Himachal Pradesh High Court
Milap Kaur And Ors. vs The Secretary, Himachal Pradesh Public ... on 11 September, 1987
Equivalent citations: I(1988)ACC382
JUDGMENT P.D. Desai, C.J.
1. The accident giving rise to this appeal occurred on October 21, 1973, at about 4-30 p.m. in village Bhumain, Tehsil Nalagarh, District Solan. The husband of the first appellant and the father of the rest of the appellants, aged about 32 at the material time, died as a result of the injuries received by him in the course of the said accident.
2. The vehicle involved in the accident, truck No. HPB 154, was owned by the Himachal Pradesh Public Works Department (first respondent). It was being driven at the material time by the second respondent, an employee of the first respondent.
3. In the claim petition instituted by the appellants, compensation was claimed in the sum of Rs. 2,40,000/-. The Motor Accident claims Tribunal found that the accident had occurred on account of the negligent act of the second respondent in reversing the vehicle in a narrow street of the village without the assistance of the cleaner to guide him. The Tribunal assessed the loss of monthly dependency at Rs. 225/- and of the annual dependency at Rs. 2700/- and applied the multiplier of 18 and computed the total compensation for the loss of dependency benefit at Rs 48,600/-. Instead of awarding the whole of the said amount as compensation, the Tribunal made an award in the sum of Rs. 25,000/- only on the ground that a deduction to the extent of about 48% was required to be made since the compensation was being received by the appellants in a lump-sum and the interest earned thereon would provide them sufficient income to off-set the loss of dependency benefit and also on account of the "uncertainties of the future income". Hence the present appeal.
4. The finding on the issue of negligence has become final since a cross-appeal, namely, FAO (MVA) No. 6 of 1977, preferred by the State was summarily dismissed on March 7,1977 and, consequently, the cross-objections filed in the present appeal were also dismissed as not maintainable by an order passed on August 20, 1987.
5. The substantial question which requires consideration in this appeal is whether the Tribunal was justified in law in making a deduction to the extent of about 40% from the compensation amount assessed as due and payable to the appellants.
6. There is a diversification of judicial opinion in our country on the question whether a deduction from the assessed amount of compensation should be made on the ground that the compensation has the effect of putting the deceased's future contribution into the dependants' hands long before they would otherwise have received it and would enable them to enjoy the interest accruing in the intervening period. Before dealing with the case law, it is necessary to refer to the general method of assessment of the dependency value which is being followed by the Courts where the death of the bread-winner of the family results on account of a tortious act.
7. In McGregor on Damages, Fourteenth Edition, paragraph 1289, at page 877, this aspect has been succinctly dealt with under the sub-title "General method of assessment" in the following words:
The courts have evolved a particular method for assessing the value of the dependency, or the amount of pecuniary benefit that the dependent could reasonably expect to have received from the deceased in the future. This amount is calculated by taking the present annual figure of the dependency, whether stemming from money or goods provided or services rendered, and multiplying it by a figure which, while based upon the number of years that the dependency might reasonably be expected to last, is discounted so as to allow for the fact that a lump sum is being given now instead of periodical payments over the years. This latter figure has long been called the multiplier; the former figure has now come to be referred to as the multiplicand. Further adjustments, however, may have to be made to multiplicand or multiplier on account of a variety of factors, viz the probability of future increase or decrease in the annual dependency, the so-called contingencies of life, and the incidence of inflation and taxation. Moreover, the value of the dependency can include not only that part of the deceased's earnings which he would have expended annually in maintaining his dependants but also that part of his earnings which he would have saved and which would have come to his dependants by inheritance on his death.
(Underlining supplied) In paragraphs 1306 and 1307 at pages 888 and 889, which occur under the sub-title "Calculation of the multiplier", the learned author has made the following pertinent observations:
(ii)-- Discount for lump sum. The dependants' annual loss--the multiplicand--is not to be multiplied by the number of years during which they have been deprived of the deceased's support; this would clearly produce overcompensation as it would put the deceased's future contrib. ions into the dependants' hands long before they would otherwise have received them, and would enable them to enjoy the interest accruing in the intervening period. It is the present value of the future contributions that is to be awarded, and while the surest way of ascertaining such present value is by resort to combined annuity and life expectation tables which give the present value of an annuity for life for persons of every age, the courts, as already indicated, are somewhat chary of using statistical data. However, although the courts prefer the more haphazard approach of making a somewhat arbitrary deduction in the multiplier to be applied to the figure to annual loss, they are still prepared to check their calculations against the available statistical data....
(Underlining supplied)
8. These observations in a standard treatise would indicate that the discount for the lump sum payment is a factor which is usually taken into consideration while selecting the multiplier. Once the assessment of damages for the loss of the deceased's support is made by applying the appropriate multiplier, which has to be selected bearing in mind a variety of factors and circumstances including the fact that a lump sum is being given now instead of periodical payment over the years, no further deduction is called for or required to be mads from the assessed damages.
9. In Kemp & Kemp, the quantum of Damages In Personal Injury and Fatal Accident claims, Volume I, Fourth Edition, the method usually adopted by the Courts for assessing the damages to be awarded for the dependant's loss is discussed. The following passage from the judgment of Lord Wright in Davies v. Powell Duffryn Associated Collieries Ltd. (1942) AC 601 at page 617 is extracted at page 230:
There is no question here of what may be called sentimental damage, bereavement or pain and suffering. It is a hard matter of pounds, shillings and pence, subject to the element of reasonable future probabilities. 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....
In foot-note 6 at the same page, the learned authors have observed as follows:
The passage cited from Lord Wright's judgment continued as follows: 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 dependent, and other like matters of speculation and doubt'. We have omitted this sentence from the present edition of the book for two reasons. First, a widow's remarriage and prospects of remarriage are no longer to be taken into account. Secondly, the modern practice is to take the various uncertain factors into account in fixing the appropriate multiplier. The courts do not normally go through two stages, i.e. first applying a multiplier that yields an appropriate lump sum as the present value of a future recurring loss, and then taxing down that lump sum to take account of uncertainties. Instead, they apply a multiplier to the basic annual dependency which both takes into account an appropriate discount for a lump sum payment and also has due regards to uncertainties (see, for example, Pearson L.J.'s remarks in Butler's case, set out at P. 259, post). It is this multiplying factor which we refer to in this book as 'the multiplier.
(Underlining supplied) At pages 231 to 234, the learned authors have discussed under the sub-heading "The Multiplier", the various factors which enter into account while selecting the appropriate multiplier. At pages 233 and 234, the following pertinent observations are found to have been made:
On the other hand the court must take account of the uncertainties of life, particularly where the deceased was engaged in some especially hazardous employment. The Court will also make some discount on the ground that the dependants get a lump sum down and will be able to enjoy the interest on it. But the rate of interest envisaged by the court should be 'interest rates appropriate to times of stable currency such as 4 per cent to 5 per cent. Regard should also be had to the fact that the interest may be taxed: only the net rate after deduction of tax should be taken into account.
(Underlining supplied).
These passages extracted from yet another standard book give a pointer in the same direction, namely, that the consideration that the dependants get a lump sum down is a factor which affects the multiplier and must be taken into account while choosing the appropriate multiplier.
10. Some of the decisions rendered by some of the High Courts in our country bearing upon the aspect of deduction may now be adverted to. I shall first refer to the line of decisions which rules against any deduction being made.
11. In Kailashwati and Anr. v. faryana State and Ors. 1974 ACJ 514, a learned single Judge of this High Court was dealing with a case where the Motor Accident claims Tribunal had made a deduction of 15% from the assessed compensation on account of lump sum payment and such deduction was challenged on the ground that it was wrongly made in view of the fact that the compensation was assessed without taking into consideration the future probable rise in the income of the deceased. The following pertinent observations made at pages 517 and 518 (Paras IS & 17) in the said decision are extracted hereinbelow ;
...If the future increase in income had been allowed then there could be some justification for some deduction out of the amount. Therefore, there could not be any justification for deduction of this 15 per cent of the claim so assessed as the future increase was not taken into account In this behalf the learned Counsel has relied on a few authorities. The first authority is Valcan Ins. Co. Ltd. and Anr. v. Kongasari Lal Banerji and Anr. (High Court of Patna) 1972 ACJ 208 wherein it has been held that deduction for lump-sum payment is allowed in appropriate cases The second authority is Damayanti Devi and Ors. v. Sita Devi and Ors. (High Court Of Punjab and Haryana) 1972 ACJ 334. In this authority, it was held that 'no deduction on account of lump-sum payment was allowed, firstly, because the prospects of the deceased improving his earnings were not taken into account while assessing the loss, secondly, the claimants were not allowed any interest on the amount awarded'. The third authority is Major JagjitSingh and Ors. v. Kartar Singh and Ors. 1973 ACJ 147 wherein it has been held that 'the cut on account of lump-sum payment is not made because of the uncertain and imponderable factors which may come about in future resulting in the increase or decrease of her income. But if the increase in income is taken into account then it is a case for applying a reasonable reduction on account of lump-sum payment. No reduction on account of lump-sum payment has to be made if the compensation is determined on the basis of the income at the time of accident without taking into calculation any future increase therein'. A similar view has been taken in Sood and Company, Kulu v. Surjit Kaur and Ors. (High Court of Punjab and Haryana) 1973 ACJ 414.
The learned Advocate Osneral has tried to support the fiadiags of the claims Tribunal but he has not baen able to show any authority to justify his stand in supporting the deductions made by the claims Tribunal Therefore, I have no hesitation in accepting the contention of the learned Counsel for the appellant that this deduction on the claims assessed by the claims Tribunal is unjustified as the claims Tribunal has not taken into considsration the prospects of the future increase of the earnings.
12. In Damyanti Devi and Ors. v. Sita Devi and Ors. 1972 ACJ 334, a Division Bench of the Punjab and Haryana High Court referred to the decision of a Division Bench of the Delhi High Court in Union of India and Ors. v. Viranwali and otheri 1967 ACJ 41, wherein a view was taken that the benefit of getting a lump sum payment was off-set by the increase in the prices and the progressive decrease in the value of the rupee and proceeded to make the following instructive observations at page 349 (para 18):
Some other judgments have been brought to our notice in which a deduction ranging between 15 per cent and 25 per cent was made from the amount of damages as determined on account of the fact that the amount was being paid in lump sum whereas the benefit from the deceased would have accrued to the claimants month by month. Since we have determined the compensation payable to the appellants on the basis of the amount that was being contributed by Manohar Lal towards their maintenance on the date of his death, and have not taken into consideration the increase in that amount in the future years, according to the increase in his income, as is evident from the accounts produced on the record, nor have enhanced that compensation on account of the continued and continuing rise in the prices of all commodities which has been more than 20 per cent since 1966, we consider that no reduction from the amount of compensation can fairly be made on this account. It is true that the amount that will be received by the claimants can yield some income if prudently invested but that is no ground to reduce the amount of compensation in view of what has been stated above. Another reason for not making any reduction is that the claimants have already been deprived of the compensation due to them for nearly six years, which account for 25 per cent of the number of years, on the basis of which the compensation has been determined, and no interest for that period has been allowed. The needs of the appellants will also increase with the advancement of age which fact has not been taken into consideration while determining the just compensation and for that reason too no reduction is possible on this account.
13. In Bhagwanti Devi and Ors. v. Ish Kumar and Ors. 1975 ACJ 56 a learned single Judge of the Delhi High Court dealt with the question in the following words at pages 70-71 (Para 45):
The only other question that remains to be considered is the deduction of Rs. 6,500/ made on account of the fact that instead of periodic benefits, the dependant would be getting the amount of com-pensation in lumpsum thereby obviating various uncertainties and is a deduction which is supported by considerable authority, but, though based on sound principle, is not a rule universally applicable and has to be applied in the context of such counter balancing factor as may be present in a particular case, such as increasing cost of living and proportional devaluation of the rupee, the time lag between the death and the Award as well as between the Award and the actual payment. Such deduction, however, would not be justified on the facts of the present case for two reasons. In the first instance, the benefit of receiving lumpsum payment is wholly illusory The award was made on January 14, 1971 and the dependants have not as yet received a single penny but of the compensation awarded to them and the matter is at the first appellate stage. The litigation is likely to continue further and I would not be surprised if another few years have elapsed before the dependants could receive the compensation to which they are entitled. Secondly, the runaway inflation and the consequent devaluation of the rupee has considerably reduced the quantum of compensation in its real worth and being so, it would be unreasonable in the present case to make any deduction on account of the prospect of getting the benefit in one lumpmra. The view that T have taken of the matter finds support from Prem Singh and Ors. v. Tika Ram and Ors. 1967 ACJ 243 Narain Devi v. Dev Raj and Ors. 1967 ACJ 344 Khidni and Ors. v. Dayal Singh and Ors.1969 ACJ 444 Himachal Govt. Transport Shimla and Anr. v. Jogin-der Singh and Anr. 1970 ACJ 37 and Damyanti Devi and Ors. v. Sita Devi and Ors. 1972 ACJ 334.
14. In Municipal Corporation of Delhi and Ors. v. Shanti Devi Dutt and Anr. 1975 ACJ 508 a Division Bench of the same High Court has made somewhat similar observations at page 512 (Para 10):
The learned Counsel for the respondents, however, contends that a deduction has to be made from the amount of compensation determined by the learned Tribunal on account of the lumpsum payment which would be made to the claimants. The learned Tribunal has taken this fact also into consideration and has observed that the advantage derived by the claimants by getting a lumpsum payment is neutralised by the rise in the prices of the necessities of life. This view of the learned Tribunal is supported by a number of decisions of this Court, vide Prem Singh and Ors. v. Tika Ram and Ors. 1967 ACJ 423. Therefore, there is no justification for making any deduction from the compensation determined by the learned Tribunal on this account.
15. In Srisaliam Devastanam v. Bhavani Pramilamma and Ors. 1983 ACJ 580 a Division Bench of the Andhra Pradash High Court, when confronted with the same question, ruled as follows at pages 592 and 593 (Paras 38 and 39:
The next question for consideration is when we are awarding a lump sum amount to the claimants I to 3 whether any deduction should be made from the amount now to be awarded to them. It is an admitted fact that the deceased died on 24-4-1976 and 6-1/2 years have elapsed from the date of the death till date and they did not realise any amount 10 far. In the interregnum, cost of living has been mounting up and the value of the money has gone down miserably to the ebb and now the official figures put the value of the rupee at twenty-two paisa per rupee. Taking these factors into consideration the lapse of time would be taken as 'set off' for deduction from the lump sum amount we have held that the claimants are entitled to. The fact that there is steep fall in the value of money has received judicial notice by the highest Court of the land in Motor Owners Insurance Co. Ltd. v. J. K. Modi 1981 ACJ 507 SC wherein their Lordships of the Supreme Court have held thus:
The delay in the final disposal of motor accident compensation cases, as in all other classes of litigation, takes the sting out of the laws of compensation because, an infant child who seeks compensation as a dependent of his deceased father has often to await the attainment of majority in order to see the colour of the money. Add to that the monstruous inflation and the consequent fall in the value of the rupee. Compensation demanded say, ten years ago, is less than quarter of its value when it is received today.
In Union of India v. Viranwali 11967 ACJ 41 (Delhi) a Division Bench of the Delhi High Court consisting of their Lordships, Chief Justice Hegde (as His Lordship then was) and I.D, Dua (as His Lordship then was) have held in paragraph 13 that:
The benefit of getting a lump sum payment is offset by the increase in prices and the progressive decrease in the value of the rupee.' Following the law thus Laid down, we hold that the loss of the value Of the money in the interregum, i.e., between 24-4-1976 till date of receipt of compensation, be the 'set off' and no deduction need be made from the total compensation awarded to the claimants. No doubt it can be said that this amount is given as a windfall due to the fortuitous circumstances of the death of the deceased. in a recent decision rendered by their Lordships of the Supreme Court in Manjushri v. B.L. Gupta 1977 ACJ 134 (SC), the deduction as set-off was not accepted. The said decision was followed by a Division Bench of this Court consisting of our learned brethern Madhava Reddy J. (as His Lordship then was) and Ramchandra Raju, J., In United India Fire & General Insurance Company v. L. Anuradha 1981 ACJ 257 (AP) and held that:
...We are bound by the latter decision of the Supreme Court in Manjushrt v. B L. Gupta referred to above. Further the judgment dated 1-8-1979 in C.M.A. Nos. 195 and 495/76 to which one of us, (Madhava Reddy, J.) was a party, following the above decision of the Supreme Court awarded compensation by multiplying the life expectancy without making any deduction. We, therefore, do not see the amount of compensation payable to the claimants in accordance with the decision of the Supreme Court in Manjushri v. B L. Gupta would be much higher than what is actually claimed by them.' We respectfully agree with the reasoning of our learned brethren.
16. In Prem Chand v. Jasoda and Ors. 1985 ACJ 315, a learned single Judge of the Rajasthan High Court, has dealt with the question as follows at page 317 (Para 17):
Now coming to the two appeals filed by the claimants of the two deceased. The sole submission of Mr. Srivastava is that the deduction made by the Tribunal to the extent of 25% from the total compensation calculated on the basis of the earlier decision, wherein while awarding the lump sum amount, some deduction is usually made, on account of the interest which the claimants get and the benefit which they get in advance, has not been accepted by this Court and many other High Courts in the context of the changed social circumstances, Here again, after a detailed discussion, I have taken the view in Inder-lal v. Narendra Kumar 1985 ACJ 303 (Raj), that the latest approach in this distinct field of social welfare legislation should be not to minimise the compensation by making deduction. I have noticed the following circumstances for taking this view:
Rise in prices and spiral on prices of all the commodities which is ever increasing in an unprecedented manner, the extraordinary delay which takes place between the date of the accident and the realisation of the amount partially on account of the pendency of the cases in Tribunal and appeals before the High Court and partially on account of the execution of the decree.'I have followed the view taken by the Delhi High Court in Satya Wati Pathak v. Hari Ram 1983 ACJ 424 (Delhi) and Andhra Pradesh High Court in Srisailam Devastanam v. Bhavani Pramilomma 1983 ACJ 580 (AP).
17. In Maharashtra State Road Transport Corporation v. Babalal Daud Mulani and Ors. 1985 ACJ 282 a Division Bench of the Bombay High Court was concerned with a case in which the Tribunal, on the basis of the evidence adduced before it, had assessed the loss of the monthly dependency benefit at Rs. 300/- and the annual dependency benefit at Rs. 3600/- and having applied the multiplier of 25 arrived at the figure of Rs. 67,500/- as the compensation payable to the dependants of the deceased. A sum of Rs. 4500/-was added thereto as compensation for the shock and loss of company and affection. A deduction of 50 per cent was then made from the aggregate compensation amount on account of the contributory negligence of the deceased. The net award was, therefore, made in the sum of Rs. 36,000/-. On appeal, the compensation awarded accordingly was assailed on the ground that a further reduction was required to be made keeping in view the interest which a prudent man would earn on the investment of the compensation amount paid as lump sum. Reliance was placed in support of the submission on the previous decision of that High Court in Jai-kumar Chhaganlat Patni v. Mary Jerome D'Souza 1978 ACJ 28. The submission was rejected on the ground that since a correct multiplier was adopted and all necessary deductions were made there was no question of making any further deductions. The decision in Jaikumar's case was distinguished on the ground that compensation was not fixed in that case on the basis as to how much interest would be received if the amount was invested. While dealing with the point raised as aforesaid, it was observed as follows at pages 286-287 (Paras 10 and 11):
...In the present case, the method followed for fixing fair and just compensation by the learned Member was the multiplier method. For fixing the fair and just compensation, the learned Member of the Tribunal has applied the multiplier of 25. The deceased was aged 25 year at the time of the accident The normal span of life in our country has practically reached 70 Therefore, compensation is not fixed by the Tribunal after taking into consideration the total span of life of the deceased in all the cases on which reliance is placed by Mr. Hegde the question regarding receipt of interest on the amount invested was considered in the context of choosing the correct multiplier or the method of deduction. In our opinion, it will not be correct to say that even though the correct multiplier is adopted and all necessary deductions are made then also the question should be again reconsidered by giving a second thought and the compensation should be further reduced keeping in view the interest which a prudent man can get if the lump sum is invested.... Any further deduction on the basis of interest theory is wholly unwarranted because of the rapidly falling rate of the value of the rupee. There is a good interest rate only for long term investments Meanwhile there is increase in prices and cost of living and consequent fall in the value of rupee. This outweighs the rate of interest, even on long term investment. Further, because of illiteracy and ignorance, prudent investment itself is and exception and not a normality. Therefore, it is not possible to lay down a general rule that while finding just and fair compensation, it should always be based on the basis of the interest which will be derived or received if the lump sum is prudently invested. Thus, it is not possible for us to accept the broad proposition put forth by Mr. Hegde.
In P.K. Krishanan Nair and Ors. v. K. Karukaran Nair and Ors. 1986 ACJ 41, the same point raised its head before a Division Bench of the Kerala High Court and it was answered as follows at page 45 (Para 12):
Next question is whether on account of lump sum payment, any deduction has to be made. It is true that the claimants get a lump sum payment in the place of payment expected to be spread over a period of 20 years and if they invest this amount right now they will get interest for the 20 years and retain the princioal amount. However, the quantum of compensation was arrived at by the Tribunal without considering the future prospects of the deceased or the likely increase in his income; the computation was made only on the basis of the income derived by him and the benefit being derived by the dependants on the date of the accident. In other words, the Tribunal ignored the future prospects of the deceased. At the same time, we are entitled to take judicial notice of the fact that on account of severe inflation the rupee has been undergoing sharp decline in value. All these are relevant in considering the question whether any deduction has to be made. See Prem Singh v. Tika Ram 1967 ACJ 243 (Delhi); Himachal Government Transport v. Joginder Singh 1970 ACJ 37 (P&H); Punjab State v. Hardeep Kaur 1970 ACJ 150 (P&H); Jaswant Kaur v. Rani Ram 1971 ACJ 31 (P&H) Major Jagjit Singh v. Kartar Singh 1973 ACJ 147 (P&H); Sood and Company v. Surjit Kaur 1973 ACJ 414 (P&H); Damyanti Devi v. Sita Devi 1972 ACJ 334 (P&H); Kailashwati v. Haryana State 1974 ACJ 514 (HP). In the light of the fact that computation of compensation was made on the basis of the income of the deceased at the time of the accident without taking into consideration the future prospects of the deceased and the likely fall in the value of the rupee on account of inflation and the fact that the award was passed more than three years after the date of the death of Radhakrishnan Nair and the fact that even as per the interim order of this Court only a sum of Rs. 20,000/- was deposited in the Tribunal with liberty to the claimants to withdraw the same and that interest awarded by the Tribunal is only at the rate of 6% per annum, we do not think any deduction should be made out of the lump sum compensation fixed by the Tribunal.
18. In yet another decision, Kerala State Electricity Board v. Kamalak-shy Amma 1987 ACJ 251 another Division Bench of the same High Court had the occasion to consider the same question over again and they ruled as follows at pages 256, 257 and 258 (Para 14):
Learned Counsel contended that the court below ought to have made deductions considering factors such as future imponderables which would have visited the deceased and the advantage of getting a lump sum amount. If we have to find that deductions should have been made on account of the aforesaid factors, we cannot overlook or ignore other considerations which may further add to the assessment It is, of course, a recent development that courts are inclined to recognise the fall in value of money while assessing the amount of compensation, or fixing the market value or estimating the unliquidated damages. Earlier, courts were hesitant in doing so. For example Denning, LJ. (as he then was) expressed his view that 'a man who stipulates for a pound must take a pound when payment is made, whatever the pound is worth at that time' (Treseder-Griffin's case (1956) 2 A 1 ER 33). But a Division Bench of this Court in a recent decision, State of Kerala v. Thomas (ILR 1985(1) Ker 228 took note of the deviation made by Browne-Wilkinson, J. in Multiser-vice Bookbinding v. Marden (1972) 2 All ER 489 two decades later. Their Lordships in the aforesaid case, left the point for deeper consideration in future.... In American Jurisprudence, Second Edition, Vol. 22, page 125, para 87, it is stated:
'Many cases have considered the effect which changes in the cost of living or the purchasing power of money should have on the amount of damages awarded in actions for personal injuries or wrongful death. The problem is presented because often the trial of the case is held several monthe or years after the injury, and further, the award-at least where the injury is permanent-compensates for injuries which will continue many years into the future. The rule is now well settled that a court, in determining whether an award of damages for personal injuries is proper, can consider the changes in the cost of living or, in its alternative expression, in the purchasing power of money. The court may also take account of future prospects of inflation or deflation, in fixing personal injury damages. The basis of this rule is that compensation means compensation in money, and the value of money lies not in intrinsic worth but in what it will by. Thus reviewing courts state that changes in the value of money are considered in determining whether a particular award of damages is excessive or inadequate.' In working out the compensation, the court or Tribunal has wide discretion in the matter and in so doing, and in awarding a 'fair' and 'just' compensation, or a 'reasonable' one, it may take into consideration the prevailing purchasing power of rupee in order to see that the awards must keep pace with the growing inflation. This is one of the factors to be borne in mind to enable the Tribunal or court, to be just, real and reasonable.... We are of the view that fall in the rupee value is a factor which courts can justifiably take into account in assessing damages in fatal accident cases. If that be so, the appellant cannot possibly have a grievance that the amount should have been further reduced on account of considerations of future imponderables and lump sum payment, because there are other considerations which may offset the former, if not ever-ride them.
19. The principle which emerges from these decisions is that no deduction on account of the lump sum payment given to the dependants is required to be made because of diverse factors, such as, the prospects of inflation and the proportionate devaluation of the rupee, the continuing rise in prices of the necessities of life and the increase in the cost of living, the omission to take into account the probability of the future increase of income of the deceased by the improvement of prospects, the time consumed in the making or the finalisation of the award due to the usual delay in the multi-tier adjudicatory process and/or in recovering the compensation amount, the denial of interest or the award of interest at low rates on the compensation amount, the increase in needs of the dependants with the advancement of age, et al. These various factors have been regarded as counter-balancing or off-setting the benefit of getting a lump sum payment. In one case (Babalal Daud Mulani (supra), where the multiplier method was followed, no deduction was made since the choice of the correct multiplier was taken to have reflected this factor. The said decision falls in line with the observations made on this point by the learned authors of the two treatises referred to earlier (Mc Gregor on Damages and Kemp and Kemp on the Quantum of Damages). It will be seen that in this line of decisions cogent and convincing grounds have been set out, which accord with common sense, reason and justice, for not allowing deduction being made from the assessed amount of compensation on the ground of lump sum payment. There is no reason why the ratio of these judgments should not prevail unless stronger or equally formidable ratiocination is to be found in the judicial dicta elsewhere.
20. The catena of decisions, which appears to take the contrary view, may be referred to now. Reference may be made first to the decision of the Supreme Court in Madhya Pradesh State Road Transport Corporation, Bairagarh, Bhopal v. Sudhakar and Ors. 1977 A.C.J. 290. It is necessary to refer to this decision at the outset since certain observations therein made have been relied upon in some of the cases as supporting the view that a suitable deduction has to be made from the compensation amount where a lump sum payment is made.
21. In Sudhakar's case, the victims of the accident were the claimant's wife, aged about 23, and their one year old son. At the time of her death, the deceased was employed as physical Instructress on a monthly salary of Rs. 190/- in the scale of Rs. 150-10-250. The claimant had remarried within a year of death of the first wife. The Tribunal awarded damages in the sum of Rs. 15,000/- to the claimant "for the loss of his wife, which resulted into conditions of inconvenience, suffering, shock, derangement in house and the life, for a period of nearly 11 month", that being the period of time which had elapsed between the death and remarriage. Upon cross appeals preferred by the claimant and the Corporation, the High Court counted the span of the earning life of the deceased as 35 years from the age of superannuation. For the first six years of such span, the sum of Rs. 200/- was taken as the average monthly income and for the remaining 29 years, the average income per month was fixed at Rs. 250/-. The total earnings for the entire span were computed at Rs. 96,000/-. Giving allowance for her own expenses an d also taking into account the promotions and consequently the increased salary she might have received, the High Court found that the deceased could have "easily spared" half of the amount for the household. The estimated loss on account of her death was thus rounded upto Rs. 50,000/ and the compensation was enhanced accordingly. The factum of remarriage was ignored on the ground that the second wife was not an earning member of the family nor was it shown that the claimant had in any way benefited from the second marriage financially. The Supreme Court held that the High . Court was not right in estimating the damages at Rs. 50,000/ in the manner it did. It was observed that although it was not impossible for the deceased to have contributed half of her salary to the household, it was reasonable to suppose, at the same time, that the husband, who was employed at a slightly higher salary, would have contributed his share to the common pool for being utilised for the lodging and boarding of both of them and that it would not, therefore, be correct to assume that the husband's loss amounted to half the monthly salary the deceased was likely to draw until she retired. On the said basis, it was found that if, on an average, the deceased contributed Rs. 100/- per month to the common pool, then the husband's loss would be roughly not more than Rs. 50/- per month and, assuming that she would have worked upto 58 years, the total loss would not have exceeded Rs. 19,000/-. The Supreme Court then made the following pertinent observations at page 292 (Para 5):
But in assessing damages certain other factors have to be taken note of which the High Court overlooked, such as the uncertainties of life and the fact of accelerated payment that the husband would be getting a lump sum payment which but for his wife's death would have been available to him in driblets over a number of years. Allowance must be made for the uncertainties and the total figure scaled down accordingly. The deceased might not have been able to earn till the age of retirement for some reason or other, like illness or for having to spend more time to look after the family which was expected to grow. Thus the amount assessed has to be reduced taking into account these imponderable factors. Some element of conjecture is inevitable in assessing damages. Lord Pearce in Mallett v. Mc. Monagle1969 ACJ 312 calls it "reasonable prophecy". Taking note of all the relevant factors, the sum of Rs 15,000/- awarded by the Tribunal appears to be a reasonable figure which we do not find any reason to disturb.
The observations made as aforesaid have to be appreciated and the deduction made on that basis has to be viewed in the context of the method employed in that case for assessing the amount of pecuniary benefit that the claimant could have expected to receive from the deceased in the future. It will be seen that the amount was not determined by multiplying the datum or basic figure by a certain number of years' purchase. There was no scope, therefore, for discounting the various factors, such as, the uncertainties of life and the accelerated payment, while selecting the appropriate multiplier. Since the loss of the claimant's pecuniary benefit was assessed by multiplying the figure of annual loss by the exact number of years during which the deceased was likely to have contributed to the household, allowance had to be made for those factors and the total figure of the assessed damages had to be scaled down accordingly. The decision, therefore, is no authority for the proposition that where the method of assessing damages, which is now in vogue, is followed by the courts, namely, the multiplication of the basic or datum figure by an appropriate multiplier chosen having due regard to the number of years for which the pecuniary benefit is reasonably expected to last and also to the need of making a discount for the lump sum payment and the uncertainties of life, the resultant figure of damages is still to be reduced further on the ground of accelerated benefit etc. Such a course of action would clearly produce under compensation by reason of the same factors being pressed into service twice over in justification of the deduction. The following further observations made in that very case at page 292 (para 6) make this position clear:
A method of assessing damages, usually followed in England, as appears from Mallett v. Mc. Managle (supra), is to calculate the net pecuniary loss upon an annual basis and to 'arrrive at the total award by multiplying the figure assessed as the amount of the annual 'dependancy' by a number of 'year's purchase', that is, the number of years the benefit was expected to last, taking into the consideration the imponderable factors in fixing either the multiplier or the multiplicand. The husband may not be dependent on the wife's income, but the basis of assessing the damages payable to the husband for the death of his wife would be similar. Here, the lady bad 30 years of service before her when she died. We have found that the claimant's loss reasonably works out to Rs. 50/- a month i.e. Rs. 600/- a year. Keeping in mind all the relevant facts and contingencies and taking 20 as the suitable multiplier, the figure comes to Rs. 1,000/-. The Tribunal's award cannot, therefore, be challenged as too low though it was not based on proper grounds.
It is significant to note that while cross checking the assessment of damages by following the alternative method, no further deduction was made from the sum of Rs. 12,000/- assessed as compensation since "all the relevant facts and contingencies" were kept in mind while selecting the suitable multiplier.
22. In Bimla Poddar and Ors. v. Union of India and Ors. 1986 ACJ 69 which is a decision rendered in a suit tried by a learned Single Judge of this Court, the plaintiffs, who were the widow, children and parents of the deceased, had claimed total compensation in the sum of Rs. 7,10,000/-on the allegation that the deceased had died on account of electrocution through the negligence of the defendants and their servants. The death was found to be the result of such negligence and the defendants were held liable to pay the damages. The monthly dependency was worked out at Rs. 1425/- and the annual dependency at Rs. 17,100/-(Rs. 17,000/- approximately) in view of the fact that the income of the deceased at tbe time of his accidental death was Rs. 2,000/- per month. The multiplier of 18 was applied and the net compensation payable to the plaintiffs was assessed at Rs. 3,06,000/-. However, a deduction to the extent of Rs. 56,000/- was made from the compensation assessed accordingly on the ground that a lump sum was being paid to the plaintiffs. The relevant portion of the judgment at page 81(para 50) of the report is reproduced herein below:
The learned Counsel for the defendants contends that plaintiffs will be getting the amount in lump sum, therefore, proper deduction should be made. As the amount to be awarded to the plaintiffs is in tbe lump sum, therefore, in my view a reasonable deduction should be made taking into consideration the various circumstances. The deceased had three daughter (plaintiffs 2 to 4) and for their marriages, plaintiff No. 1 (widow of the deceased) is likely to spend a substantial amount keeping in view the status of the family. Hence I am of the opinion that a lump sum amount of Rs. 2,50,000/- should meet the ends of justice on this ground.
The decision, with respect, cannot be regarded as a judicial precedent or as a persuasive authority for more than one reason. First, the Court's attention was not invite.d to the previous decision of this very High Court in Kailashwati's case (supra), wherein it was held that no deduction on account of lump sum payment has to be made if the compensation is determined on the basis of the income at the time of the accident without taking into consideration the prospects of the future increase of the earnings. The decision is, to that extent, inconsistent with the earlier decision, the conflict having arisen albeit through inadvertence since the relevant prior decision was not cited before the Court. Secondly, the decision was arrived at sub silentio inasmuch as it was neither argued nor considered by the Court whether a deduction from the assessed damages was still required to be made, when the method followed for determining the loss of dependency benefit was to multiply the datum figure by an appropriate multiplier, which necessarily implies that an allowance was duly made, inter-alia, for the lump sum payment while selecting the multiplier. Thirdly, the case was decided apparently without the plaintiffs' side arguing, or at any rate fully arguing, against such deduction being made taking into consideration all the relevant aspects. Fourthly, the deduction is not supported by any reasoning and rests merely on the ipse dixit ; there is in fact, no ratio decidendi which can be followed or applied in subsequent cases. For the reasons aforementioned, the decision is not a precedent or, at any rate, is deprived of its value as a precedent, which, sitting singly, I would have been required to follow otherwise. Indeed, since the decision is in conflict with the previous decision in Kailashwati's case. I am free so choose between the two (See: Young v. Bristol Aeroplane Co. Lid. (1944) 2 All E.R. 293 and I would prefer to follow the latter (Kailashwati) rather than the former.
23. In Hira Devi and Ors. v. Bhaba Kanti Das and Ors. 1977 ACJ 293, a Full Bench of the Assam High Court was dealing with a case in which a Government Officer, aged about 41, was one of the victims of a motor vehicle accident. The Tribunal had awarded Rs. 33,000/- as compensation for the pecuniary loss and Rs. 10,000/- for the mental suffering and loss of companionship to his widow and children. In appeal, the High Court assessed the total pecuniary loss to the dependants at Rs. 51,600/- on the basis that the loss of monthly dependency benefit was Rs. 200/- during the remaining period of 14 years of active service (total Rs. 33,600/-) and Rs. 150/- for the subsequent period of 10 years after superannuation (total Rs. 18,000/-). To the sum of Rs. 51,600/- arrived at accordingly was added a further sum of Rs. 10,000/- for the loss of companionship etc. The aggregate compensation of Rs. 61,600/- was then reduced by 20 per cent, such deduction having been held justified on account of "the uncertainties of life". An intermediate figure of Rs. 49,280/- was arrived at accordingly and a further deduction of 10 per cent was made from the said amount "on account of the claimants getting a lump sum". Accordingly, the net compensation payable to the dependants was worked out at Rs 44,352/- (See: paras 15 and 16 at pages 299-300 of the report). The Tribunal had not made those deductions while assessing the damages but since its award was not found either too high or too low, no interference was made. It will be seen that in this case also, while assessing the loss of dependency benefit, the datum figures were multiplied straightaway by the number of years for which the deprivation of the deceased's support was likely to last. The method of choosing an appropriate multiplier having been not followed, the deduction to the extent of 30 per cent on account of the uncertainties of life and the lump sum payment was made from the assessed damages to avoid over compensation. The principle Laid down in the decision will not apply where the usual multiplier method is followed.
24. In Dyer Meakin Breweries Ltd. and Anr. v. Bimla Gupta and Ors. 1986 ACJ 334 a Division Bench of the Allahabad High Court reviewed several decisions, pre and contra, on the question of deduction to be effected on account of lumpsum payment and proceeded to make the following observations at page 341 (Para 5);
We have carefully considered the numerous decisions of other High Courts in which deduction was refused. Different sets of principles are applicable for determining compensation and allowing deduction on account of lump sum payment and uncertainties of life. The reasons given in these judgments may be taken into consideration while determining compensation but the same cannot justify refusal of deduction. We feel that in a judicial decision reason should prevail over sentiment. We are of the opinion that these decisions cannot be considered good law as the same do not follow the law Lald down by the Supreme Court in M.P. State Road Transport Corporation v. Sudhakar 1977 ACJ 220 (SC). We respectfully agree with the consistent view of the various Division Benches of this Court and hold that a deduction has to be made for lump sum payment and uncertainties of life. In the circumstances of this case, the Tribunal should have allowed a deduction of 25% In that case the Tribunal had assessed the monthly dependency of the widow, a minor daughter and mother of the deceased at Rs. 250/- and the annual dependency at Rs. 3000/-. The compensation for the loss of dependency benefit was assessed at Rs. 75,000/- by taking 25 years as the life expectancy of the deceased In other words, the multiplier method was not followed and still no deduction was effected from the assessed damages. Under those circumstances, it was held, as in Hira Devi's case (supra), that the Tribunal should have allowed a deduction of 25 per cent for the lump sum payment and uncertainties of life. The extracted observations are, therefore, to be read as applicable to and to be confined to cases in which the multiplier system is not adopted. With respect, however, it has to be said that the opinion therein expressed to the effect that the judicial decisions taking the view that no deduction is to be effected for lump sum payment and uncertainties of life cannot be considered good law, since they do not follow the law Laid down by the Supreme Court in Sudhakar's case (Supra), is too broadly stated. I have already dealt with Sudhakar's case and the true ratio Laid down therein. The judicial decisions in which the multiplier method is followed for assessing the loss of dependency benefit cannot be regarded as going against the ratio in Sudhakar's case if no deduction on account of lump sum payment and uncertainties of life is made from the assessed compensation in those cases.
25. In Chief Engineer, Electricity-cum-Electrical Project, Bhubaneshnar and Anr. v. Bhanumati Mishra and Ors. 1986 ACJ 909 a case before a learned single Judge of the Orissa High Court, the total compensation award-able to the dependants was assessed at Rs. l,50,000/-. A deduction tberefrom to the extent of l/8th was made on the ground that the Provident Fund, Death-cum-Retirement Gratuity and Group Insurance had been made available to the claimants. A further deduction to the extent of l/6th was made for the lump sum payment and uncertainties of life. A total deduction to the extent of 7/24th, that is, in the sum of Rs. 43750/-, was accordingly made and the award was reduced to Rs. 1,06,250/-. In arriving at the net compensation after making the deductions as aforesaid, the learned single Judge relied upon the earlier Division Bench decisions of the same High Court in Sabita Pati v. Rameshwar Singh 1973 ACJ 319 and Orisa Road Transport Co. Ltd. v. Sibananda Patnaik 1979 ACJ 45 (See para 15 at page 913). Upon a scrutiny of all these cases, it is found that in the Orissa High Court there appears to be a consistent practice to compute first the pecuniary loss sustained by the dependents taking into consideration the entire life expectancy of the deceased and then to make deductions to the extent of l/6th and l/8th, that is, 7/24th, on the ground that Provident Fund, Death-cum-Retirement Gratuity and Group Insurance scheme monies have become available to them and also on account of the lump sum payment and uncertainties. In none of these decisions, the multiplier method was applied for determining the compensation and, as such, the deductions made may be justifiable on the ground that failure so to do would have resulted in over compensation. The decision, therefore, is in line with the ruling in Hira Devi's and Dyer Meakin's cases.
26. In A.P.S.R.T.C. Corporation v. Jonnalagadda Venkatarama Sharma 1986 ACJ 1016 a learned single Judge of the Andhra Pradesh High Court was concerned with a case where the deceased was an educated married woman, aged 26. She had acquired technical qualifications to be appointed as Typist or Stenographer. Although she was not gainfully employed at the time of her death, it was found that she could have obtained employment on a remuneration of at least Rs. 300/- per month and could have thus contributed some amount to the pool of family maintenance. The annual dependency of the husband on that basis was worked out at Rs. 1200/-lasting for a period of 16 years. The total loss was accordingly worked out at Rs. 19,200/-. On the ground of the possibility of the husband getting remarried and the receipt of the lump sum amount, a deduction to the extent of one third was made from the said compensation amount and an award in the sum of Rs. 12,800/- was made (See Para 13 at page 1018). It will be seen that in this case the deduction was made not only on account of the lump sum payment but also on the ground of a distinct possibility of the husband getting remarried. Besides, although the word "multiplier" is used in the judgment, the multiplier method does not appear to have been strictly followed. There is also no reasoning to support the deduction made partly on account of lump sum payment and it is not considered whether, if the multiplier method is followed, any deduction is require 1 to be made still on that account. The view also runs counter to the decision of a Division Bench of that High Court in Srisailam Devastanam v. Bhavani Pramilamma and Ors. (supra), wherein it is observed that because of the fall in the value of money and the rise in the cost of living between the date of the accident and the date of receipt of the compensation amount, no deduction needs to be made from the total compensation awarded to a claimant. The ruling, therefore, cannot be treated as an authority in support of the proposition for deduction.
27. In Union of India through Defence Ministry v. Yashwant Singh 1987 ACJ 437 the case before a learned Single Judge of the Madhya Pradesh High Court, compensation was awarded by the Tribunal in a personal injury case. On behalf of the appellant, relying upon the decision in Dyer Meakin's case (supra), it was argued that a deduction to the extent of 25 per cent should have been made on account of the part payment of the awarded amount in lump sum. While dealing with the contention, it was observed that the claim for compensation being in respect of a personal injury, one of the main factors which weighs in making a deduction in a fatal accident case, namely, uncertainties of life, was absent. However, a deduction to the' extent of 5 per cent was allowed from total compensation awarded in that case on account of the lump sum payment. The following reasoning weighed in arriving at the said decision (Para 4 at page 439):
Law to be just and relevant must meet challenge of changing times. Slump in money value must obviously reflect in proportionate lowering of what may be called 'credit value' in terms of the economics of credit worthiness. Indeed, a millionaire ten years age must be a billionaire today to maintain his creditworthiness and of what importance is lumpsum payment if not to increase the creditworthiness of the recipient of the awarded amount. Otherwise, for subsistence and survival not lump sum, but recurring payment, would be of greater value equally to all classes of fully or partially disabled or destituted persons a damsel in distress, an orphan, a toddler or an aged person or an infirm, mostly for loss of total dependency, but otherwise also. That apart, such deduction has to be viewed as a rebate and ought to be made conditional upon lump sum payment being actually made to discharge fully the liability under the award. Even if, due to judicial intervention, payment is delayed in any case, the benefit of rebate should be deemed to have been denied or even waived. Accordingly, although I hold that the award of the Tribunal is erroneous in this respect, it can be modified by a direction that whatever amount is awarded by this Court, on a computation made on different courts of the claim, the total awarded amount shall be subject to a deduction for lump sum payment, indeed at the rate of 5% only.
The decision is probably the only one of its kind where a deduction on account of the lump sum payment is made in a personal injury case. The factor of uncertainties of life, which is usually associated with that of the lump sum payment in effecting a deduction in a fatal accident case, does not have that much relevance in a personal injury case. The multiplier method having been followed in that case in determining the compensation, the factor of lump sum payment should have been taken into consideration in the choice of the proper multiplier. The reasoning that the lump sum payment increases the creditworthiness is somewhat difficult to accept since the awarded amounts in our country do not ordinarily assume that proportion which by themselves would lend credit value to the recipient. For the aforesaid reasons, the decision which, with respect, goes also against the proponderance of authority taking the contrary view, cannot be regarded as having Laid down the correct law.
28. Having reviewed the law on the subject, in my opinion, the fact that the compensation has the effect of putting the deceased's future contribution into the hands of the dependant (s) at once, should not be regarded as justifying a deduction being made from the assessed amount of compensation under all circumstances and in all cases. The view that the benefit of lump sum payment is set-off or counter-balanced by several other factors over which the dependants have no control has found acceptance in a large number of cases and although it may appear to be more in consonance with the recent trend of law and also in conformity with the principle of equity, justice and good conscience, a just approach to the matter, in my view, would be that it is not a consideration which is to be wholly ignored or overplayed. It is a factor which may be borne in mind, along with the other equally relevant and probably more rational and realistic factors highlighted in the various decisions referred to earlier (Kailashwati to Kamalakshy Amma), while selecting the multiplier, if the multiplier method is followed, or in computing the net compensation, if the pecuniary loss is ascertained in terms of the actual number of years for which the loss will be suffered.
29. The deceased was aged about 32 at the time of his death. He was in the prime of his life. He was the sole bread winner of the family consisting of himself, his wife, six children and an aged mother. The family could have reasonably expected to receive financial support from him for a period of about 25 to 30 years more having regard to the average life expectancy in the country as well as the history of longevity in the family. He was a businessman and also an agriculturist and he could be reasonably expected to have striven to augment his income in course of time as the children grew up and the responsibilities increased, although this factor has not been ostensibly taken into account by the Tribunal in arriving at the datum figure for computing the loss of dependency benefit. However, the multiplier of 18 selected by the Tribunal takes into consideration all the relevant factors such as the probability of future increase or decrease in the dependency, the contingencies of life, the incidence of inflation, the lump sum payment instead of the periodical payments over the years etc.
30. In view of the legal and factual position emerging as aforesaid, the deduction to the extent of about 48 per cent made in the present case from the assessed compensation amount must be held to be wholly unjustified. The appellants are, therefore, held entitled to the full amount of compensation assessed by the Tribunal, namely, Rs. 48,600/-.
31. The Tribunal has not made any award for the loss of expectation of life and this is an error which too requires to be corrected. The appellants are, therefore, awarded the conventional amount of Rs. 3,000/- in addition to the sum awarded by the Tribunal.
32. On the aforesaid basis, the total compensation to which the appellants become entitled works out to Rs. 51,600/- The Tribunal has awarded interest on the compensation amount at the rate of 6 per cent per annum from the date of the order till payment. Here, too, the Tribunal has fallen into an error. Under Section 110-CC of the Motor Vehicles Act, 1939; where a claim for compensation is allowed, simple interest is also payable at such rate and from such date not earlier than the date of making the claim as may be specified in that behalf in addition to the amount of compensation. Having regard to the fact that the accident had taken place on October 21, 1973 and that the claim petition was instituted on March 29, 1974 and that the Tribunal made the award on September 28, 1976 and that litigation is seeing the end nearly 14 years hence, there is full justification for the award of interest at the rate of 9 per cent per annum from the date of institution of the claim petition till the date of payment(s). The interest will be payable accordingly on the sum of Rs. 25,000/- awarded by the Tribunal and paid to tbe appellants from March 29, 1974 till the date of the deposit or payment of the said sum which-ever is earlier. On the excess amount becoming payable pursuant to the success of this appeal, interest at tbe said rate will be payable from March 29, 1974 till the date of deposit. The sum accordingly becoming due and payable together with the costs of the appeal, which are quantified at Rs. 350/-, will be deposited in the Registry of this Court on or before October 15,1987. The amount so deposited other than the taxed costs of the appeal, is apportioned equally between appellants No. 1 to 7, unless one or more of those appellants make (s) an application on or before October 10, 1987 foregoing his/her/ their claim to a share in the enhanced compensation. The costs of the appeal will be paid to the first appellant. The case be listed before the Registrar in the week commencing from October 19, 1987 for the settlement of the usual draft order regarding the investment of the amount.
33. The appeal succeeds and is allowed in the aforesaid terms.