2005.
H
TAMILNADUSTATETRANSPORTCORPORATIONLTD.v.S.RAJAPRIYAcPASAYAT,J.] 739

From the Judgment and Order dated 18.9.2003 of the Madras High A
Court in C.M.A. No. 2351 of 2003.

Subramonium Prasad for the Appellant.

The Judgment of the Court was delivered by
B
ARIJIT PASAYAT, J. Leave granted.

Tamil Nadu State Transport Corporation Ltd. (hereinafter referred to as
the 'Corporation') calls in question legality of the judgment rendered by a
Division Bench of the Madras High Court dismissing the appeal filed by the
Corporation. By the impugned order the Division Bench confirmed the C
compensation awarded to the respondents by the Motor Vehicle Accident
Compensation Claim Tribunal, Principal District Judge, Thanjur (in short the
'Tribunal').

Background facts in a nutshell are as follows :
D
On 30.8.2001 one Sathyamunhy (hereinafter referred to as the
'deceased') lost his life in an automobile accident. His widow (respondent
no. I) and minor son (respondent no.2) filed petition claiming compensation
under the Motor Vehicles Act, 1988 (in short the 'Act'). Deceased's mother
was impleaded as respondent no.2 in the claim petition, while the Corporation E
was impleaded as respondent no. l. It was stated in the claim petition that the
accident occurred due to rash and negligent driving of the Corporation's
driver. Claim of Rs. 20 lakhs was made. Tribunal noted that the deceased was
about 38 years of age and was getting monthly salary of Rs.4688 (annually
Rs.56,208) from the Corporation. After deductions one-third for personal
expenses contribution of the deceased was fixed at Rs.37,472 per annum. As F
the deceased was about 38 years of age, multiplier of 16 was applied.
Accordingly, the compensation was worked out at Rs.6,09,552. The award
wa5 questioned in appeal before the Madras High Court and the Division
Bench as noted above, dismissed the same.

In support of the appeal, learned coun3el for the appellant submitted G '
that quantum as arrived at by applying multiplier of 16 is high. There is no
appearance on behalf of the respondents in spite of the notice. While issuing
notice on 22.3.2004 the dispute was restricted to the appropriate multiplier to
be adopted. The question regarding appropriate multiplier has been considered
by this Court in General Manager, Kera/a State Road Transport Corporation, H
740 SUPREME COURT REPORTS [2005] 3 S.C.R.

A Trivandrum v. Susamma Thomas (Mrs.) and Ors., [1994] 2 SCC 176 and
U.P. State Road Transport Corporation and Ors. v. Trilok Chandra and
Ors., [I 996] 4 sec 362.

Certain principles were highlighted by this Court in the case of Municipal
Corporation of Delhi v. Subhagwanti, [1966] 3 SCR 649 in the matter of
B fixing the appropriate multiplier and computation of compensation. In a fatal
accident action, the accepted measure of damages awarded to the dependants
is the pecuniary loss suffered by them as a result of the death. "How much
has the widow and family lost by the father's death?" The answer to this lies
in the oft quoted passage from the opinion of Lord Wright in Davies v.
C Powell Duffregn Associated Collieries Ltd., (1942) AC 601 which says :

"The starting point is the amount of wages which the deceased
was earning, the ascertainment of which to some extent may depend
on the regularity of his employment. Then there is an estimate of how
much was required or expen~ed for his own personal and living
D expenses. The balance will give a datum or basic figure which will
generally be turned into a lump sum by taking a certain number of
years' purchase. That sum, however, has to be taxed down by having
due regard to uncertainties, for instance, that the widow might have
again married and thus ceased to be dependent, and other like matters
of speculation and doubt."
E
The rule in common law in Baker v. Bolton, [1979] 1 All ER 774
enunciated by Lord Ellenborough was that "in a Civil Court, the death of a
human being could not be complained of as a injury,". Indeed, the maxim
action personalis moritur cum persona, ha~ the effect that all actions in tort,
F with very few exceptions, also became extinguished with that person. Great
changes were brought about by the Fatal Accidents Act, 1846 (now Fatal
Accidents Act, 1976) and the Law Reforms (Miscellan·eous Provisions) Act,
1934. Under the statute, as indeed under the Indian Statute as well, there are
two separate and distinct cause of action, which are maintainable, in
consequence of a person's death. There were the dependant's claim for the
G financial loss suffered and acclaim for injury, loss or damage, whkh the
deceased would have had, had he lived, and which survives for the benefit
of his estate.

The measure of damage is the pecuniary loss suffered and is likely to
be suffered by each dependant. Thus "except where there is express statutory
H direction to the contrary, the damages to be awarded to a dependant of a
TAMILNADUSTATETRANSPORTCORPORATION LTD. v. S. RAJAPRIYA[PASAYAT,J.] 741

deceased person under the Fatal Accidents Acts must take into account any A
pecuniary benefit accruing to that dependant in consequence of the death of
the deceased. It is the net loss on balance which constitutes the measure of
damages." Lord Wright in the Davies 's case (supra) said, "The actual pecuniary
loss of each individual entitled to sue can only be ascertained by balancing
on the one hand the loss to him of the future pecuniary benefit, and on the B
other any pecuniary advantage which from whatever sources comes to him
by reason of the death." These words of Lord Wright were adopted as the
principle applicable also under the Indian Act in Gobald Motor Service Ltd
v. R.MK. Veluswami, [1962] 1 SCR 929 where this Court stated that the
general principle is that the actual pecuniary loss can be ascertained only by
balancing on the one hand the loss to the claimant of the future pecuniary C
benefit and on the other any pecuniary advantage which from whatever sources
comes to them by reason of the death, that is, the balance of loss and gain
to a dependant by the death, must be ascertained.

The assessment of damages to compensate the dependants is beset with
difficulties because from the nature of things, it has to take into account D
many imponderables, e.g., the life expectancy of the deceased and the
dependants, the amount that the deceased would have earned during the
remainder of his life, the amount that he would have contributed to the
dependants during that period, the chances that the deceased may not have

-- lived or the dependants 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 together.
E

The manner of arriving at the damages is to ascertain the net income
of the deceased available for the support of himself and his dependants, and
to deduct therefrom such part of his income as the deceased was accustomed F
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 dependants. Then that should be capitalized by
multiplying it by a figure representing the proper number of year's purchase.

Much of the calculation necessarily remains in the realm of hypothesis G
"and in that region arithmetic is a good servant but a bad master" since there
are so often many imponderables. In every case "it is the overall picture that
matters", and the court must try to assess as best as it can the loss suffered.

There were two methods adopted to determine and for calculation of
compensation in fatal accident actions, the first the multiplier mentioned in H
742 SUPREME COURT REPORTS [2005) 3 S.C.R.

A Davies case (supra) and the second in Nance v. British Columbia Electric
Railway Co. Ltd., [ 1951] 2 All ER 448 .

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
B 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-
C up over the period for which the dependency is expected to last.

The considerations generally relevant in the selection of multiplicand
and multiplier were adverted to by Lord Diplock in his speech in Mal/eu v.
Mc Mangle, [1969] 2 All ER 178 where the deceased was aged 25 and left
behind his widow of about the same age and three minor children. On the
D question of selection of multiplicand Lord Diplock observed :

"The starting point in any estimate of the amount of the 'dependency'
is the annual value of the material benefits provided for the dependants
out, of the earnings of the deceased at the date of his death. But. ...there

E
are many factors which might have led to variations up or down· in
the future. His earnings might have increased and with them the
amount provided by him for his dependants. They might have
--
diminished with a recession in trade or he might have had spells of
unemployment. As his children grew up and became independent the
proportion of his earnings spent on his dependants would have been
likely to fall. But in considering the effect to be given in the award
F
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 Jess confidence there can be in the
chances of its occurring and the smaller the allowance to be made for
it in the assessment. The second is that as a matter of the arithmetic
G of the calculation of present value, the later the change takes place
the less will be its effect upon the total award of damages. Thus at
interest rates of 4- 1/2% the present value of an annuity for 20 years
of which the first ten years are at $ 100 per annum and the second
ten years at $ 200 per annum, is about 12 years' purchase: of the
arithmetical average annuity of $ 150 per annum, whereas if the first
H
TAMIL NADU STATE TRANSPORT CORPORATION LTD. v. S. RAJAPRIYA [PASA VAT, J.] 743

ten years are at $200 per annum and the second ten years at $ I 00 A
per annum the present value is about 14 years' purchase of the
arithmetical mean of $ 150 per annum. If therefore the chances of
variations in the 'dependency' are to be reflected in the multiplicand
of which the years' purchase is the multiplier, variations in the
dependency which are not expected to take place until after ten years
should have only a relatively small effect in increasing or diminishing B
the 'dependency' used for the purpose of assessing the damages."

In regard to the choice of the multiplicand the Halsbury's Laws of
England in vol. 34, para 98 states the principle thus:

"98. Assessment of damages under the Fatal Accident Act, 1976 The C
courts have evolved a method for calculating the amount of pecuniary
benefit that dependants could reasonably expect to have received
from the deceased in the future. First the annual value to the dependants
of those benefits (the multiplicand) is assessed. In the ordinary case
of the death of .a wage-earner that figure is arrived at by deducting D
from the wages the estimated amount of his own personal and living
expenses.

The assessment is split into two parts. The first part comprises
damages for the period between death and trial. The multiplicand is
multiplied by the number of years which have elapsed between those E
two dates. Interest at one-half the short-term investment rate is also
award.!d on that multiplicand. The second part is damages for the
period from the trial onwards. For that period, the number of years
which have based on the number of years that the expectancy would
probably have lasted; central to that calculation is the probable length
of the deceased's working life at the date of death." F
As to the multiplier, Halsbury states :

"However, the multiplier is a figure considerably less than the number
of years taken as the duration of the expectancy. Since the dependants
can invest their damages, the lump sum award in respect of future G
loss must be discounted to reflect their receipt of interest on invested
funds, the intention being. that the dependants will each year draw
interest and some capital (the interest element decreasing and the
capital drawings increasing with the passage of years), so that they
are compensated each year for their annual loss, and the fund will be H
744 SUPREME COURT REPORTS (2005) 3 S.C.R.

A exhausted at the age which the court assesses to be the correct age,
having regard to all contingencies. The contingencies of life such as
illness, disability and unemployment have to be taken into account.
Actuarial evidence is admissible, but the courts do not encourage
such evidence. The calculation depends on selecting an assumed rate
of interest. In practice abciut 4 or 5 per cent is selected, and inflation
B is disregarded. It is assumed that the return on fixed interest bearing
securities is so much higher than 4 to 5 per cent that rough and ready
allowance for inflation is thereby made. The multiplier may be
increased where the plaintiff is a high tax payer. The multiplicand
is based on the rate of wages at the date of trial. No interest
c is allowed on the total figure."

In both Susamma Thomas and Trilok Chand's cases (supra) the multiplier
appears to have been adopted taking note of the prevalent banking rate of
interest.

D In Susamma Thomas 's case (supra) it was noted that the nonnal rate of
interest was about 10% and accordingly the multiplier was worked out. As
the interest rate is on the decline, the multiplier has to consequentially be
raised. Therefore, instead of 16 the multiplier of 18 as was adopted in Trilok
Chandra's case (supra) appears to be appropriate. In fact in Trilok Chand's
E case '(supra), after reference to Second Schedule to the Act, it was noticed
that the same suffers from many defects. It was pointed out that the same is
to serve as a guide, but cannot be said to be invariable ready reckoner.
However, the appropriate highest multiplier was held to be 18. The highest
multiplier has to be for the age group of 21 years to 25 years when an
ordinary Indian Citizen starts independently earning and the lowest would be
F in respect of a person in the age group of 60 to 70, which is the nmmal
retirement age.

Considering the age of the deceased and the principles indicated above,
the appropriate multiplier would be 12 and not 16 as adopted by the Tribunal
and affirmed by the High Court. By applying multiplier 12, amount of
G compensation is fixed at Rs.4,50,000 (in round figures). The Tribunal has
fixed interest @ 9% per annum from the date of the claim petition. Taking
note of the prevailing rate of interest in bank deposits, the same is fixed at
7.5% per annum. It is stated that a sum of Rs.4,00,000 has been deposited
pursuant to the order dated 22.3.2004. The balance amount shall be deposited
H with the Tribunal within four weeks from today. Out of the total deposit 90%
TAMIL NADU STA TE TRANSPORT CORPORATION LTD. v. S. RAJAPRIY A [PASAYAT, J.] 745

of the amount shall be kept in fixed deposit in the name of widow (respondent A
no.I), minor child (respondent no.2) and the mother (respondent no.3) in the
proportion of 35%, 40% and 15% respectively. Rest 10% shall be paid in
cash equally to the widow and the mother. Fixed deposits shall be made
initially for a period of five years and no withdrawal permitted and only
monthly interest will be paid, so far as the fixed deposits in the names of the B
widow and the mother are concerned. So far as the minor child is concerned,
fixed deposit shall be made initially for a period of five years and shall be
renewed till the child attains majority. The monthly interest on the deposit
shall also be released to the mother as the guardian of the minor.

No loan advance of any kind and/or pre-mature encashment shall be C
permitted in respect of the fixed deposits. Hnwever, on an application being
made to the Tribunal and it being satisfied about the urgency of any need and
absence of financial resources to meet any urgent financial need may permit
loan or advance or pre-mature encashment by a reasoned order.

Appeal is allowed to the extent indicated. No costs.

D.G. Appeal allowed.