2009 (4) TMI 1030 - SC - Indian Laws

Motor accident claim - Claim for compensation on death of dependency - quantum of compensation so awarded - Application seeking increase in compensation - Principles relating to assessment of compensation in cases of death - HELD THAT - 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. Addition to income for future prospects - In view of 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. 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 standardize 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. Deduction for personal and living expenses - 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 dependant family members is 4 to 6, and one-fifth (1/5th) where the number of dependant family members exceed six. 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. However, where family of the bachelor is large and dependant on the income of the 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. Selection of Multiplier - The principles relating to determination of liability and quantum of compensation are different for claims made u/s 163A of MV Act and claims u/s 166 of MV Act. Section 163A and Second Schedule in terms do not apply to determination of compensation in applications u/s 166. Computation of compensation - In this case as noticed, the salary of the deceased at the time of death was ₹ 4,004. By applying the principles enunciated by this Court to the evidence, the High Court concluded that the salary would have at least doubled (₹ 8008/-) by the time of his retirement and consequently, determined the monthly income as an average of ₹ 4004/- and ₹ 8008/- that is ₹ 6006/- per month or ₹ 72072/- per annum. We find that the said conclusion is in conformity with the legal principle that about 50% can be added to the actual salary, by taking note of future prospects. 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. As 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 ₹ 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 ₹ 57,658 x 15 ₹ 8,64,870/-. In addition, the claimants will be entitled to a sum of ₹ 5,000/- under the head of loss of estate' and ₹ 5000/- towards funeral expenses. The widow will be entitled to ₹ 10,000/- as loss of consortium. Thus, the total compensation will be ₹ 8,84,870/-. After deducting ₹ 7,19,624/- awarded by the High Court, the enhancement would be ₹ 1,65,246/-. We allow the appeal in part accordingly. The appellants will be entitled to the said sum of ₹ 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.

Summary

Issues Involved:
1. Future prospects in determining the income of the deceased.
2. Deduction towards personal and living expenses.
3. Appropriate multiplier for calculating compensation.
4. Final compensation amount.

Issue-wise Detailed Analysis:

1. Future Prospects in Determining the Income of the Deceased:

The Supreme Court addressed whether future prospects should be considered for determining the income of the deceased and if pay revisions during the pendency of claim proceedings should be included. The Court referenced previous cases like Susamma Thomas and Sarla Dixit, which supported considering future prospects. The Court decided to standardize the addition to the actual salary for future prospects: 50% for those below 40 years, 30% for those between 40 to 50 years, and no addition for those above 50 years. The Court rejected the appellants' argument to consider actual future pay revisions, as it would introduce inconsistencies and depend on the fortuitous timing of case resolutions.

2. Deduction Towards Personal and Living Expenses:

The Court examined the appropriate deduction for personal and living expenses. It acknowledged the need for standardization but also recognized that the deduction should vary based on the number of dependents. For married individuals, the standard deduction was one-third if there were 2-3 dependents, one-fourth for 4-6 dependents, and one-fifth for more than six dependents. For bachelors, generally, 50% was deducted, but this could be adjusted based on specific circumstances. In the present case, with a large family of eight dependents, the Court decided that one-fifth of the income should be deducted for personal and living expenses.

3. Appropriate Multiplier for Calculating Compensation:

The Court discussed the selection of the multiplier, which represents the number of years' purchase for capitalizing the loss of dependency. It referenced the Second Schedule of the Motor Vehicles Act and previous judgments to standardize the multiplier. The Court concluded that the multiplier should be selected based on the age of the deceased, starting with 18 for ages 15-25 and reducing progressively. For the deceased aged 38, the appropriate multiplier was determined to be 15.

4. Final Compensation Amount:

The Court recalculated the compensation based on the standardized principles. The deceased's monthly income was averaged to Rs. 6,006, considering future prospects. After deducting one-fifth for personal expenses, the annual contribution to the family was Rs. 57,658. Using a multiplier of 15, the loss of dependency was calculated as Rs. 8,64,870. Additional amounts were added for loss of estate, funeral expenses, and consortium, bringing the total compensation to Rs. 8,84,870. After deducting the amount already awarded by the High Court, the enhancement was Rs. 1,65,246, with interest at 6% per annum from the date of the petition until realization.

The appeal was allowed in part, with the additional compensation awarded to the widow exclusively. Each party was to bear their respective costs.