The evolution of jurisprudence in motor accident claims cases dates back to case earlier than Motor Vehicle Act, 1988. That time the Supreme Court including High Courts of many states decided the cases by considering various heads for claim of compensation in motor accident claim cases but the arrival of MVA ,1988 uniformed many heads, however many heads and their right calculation remained vary from case to case.

In many landmark cases, the Supreme Court established norms and principles to count the claims under various heads. Sarla Verma Case is a landmark case in this regard where the court set the multiplier method while considering the compensation claim.

The Facts of the Case

• One Rajinder Prakash died on account of injuries sustained in a motor accident which occurred on 18 April 1988 involving a bus belonging to the Delhi Transport Corporation.

Motor Accident Claim Tribunal (MACT)

• At the time of the accident and untimely death, the deceased was aged 38 years, and was working as a Scientist in the Indian Council of Agricultural Research (ICAR) on a monthly salary of Rs. 3402/- and other benefits. His widow, three minor children, parents and grandfather (who is no more) filed a claim for Rs. 16 lakhs before the Motor Accidents Claims Tribunal, New Delhi.

• An officer of ICAR, gave evidence that the age of retirement in the service of ICAR was 60 years and the salary received by the deceased at the time of his death was Rs. 4004/- per month.

• The Tribunal by its judgment and award dated 6 sep 1993 allowed the claim in part. The Tribunal calculated the compensation by taking the monthly salary of the deceased as Rs. 3402. It deducted one-third towards the personal and living expenses of the deceased, and arrived at the contribution to the family as Rs. 2250 per month (or Rs. 27,000/- per annum).

• In view of the evidence that the age of retirement was 60 years, it held that the period of service lost on account of the untimely death was 22 years. Therefore, it applied the multiplier of 22 and arrived at the loss of dependency to the family as Rs. 5,94,000/-. It awarded the said amount with interest at the rate of 9% per annum from the date of petition till the date of realization.

• After deducting Rs. 15000/- paid as interim compensation, it apportioned the balance compensation among the claimants, that is, Rs. 3,00,000/- to the widow, Rs. 75000/- to each of the two daughters, Rs. 50000/- to the son, Rs. 19000/- to the grandfather and Rs. 30000/- to each of the parents.

High Court

• Dissatisfied with the quantum of compensation, the appellants filed an appeal. The Delhi High Court by its judgment dated 15 fab 2007 allowed the said appeal in part. The High Court was of the view that though in the claim petition the pay was mentioned as Rs. 3,402 plus other benefits, the pay should be taken as Rs. 4,004/- per month as per the evidence of officer.

• Having regard to the fact that the deceased had 22 years of service left at the time of death and would have earned annual increments and pay revisions during that period, it held that the salary would have at least doubled (Rs. 8008/- per month) by the time he retired. It therefore determined the income of the deceased as Rs. 6006/- per month, being the average of Rs. 4,004/- (salary which he was getting at the time of death) and Rs. 8,008/- (salary which he would have received at the time of retirement).

• Having regard to the large number of members in the family, the High Court was of the view that only one fourth should be deducted towards personal and living expenses of the deceased, instead of the standard one-third deduction. After such deduction, it arrived at the contribution to the family as Rs. 4,504/- per month or Rs. 54,048/- per annum.

• Having regard to the age of the deceased, the High Court chose the multiplier of 13. Thus it arrived at the loss of dependency as Rs. 702,624/-. By adding Rs. 15,000/- towards loss of consortium and Rs. 2,000/- as funeral expenses, the total compensation was determined as Rs. 7,19,624/-.

• Thus it disposed of the appeal by increasing the compensation by Rs. 1,25,624/- with interest at the rate of 6% P.A. from the date of claim petition.

Supreme Court

• Not being satisfied with the said increase, the deceased family filed the appeal in Supreme Court. They contended that the High Court erred in holding that there was no evidence in regard to future prospects; and that though there is no error in the method adopted for calculations, the High Court ought to have taken a higher amount as the income of the deceased.

• They submitted that two applications were filed before the High Court on 2 June 2000 and 5 may 2005 bringing to the notice of the High Court that having regard to the pay revisions, the pay of the deceased would have been Rs. 20,890/- per month as on 31 dec 1999 and Rs. 32,678/- as on 1 Oct 2005, had he been alive.

• To establish the revisions in pay scales and consequential re-fixation, the appellants produced letters of confirmation dated 7 Dec 1998 and 28 Oct 2005 issued by the employer (ICAR). Their grievance was that the High Court did not take note of those indisputable documents to calculate the income and the loss of dependency. They contend that the monthly income of the deceased should be taken as Rs. 18341/- being the average of Rs. 32,678/- (income shown as on 1 oct 2005) and Rs. 4,004/- (income at the time of death).

• They submitted that only one-eighth should have been deducted towards personal and living expenses of the deceased. They pointed out that even if only one fourth (Rs. 4585/-) was deducted therefrom towards personal and living expenses of the deceased, the contribution to the family would have been Rs. 13,756/- per month or Rs. 1,65,072/- per annum. They submit that having regard to the Second Schedule to the Motor Vehicles Act, 1988 (‘Act’ for short), the appropriate multiplier for a person dying at the age of 38 years would be 16 and therefore the total loss of dependency would be Rs. 26,41,152/-.

• They also contended that Rs. 1,00,000/- should be added towards pain and suffering undergone by the claimants. They therefore submit that Rs. 27,47,152/- should be determined as the compensation payable to them.

Main Issues

The main issues before the court were that,

(i) Whether the future prospects can be taken into account for determining the income of the deceased? If so, whether pay revisions that occurred during the pendency of the claim proceedings or appeals therefrom should be taken into account?

(ii) Whether the deduction towards personal and living expenses of the deceased should be less than one-fourth (¼th) as contended by the appellants, or should be one-third (⅓rd) as contended by the respondents?

Analysis by the Court

By setting down the steps to ascertain the claims, the court established that,

Basically, only three facts need to be established by the claimants for assessing compensation in the case of death:

(a) age of the deceased;

(b) income of the deceased; and the

(c) the number of dependents.

The issues to be determined by the Tribunal to arrive at the loss of dependency are

(i) additions/deductions to be made for arriving at the income;

(ii) the deduction to be made towards the personal living expenses of the deceased; and

(iii) the multiplier to be applied with reference of the age of the deceased.

If these determinants are standardized, there will be uniformity and consistency in the decisions. There will lesser need for detailed evidence. It will also be easier for the insurance companies to settle accident claims without delay. To have uniformity and consistency, Tribunals should determine compensation in cases of death, by the following well settled steps:

Step 1 (Ascertaining the multiplicand)

The income of the deceased per annum should be determined. Out of the said income a deduction should be made in regard to the amount which the deceased would have spent on himself by way of personal and living expenses. The balance, which is considered to be the contribution to the dependant family, constitutes the multiplicand.

Step 2 (Ascertaining the multiplier)

Having regard to the age of the deceased and period of active career, the appropriate multiplier should be selected. This does not mean ascertaining the number of years he would have lived or worked but for the accident. Having regard to several imponderables in life and economic factors, a table of multipliers with reference to the age has been identified by this Court. The multiplier should be chosen from the said table with reference to the age of the deceased.

Step 3 (Actual calculation)

The annual contribution to the family (multiplicand) when multiplied by such multiplier gives the ‘loss of dependency’ to the family.

Thereafter, a conventional amount in the range of Rs. 5,000/- to Rs. 10,000/- may be added as loss of estate. Where the deceased is survived by his widow, another conventional amount in the range of 5,000/- to 10,000/- should be added under the head of loss of consortium. But no amount is to be awarded under the head of pain, suffering or hardship caused to the legal heirs of the deceased.

The funeral expenses, cost of transportation of the body (if incurred) and cost of any medical treatment of the deceased before death (if incurred) should also added.

(i) – addition to income for future prospects

The question is whether actual income at the time of death should be taken as the income or whether any addition should be made by taking note of future prospects.

In Susamma Thomas, this Court held that the future prospects of advancement in life and career should also be sounded in terms of money to augment the multiplicand (annual contribution to the dependants); and that where the deceased had a stable job, the court can take note of the prospects of the future and it will be unreasonable to estimate the loss of dependency on the actual income of the deceased at the time of death.

In that case, the salary of the deceased, aged 39 years at the time of death, was Rs. 1032/- per month. Having regard to the evidence in regard to future prospects, this Court was of the view that the higher estimate of monthly income could be made at Rs. 2000/- as gross income before deducting the personal living expenses.

In Susamma Thomas, the Court increased the income by nearly 100%, in Sarla Dixit[1], the income was increased only by 50% and in Abati Bezbaruah[2] the income was increased by a mere 7%. In view of imponderables and uncertainties, the court was 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 salary’ should be read as ‘actual salary less tax’]. The addition should be only 30% if the age of the deceased was 40 to 50 years.

There should be no addition, where the age of deceased is more than 50 years. Though the evidence may indicate a different percentage of increase, it is necessary to standardise the addition to avoid different yardsticks being applied or different methods of calculations being adopted. Where the deceased was self-employed or was on a fixed salary (without provision for annual increments etc.), the courts will usually take only the actual income at the time of death. A departure therefrom should be made only in rare and exceptional cases involving special circumstances.

Question (ii) – deduction for personal and living expenses

Where the deceased was married, the deduction towards personal and living expenses of the deceased, should be one-third (⅓rd) where the number of dependent family members is 2 to 3, one-fourth (¼th) where the number of dependant family members is 4 to 6, and one-fifth (⅕th) where the number of dependant family members exceed six. 15.

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.

Question (iii) – selection of multiplier

The Court held that the multiplier to be used should be as mentioned in column (4) of the Table below (prepared by applying Susamma Thomas, Trilok Chandra[3] and Charlie), which starts with an operative multiplier of 18 (for the age groups of 15 to 20 and 21 to 25 years), reduced by one unit for every five years, that is M-17 for 26 to 30 years, M-16 for 31 to 35 years, M-15 for 36 to 40 years, M-14 for 41 to 45 years, and M-13 for 46 to 50 years, then reduced by two units for every five years, that is, M-11 for 51 to 55 years, M-9 for 56 to 60 years, M-7 for 61 to 65 years and M-5 for 66 to 70 years.

 Question (iv) – Computation of compensation

Finally, the Court while deciding the compensation concluded that,

‘Appellants contended that when actual figures as to what would be the income in future, are available it is not proper to take a nominal hypothetical increase of only 50% for calculating the income. He submitted that though the deceased was receiving Rs. 4004/- per month at the time of death, as per the certificates issued by the employer (produced before High Court), on the basis of pay revisions and increases, his salary would have been Rs. 32,678/- in the year 2005 and there is no reason why the said amount should not be considered as the income at the time of retirement. It was contended that the income which is to form the basis for calculation should not therefore be the average of Rs. 4004/- and Rs. 8008/-, but the average of Rs. 4004/- and Rs. 32,678/-.

The assumption of the appellants that the actual future pay revisions should be taken into account for the purpose of calculating the income is not sound. As against the contention of the appellants that if the deceased had been alive, he would have earned the benefit of revised pay scales, it is equally possible that if he had not died in the accident, he might have died on account of ill health or other accident, or lost the employment or met some other calamity or disadvantage. The imponderables in life are too many. Another significant aspect is the non-existence of such evidence at the time of accident.

In this case, the accident and death occurred in the year 1988. The award was made by the Tribunal in the year 1993. The High Court decided the appeal in 2007. The pendency of the claim proceedings and appeal for nearly two decades is a fortuitous circumstance and that will not entitle the appellants to rely upon the two pay revisions which took place in the course of the said two decades.

If the claim petition filed in 1988 had been disposed of in the year 1988-89 itself and if the appeal had been decided by the High Court in the year 1989-90, then obviously the compensation would have been decided only with reference to the scale of pay applicable at the time of death and not with reference to any future revision in pay scales. If the contention urged by the claimants is accepted, it would lead to the following situation: The claimants only could rely upon the pay scales in force at the time of the accident, if they are prompt in conducting the case.

But if they delay the proceedings, they can rely upon the revised higher pay scales that may come into effect during such pendency. Surely, promptness cannot be punished in this manner. We therefore reject the contention that the revisions in pay scale subsequent to the death and before the final hearing should be taken note of for the purpose of determining the income for calculating the compensation.

25. The appellants next contended that having regard to the fact that the family of deceased consisted of 8 members including himself and as the entire family was dependent on him, the deduction on account of personal and living expenses of the deceased should be neither the standard one-third, nor one-fourth as assessed by the High Court, but one-eighth.

We agree with the contention that the deduction on account of personal living expenses cannot be at a fixed one-third in all cases (unless the calculation is under section 163A read with Second Schedule to the MV Act). The percentage of deduction on account personal and living expenses can certainly vary with reference to the number of dependant members in the family. But as noticed earlier, the personal living expenses of the deceased need not exactly correspond to the number of dependants. As an earning member, the deceased would have spent more on himself than the other members of the family apart from the fact that he would have incurred expenditure on travelling/transportation and other needs.

Therefore we are of the view that interest of justice would be met if one-fifth is deducted as the personal and living expenses of the deceased. After such deduction, the contribution to the family (dependants) is determined as Rs. 57,658/- per annum. The multiplier will be 15 having regard to the age of the deceased at the time of death (38 years). Therefore the total loss of dependency would be Rs. 57,658 x 15 = Rs. 8,64,870/-. 26.

In addition, the claimants will be entitled to a sum of Rs. 5,000/- under the head of ‘loss of estate’ and Rs. 5000/- towards funeral expenses. The widow will be entitled to Rs. 10,000/- as loss of consortium. Thus, the total compensation will be Rs. 8,84,870/-. After deducting Rs. 7,19,624/- awarded by the High Court, the enhancement would be Rs. 1,65,246/-. 27. We allow the appeal in part accordingly.

The appellants will be entitled to the said sum of Rs. 165,246/- in addition to what is already awarded, with interest at the rate of 6% per annum from the date of petition till the date of realization. The increase in compensation awarded by us shall be taken by the widow exclusively.”

Reference

Sarla verma v. Delhi Transport Corporation (2009)

[1] Sarla Dixit v. Balwant Yadav, 1996(2) RRR 90 : [1996(3) SCC 179]

[2] Abati Bezbaruah v. Dy. Director General, Geological

Survey of India [2003(3) SCC 148]

[3] UPSRTC v. Trilok Chandra [1996(4) SCC 362]