Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.2241 OF 2009
(Arising out of SLP (C) No.20207 of 2007)
Rani Gupta & Ors. … Appellants
Versus
M/s. United India Insurance Co. Ltd. & Ors. … Respondents
J U D G M E N T
S.B. Sinha, J.
1. Leave granted.
2. This appeal is directed against the judgment and order dated
31.5.2007 passed by the High Court of Delhi in MAC No.986 of 2006
whereby and whereunder an appeal preferred by the first respondent herein
under Section 173 of the Motor Vehicles Act, 1988 (for short, ‘the Act’)
was allowed.
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3. Appellant filed an application before the Motor Vehicles Accidents
Claims Tribunal praying for payment of compensation for the death of her
husband Praveen Kumar Gupta who was travelling in a private Indica Car
driven by his friend Shri Avtar Singh.
Shri Ankit and Shri Rajendra Jindal (the deceased) were returning
from Agra after attending some business promotion work. The accident
took place as the said car ran into a tree. Praveen Kumar Gupta and
Rajendra Jindal died on the spot. Ankit suffered injuries.
4. Before the learned Tribunal, one of the questions which was raised is
as to whether a passenger in a car which was being driven negligently
would be covered by the policy of insurance.
5. The learned Tribunal, applying the principle of Res Ipsa Loquitor,
opined that Shri Avtar Singh was driving the car rashly and negligently.
Having regard to the income tax returns filed by the deceased, the learned
Tribunal arrived at the finding that his annual income was Rs.1,87,500/-. In
view of the age of the deceased and the children having attained the age of
majority, multiplier of 13 was applied in determining the amount of
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compensation. Upon deducting 1/3 of the annual income towards personal
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use from his annual income, the total amount of compensation, thus, was
arrived at in the following terms :
“Annual Income Rs. 1,25,000
Future Increase in income Rs. 2,50,000
Rs. 3,75,000
Mean/Average income Rs. 1,87,500
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Less: 1/3 towards personal use
An consumption Rs. 62,500
Annual Dependency Rs. 1,25,000
Hence
a) Loss of Financial dependency Rs. 16,25,000
(1,25,000 x 13)
b) Loss of consortium Rs. 25,000
c) Loss of love and affection Rs. 75,000
(25,000 X 3)
d) Funeral expenses Rs. 15,000
TOTAL COMPENSATION
Rs.17,40,000”
6. First Respondent preferred an appeal thereagainst.
7. The question raised before the High Court was as to whether the
deceased having been travelling as a gratuitous passenger in a private car
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would fall within the meaning of ‘third party’ and, thus, would be covered
by the statutory policy under Section 147 of the Act.
The learned Judge noticed that the policy was “Private Car Package
Policy” as notified by the Tariff Advisory Committee with effect from
1.7.2002, the terms and conditions whereof are :
“SECTION II – LIABILITY TO THIRD PARTY
1. Subject to the limits of liability as laid down
in the Schedule hereto the Company will
indemnify the insured in the event of an accident
caused by or arising out of the use of the vehicle
against all sums which the insured shall become
legally liable to pay in respect of :
(i) death of or bodily injury to any person
including occupants carried in the vehicle
(provided such occupants are not carried for
hire or reward)but except so far as it is
necessary to meet the requirements of Motor
Vehicles Act, the Company shall not be
liable where such death or injury arises out
of and in the course of the employment of
such person by the insured.
(ii) Damage to property other than property
belonging to the insured or held in trust or
in the custody or control of the insured.”
8. It was furthermore opined that the object and purpose of Section 146
and 147 is that policy of insurance should cover liability in respect of death
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or bodily injury of a person including owner of the goods or its authorized
representative who may be carried in a goods vehicle/carriage as defined in
Section 2(14) of the Act.
9. The learned Judge, however, having regard to several decisions of
this Court in particular UP State Road Transport Corporation v. Trilok
Chand [(1996) 4 SCALE 22 = (1996) 4 SCC 362], as also various other
decisions including New India Assurance Co. v. Kalpana & Ors. [(2007) 2
SCALE 227], opined that appropriate multiplier to be adopted was 10. On
the aforementioned premise loss of dependency was determined at
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Rs.1,87,500/- per annum. The learned Judge further apportioned 2/3 as
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labour input, i.e., personal input of the deceased in business and treated 1/3
as yield from the capital asset, loss occasioned due to death of the deceased
was held to be Rs.12,50,000/-, stating :
“The remaining loss of Rs.6,25,000/- could be
made good by the family by renting out the factory
or after liquidating the capital asset investing the
money in an annuity yielding income by way of
interest.”
10. Mr. Ashok K. Majhajan, learned counsel appearing on behalf of the
appellant, would contend that the High Court committed a serious error in
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applying the multiplier of 10 only as in terms of the Second Schedule
appended to the Act, the appropriate multiplier which should have been
applied is 13. It was urged that for the purpose of calculation of annual
dependency, in a case of this nature, the High Court should have been kept
in view the backdrop of events, namely, the deceased who took loan for a
sum of Rs.14,00,000/- from the bank for the purpose of purchasing an
industrial plot in NOIDA in 1985, had paid up the same.
11. Mr. A.K. De, learned counsel appearing on behalf of the respondent,
on the other hand, contended that the income of the deceased can only be
assessed on net earnings and what was actually lost is his labour and other’s
contributions to run his business, and, thus, the loss of dependency should
be determined on the value of such services or contribution of labour being
in the nature of skill and knowledge that he had been contributing thereto.
It was urged that indicator of the value of his services could only be the
profitability of the business which must be shown and established upon
bringing on appropriate materials on record.
12. Determination of the amount of compensation arising out of loss of
life of a person, who was the earning member of the family, would depend
upon a large number of factors; one of them being the nature of job or
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business he was doing. For the said purpose, an average gross future
monthly income must be arrived at by adding the actual gross income at the
time of his death to the maximum which he might have got, had he not met a
pre-mature death.
The learned Tribunal, keeping in view the fact that within a short
time, appellant had been able to wipe off the entire loan taken by him from
the bank and, thus, became the owner of an industrial plot and furthermore
in view of the fact that he was only aged 46 years at the relevant time,
thought that his income would have doubled at the time of his death. We
think that the approach of the learned Tribunal was correct.
13. This Court in Sarla Dixit v. Balwant Yadav [(1996) 3 SCC 179] took
into consideration the future prospect of the deceased in great details. It
was held that multiplier method involving the ascertainment of the loss of
dependency should be applied in appropriate case. It took into
consideration the decision of English Courts to opine that the said method is
appropriate. It opined that only in severe cases, the said method should be
departed from. As regards adoption of proper multiplier, it was held :
“ 7. So far as the adoption of the proper multiplier
is concerned, it was observed that the future
prospects of advancement in life and career should
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also be sounded in terms of money to augment the
multiplicand. While the chance of the multiplier is
determined by two factors, namely, the rate of
interest appropriate to a stable economy and the
age of the deceased or of the claimant whichever
is higher, the ascertainment of the multiplicand is
a more difficult exercise. Indeed, many factors
have to be put into the scales to evaluate the
contingencies of the future. All contingencies of
the future need not necessarily be baneful.”
14. Average life expectancy in India also is one of the factors which must
be taken into consideration for the purpose of calculating the average gross
future monthly income. The average life expectancy in India is now 60-61
years. It is necessary to subtract personal and living expenses and other
statutory liabilities like payment of income tax etc.
This Court in National Insurance Co. Ltd. v. Indira Srivastava [(2008)
2 SCC 763], held :
“17 . This Court in Asha 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 dependants have lost due to
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death of the deceased. It is in the nature of
compensation for future loss towards the family
income.
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.
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 the purpose of payment of
income tax or professional 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.
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.”
15. Ordinarily and subject to just exceptions, a lump sum amount
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equivalent to 1/3 of the income of the deceased, i.e., living and
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miscellaneous expenses from the income should be deducted. [See Sunil
Kumar v. Ram Singh Gaud & Ors. [(2007) 12 SCALE 792].
16. We may, however, note that in a case of permanent disability, where
the injured even for a very small thing would have to depend on the services
of another, a direction to deduct the said amount may not be insisted upon.
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17. Deduction of 1/3 is, thus, the ordinary rule.
Upon applying the aforementioned principle, the multiplicant would
be annual dependency multiplied by life expectancy minus age of the
deceased.
On the aforementioned premise, we may consider the applicability of
multiplier method for the purpose of calculating the amount of
compensation. The said method was applied in Davies v. Powell Duffryn
Associated Collieries Ltd. [1942 (1) All ELR 657], wherein it was held :
“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 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,
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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 dependant, and other like matters of
speculation and doubt.”
In Trilok Chand (supra), this Court noticed as under:
“ 7. The same principles were recalled by this
Court in the case of Municipal Corpn. of Delhi v.
Subhagwanti . In this case the claim for
compensation arose on account of loss of life
caused by the collapse of the Clock Tower
abutting a highway. The Court referred to both the
aforementioned judgments, and extracted the
following passage from the judgment in the case
of Davies :
“The starting point is the amount of wages
which the deceased was earning, the
ascertainment of which to some extent may
depend upon the regularity of his
employment. Then there is an estimate of
how much was required or expended for his
own personal and living 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 dependant, and other like matters of
speculation and doubt.”
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In Helen C. Rebello v. Maharashtra S.R.T.C. [(1999) 1 SCC 90], this
Court stated the law, thus :
32. So far as the general principle of estimating
damages under the common law is concerned, it is
settled that the pecuniary loss can be ascertained
only by balancing on one hand, the loss to the
claimant of the future pecuniary benefits that
would have accrued to him but for the death with
the “pecuniary advantage” which from whatever
source comes to him by reason of the death. In
other words, it is the balancing of loss and gain of
the claimant occasioned by the death. But this has
to change its colour to the extent a statute intends
to do.”.
In regard to the choice of the multiplier, Halsbury’s Laws of England
in Vol. 34, states, thus:
“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 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 illness, disability and unemployment have to be
taken into account. Actuarial evidence is
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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 allowance for inflation is
thereby made. The multiplier may be increased
where the plaintiff is a high taxpayer. The
multiplicand is based on the rate of wages at the
date of trial. No interest is allowed on the total
figure.”
The legislation being a beneficient one, the provisions thereof should
be interpreted liberally but it is also well settled that it does not contemplate
unjust enrichment. We may, however, notice that in New India Assurance
Company Ltd. v. Charlie [(2005) 10 SCC 720], this Court held:
“ 14. The multiplier method involves the
ascertainment of the loss of dependency or the
multiplicand having regard to the circumstances of
the case and capitalising 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
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.”
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In United India Insurance Co. Ltd. v. Patricia Jean Mahajan [(2002) 6
SCC 281], however, this Court following the earlier decisions in General
Manager, Kerala S.R.T.C. v. Susamma Thomas [(1994) 2 SCC 176] as also
Trilok Chand (supra), held :
“ 16. What thus emerges from the above decisions
is that the court must adhere to the system of
multiplier in arriving at the proper amount of
compensation, and also with a view to maintain
uniformity and certainty. Use of higher multiplier
has been deprecated and it is emphasized that it
cannot exceed 18. The multiplier, as would be
evident from the observations quoted earlier, may
differ in the peculiar facts and circumstances of a
particular case as according to the example cited,
where a bachelor dies at the age of 45, the age of
his dependent parents may be relevant for
selecting a proper multiplier. Meaning thereby that
a multiplier less than what is provided in the
Schedule could be applied in the special facts and
circumstances of a case. In the later cases also this
Court has taken the same view that multiplier
system is a more appropriate and proper method
for calculating the amount of compensation. Lata
Wadhwa v. State of Bihar may be referred to.
Decision in the case of Susamma Thomas and
other English decisions considered in the
judgments referred earlier, namely, Davies v.
Taylor , Davies v. Powell Duffryn Associated
Collieries Ltd. and Mallett v. McMonagle have
been referred to.”
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18. By and large, therefore, the Court had proceeded on the basis that the
multiplier mentioned in the Second Schedule should be taken to be the
guide but it may not be.
19. The multiplier specified in the Second Schedule may not be decisive
for calculating compensation in cases of death. In fact, the word multiplier
has been used only for the purpose of calculating damages in the case of
permanent disability and not in the case of death as would appear from note
5 and 6 appended thereto.
20. The Second Schedule provides for payment of the amount of
compensation to the persons whose income is from Rs.3,000/- to
Rs.40,000/- per annum, depending upon the age of the deceased; as for
example if the age of the deceased is 15 years, the amount of compensation
payable would be 60,000/-, but where the annual income is Rs.3,000/-, a
sum of Rs.50,000/- has been specified therefor even if the age of the
deceased is between 35 to 65 years.
21. The Parliament had, therefore, thought that Rs.50,000/- should be the
minimum amount of compensation payable to legal representatives of those
persons whose annual income is Rs.3,000/- per month. For the said
purpose, the multiplier specified in the Second Schedule has no role to play.
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Even in absence of the multiplier in the Second Schedule, the amount of
compensation payable would be the same irrespective of the multiplier
specified therein.
22. We may, however, notice that in a given case even in terms of the
Second Schedule where the compensation is payable on the basis of a no
fault liability, the amount of compensation may be higher than the one
which has been specified in the Second Schedule in case of a fault liability.
23. The question, in an appropriate case, may require consideration by a
larger Bench.
24. In this case, however, the deceased was a businessman. What was the
actual loss of dependency to the family was his contribution to run the
business. The assets of the business remained. The amount of
compensation, therefore, was required to be determined keeping in view that
factor in mind.
25. Application of the multiplier of 10, therefore, cannot be said to be bad
in law. In terms whereof the amount of compensation would come out to
Rs.12,50,000/-, although the High Court, in our opinion, might not, thus, be
entirely correct in opining that the remaining loss could be made good. We,
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however, need not delve into the said question any further as we are of the
opinion that the ultimate decision of the High Court is correct.
26. We, therefore, do not find any merit in this appeal, which is dismissed
accordingly. However, in the facts and circumstances of the case, there
shall be no order as to costs.
………………………….J.
[S.B. Sinha]
..…………………………J.
[Cyriac Joseph]
New Delhi;
April 8, 2009