CASE NO.: Appeal (civil) 1272 of 2008 PETITIONER: Oriental Insurance Company Ltd. RESPONDENT: Jashuben & Ors. DATE OF JUDGMENT: 14/02/2008 BENCH: S.B. Sinha & V.S. Sirpurkar JUDGMENT:
J U D G M E N T
(Arising out of SLP (C) No.7304 of 2007)
S.B. Sinha, J.
Leave granted.
1. Appellant is before us aggrieved by and dissatisfied with a judgment
and order dated 22.11.2006 passed by the Division Bench of the High Court
of Gujarat at Ahmedabad in First Appeal No.4586 of 2006 dismissing the
appeal preferred by him.
2. Claimants-Respondents herein are heirs and legal representatives of
Davjibhai Kushalbhai Rathod. He, while travelling in a mini luxury bus as a
passenger from Surat to Mehsana, met with a road accident which took place
on 23.6.1994. The accident occurred due to rash and negligent driving on
the part of the driver of the said mini bus is not question.
3. The deceased, Devjibhai, at that time, was aged about 35 years. He
was working as an Assistant in the Oil and Natural Gas Commission. A sum
of Rs.12,00,000/- was initially claimed by way of compensation which was
subsequently raised to 25,00,000/-. The Tribunal, as per the certificate
issued by the Senior Personnel and Administrative Officer, ONGC, noticed
that the deceased had been receiving the following salaries and perks in the
month of June 1994 :
1. Basic Pay Rs.3295/-
2. DA @ 18.5% Rs. 610/-
3. DSCA 20% of basic Rs. 650/-
4. HRA @ 18% of basic Pay Rs. 593/-
5. Productivity allowance Rs. 450/-
6. Washing allowance Rs. 45/-
7. Conveyance Allowance Rs. 375/-
8. Child Education Allowance
(for two children) Rs. 240/-
9. Child Bus fare (for children) Rs. 160/-
Total : Rs.6418/-
________
4. However, the Tribunal also took into consideration the salary which
might have been payable to the said deceased as in August, 2002; had he
continued in service which was stated to be as under :
1. Basic Pay Rs.10698.00 2. DA @ 35.5% Rs. 3892.00 3. DSCA 20% of basic (maximum Rs.3100) Rs. 2193.00 4. HRA @ 22.5% of basic Pay Rs. 2406.00 5. Productivity allowance Rs. 500.00 6. Tribal allowance Rs. 200.00 7. Conveyance Allowance Rs. 740.00 8. Child Education Allowance (for two children) Rs. 500.00 9. Child Bus fare (for children) Rs. 250.00 10. Canteen Sub. Rs. 164.80 Total : Rs.21803.80 _________
5. The Tribunal, clubbed the income of the deceased which he might
have got at the time of his retirement, i.e., Rs.3,295/- + Rs.17453/-, totaling
a sum of Rs.20,748/- and divided the same by figure two to arrive the figure
of at Rs.10,374/- per month. Adopting a multiplier of 16, the amount of
compensation was determined at Rs.13,27,872/-. Besides the compensation
amount, amount of gratuity, conventional amount and funeral expenses were
calculated as follows :
Rs.13,27,872/- towards dependency loss
Rs. 10,000/- towards conventional amount
Rs. 3,000/- towards funeral expenses
Rs. 3,02,468/- towards gratuity
Rs. 16,43,340/-
6. Interest on the said amount sum at the rate of 12 per cent was also
awarded.
7. On an appeal preferred by the appellant thereagainst, a Division
Bench of the High Court opined that as a revision of pay had been effected
by ONGC from 1.1.1997 and in August 2002, the employees in the same
cadre would have received a sum of Rs.10,693/- per month with Dearness
Allowance at the rate of 35.5% amounting to Rs.3892/- and other
allowances. The net income of the deceased was found to be at least a sum
of Rs.16,000/- so as to enable the Tribunal to come to the conclusion that the
loss of dependency benefit would come to Rs.16,000/- from January 1997
onwards. The High Court stated :
In view of the above settled legal position, we do
not find any difficulty in accepting the submission
of Mr. Nanavati for the original claimants that the
Tribunal was justified in looking at the pay
revision of employees of the ONGC for the
purpose of assessing prospective income of the
deceased. The accident in question took place in
September 1994. The basic pay of the deceased at
that time was Rs.3295/- and with dearness
allowance and other allowances, his total pay-
packet was Rs.6,418/-. Even proceeding on the
basis that the deductions made by the employer
may be taken into account, basic pay, dearness
allowance, drill site compensation allowance and
house rent allowance granted to the deceased
would almost come to Rs.5,000/- per month.
Within less than three years from the date of the
accident, pay revision was made by the ONGC
with effect from 1.1.97 and in August 2002, basic
pay of the employees in the same cadre in which
the deceased was working was Rs.10,693/- per
month with dearness allowance at the rate of
35.5% being Rs.3892/-; drill site compensatory
allowance and HRA were also substantially
revised and they were 20% and 22.5% of the basic
pay in August 2002. These four items aggregated
to Rs.19,184/- per month. Over and above these
heads, there were also other allowances like
productivity allowance, conveyance allowance,
child education allowance, child bus welfare
allowance, etc. making it a total figure of
Rs.21,808/-. Even after taking into account all
deductions including the income tax liability, the
net income available to the deceased and his
family would have been at least Rs.16000/- from
January 1997 onwards.
8. The High Court, however, not only adopted the multiplier of 13
instead of 16 to arrive at the conclusion that the loss of dependency would
be about Rs.16,000/-, but also interfered with the rate of interest to hold that
reasonable interest payable would be 8% per annum. Appellant was directed
to deposit the said amount with proportionate costs and interest at the rate of
8% per annum from the date of filing of the claim petition till its realization.
9. Mr. Pankaj Seth, learned counsel appearing on behalf of the appellant,
would submit that the Tribunal as also the High Court committed a serious
error in passing the impugned judgment in so far as they failed to take into
consideration that computation for loss of income should have, in a situation
of this nature, been determined only by doubling the amount of the salary
received by the deceased at the relevant time. Future prospects, according to
the learned counsel, could not have been taken into consideration.
10. Mr. Karia, learned counsel appearing for the respondent, on the other
hand, urged that future prospect including the revision in the scale of pay
should be taken into consideration for the purpose of determination of the
amount of compensation.
11. The amount of compensation payable to the heirs and legal
representatives of a deceased victim of an accident must be a fair and
reasonable one. The estimate of the amount of loss of dependency may be
arrived at by adopting various methods, application of structured formula
being one of them. Such a formula has also been provided for in Schedule II
appended to the Motor Vehicles Act, 1988. While determining the amount
of compensation, certain well known principles must be kept in mind.
12. It is not a case where, as on the date of death, the salary of the
deceased was revised with retrospective effect from 1994. Salary would be
revised or not was not known at that part of time. Only because such salary
was revised at a later point of time, the same by itself would not have been a
factor which could have been taken into consideration for determining the
amount of compensation. The Tribunal, therefore, committed a serious
illegality in taking into consideration the latter aspect.
13. The amount of compensation indisputably should be determined
having regard to the pecuniary loss caused to the dependents by reason of
the death of the victim. It was necessary to consider the earnings of the
deceased at the time of the accident. Of course, further prospect is not out of
bound for such consideration. But the same should be founded on some
legal principle.
14. In General Manager, Kerala State Road Transport Corporation,
Trivendrum v. Susamma Thomas [(1994) 2 SCC 176], this Court held :
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 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.
15. The legal principle in this behalf has been laid down in the following
terms :
19. In the present case the deceased was 39 years
of age. His income was Rs. 1032/- per month. Of
course, the future prospects of advancement in life
and career should 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. The deceased person in this
case had a more or less stable job. It will not be
inappropriate to take a reasonably liberal view of
the prospects of the future and in estimating the
gross income it will be unreasonable to estimate
the loss of dependency on the present actual
income of Rs. 1032/- per month. We think, having
regard to the prospects of advancement in the
future career, respecting which there is evidence
on record, we will not be in error in making a
higher estimate of monthly income at Rs. 2000/- as
the gross income. From this has to be deducted his
personal living expenses, the quantum of which
again depends on various factors such as whether
the style of living was spartan or bohemian. In the
absence of evidence it is not unusual to deduct
one-third of the gross income towards the personal
living expenses and treat the balance as the amount
likely to have been spent on the members of the
family and the dependents. This loss of
dependency should capitalise with the appropriate
multiplier. In the present case we can take about
Rs. 1,400/- per month or Rs. 17,000/- per year as
the loss of dependency and if capitalized on a
multiplier of 12 which is appropriate to the age of
the deceased, the compensation would work out to
(Rs. 17,000/- x 12= 2,04,000/- rupees) to which is
added the usual award for loss of consortium and
loss of the estate each in the conventional sum of
Rs. 15,000/.
This Court in Sarla Dixit & Anr. v. Balwant Yadav & Ors. [(1996) 3
SCC 179] opined :
The average gross future monthly income could
be arrived at by adding the actual gross income at
the time of death, namely, Rs.1,500/- per month to
the maximum which he would have otherwise got
had he not died a premature death, i.e., Rs.3,000/-
per month and dividing that figure by two. Thus,
the average gross monthly income spread over his
entire future career, had it been available, would
work out to Rs.4,500/- divided by 2, i.e.,
Rs.2,200/-. Rs.2,200/- per month would have been
the gross monthly average income available to the
family of the deceased had he survived as a bread
winner.
16. In Rathi Menon v. Union of India [(2001) 3 SCC 714], this Court,
upon considering the dictionary meaning of compensation held :
In this context a reference to Section 129 of the
Act appears useful. The Central Government is
empowered by the said provision to make rules by
notification “to carry out the purposes of this
Chapter”. It is evident that one of the purposes of
this chapter is that the injured victims in railway
accidents and untoward incidents must get
compensation. Though the word “compensation” is
not defined in the Act or in the Rules it is the
giving of an equivalent or substitute of equivalent
value. In Black’s Law Dictionary , “compensation”
is shown as
equivalent in money for a loss
sustained; or giving back an
equivalent in either money which is
but the measure of value, or in actual
value otherwise conferred; or
recompense in value for some loss,
injury or service especially when it is
given by statute.
It means when you pay the compensation in terms
of money it must represent, on the date of ordering
such payment, the equivalent value.
17. In N. Sivammal and Ors. v. Managing Director, Pandian Roadways
Corporation and Ors. [(1985) 1 SCC 18], this Court took into consideration
the pay packet of the deceased.
18. We may also notice that in T.N. State Transport Corporation Ltd. v. S.
Rajapriya and Ors. [(2005) 6 SCC 236], this Court held :
8. 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 together.
9. 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 years’ purchase.
10. 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 overall picture that matters”,
and the court must try to assess as best as it can the
loss suffered.
19. The same view was reiterated in New India Assurance Co. Ltd. v.
Charlie and Anr. [(2005) 10 SCC 720]. However, therein although the words
‘net income’ has been used but the same would ordinarily mean gross income
minus the statutory deductions. We must also notice that the said decision
has been followed in New India Assurance Co. Ltd. v. Kalpana (Smt.) and
Ors. [(2007) 3 SCC 538].
20. In Bijoy Kumar Dugar v. Bidya Dhar Dutta & Ors. [(2006) 3 SCC
242], this Court, in a case where the salary of the deceased was found to be
Rs.3600/- after deduction and wherein multiplier of 12 was applied where
the age of the parents of the deceased was between 45 and 50 years, held
that no further enhancement was warranted.
21. In U.P. State Road Transport Corporation v. Krishna Bala & Ors.
[(2006) 6 SCC 249], it was held :
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 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 over the period for which
the dependency is expected to last.
22. Therein a multiplier of 13 was adopted in a case where the age of the
deceased was around 36.
23. Almost to the same effect is the decision of this Court in The
Managing Director, TNSTC v. Sripriya & Ors. [2007 (4) SCALE 222]. In
that case, a multiplier of 12 was applied in a case where the age of the
deceased was 37 years.
24. Even certain allowances payable to the deceased could have been
taken into consideration in the changing social scenario. In National
Insurance Company Ltd. v. Indira Srivastava & Ors. [2007 (14) SCALE
461], it is useful to notice, this Court observed :
17. 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.
Noticing the dictionary meaning of income, it was held :
19. 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
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.
25. We, therefore, are of the opinion that what would have been the
income of the deceased on the date of retirement was not a relevant factor in
the light of peculiar facts of this case and, thus, the approach of the Tribunal
and the High Court must be held to be incorrect. It is impermissible in law
to take into consideration the effect of revision in scale of pay w.e.f.
1.1.1997 or what would have been the scale of pay in 2002.
26. The loss of dependency, in our opinion, should be calculated on the
basis as if the basic pay of the deceased been Rs. 3295/- X 2 = Rs. 6,590/-,
thereto should be added 18.5% dearness allowance which comes to
Rs.1219/-, child education allowance for two children @ Rs.240/- X 2 =
Rs.480 and child bus fair Rs.160 X 2 = Rs.320/- should have been added
which comes to Rs.8,609/-.
27. From the aforementioned figure 1/3rd should be deducted. After
deduction, the amount of income comes to Rs.5,738/- per month [Rs.8609/-
Rs.2871/-] and the amount of compensation should be determined by
adopting the multiplier of 13, which comes to Rs.8,95,128/-
28. In the present case, the High Court itself has applied the multiplier of
13. We are of the opinion that no interference therewith is warranted. We
furthermore do not intend to interfere with the rate of interest in the facts and
circumstance of the case.
29. The appeal is allowed in part and to the extent mentioned
hereinbefore. In the facts and circumstances of the case, there shall be no
order as to costs.