Holding

The appropriate multiplier is 13 and the rate of interest is 6% per annum.

Summary

The appellant, United India Insurance Co. Ltd., appealed a compensation award granted by the Motor Accident Claims Tribunal (MACT) under Section 166 of the Motor Vehicles Act, 1988, in a fatal accident where the deceased, aged 32, earned Rs 7,427 per month. The MACT had used a multiplier of 17 and awarded Rs 10,61,000 with 9% interest, which the High Court upheld. The insurer contended that both the multiplier and the interest rate were excessive. The Supreme Court examined the multiplier method, referring to English case law and prior Indian decisions, and held that the appropriate multiplier for a 32‑year‑old deceased is 13 and the suitable rate of interest is 6% per annum. Consequently, the MACT was directed to recompute the entitlement on these bases. The appeal was allowed in part.

Issues considered

Whether the multiplier of 17 applied by the MACT is appropriate under Section 166 of the Motor Vehicles Act, 1988.
Whether the rate of interest of 9% per annum awarded is appropriate.
What multiplier and rate of interest should be applied in calculating compensation for fatal accident claims.

Legislation cited

Motor Vehicles Act, 1988s. 166

Subjects

Motor Vehicles Actfatal accident compensationmultiplier methoddependency lossinterest rateSection 166MACTinsurance claimcompensation calculation

Judgment

[2009) 1 S.C. R. 872

A UNITED INDIA INSURANCE CO. LTD.
v.
BINDU AND ORS.
(Civil Appeal No. 724 of 2009)
FEBRUARY 5, 2009
B
[DR. ARIJIT PASAYAT AND ASOK KUMAR
GANGULY, JJ.]

Motor Vehicles Act, 1988:
c Fatal accident - Deceased aged 32 years and earning
Rs. 7,4271- per month - Tribunal adopting multiplier of 17
awarding compensation of Rs.10,61,0001- with 9% interest-
Held: Appropriate multiplier would be 13 and rate of interest
6% - Tribunal to workout the entitlement accordingly.
D
In a claim petition field uls.166 of the Motor Vehicles
Act, 1988 filed by the dependents of the victim of a fatal
accident, who was aged 32 years and earning Rs.7,7241
- per month, the MACT applied the multiplier of 17 and
awarded a compensation of Rs.10,61,0001- with 9 %
E interest from the date of filing of the claim petition. The
High Court affirmed the award.
In the instant appeal field by the Insurance Company,
it was contended for the appellant that the multiplier
F adopted by the Tribunal had no basis and the rate of
interest awarded was also high.
Allowing the appeal in part, the Court
HELD:1.1. The multiplier method involves
G 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
H 872
UNITED INDIA INSURANCE CO. LTD. v. BINDU AND 873
ORS.

whichever is higher) and by the calculation as to what A
+- 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 B
dependency is expected to last. [Para 6) [876-C-E]
Mallett v. Mc Mangle (1969) 2 All ER 178; Davies v.
Powell Duffregn Associated Collieries Ltd. 1942 AC 601 and
Nance v. British Columbia Electric Railway Co. Ltd. (1951) 2
All ER 448, referred to. c
1.2. Keeping in view the parameters laid down in the
decided case, it would be appropriate to fix the multiplier
at 13 and the rate of interest at 6% p.a. The MACT shall
work out the entitlements accordingly. [Para 12) [878-F]
D
General Manager, Kera/a State Road Transport
Corporation, Trivandrum v. Susamma Thomas (Mrs.) and
Ors. (1994) 2 SCC 176 and UP. State Road Transport
Corporation And Others v. Trilok Chandra and Ors. (1996) 4
sec 362, relied on. E
Case Law Reference:
1942 AC 601 referred to para 5
(1951) 2 All ER 448 referred to para 5
(1969) 2 All ER 178 referred to para 7 F

(1994) 2 sec 116 relied on para 10
(1996) 4 sec 362 relied on para 10
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 724
G
of 2009.
From the Order dated 1.12.2006 of the High Court of
Kerala at Ernakulam in MFA No. 313 of 2002.
M.K. Dua, Kishore Rawat and Dhiraj for the Appellant.
H
874 SUPREME COURT REPORTS (2009) 1 S.C.R.

A The Judgment of the Court was delivered by
DR. ARIJIT PASAYAT, J. 1. Leave granted.
2. Challenge in this appeal is to the judgment of a Division
Bench of the Kera la High Court dismissing the appeal filed by
B the appellant questioning correctness of the award passed by
the Motor Accident Claims Tribunal, Paravur (in short the
'MACT').
3. Background facts in a nutshell are as follows:
C One Anil lost his life in a vehicular accident on 17.6.1999.
The respondents filed a Claim Petition in terms of Section 166
of the Motor Vehicles Act, 1988 (in short the 'Act'). It was stated
in the claim petition that when the deceased was driving a
motor cycle, a tractor owned by respondent no.5 which was
being driven in rash and negligent manner by respondent No.4
D dashed against him and he suffered serious injuries. The
vehicle was the subject matter of insurance with the present
appellant (hereinafter referred to as the 'insurer'). A claim of
Rs.12,00,000/- was made. The stand taken by the insurer was
that the accident took place only due to the negligence of the
E deceased and there was no negligence on the part of the driver.
It was also submitted that there was no evidence regarding the
income of the deceased and, therefore, the claim was highly
exaggerated. It was indicated in the claim petition that the age
of the deceased was 32 years and that he was getting
F Rs.7,427/- as monthly salary. The MACT found that the monthly
income as claimed has been established. Adopting a multiplier
of 17 the entitlement of the claim was fixed at Rs.10,61,000/-
with 9% interest from the date of filing of the claim petition.
An appeal was filed before the High Court which
G dismissed the appeal on the ground that the award made was
in order. ).
3. It was submitted by learned counsel for the appellant that
not only the claim of income was without any basis but also the
H multiplier has no rational basis. It is also submitted that the rate
UNITED INDIA INSURANCE CO. LTD. v. BINDU AND 875
ORS. [DR. ARIJIT PASAYAT, J.]

~- .--......_ of interest awarded is high. A
4. There is no appearance on behalf of the respondents
in spite of service of notice.

5. There were two methods adopted to determine and for
calculation of compensation in fatal accident actions. The first B
multiplier method mentioned in Davies v. Powell Duffregn
Associated Collieries Ltd. (1942 AC 601) and the second in
Nance v. British Columbia Electric Railway Co. Ltd. (1951 (2)
All ER 448).
6. The multiplier method involves the ascertainment of the C
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 D
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. E
7. The considerations generally relevant in the selection of
multiplicand and multiplier were adverted to by Lord Diplock in
his speech in Mallett v. Mc Mangle (1969 (2) All ER 178) where
the deceased was aged 25 and left behind his widow of about
the same age and three minor children. On the question of F
selection of multiplicand Lord Diplock observed:
"The starting point in any estimate of the amount of the
'dependency' is the annual value of the material benefits
provided for the dependants out of the earnings of the G
deceased at the date of his death. But.. .. there are many
factors which might have led to variations up or down in
the future. His earnings might have increased and with
them the amount provided by him for his dependants. They
might have diminished with a recession in trade or he might
H
876 SUPREME COURf REPORTS [2009] 1 S.C.R.

A have had spells of unemployment. As his children grew
up and became independent the proportion of his earnings
spent on his dependants would have been likely to fall. But
in considering the effect to be given in the award of
damages to possible variations in the dependency there
B are two factors to be borne in mind. The first is that the
more remote in the future is the anticipated change the less
confidence there can be in the chances of its occurring and
the smaller the allowance to be made for it in the
assessment. The second is that as a matter of the
c arithmetic of the calculation of present value, the later the
change takes place the less will be its effect upon the total
award of damages. Thus at interest rates of 4- 112% the
present value of an annuity for 20 years of which the first
ten years are at $ 100 per annum and the second ten years
D at $ 200 per annum, is about 12 years' purchase of the
arithmetical average annuity of$ 150 per annum, whereas
if the first ten years are at $200 per annum and the second
ten years at $ 100 per annum the present value is about
14 years' purchase of the arithmetical mean of$ 150 per
annum. If therefore the chances of variations in the
E
'dependency' are to be reflected in the multiplicand of
which the years' purchase is the multiplier, variations in the
dependency which are not expected to take place until after
ten years should have only a relatively small effect in
increasing or diminishing the 'dependency' used for the
F purpose of assessing the damages."
8. In regard to the choice of the multiplicand, Halsbury's
Laws of England in vol. 34, para 98 states the principle thus:
"98. Assessment of damages under the Fatal Accident
G Act, 1976 - The courts have evolved a method for
calculating the amount of pecuniary benefit that dependants
could reasonably expect to have received from the
deceased in the future. First the annual value to the
dependants of those benefits (the multiplicand) is
H assessed. In the ordinary case of the death of a wage-
UNITED INDIA INSURANCE CO. LTD. v. BINDU AND 877
ORS. [DR. ARIJIT PASAYAT, J.]
earner that figure is arrived at by deducting from the wages A
the estimated amount of his own personal and living
expenses.

The assessment is split into two parts. The first part
comprises damages for the period between death and
trial. The multiplicand is multiplied by the number of years B
which have elapsed between those two dates. Interest at
one-half the short-term investment rate is also awarded on
that multiplicand. The second part is damages for the
period from the trial onwards. For that period, the number
of years which have based on the number of years that the C
expectancy would probably have lasted; central to that
j
lllr.
\
calculation is the probable length of the deceased's
working life at the date of death."

9. As to the multiplier, Halsbury states: D
"However, tbe 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 E
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 F
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 admissible, but the courts do not encourage G
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 H
878 SUPREME COURT REPORTS [2009] 1 S.C.R.

A allowance for inflation is thereby made. The multiplier may -f- •
be increased where the plaintiff is a high tax payer. The
multiplicand is based on the rate of wages at the date of
trial. No interest is allowed on the total figure."
10. In both General Manager, Kera/a State Road
B Transport Corporation, Trivandrum v. Susamma Thoma~
(Mrs.) and Ors. (1994 (2) SCC 176) and U.P. State Road
Transport Corporation and Others v. Trilok Chandra and Ors.
(1996 (4) sec 362) the multiplier appears to have been
..
adopted by this Court taking note of the prevalent banking rate
c of interest.
11. In fact in Trilok Chand's case (supra), after reference
to Second Schedule to the Act, it was noticed that the same
iii '
suffers from many defects. It was pointed out that the same is
to serve as a guide, but cannot be said to be invariable ready
D reckoner. However, the appropriate highest multiplier was held
-+
to be 18. The highest multiplier has to be for the age group of
21 years to 25 years when an ordinary Indian Citizen starts
independently earning and the lowest would be in respect of a
person in the age group of 60 to 70, which is the normal
E retirement age.
•
12. Keeping in view the parameters indicated above it
would be appropriate to fix the multiplier at 13 and the rate of
interest at 6% p.a. The MACT shall work out the entitlements ,..
-;.
on the aforesaid basis. It is stated by learned counsel for the
F
appellant that pursuant to the order of this Court on 27.7.2007,
a sum of Rs.7,00,000/- has been deposited. The balance
amount payable in terms of this Court's order shall be
deposited by the insurer with the MACT within eight weeks. The
MACT shall permit withdrawal of the amount on such terms
including the fixed deposit in a scheduled bank after a deposit
is made, as the circumstances warrant.
>
13. The appeal is allowed to the aforesaid extent. '"'
R.P. Appeal partly allowed.