Holding

With the deceased aged 37, the appropriate multiplier is 12 and the interest rate 7.5%, resulting in a total compensation of Rs.6,00,000, with other ancillary expenses unchanged.

Summary

The widow of a bus driver employed by the Tamil Nadu State Transport Corporation (TNSTC) filed a claim for Rs.15,00,000 after his death in a bus accident. The Motor Accident Claims Tribunal awarded Rs.7,72,000 using a multiplier of 16 and 9% interest, also allowing amounts for loss of happiness, love and affection, and funeral expenses. TNSTC appealed, contending that the multiplier and interest rate were excessive and that the ancillary claims were unwarranted. The Supreme Court held that, given the deceased’s age of 37, the appropriate multiplier is 12 and the proper interest rate is 7.5%, fixing the loss of income at Rs.5,76,000 and total compensation at Rs.6,00,000, leaving other awarded expenses unchanged. Consequently, the appeal was allowed in part, reducing the compensation and interest awarded.

Issues considered

The correct multiplier to be applied for compensation in a fatal accident under the Motor Vehicles Act, 1988.
The appropriate rate of interest to be awarded on the compensation amount.
Whether claims for loss of happiness, love and affection, and funeral/transportation expenses should be allowed.
Whether the Tribunal's deduction for personal expenses and the income figure fixed for the deceased can be interfered with.

Legislation cited

Motor Vehicles Act, 1988s. 173

Subjects

motor accident compensationmultiplier methodpecuniary lossinterest rateMotor Vehicles Actfatal accidentdependency lossloss of earningsloss of love and affection

Judgment

A THE MANAGING DIRECTOR, TNSTC
v.
SRIPRIYA AND ORS.

MARCH 8, 2007

B [DR.ARIJITPASAYAT ANDLOKESHWARSINGHPANTA,JJ.)

Motor Vehicles Act, 1988:

Motor accident-Death of victim-Compensation-Computation of-
C Multiplier-Interest-Held, in a fatal accident action, accepted measure of
damages is pecuniary loss suffered by dependents as a result of death-Age
- of deceased being 3 7 years, appropriate multiplier would be 12 and rate of
interest 7. 5-/ncome fixed by Tribunal and deduction for personal expenses
as 113, not interfered with-Other expenses awarded would remain unaltered.

D Respondent's husband, who was a driver in the appellant-Cor:poration,
was traveling in its bus, which met with an accident and as a result he died.
The respondent along with her minor daughter and in-laws filed a claim
petition before the Motor Accident Claims Tribunal for compen:mtion of ~
Rs.15,00,000/· indicating the age of the deceased about 37 years and monthly
salary of Rs.6000/-. The Tribunal adopting a multiplier of 16 and after
E deducting 1/3 for personal expenses, awarded a sum of Rs.7,72,000/- with
9% interest from date of the petition till payment. The Corporation having
remained unsuccessful before the High Court, filed the appeal.

It was contended for the appellant that the multiplier of 16 as adopted
by the Tribunal was high and so also was the rate of interest. It wa:> further
F submitted that claim of Rs.10,000/- for loss of happiness of marriedl life and
loss of love and affection as also Rs.2000/- each for funeral and transportation
expenses should also not have been allowed.

Allowing the appeal in part, the Court

G HELD: l. In a fatal accident action, the accepted measure of damages
awarded to the dependents is the pecuniary loss suffered by them m: a result
of the death. (Para 6) (765-A-B)

Municipal Corporation of Delhi v. Subhagwanti, (1966) 3 SCR 649,
relied on.
H 762
THE MANAGING DIRECTOR, TNSTC v. SRIPRIY A 763
Davies v. Powell Duffryn Associated Collieries Ltd. ALL ER 665, A
referred to.

2.1. 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 B
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. [Para 81
c
G.M Kera/a S.R.T.C. v. Susamma Thomas, AIR (1994) SC 1631; U.P.
State Road Transport Corpn. v. Trilok Chand, [1996) 4 SCALE 22; New India
Assurance Co. Ltd. v. Charlie and Anr., [2005110 SCC 720; U.P. State Road
Transport Corporation v. Krishna Bala and Ors., [2006) 6 SCC 249;
Managing Director TNSTC Ltd v. KI. Bindu, [200518 SCC 473; T.N. State
Transport Corporation Ltd. v. S. Rajapriya, [20051 6 SCC 236; Municipal D
Corpn. Of Greater Bombay v. Laxman Iyer, [2003) 8 SCC 731; State of
Haryana v. Jasbir Kaur, [2003) 7 SCC 484; The New India Assurance
Company Ltd. v. Smt. Kalpana and Ors., (2007) 2 SCALE 227 and New India
Assurance Company Ltd. v. Satendar & Ors., JT (2006) 10 SC 234, relied on.

Mallett v. MC Mangle, [19691 2 All ER 178 and Nance v. British E
Columbia Electric Railway Co. Ltd., [195112 All ER 448, referred to.

2.2. In the instant case, considering the age of the deceased, appropriate
multiplier would be 12. The income fixed by the Tribunal and the deduction
for personal expenses do not warrant any interference. Worked out on that
basis, the entitlement of the loss of income is Rs.5, 76,000/-. The other F
expenses awarded remain unaltered. In other words, total entitlement of the
claimants is fixed at Rs.6,00,000/-. It would be appropriate to fix the rate of
interest at 7.5% instead of9% as done by the Tribunal and maintained by
the High Court. The amount shall be disbursed and appropriated as directed
in the judgment. [Para 14 and 151 [768-C-GI G
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1200 of2007.

From the Judgment and Order dated 26.8.2004 of the High Court of
Judicature at Madras in C.M.A. No. 2404 of 2004.

T. Harish Kumar and R. Ayyam Perumal for the Appellant. H
764 SUPREME COURT REPORTS [2007] 3 S. C.R.

A V. Balaji and P.N. Ramalingam for the Respondents.

The Judgment of the Court was delivered by

DR. ARIJIT PASAYAT, J, I. leave granted

B 2. Challenge in this appeal is to the order passed by a Division bench
of the Madras High Court dismissing the appeal under Section 173 of the
Motor Vehicles Act, 1988 (in short the 'Act') filed by the appellant-Tamil Nadu
State Transport Corporation (hereinafter referred to as the 'Corporation').

3. One Sathyabalan (hereinafter referred to as the deceased') was the
C driver of the appellant-Corporation and was traveling in the corporation bus.
The vehicle met with an accident, the driver of the bus tried to avoid c:ollision
with a lorry, dashed against the bridge. The wall of the bridge broke and the
bys capsized and fell into the river and the deceased who was sitting in the
front seat 'fot buried in the sand and died. The respondent i.e. the widow of
the deceased, his minor daughter and his parents filed a claim petition before
D the Motor Accidents Claims Tribunal, Maylladutturai, (hereinafter refmed to
as the 'Tribunal') claming compensation of Rs. 15,00,000/-. In the claim petition,
it was indicated that the monthly salary of the deceased was Rs. 6,040/- and
he had agricultural income and was aged about 37 years. 'I--

4. The appellant-Corporation took the stand that the accident was
E purely an act of God. There was no negligence which can be attributed to the
driver of the bus The Tribunal allowed the claim petition by the present
respondents and awarded a sum of Rs. 7,72,000/- with 9% interest from the
date of petition till payment. Aggrieved by the compensation awarded the
appellant-Corporation filed an appeal before the Madras High Court. The
same was dismissed as noted above by the impugned judgment. It is to be
F noted that the tribunal had adopted a multiplier of 16 on annual income of
Rs. 6,000/- and after deductien of 1/3 for personal expenses worked out the 1<
entitlement of the claimants.

5. In support of the appeal, learned counsel for the appellant-Corporntion
submitted that the multiplier as adopted is high and same is the case with the
G rate of interest applied . It was pointed out that the loss of income on the
ground of death was fixed at Rs. 7,48,000/- and that for loss of happiness of
married life and loss of love and affection Rs. I0,000/- each was allowed and
for funeral and transportation expenses Rs. 2,000/- each was awaroled.
Therefore, the total entitlement was fixed at Rs. 7, 72,000/-.
H 6. Certain principles were highlighted by this Court in the case of
\
THE MANAGING DIRECTOR. TNSTC v. SRIPRIY A (PASA YAT. J.] 765

Municipal Corporation of Delhi v. Subhagwanti, [1966] 3 SCR 649 in the A
matter of 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 to the death.
"How much has the widow and family lost by the father's death?" The answer
to this lies in the of quoted passage from the opinion of Lord Wright in
Davies v. Powell Duffryn Associated Collieries Ltd., All ER p. 665 A-B ) B
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 expended for his own personal and living C
expenses. The balance will give a datum or basic figure which will
generally be turned 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."
D
7. There were two methods adopted to determine and for calculation of
compensation in fatal accident actions, the first the multiplier mentioned in
Davies case (supra) and the second in Nance v. British Columbia Electric
Railway Co. Ltd., [1951] 2 All ER 448.

8. The multiplier method involves the ascertainment of the loss of E
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 interested. In ascertaining this regard F
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.

9. The considerations generally relevant in the selection of multiplicand
and multiplier were adverted to by Lord Dip lock in his speech in Mallett v. G
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
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 H
766 SUPREME COURT REPORTS [2007) 3 S.C.R.

A 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 spelis of
unemployment. As his children grew up and became independent the
proportion of his earnings spent on his dependants would have been
B likely to fall. But in considering the effect to be given in the award
of damages to possible variations in the dependency there are two
factors to be borne in mind. The fi9rst is that the more remote in the
. future is the anticipated change the less confidence there can be in
the chances of its occurring and the smaller the allowance to be made
for it in the assessment. The second is that as a matter of the arithmetic
c of the calculation of present value , the later ihe change takes place
topless 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 20years
of which the first ten years are at $ I 00 per annum and the second
ten years at $ 200 per annum, is about 12 years purchas~' of the
D arithmetical average annuity of$ 150 per annum , whereas if the first
ten years are at $200 per annum and the second ten years at $ I00
per annum the present value is about 14 years purchase of the
arithmetical mean of $ 150 pc;r annum. If therefore the cha.~ces of
variations in the 'dependency' are to be reflected in the multiplicand
of which the years purchase is the multiplier, variations in the
E dependency which are not expected to take 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 d'lmages."

10. In regard to the choice of the multiplicand the Halsbury's L~ws of
England in vol34, ·para 98 stated the principle thus:
F
"98. Assessment of damages under the Fatal Accident Act, 1976 - The
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
G of the death of a wage-earner that figure is arrived at by deducting
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
H multiplied by the number of years which have elapsed between those
THE MANAGING DIRECTOR, TNSTCv. SRIPRIYA [PASAYAT, J.] 767

two dates. Interest at one-half the short-term investment rate is also A
awarded 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."
B
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 loss
must be discounted to reflect their receipt of interest on invested C
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
exhausted at the age which the court assesses to be the correct age,
having regard to all contingencies. The contingencies of life such as D
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 about 4 or 5 per cent is selected, and inflation
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 E
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 is allowed on the total
figure."

11. In G.M Kera/a S.R.T.C. v. Susarnrna Thomas, AIR (1994) SC 1631 F
and U.P. State Road Transport Corpn. v. Trilok Chand, (1996) 4 SCALE 22
the multiplier appears to have been adopted taking note of the prevalent
banking rate of interest.

12. In Sus am ma Thomas 's case (supra) it was noted that the normal rate
of interest was about 10% and accordingly the multiplier was worked out. As G
the interest rate is on the decline, the multiplier has to consequently 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 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 H
768 SUPREME COURT REPORTS [2007] 3 S. C.R.

A 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 as ordinary Indian Citizen
~ -
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. [See: New
India Assurance Co. Ltd. v. Charlie and Anr., [2005] 10 SCC 720].
B
13. The above position was highlighted in UP. State Road Transport
Corporation v. Krishna Bala and Ors., [2006] 6 SCC 249, Managing Director
TNSTC Ltd. v. K.I. Bindu, [2005] 8 SCC 473, T.N State Transport Corporation
Ltd. v. S. Rajapriya, [2005] 6 SCC 236, Municipal Corpn. of Greater Bombay
v. Laxman Iyer, [2003] 8 SCC 731, State of Haryana v. Jasbir Kaur, (2003) 7
c SC 484, The new India/Assurance Company Ltd. v. Smt Kalpana and Ors.
(2007) 2 SCALE 227, New India Assurance Co. Ltd. v. Satender and Ors., JT
(2006) IO SC 234.

14. Considering the age of the deceased appropriate multiplier would be
12 .The income fixed by the Tribunal and the deduction for personal expenses
D do not warrant any interference. Worked out on that basis, the entitlement of
the loss of income is Rs. 5,76,000/-. The other expenses awarded remain
unaltered . In other words, total entitlement of the claimants is fixed at
Rs.6,00,000/- It would be appropriate to fix the rate of interest at 7.5% instead
of 9% as 'ct<:me by the Tribunal and maintained by the High Court.
""'
E 15. Pursuant to the directions of this Court by Order dated 4.3.2005, it
is stated that a sum of Rs. 4,00,000/: was deposited with the Tribunal .The ·
balance amount on the basis of the judgment shall be deposited within a
period of eight weeks. Out of the total amount a sum of Rs. 1,00,000/- shall
be kept as fixed deposit in respect of respondent No. 1. Further a sum of
Rs. 4,00,000/- shall be kept in fixed deposit in the name of minor, respondent
F No.2 - Sarojini. Fixed deposit ofRs.50,000/- Each shall be made in the names
of respondent No. 3, Lakshmi and respondent No.4-Duraisingam. The balance
amount shall be paid to respondent No.I widow of the deceased Sripriya. The
fixed deposits shall be initially for a period of five years in the name of
1<'
-
respondent Nos. 1,3,and 4. The fixed deposit in the name of respondent No.2
G will be for a similar period but it shall be renewed from time to time till she
attains majority.

16. The appeal is allowed to the aforesaid extent.

RP. Appeal allowed.
'