RESHMA KUMARI vs. MADAN MOHAN

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 4646 OF 2009 Reshma Kumari and Ors. … Appellants Vs. Madan Mohan and Anr. … Respondents WITH CIVIL APPEAL NO. 4647 OF 2009 JUDGMENT R.M. LODHA,J . A two-Judge Bench (S.B. Sinha and Cyriac Joseph, JJ.) JUDGMENT proceeded to hear these appeals on two common questions, namely, (1) Whether multiplier specified in the Second Schedule appended to the Motor Vehicles Act, 1988 (for short “the 1988 Act”) should be scrupulously applied in all cases? and (2) Whether for determination of the multiplicand, the 1988 Act provides for any criterion, particularly as regards determination of future prospect. In the course of hearing few decisions of this Court, General Manager, Kerala State Road 1 Page 1 Transport Corporation, Trivandrum v. Susamma Thomas (Mrs.) and 1 2 Ors ., Sarla Dixit (Smt.) and Anr. v. Balwant Yadav and Ors ., U.P. State Road Transport Corporation and Ors. V. Trilok Chandra and

4 Co. Ltd. and Ors. , United India Insurance Co. Ltd. & Ors. v. Patricia 5 6 Jean Mahajan & Ors. , Jyoti Kaul & Ors. v. State of M.P. & Anr. , Abati 7 Bezbaruah v. Dy. Director General, Geological Survey of India & Anr. , 8 New India Assurance Co. Ltd. v. Shanti Pathak (Smt.) & Ors. , were cited. The attention of the Bench was also invited to Sections 163A and 166 of the 1988 Act. The Bench was of the opinion that the question, whether the multiplier specified in the Second Schedule should be taken to be guide for calculation of amount of compensation payable in a case falling under Section 166 of the 1988 Act needed to be decided by a larger Bench. The reasons for referring JUDGMENT the above issue to the larger Bench indicated in the referral order dated 23.07.2009 read as under: “39. We have noticed hereinbefore that in Patricia Jean 5 7 Mahajan 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 1 1994 (2) SCC 176 2 1996 (3) SCC 179 3 1996 (4) SCC 362 4 2001 (2) SCC 9 5 2002 (6) SCC 281 6 2002 (6) SCC 306 7 2003 (3) SCC 148 8 2007 (10) SCC 1 2 Page 2

JUDGMENT 3 Page 3

2. We are concerned with the above reference . Before we refer to the provisions contained in Sections 163A and 166 of the 1988 Act, JUDGMENT it is of some relevance to notice the background in which the Parliament considered it necessary to bring in the provisions of no fault liability on the statute. It so happened that in Minu B. Mehta and Anr. 9 v. Balkrishna Ramchandra Nayan and Anr. , a three-Judge Bench of this Court while considering the question whether the fact of injury resulting from the accident involving the use of a vehicle on the public road is the basis of a liability and that it is not necessary to prove any 9 1977 (2) SCC 441 4 Page 4 negligence on the part of the driver, held that the liability of the owner of the car to compensate the victim in a car accident due to the negligent driving of his servant is based on the law of tort and before

servant was acting during the course of his employment and that he was negligent. This Court held that the concept of owner’s liability without any negligence is opposed to the basic principles of law. The mere fact that a person died or a party received an injury arising out of the use of a vehicle in a public place cannot justify fastening liability on the owner. This Court noticed a judgment of Madras High Court in M/s Ruby Insurance Co. v. Govindaraj, (A.A.O. Nos. 607 of 1973 and 296 of 1974) decided on December 13, 1976 wherein the necessity of having social insurance to provide cover for the claimants irrespective of proof of negligence to a limited extent was suggested. This Court JUDGMENT said “unless these ideas are accepted by the legislature and embodied in appropriate enactments Courts are bound to administer and give effect to the law as it exists today. We conclude by stating that the view of the learned Judges of the High Court has no support in law and hold that proof of negligence is necessary before the owner or the insurance company could be held to be liable for the payment of compensation in a motor accident claim case”. 5 Page 5 3. The Parliament having regard to the above view of this Court and the recommendation of the Law Commission of India, amended the Motor Vehicles Act, 1939 (for short, “1939 Act”) and inserted

under sub-section (1) of Section 92-A, the claimant shall not be required to plead and establish that the death or permanent disablement in respect of which the claim has been made was due to any wrongful act, neglect or default of the owner or owners of the vehicles concerned or of any other person. 4. In Gujarat State Road Transport Corporation, Ahmedabad v. 10 Ramanbhai Prabhatbhai and Another , a two-Judge Bench held that the compensation awardable under Section 92-A was without proof of any negligence on the part of the owner of the vehicle or any other person which was clearly a departure from the usual common law JUDGMENT principle that a claimant should establish negligence on the part of the owner or driver of the motor vehicle before claiming any compensation for the death or permanent disablement caused on account of a motor 9 vehicle accident. Certain observations made in Minu B. Mehta were 10 held to be obiter in Ramanbhai Prabhatbhai . 5. The 1988 Act replaced the 1939 Act. Chapter X of the 1988 Act deals with liability without fault in certain cases. Sub-section (3) of 10 1987 (3) SCC 234 6 Page 6 Section 140 provides that in any claim for compensation under sub- section (1) the claimant shall not be required to plead and establish that the death or permanent disablement in respect of which the claim

owner or owners of the vehicle or vehicles concerned or of any other person. Chapter XI of the 1988 Act deals with insurance of motor vehicles against third party risks. Chapter XII deals with the claims tribunals. Section 166 makes a provision for application for compensation arising out of an accident which after few amendments reads as under: “Section 166 - Application for compensation (1) An application for compensation arising out of an accident of the nature specified in sub-section (1) of section 165 may be made- (a) by the person who has sustained the injury; or JUDGMENT (b) by the owner of the property; or (c) where death has resulted from the accident, by all or any of the legal representatives of the deceased; or (d) by any agent duly authorised by the person injured or all or any of the legal representatives of the deceased, as the case may be: Provided that where all the legal representatives of the deceased have not joined in any such application for compensation, the application shall be made on behalf of or for the benefit of all the legal representatives of the deceased and the legal representatives who have not so joined, shall be impleaded as respondents to the application. 7 Page 7

Provided that where no claim for compensation under section 140 is made in such application, the application shall contain a separate statement to that effect immediately before the signature of the applicant. (4) The Claims Tribunal shall treat any report of accidents forwarded to it under sub-section (6) of section 158 as an application for compensation under this Act.” 6. By Act 54 of 1994, Section 163A was brought in the 1988 Act w.e.f. 14.11.1994. Section 163A may be reproduced which reads as under:- “163-A. Special provisions as to payment of compensation on structured formula basis .—(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 case of death or permanent disablement due to accident arising out of the use of motor vehicle, compensation, as indicated in the Second Schedule, to the legal heirs or the victim, as the case may be. Explanation .—For the purposes of this sub-section, ‘permanent disability’ shall have the same meaning and 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 death or permanent disablement in respect of which the claim has been made was due to any wrongful act or neglect or default of the owner of the vehicle or vehicles concerned or of any other person. JUDGMENT 8 Page 8 (3) The Central Government may, keeping in view the cost of living by notification in the Official Gazette, from time to time amend the Second Schedule.”

government to amend the Second Schedule from time to time keeping in view the cost of living. 8. Consequent upon the insertion of Section 163A in the 1988 Act, certain amendments were brought in the 1988 Act. Sub-section (5) which was inserted in Section 140 reads as follows: “Notwithstanding anything contained in sub-section (2) regarding death or bodily injury to any person, for which the owner of the vehicle is liable to give compensation for relief, he is also liable to pay compensation under any other law for the time being in force. Provided that the amount of such compensation to be given under any other law shall be reduced from the amount of compensation payable under this section or under section 163A.” JUDGMENT 9. Section 163B was also brought in the 1988 Act along with Section 163A. Section 163B reads as follows: “163B. Option to file claim in certain cases. – Where a person is entitled to claim compensation under section 140 and section 163A, he shall file the claim under either of the said sections and not under both.” 10. The 1988 Act gives choice to the claimants to seek compensation on structured formula basis as provided in Section 163A or make an application for compensation arising out of an accident of 9 Page 9 the nature specified in sub-section (1) of Section 165 under Section 166. The claimants have to elect one of the two remedies provided in Section 163A and Section 166. The remedy provided in Section 163A

provides for an alternative course to Section 166. By incorporating Section 163A in the 1988 Act, the Parliament has provided the remedy for payment of compensation notwithstanding anything contained in the 1988 Act or in any other law for the time being in force or instrument having the force of law, that the owner of a motor vehicle or authorised insurer shall be liable to pay compensation on structured formula basis as indicated in the Second Schedule in the case of death or permanent disablement due to accident arising out of the use of motor vehicle. The peculiar feature of Section 163A is that for a claim made thereunder, the claimants are not required to plead or JUDGMENT establish that the death or permanent disablement in respect of which the claim has been made was due to any wrongful act or neglect or default of the owner or owners of the vehicle concerned. The scheme of Section 163A is a departure from the general principle of law of tort that the liability of the owner of the vehicle to compensate the victim or his heirs in a motor accident arises only on the proof of negligence on the part of the driver. Section 163A has done away with the 10 Page 10 requirement of the proof of negligence on the part of the driver of the vehicle where the victim of an accident or his dependants elect to apply for compensation under Section 163A. When an application for

as indicated in the Second Schedule. The table in the Second Schedule has been found by this Court to be defective to which we shall refer at a little later stage. 11. On the other hand, by making an application for compensation arising out of an accident under Section 166 it is necessary for a claimant to prove negligence on the part of the driver or owner of the vehicle. The burden is on the claimant to establish the negligence on the part of the driver or owner of the vehicle and on proof thereof, the claimant is entitled to compensation. We are confronted with the question, whether while considering an application JUDGMENT for compensation made under Section 166, the multiplier specified in the Second Schedule can be taken to be guide for determination of amount of the compensation. 1 12. In Susamma Thomas , this Court noticed the two decisions of House of Lords, (1) Davies & Anr. v. Powell Duffryn 11 Associated Collieries Ltd. and (2) Nance v. British Columbia Electric 11 1942 (1) All ER 657 11 Page 11 12 Railway Co. Ltd. wherein two different methods – lump sum method and multiplier method - were adopted for determination and for calculation of compensation in fatal accident actions. This Court has

holding so, this Court also referred to another decision of House of 13 Lords in Mallett v. Mc Monagle . It has been laid down in Susamma 1 Thomas that multiplier method was logically sound and legally well established. The multiplier represented the number of year’s purchase on which the loss of dependency is capitalized. The multiplier method involves the ascertainment of the loss of dependency or the multiplicand having regard to the circumstances of the case and capitalizing the multiplicand by an appropriate multiplier. The choice of the multiplier is determined by the age of the deceased (or that of the claimants whichever is higher) and by the calculation as to what capital JUDGMENT 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, the Court said that regard should also be had to the fact that ultimately the capital sum should also be consumed-up over the period 1 for which the dependency is expected to last. In Susamma Thomas 12 1951 (2) All ER 448 13 1969 (2) All ER 178 12 Page 12 this Court noticed that English Courts have rarely applied operative multiplier exceeding 16. 13. The award of compensation in a motor accident case

3 three-Judge Bench in Trilok Chandra reiterated what was stated in 1 Susamma Thomas as regards determination of compensation in 3 accident cases on the basis of multiplier method. In Trilok Chandra , the Court considered Section 163A and the Second Schedule which 1 was not under consideration in Susamma Thomas as Section 163A 1 was not on the statute when the judgment in Susamma Thomas was delivered . It was observed that by incorporation of Sections 163A and 163B in the 1988 Act the situation had undergone a change. Under the Second Schedule, the maximum multiplier could be upto 18 and not 16 1 3 as was held in Susamma Thomas . In Trilok Chandra , the maximum JUDGMENT multiplier was fixed at 18 but the Court did find several defects in the calculation of compensation and the amount worked out in the Second 3 Schedule. Importantly this Court stated in Trilok Chandra that Tribunals and the Courts cannot go by the ready reckoner; the Schedule can only be used as a guide. This is what this Court said in paras 17 and 18 of the Report: “17. The situation has now undergone a change with the enactment of the Motor Vehicles Act, 1988, as amended by 13 Page 13

JUDGMENT 14 Page 14 (Emphasis supplied by us) 14. A three-Judge Bench in Supe Dei (Smt) and others v. National

Second Schedule to the 1988 Act can be made applicable in deciding the application for compensation made under Section 166 or not? This Court held that the Second Schedule under Section 163A of the 1988 Act which gives the amount of compensation to be determined for the purpose of claim under that Section can be taken as a guideline while determining the compensation under Section 166 of the 1988 Act. The Second Schedule in terms does not apply to a claim made under Section 166 of the 1988 Act. 5 15. In Patricia Jean Mahajan , this Court had an occasion to JUDGMENT consider Sections 163A and 166 of the 1988 Act. With regard to Section 163A, the Court stated, “the noticeable features of this provision are that it provides for compensation in the case of death or permanent disablement due to accident arising out of use of motor vehicle. The amount of compensation would be as indicated in the Second Schedule. The claimant is not required to plead or establish that the death or permanent disablement was due to any wrongful act 14 (2009) 4 SCC 513 15 Page 15 or negligence or default of the owner of the vehicle or any other person.” 16. Then the Court referred to Sections 165 and 166 of the 1988

the amount of compensation according to the Second Schedule; rather Section 168 makes it clear that it is for the tribunal to arrive at an amount of compensation which it may consider to be just in the facts and circumstances of the case. However, the Court did observe that structured formula as provided under Second Schedule would be a safe guide to calculate the compensation while dealing with a claim made under Section 166. 5 17. In Patricia Jean Mahajan , in light of the facts which were obtaining in that case, this Court held in paragraphs 19 and 20 of the Report (pgs. 294 and 295) as under: JUDGMENT “19. In the present case we find that the parents of the deceased were 69/73 years. Two daughters were aged 17 and 19 years. The main question, which strikes us in this case is that in the given circumstances the amount of multiplicand also assumes relevance. The total amount of dependency as found by the learned Single Judge and also rightly upheld by the Division Bench comes to 2,26,297 dollars. Applying multiplier of 10, the amount with interest and the conversion rate of Rs 47, comes to Rs 10.38 crores and with multiplier of 13 at the conversion rate of Rs 30 the amount comes to Rs 16.12 crores with interest. These amounts are huge indeed. Looking to the Indian economy, fiscal and financial situation, the amount is certainly a fabulous amount though in the background of American 16 Page 16

JUDGMENT 17 Page 17

5 18. The noticeable observations in Patricia Jean Mahajan are that, (i) for the purposes of fair compensation, a lesser multiplier can be applied to a heavy amount of multiplicand and (2) a deviation would be reasonably permissible in the figure of multiplier in appropriate cases. 19. In Deepal Girishbhai Soni and others v. United India 15 Insurance Co. Ltd., Baroda , the question that arose for consideration before a three-Judge Bench was, whether a proceeding under Section 163A of the 1988 Act was a final proceeding and the claimant, who JUDGMENT has been granted compensation under Section 163A, was debarred from proceeding with any further claims on the basis of the fault liability in terms of Section 166. This Court considered the statutory provisions contained in the 1988 Act, including Sections 163A and 166. With regard to Section 163A, the Court stated as follows: “42. Section 163-A was, thus, enacted for grant of immediate relief to a section of the people whose annual income is not more than Rs 40,000 having regard to the fact that in terms 15 (2004) 5 SCC 385 18 Page 18

xxx xxx xxx 46. Section 163-A which has an overriding effect provides for special provisions as to payment of compensation on structured-formula basis. Sub-section (1) of Section 163-A contains non obstante clause in terms whereof the owner of the motor vehicle or the authorised insurer is liable to pay in the case of death or permanent disablement due to accident arising out of the use of motor vehicle, compensation, as indicated in the Second Schedule, to the legal heirs or the victim, as the case may be. …….. . JUDGMENT xxx xxx xxx 51. The scheme envisaged under Section 163-A, in our opinion, leaves no manner of doubt that by reason thereof the rights and obligations of the parties are to be determined finally. The amount of compensation payable under the aforementioned provisions is not to be altered or varied in any other proceedings. It does not contain any provision providing for set-off against a higher compensation unlike Section 140. In terms of the said provision, a distinct and specified class of citizens, namely, persons whose income per annum is Rs 40,000 or less is covered thereunder whereas Sections 140 and 166 cater to all sections of society. 52. It may be true that Section 163-B provides for an option to a claimant to either go for a claim under Section 140 or 19 Page 19

7 Abati Bezbaruah 20. A two-Judge Bench in with reference to the structured formula set out in the Second Schedule in 1988 Act observed as follows:- 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 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 compensation should be just and fair in the facts and circumstances of each case. JUDGMENT 8 21. In Shanti Pathak a three-Judge Bench of this Court in a very brief order applied multiplier of 8 for a claim of compensation in respect of the deceased who was 25 years at the time of his death. 20 Page 20 16 22. In Oriental Insurance Company Ltd. v. Jashuben and Ors . , two-Judge Bench of this Court applied the multiplier of 13 in a case where the age of the deceased was 35 years at the time of accident.

17 and Anr. , this Court had an occasion to consider the peculiarities of Section 163A of the 1988 Act vis-à-vis Section 166. The Court reiterated what was stated in earlier decisions that the principles relating to determination of liability and quantum of compensation were different for claims made under Section 163A and claims made under Section 166. It was stated that Section 163A and the Second Schedule in terms did not apply to determination of compensation in applications under Section 166. While stating that Section 163A contains a special provision, this Court said: “34. . . . . . . Section 163-A of the MV Act contains a special provision as to payment of compensation on structured formula basis, as indicated in the Second Schedule to the Act. The Second Schedule contains a table prescribing the compensation to be awarded with reference to the age and income of the deceased. It specifies the amount of compensation to be awarded with reference to the annual income range of Rs 3000 to Rs 40,000. It does not specify the quantum of compensation in case the annual income of the deceased is more than Rs 40,000. But it provides the multiplier to be applied with reference to the age of the deceased. The table starts with a multiplier of 15, goes up to 18, and then steadily comes down to 5. It also provides the standard deduction as one-third on account of personal JUDGMENT 16 2008 (4) SCC 162 17 2009 (6) SCC 121 21 Page 21

24. This Court, however, noticed discrepancies/errors in the multiplier scale given in the Second Schedule table and also observed that application of table may result in incongruities. Paras 35 and 36 (pp. 137) of the Report are as follows: “ 35 . There are however discrepancies/errors in the multiplier scale given in the Second Schedule table. It prescribes a lesser compensation for cases where a higher multiplier of 18 is applicable and a larger compensation with reference to cases where a lesser multiplier of 15, 16, or 17 is applicable. From the quantum of compensation specified in the table, it is possible to infer that a clerical error has crept in the Schedule and the “multiplier” figures got wrongly typed as 15, 16, 17, 18, 17, 16, 15, 13, 11, 8, 5 and 5 instead of 20, 19, 18, 17, 16, 15, 14, 12, 10, 8, 6 and 5. 36. Another noticeable incongruity is, having prescribed the notional minimum income of non-earning persons as Rs 15,000 per annum, the table prescribes the compensation payable even in cases where the annual income ranges between Rs 3000 and Rs 12,000. This leads to an anomalous position in regard to applications under Section 163-A of the MV Act, as the compensation will be higher in cases where the deceased was idle and not having any income, than in cases where the deceased was honestly earning an income ranging between Rs 3000 and Rs 12,000 per annum. Be that as it may.” JUDGMENT 22 Page 22 25. While referring to the decisions of this Court in New India 18 Assurance Company Ltd. v. Charlie and Anr ., T.N. State Road

20 Transport Corporation v. Krishna Bala and Ors. , this Court in Sarla 17 Verma in paragraph 39 (pg. 138) of the Report observed as follows: “ 39. In New India Assurance Co. Ltd. v. Charlie this Court noticed that in respect of claims under Section 166 of the MV Act, the highest multiplier applicable was 18 and that the said multiplier should be applied to the age group of 21 to 25 years (commencement of normal productive years) and the lowest multiplier would be in respect of persons in the age group of 60 to 70 years (normal retiring age). This was reiterated in T.N. State Transport Corpn. Ltd. v. S. Rajapriya and U.P. SRTC v. Krishna Bala .” 17 26. In Sarla Verma , this Court undertook the exercise of 1 comparing the multiplier indicated in Susamma Thomas , Trilok JUDGMENT 3 18 Chandra and Charlie , for claims under Section 166 of the 1988 Act with the multiplier mentioned in the Second Schedule for claims under Section 163A (with appropriate deceleration after 50 years) as follows:

18 2005 (10) SCC 720 19 2005(6) SCC 236 20 2006 (6) SCC 249 23 Page 23

JUDGMENT 17 28. The above exercise was undertaken in Sarla Verma to ensure uniformity and consistency in the selection of multiplier while 24 Page 24 awarding compensation in motor accident claims made under Section 166. 29. Section 168 of the 1988 Act provides the guideline that the

appears to it to be just. The expression, ‘just’ means that the amount so determined is fair, reasonable and equitable by accepted legal standards and not a forensic lottery. Obviously ‘just compensation’ does not mean ‘perfect’ or ‘absolute’ compensation. The just compensation principle requires examination of the particular situation obtaining uniquely in an individual case. 21 30. Almost a century back in Taff Vale Railway Co. v. Jenkins , the House of Lords laid down the test that award of damages in fatal accident action is compensation for the reasonable expectation of pecuniary benefit by the deceased’s family. The purpose of award of JUDGMENT compensation is to put the dependants of the deceased, who had been bread-winner of the family, in the same position financially as if he had lived his natural span of life; it is not designed to put the claimants in a better financial position in which they would otherwise have been if the accident had not occurred. At the same time, the determination of compensation is not an exact science and the exercise involves an assessment based on estimation and conjectures 21 (1913) AC 1 25 Page 25 here and there as many imponderable factors and unpredictable contingencies have to be taken into consideration. 31. This Court in C.K. Subramania Iyer and Ors. v. T.Kunhikuttan

21 Railway for award of compensation in claim cases and said that there is no exact uniform rule for measuring the value of the human life and the measure of damages cannot be arrived at by precise mathematical calculations. Obviously, award of damages in each case would depend on the particular facts and circumstances of the case but the element of fairness in the amount of compensation so determined is the ultimate guiding factor. 1 32. In Susamma Thomas , this Court – though with reference to Section 110B of the Motor Vehicles Act, 1939 – stated that the multiplier method was the accepted norm of ensuring the just JUDGMENT compensation which will make for uniformity and certainty of the awards. We are of the opinion that this statement in Susamma 1 Thomas is equally applicable to the fatal accident claims made under Section 166 of the 1988 Act. In our view, the determination of compensation based on multiplier method is the best available means and the most satisfactory method and must be followed invariably by the tribunals and courts. 22 1970 (2) SCR 688 26 Page 26 17 33. We have already noticed the table prepared in Sarla Verma for the selection of multiplier. The table has been prepared in Sarla 17 Verma having regard to the three decisions of this Court, namely,

made under Section 166 of the 1988 Act. The Court said that multiplier shown in Column (4) of the table must be used having regard to the age of the deceased. Perhaps the biggest advantage by employing 17 the table prepared in Sarla Verma is that the uniformity and consistency in selection of the multiplier can be achieved. The assessment of extent of dependency depends on examination of the unique situation of the individual case. Valuing the dependency or the multiplicand is to some extent an arithmetical exercise. The multiplicand is normally based on the net annual value of the dependency on the date of the deceased’s death. Once the net JUDGMENT annual loss (multiplicand) is assessed, taking into account the age of the deceased, such amount is to be multiplied by a ‘multiplier’ to arrive 17 at the loss of dependency. In Sarla Verma , this Court has endeavoured to simplify the otherwise complex exercise of assessment of loss of dependency and determination of compensation in a claim made under Section 166. It has been rightly stated in Sarla 17 Verma that claimants in case of death claim for the purposes of 27 Page 27 compensation must establish (a) age of the deceased; (b) income of the deceased; and (c) the number of dependants. To arrive at the loss of dependency, the Tribunal must consider (i) additions/deductions to

towards the personal living expenses of the deceased; and (iii) the multiplier to be applied with reference to the age of the deceased. We do not think it is necessary for us to revisit the law on the point as we 17 are in full agreement with the view in Sarla Verma . 34. If the multiplier as indicated in Column (4) of the table read 17 with paragraph 42 of the Report in Sarla Verma is followed, the wide variations in the selection of multiplier in the claims of compensation in fatal accident cases can be avoided. A standard method for selection of multiplier is surely better than a criss-cross of varying methods. It is high time that we move to a standard method of selection of multiplier, JUDGMENT income for future prospects and deduction for personal and living expenses. The courts in some of the overseas jurisdictions have made this advance. It is for these reasons, we think we must approve 17 the table in Sarla Verma for the selection of multiplier in claim applications made under Section 166 in the cases of death. We do accordingly. If for the selection of multiplier, Column (4) of the table in 17 Sarla Verma is followed, there is no likelihood of the claimants who 28 Page 28 have chosen to apply under Section 166 being awarded lesser amount on proof of negligence on the part of the driver of the motor vehicle than those who prefer to apply under Section 163A. As regards the

of the considered opinion that in such cases irrespective of Section 163A or Section 166 under which the claim for compensation has been made, multiplier of 15 and the assessment as indicated in the Second Schedule subject to correction as pointed out in Column (6) of the 17 table in Sarla Verma should be followed. This is to ensure that claimants in such cases are not awarded lesser amount when the application is made under Section 166 of the 1988 Act. In all other cases of death where the application has been made under Section 166, the multiplier as indicated in Column (4) of the table in Sarla 17 Verma should be followed. JUDGMENT 35. With regard to the addition to income for future prospects, in 17 Sarla Verma , this Court has noted earlier decisions in S usamma 1 2 7 Thomas , Sarla Dixit and Abati Bezbaruah and in paragraph 24 of the Report held as under: “24.……In view of the imponderables and uncertainties, we are in favour of adopting as a rule of thumb, an addition of 50% of actual salary to the actual salary income of the deceased towards future prospects, where the deceased had a permanent job and was below 40 years. (Where the annual income is in the taxable range, the words “actual 29 Page 29

36. The standardization of addition to income for future prospects shall help in achieving certainty in arriving at appropriate compensation. We approve the method that an addition of 50% of actual salary be made to the actual salary income of the deceased towards future prospects where the deceased had a permanent job and was below 40 years and the addition should be only 30% if the age of the deceased was 40 to 50 years and no addition should be JUDGMENT made where the age of the deceased is more than 50 years. Where the annual income is in the taxable range, the actual salary shall mean actual salary less tax. In the cases where the deceased was self- employed or was on a fixed salary without provision for annual increments, the actual income at the time of death without any addition to income for future prospects will be appropriate. A departure from the 30 Page 30 above principle can only be justified in extraordinary circumstances and very exceptional cases. 37. As regards deduction for personal and living expenses, in

3 23 Chandra and Fakeerappa and finally in paras 30, 31 and 32 of the Report held as under: “30…….Having considered several subsequent decisions of this Court, we are of the view that where the deceased was married, the deduction towards personal and living expenses of the deceased, should be one-third (1/3rd) where the number of dependent family members is 2 to 3, one-fourth (1/4th) where the number of dependent family members is 4 to 6, and one-fifth (1/5th) where the number of dependent family members exceeds six. 31. Where the deceased was a bachelor and the claimants are the parents, the deduction follows a different principle. In regard to bachelors, normally, 50% is deducted as personal and living expenses, because it is assumed that a bachelor would tend to spend more on himself. Even otherwise, there is also the possibility of his getting married in a short time, in which event the contribution to the parent(s) and siblings is likely to be cut drastically. Further, subject to evidence to the contrary, the father is likely to have his own income and will not be considered as a dependant and the mother alone will be considered as a dependant. In the absence of evidence to the contrary, brothers and sisters will not be considered as dependants, because they will either be independent and earning, or married, or be dependent on the father. 32. Thus even if the deceased is survived by parents and siblings, only the mother would be considered to be a dependant, and 50% would be treated as the personal and living expenses of the bachelor and 50% as the contribution to the family. However, where the family of the bachelor is large and dependent on the income of the JUDGMENT 23 Fakeerappa and Anr. v. Karnataka Cement Pipe Factory and Others; [(2004) 2 SCC 473] 31 Page 31 deceased, as in a case where he has a widowed mother and large number of younger non-earning sisters or brothers, his personal and living expenses may be restricted to one-third and contribution to the family will be taken as two-third.”

deduction for personal and living expenses. One must bear in mind that the proportion of a man’s net earnings that he saves or spends exclusively for the maintenance of others does not form part of his living expenses but what he spends exclusively on himself does. The percentage of deduction on account of personal and living expenses may vary with reference to the number of dependant members in the family and the personal living expenses of the deceased need not exactly correspond to the number of dependants. 17 39. In our view, the standards fixed by this Court in Sarla Verma on the aspect of deduction for personal living expenses in paragraphs JUDGMENT 30, 31 and 32 must ordinarily be followed unless a case for departure in the circumstances noted in the preceding para is made out. 40. In what we have discussed above, we sum up our conclusions as follows: (i) In the applications for compensation made under Section 166 of the 1988 Act in death cases where the age of the deceased is 15 years and above, the Claims Tribunals shall select the multiplier as 32 Page 32 17 indicated in Column (4) of the table prepared in Sarla Verma read with para 42 of that judgment. (ii) In cases where the age of the deceased is upto 15 years,

for compensation has been made, multiplier of 15 and the assessment as indicated in the Second Schedule subject to correction as pointed 17 out in Column (6) of the table in Sarla Verma should be followed. (iii) As a result of the above, while considering the claim applications made under Section 166 in death cases where the age of the deceased is above 15 years, there is no necessity for the Claims Tribunals to seek guidance or for placing reliance on the Second Schedule in the 1988 Act. (iv) The Claims Tribunals shall follow the steps and guidelines 17 stated in para 19 of Sarla Verma for determination of compensation JUDGMENT in cases of death. (v) While making addition to income for future prospects, the 17 Tribunals shall follow paragraph 24 of the Judgment in Sarla Verma . (vi) Insofar as deduction for personal and living expenses is concerned, it is directed that the Tribunals shall ordinarily follow the standards prescribed in paragraphs 30, 31 and 32 of the judgment in 33 Page 33 17 Sarla Verma subject to the observations made by us in para 38 above. (vii) The above propositions mutatis mutandis shall apply to all

41. The reference is answered accordingly. Civil appeals shall now be posted for hearing and disposal before the regular Bench. ……………………….J. (R.M. Lodha) ..…..………………...J. (J. Chelameswar) .……………………...J. (Madan B. Lokur) NEW DELHI APRIL 2, 2013. JUDGMENT 34 Page 34