Holding

The appropriate multiplier is determined by the age of the deceased, not years of service left, and for a 36‑year‑old the correct multiplier is 13 with interest at 9% per annum.

Summary

The appellant, U.P. State Road Transport Corporation, challenged the award of Rs.5,12,000 made by a Motor Accident Claims Tribunal to the widows and children of Rajveer Singh, who died in a motor accident on 29‑Nov‑1990. The Tribunal had used a multiplier of 22, based on the deceased’s presumed 22 years of service left, and granted interest at 12% per annum. The corporation contended that both the multiplier and the interest rate were excessive. The Supreme Court examined the principles governing the multiplier method, noting that the multiplier must be derived from the age of the deceased and that the Second Schedule of the Motor Vehicles Act is only a guide, not a rigid formula. Relying on precedents such as Municipal Corporation of Delhi v. Subhagwanti and Halsbury’s Laws, the Court held that for a 36‑year‑old deceased the appropriate multiplier is 13 and the prevailing interest rate is 9%. Accordingly, the compensation should be reduced to Rs.3,37,000 with interest at 9% from the filing date. The appeal was partly allowed, setting aside the higher award.

Issues considered

Whether the multiplier of 22 adopted by the Motor Accident Claims Tribunal is appropriate for a deceased aged 36 years
Whether the interest rate of 12% per annum granted by the Tribunal is appropriate

Legislation cited

Motor Vehicles Act, 1988s. 166

Subjects

Motor Accident Claims TribunalMultiplierCompensationInterest rateFatal accidentDependency lossMotor Vehicles ActActuarial calculation

Judgment

A U.P. STATE ROAD TRANSPORT CORPORATION
v.
KRISHNA BALA AND ORS.

JULY 13, 2006

B [APJJITPASAYAT AND AL TAMAS KABIR,JJ.]

Motor Vehicles Act, 1988-Section 166-Multiplier-Determination
of-Deceased aged 36 years-Multiplier of 22 adopted by tribunal-
C Correctness of-Held. incorrect-Appropriate multiplier would be 13-lnterest
rate also reduced from 12% to 9%.

The question which has arisen for consideration in the present appeal
is whether the Tribunal was right in adopting multiplier of 22 in awarding
compensation to the widow and children of the deceased aged 36 years who
D died in motor accident and in granting interest @ 12% from the date of
application.

Partly allowing the appeal, the Court

HELD: I. The multiplier method involves the ascertainment of the loss
E of dependency or the multiplicand having regard to the circumstances of the
case and capitalizing of multiplicand by an appropriate multiplier. The choice
of the multiplier is determined by the age of the deceased (or that of the
claimants whichever is higher) and by the calculation as to what capital sum,
if invested at a rate of interest appropriate to a stable economy, would yield
the multiplicand by way of annual interest. In ascertaining this, regard should
F 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. [509-B-DI

2. The second schedule serve as a guide and is not a ready reckoner.
The highest multiplier has to be for the age group of 21 years to 25 years
G when an 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. [511-F-Gl

Municipal Corporation of Delhi v. Subhagwanti, [19661 3 SCC 649,
referred to.
H 506
U.P. STA TE ROAD TRANSPORT CORPN. v. KRISHNA BALA [PASAYA T,J.] 507

Davies v. Powell Duffryn Associated Collieries Ltd, All ER 665; Nance A
v. British Columbia Electric Railway Co. Ltd, [1951 [ 2 All ER448 and Mallett
v. Mc Mangle, [1969[ 2 All ER 178, referred to.

Hals bury 's Laws of England (Vol. 34), referred to.

3. The multiplier as adopted by the Tribunal and maintained by the High B
Court is clearly indefensible. Considering the age of the deceased the
multiplier would be 13. Calculated on that basis by taking monthly loss of
dependency at Rs.2000/- (after adjusting for personal expenses and likelihood
of increase in salary) the compensation to be awarded would be Rs.3,12,000/
-. To the aforesaid sum would be added Rs.25,000/- awarded by the Tribunal C
for deprivation of love and affection and funeral expenses and, therefore,
entitlement of the claimants is Rs.3,37,000/-. The accident took place on
29.11.1990. Therefore, the rate of interest would be 9% from the date of filing
of the claim petition. (SI 1-G-H; 512-A-BI

New India Assurance Co. Ltd. v. Charlie and Anr.. (20051 IO SCC 720; D
G.M. Kerela SRTC v. Susamma Thomas (1994) 2 SCC 176 and U.P.SRTC v.
Trilok Chandra, (1996[ 4 SCC 362, relied on.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4267 of2002.

From the Judgment and Order dated 3.9.2001 of High Court of Judacutre E
at Allahabad, in First Appeal from Order No. 1037/1992.

Sangeeta Kumar and Vijay Kumar for the Appellant.

Nagendra Singh and Vishwa Pal Singh for the Respondents.

The Judgment of the Court was delivered by
F

ARIJIT PASAYA T, J. Challenge in this Appeal is to the judgment of a
Division Bench of the Allahabad High Court which dismissed the First Appeal
filed by the appellant against the Award passed by a Motor Accident Claims
Tribunal (XII Additional District Judge, Meerut) (in short the 'Tribunal'.)
G
.,:-~ -~ By the Award made. the Tribunal awarded compensation of Rs. 5, I 2,000/
- to the respondents (hereinafter referred to as the 'Claimants'). One Rajveer
Singh (hereinafter referred to as the 'deceased') died in a motor accident on
29.11.1990. The claimants filed a claim petition under the Motor Vehicles Act,
• 1988 (in short the 'Act'). Age of the deceased was around 36 years and he H
508 SUPREME COURT REPORTS [2006] SUPP. 3 S.C.R.

A is earning monthly salary of Rs.2300/- per month. Though claim of agricultural
income was made, the Tribunal did not accept the same. It adopted multiplier
of 22 on the ground that the deceased had 22 years of service left. It was
further noted that thereafter the deceased would have got pension. The
widow of the deceased and children were awarded Rs.20,000/- towards love
B and affection, and Rs.5,000/- for funeral rites. After adopting a multiplier of
22 the amount was fixed Rs.6,07,200/-. After taking note of personal expenses
the loss of dependency was fixed at Rs.1600 per month. In addition interest
at the rate of 12% from the date of application was granted.

The Corporation questioned correctness of the award before the High
C Court. It, inter a/ia, submitted that the multiplier adopted and the rate of
interest therein was high. The High Court dismissed the appeal almost
summarily holding that the award was not excessive.

In support of the appeal, learned counsel for the appellant - Corporation
submitted that the multiplier of 22 adopted by the Tribunal and maintained
D by the High Court is high considering the age of deceased. Similarly rate of
interest is 12% per annum as awarded by the trial court and maintained by
the High Court is characterized as high.

Learned counsel for the respondents submitted that the multiplier and
the interest have been correctly applied. It is further submitted that the
E amount awarded is very small and hence this Court should not interfere.

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 fixing the appropriate multiplier and computation of compensation.
In a fatal accident action, the accepted measure of damages awarded to the
F 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. Powell DuffiJ'n Associated Collieries Ltd., All ER p.665 A-B) which
says:
G "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

H
expenses. The balance will give a datum or basic figure which will
generally be turned sum, however, has to be taxed down by having
-
UP. STATEROADTRANSPORTCORPN. v. KRISHNA BALA [PASAYAT,J.] 509

due regard to uncertainties, for instance, that the widow might have A
again married and thus ceased to be dependent, and other like matters
of speculation and doubt."

There were two methods adopted to detennine 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 B
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
of the multiplier is determined by the age of the deceased (or that of the C
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. D
The considerations generally relevant in the selection of multiplicand
and multiplier were adverted ~to by Lord Diplock in his speech in Mallett 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
question of selection of multiplicand Lord Diplock observed: E
"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
are many factors which might have led to variations up or down in
the future. His earnings might have increased and with them the F
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 G
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 chancesof 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
,. of the calculation of present value, the later the change takes place H
510 SUPREME COURT REPORTS (2006] SUPP. 3 S.C.R.

A the less will be its effect upon the total award of damages. Thus at
interest rates of 4\1,% the present value of an annuity for 20 years of
which the first ten years are at $ I00 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 $ I00 per annum the
B 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
c a relatively small effect in increasing or diminishing the 'dependency'
used for the purpose of assessing the damages."

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

D "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 of the death of a wage-earner that figure is arrived at
E 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
multiplied by the number of years which have elapsed between those
F two dates. Interest at one-half the short-term investment rate is also
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
G of the deceased's working life at the date of death."

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
H
can invest their damages, the lump sum award in respect of future loss ...
U.P. STATE ROADTRANSPORTCORPN. v. KRISHNA BALA [PASAYAT,J.] Sil
must be discounted to reflect their receipt of interest on invested A
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 wHI 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 B
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 c
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}vages at the date of trial. No interest is allowed on the total
figure."
D
In both G.M Kera/a, SRTC v. Susamma Thomas, (1994] 2 SCC 176 and
U.P. SRTC v. Trilok Chand, [1996] 4 SCC 362 the multiplier appears to have
been adopted taking note of the prevalent banking rate of interest.

In Susamma Thomas's case (supra) it was noted that the normal rate of
interest was about I0% and accordingly the multiplier was worked out. As E
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
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 F
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 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] IO SCC 720). G

Considering the principles as set out above the multiplier as adopted
by the Tribunal and maintained by the High Court is clearly indefensible.
Considering the age of the deceased the aforesaid multiplier would be 13.
Calculated on that basis by taking monthly loss of dependency at Rs. 2.000
H c
512 SUPREME COURT REPORTS [2006] SUPP. 3 S.C.R.

A (after adjusting for personal expenses and likelihood of increase in salary) the
compensation to be awarded would be Rs.3, 12,000/-. To the aforesaid sum
would be added Rs.25,000/- awarded by the Tribunal for deprivation of love
and affection and funeral expenses and, therefore, entitlement of the claimants
is Rs.3,37,000/-. The accident took place on 29.11.1990. Therefore, the rate of
B interest would be 9% from the date of filing of the claim petition. Claimants
would be entitled accordingly. Appeal is allowed to the aforesaid extent. No
orders as to costs.
·-
D.G. Appeal partly allowed.