Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 106 OF 2009
[ARISING OUT OF S.L.P. (CIVIL) NO. 16785 OF 2006]
ORIENTAL INSURANCE CO. LTD. … APPELLANT
Versus
RAM PRASAD VARMA & ORS. … RESPONDENTS
J U D G M E N T
S.B. SINHA, J.
1. Leave granted.
2. Ram Prasad Varma, respondent No. 1, an Assistant Executive
Engineer, was employed with Oil and Natural Gas Corporation (ONGC) at
Rajahmundry. On or about 9.9.1998, while he was going to the workshop,
he was hit by a lorry bearing registration No. AP-16-W-5839. The lorry ran
over his legs. He was admitted in the hospital. Indisputably, both his legs
were amputated. The fact that an accident had taken place owing to rash
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and negligent driving on the part of the driver of the said lorry is not in
dispute. It is also not in dispute that, at the relevant time, respondent was
aged 55 years and his annual income was Rs.2,27,471.00.
3. Respondent having suffered permanent disability filed a Claim
Petition in terms of Section 166 of the Motor Vehicles Act claiming
compensation of a sum of Rs.20 lakhs; Rs.50,000/- towards extra
nourishment; Rs. 50,000/- towards compensation for mental agony, pain and
suffering; Rs. 50,000/- for loss of amenities in life and Rs.2 lakhs for the
expenditure of attendant throughout the life and Rs.16.50 lakhs towards loss
of future earnings.
4. The Motor Accidents Claims Tribunal awarded a sum of
Rs.19,63,000/- with interest at the rate of 12% per annum from the date of
filing of the petition till realization.
5. An appeal preferred thereagainst by the Insurance Company before
the High Court in terms of Section 173 of the Act has been dismissed by
reason of the impugned judgment. The High Court, however, considering
the prevailing rate of interest reduced the rate of interest from 12% per
annum to 9% per annum.
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6. Mr. Pankaj Seth, learned counsel appearing on behalf of appellant
would contend:
(i) The learned Tribunal, and consequently the High Court,
committed a serious error in applying multiplier of eight
although respondent would have retired from services on
attaining the age of sixty.
(ii) The Tribunal in determining the amount of compensation
should have deducted the amount of income tax from his gross
salary as compensation has been granted on the basis of the
structured formula.
(iii) The Tribunal in determining the said amount of compensation
should have deducted one-third from the total amount of his
income by way of miscellaneous expenses.
7. Indisputably, the respondent was an Assistant Executive Engineer.
He was an income tax payee. He had submitted income tax return for the
year 1998-99 showing his gross salary at Rs.2,27,471.40 and the amount of
income-tax deducted at source was Rs.30,748.00.
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8. A claimant who had suffered injuries in a motor vehicle accident
resulting in amputation of both legs is entitled to 100% compensation in
terms of the First Schedule appended to the Workmen’s Compensation Act,
1923. The amount of compensation which represents the loss of income can
be calculated either in terms of the structured formula as contained in the
Second Schedule appended to the Motor Vehicles Act or on the basis of the
other materials brought on record. It is not in dispute that in a case of this
nature, the Tribunal cannot be said to have committed any illegality in
applying the structured formula.
9. The Second Schedule as such may not have any application as the
maximum annual income of a deceased or an injured which could be taken
into consideration therefor is Rs.40,000/- per annum. However, keeping in
view the peculiar factual circumstances of the case, the proper multiplier
which, in our opinion, should be adopted is eight for the purpose of
determining fair compensation.
10. Indisputably, he was to retire within a few years, but in view of the
injuries suffered he had to give up his job. The life expectancy of an Indian
citizen is about 62 years. A person on retirement, in the event if pension
scheme is applicable, would be entitled to pensionary benefits. Had the
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respondent worked for five years more, the amount of pension calculated on
the basis of last pay drawn would have been more than what might have
become payable in the year 1998.
11. One-third amount is deducted from computation of compensation
from the total income on the premise that some expenses were necessary for
one’s own survival. Incidentally, we may notice that in the note appended
to the Second Schedule, the amount of compensation arrived in the case of
fatal accident claims is required to be reduced by one-third in consideration
of the expenses which the victim would have incurred towards maintaining
himself had he been alive. A person, although alive, but when he is not in a
position to move and even for every small thing he has to depend upon the
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services of another, in our opinion, a direction to deduct 1/3 of the amount
from his total income need not always be insisted upon.
12. Our attention, however, has been drawn to a decision of this Court in
New India Assurance Co. Ltd. v. Charlie and Anr. [(2005) 10 SCC 720]
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wherein 1/3 was directed to be deducted towards personal expenditure, we
do not find that any legal principle was laid down therein. It also does not
appear that the premise on which such deduction is allowed and what would
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happen in a case, where such a premise does not exist, did not fall for
consideration.
In Charlie (supra), this court itself opined that in a case, where the
injured had suffered 100% disability, the legal principle for determination of
compensation applicable to a deceased can, in appropriate cases, taking note
of all relevant factors be reasonably applied even in a case of totally
permanent disabled person. This Court referred to Halsbury's Laws of
England, Volume 34, para 98 wherein it was held that the multiplier may be
increased where the plaintiff is a high tax payer. That principle is also
applicable in this case.
In Halsbury (supra), it was stated that in applying the structured
formula 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.
It was stated:
“ 14. 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
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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 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.”
13. Our attention has also been drawn to a recent decision of this Court in
Sunil Kumar vs. Ram Singh Gaud & Ors. [2007 (12) SCALE 792] wherein
a Division Bench has opined as under:-
“9. Taking into consideration the present
income of the appellant as Rs.4,000/- per month;
and the permanent disability of 45% suffered by
him, we are of the view that the capacity of the
appellant to earn in future would be reduced by
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Rs.1,800/- per month approximately. If 1/3 is
deducted towards miscellaneous expenses, the loss
of income comes to Rs.1,200/- per month which,
in turn, comes to Rs.14,400/- per annum.
Appellant was 29 years of age at the time of
accident. Taking the multiplier to be 18 [as per the
Second Schedule to Section 163A of the Act], the
total loss of income comes to Rs.2,59,200/-.”
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In that case, the injured suffered permanent disability of 45%. Even
therein the multiplier of 18 was applied. It was held that by reason of
disability suffered by the claimant his earning capacity would be reduced.
In the instant case, respondent has become totally immobile.
14. Our attention has also been drawn to a decision of this Court in Bijoy
Kumar Dugar v. Bidyadhar Dutta and Ors. [(2006) 3 SCC 242]. In that
case, multiplier of 12 was applied. However, some observations were made
that in regard to future prospects of income in the course of employment or
business or profession, as the case may be, some cogent and reliable
evidence have to be led.
15. In this case, respondent was a highly placed employee in a prestigious
public sector undertaking. By reason of termination of service, he is not
only deprived of his salary but also various other allowances to which he
was otherwise entitled to. His family members could have taken benefit of
some of the allowances.
16. We may, however, notice that in General Manager, Kerala State Road
Transport Corporation, Trivandrum vs. Susamma Thomas (Mrs.) & ors.
[(1994) 2 SCC 176], this Court held:
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“9. The assessment of damages to compensate
the dependants is beset with difficulties because
from the nature of things, it has to take into
account 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 altogether.
10. 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 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 capitalised
by multiplying it by a figure representing the
proper number of year's purchase.
11. Much of the calculation necessarily remains
in the realm of hypothesis "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 over-all picture that matters"
and the court must try to assess as best as it can the
loss suffered.”
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17. This aspect of the matter has also been considered in U.P. State Road
Transport Corporation and Ors. v. Trilok Chandra and Ors. [(1996) 4 SCC
362] by a Three-Judge Bench of this Court in the following terms:
“9. The compensation to be awarded has two
elements. One is the pecuniary loss to the estate of
the deceased resulting from the accident, the other
is the pecuniary loss sustained by the members of
his family for his death. The Court referred to
these two elements in the Gobald Motor Seivice's
[AIR 1962 SC 1] case. These two elements were to
be awarded under Section 1 and Section 2 of the
Fatal Accidents Act, 1855 under which the claim
in that case arose. The Court in that case cautioned
that while making the calculations no part of the
claim under the first or the second element should
be included twice. The Court gave a very lucid
illustration, which can be quoted with profit:
‘An illustration may clarify the position. X
is the income of the estate of the deceased,
Y is the yearly expenditure incurred by him
on his dependents (we will ignore the other
expenditure incurred by him). X-Y i.e. Z, is
the amount he saves every year. The
capitalised value of the income spent on the
dependents, subject to relevant deductions,
is the pecuniary loss sustained by the
members of his family through his death.
The capitalised value of his income, subject
to relevant deductions, would be the loss
caused to the estate by his death. If the
claimants under both the heads are the same,
and if they get compensation for the entire
loss caused to the estate, they cannot claim
again under the head of personal loss the
capitalised income that might have been
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spent on them if the deceased were alive.
Conversely, if they got compensation under
Section 1, representing the amount that the
deceased would have spent on them, if
alive, to that extent there should be
deduction in their claim under Section 2 of
the Act in respect of compensation for the
loss caused to the estate. To put it
differently if under Section 1 they got
capitalised value of Y, under Section 2 they
could get only the capitalised value of Z, for
the capitalised value Y + Z = X would be
the capitalised value of his entire income.”
{See also Bangalore Metropolitan Transport Corporation. vs. Sarojamma
and Anr. [ (2008) 5 SCC 142]}
18. Following the aforementioned precedents, we are of the opinion that
in the peculiar facts and circumstances of this case, it is not necessary to
interfere either with the application of multiplier of eight or non-deduction
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of 1/3 from his net salary. However, what was the net salary of the
respondent for the said purpose should have been determined. An employee
when not in employment is not to pay his tax. Income tax payable from the
salary, therefore, was required to be deducted. It was so held in National
Insurance Company Ltd. v. Indira Srivastava and Ors. [(2008) 2 SCC
763], stating:
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“17. This Court in Asha (supra) did not address
itself the questions raised before us. It does not
appear that any precedent was noticed nor the term
'just compensation' was considered in the light of
the changing societal condition as also the perks
which are paid to the employee which may or may
not attract income tax or any other tax. What
would be 'just compensation' must be determined
having regard to the facts and circumstances of
each case. The basis for considering the entire pay
packet is what the dependents have lost due to
death of the deceased. It is in the nature of
compensation for future loss towards the family
income.
xxx xxx xxx
19. The amounts, therefore, which were
required to be paid to the deceased by his
employer by way of perks, should be included for
computation of his monthly income as that would
have been added to his monthly income by way of
contribution to the family as contradistinguished
to the ones which were for his benefit. We may,
however, hasten to add that from the said amount
of income, the statutory amount of tax payable
thereupon must be deducted.”
Incidentally, we may notice that in that case also this Court held:
“21. If the dictionary meaning of the word
'income' is taken to its logical conclusion, it should
include those benefits, either in terms of money or
otherwise, which are taken into consideration for
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the purpose of payment of income-tax or
profession tax although some elements thereof
may or may not be taxable or would have been
otherwise taxable but for the exemption conferred
thereupon under the statute.
xxx xxx xxx
25. The expression 'just' must also be given its
logical meaning. Whereas it cannot be a bonanza
or a source of profit but in considering as to what
would be just and equitable, all facts and
circumstances must be taken into consideration.”
19. The High Court has directed payment of interest at the rate of 9% per
annum. We do not think that any case has been made out for interference
with the rate of interest. The appeal is dismissed subject to the modification
that from the gross income of the respondent, the amount of income tax as
was applicable at the relevant time should be deducted. The Tribunal is
directed to redetermine the amount of compensation in the light of this
judgment. However, in the facts and circumstances of this case, there shall
be no order as to costs.
……………….…..………….J.
[S.B. Sinha]
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..………………..……………J.
[Cyriac Joseph]
New Delhi;
JANUARY 13, 2009