Orissa High Court
Orissa Road Transport Company Ltd. vs R.K. Das And Anr. Etc. on 10 May, 1989
Equivalent citations: 1990ACJ631, AIR1990ORI74, AIR 1990 ORISSA 74
JUDGMENT L. Rath, J.
1. The sole question for which this reference has been made to this Bench is whether in assessing compensation under Section 110-D of the Motor Vehicles Act and reaching the figure of the lump sum payable, the prevailing interest rate payable by the banks is available to be taken into consideration so as to limit the lump sum to the figure which if deposited in a bank would generate annual interest equal to the annual loss of dependency. In an earlier Division Bench decision reported in (1979) 47 Cut LT 368 (O.R.T. Company Ltd. v. Sibananda Patnaik) a view had been taken that a lump sum compensation cannot be determined on the basis of the interest rate of banks since the interest rate varies and there is no provision under the Motor Vehicles Act to review the compensation once awarded on the basis of variance of rate of interest and further, the persons entitled to compensation should have control over the compensation amount since there is no justification to keep it out of their reach to make an annuity available to them.
The question was again considered in (1986) 62 Cut LT 457 : (AIR 1987 Orissa 110) (O.R.T. Company Ltd. v. Umakanta Singh) wherein a view was taken relying upon AIR 1986 SC 1199 (Pushpa Thakur v. Union of India) that there cannot be any objection in determining compensation on the basis of the interest rate of banks and that the case reported in (1979) 47 Cut LT 368 (supra) has to be confined to its own facts. In the case the conclusion was reached that in assessing compensation first the annual loss of dependency is to be determined and thereafter any of the three methods of either multiplying the annual dependency with the number of years of continuance of the loss, or by a suitable multiplier, or to fix an amount which if deposited in a bank would earn an annuity equal to the annual loss preferably calculating the same on the prevailing bank rate of interest on a fixed deposit for three years, may be adopted depending on the facts and circumstances of the case.
2. Since the later decision of this court adopted fixing of compensation on the basis of the third mode as an alternative procedure for determining the compensation, but such mode had been negatived by the earlier decision in (1979) 47 Cut LT 368 (supra), I sitting as a single Judge had referred the question of adoption of such method to be resolved by a Bench of higher strength.
3. The Motor Vehicles Act makes provision for determination of the just compensation. The Act itself does not lay down any procedure or guideline for determination of compensation, hence to determine the compensation the general principles of tort as also the principles under the Fatal Accidents Act have been resorted to and even though because of lack of any objective standard a certain amount of lack of uniformity in determining compensation by the Courts and tribunals has come to exist, yet indisputedly, as the law has been evolved in this country, two uniform methods of determination of compensation have received judicial sanction, the first being the annual loss of dependency being multiplied by the number of lost years and deducting therefrom suitably for the uncertainties of life, and the other to multiply such annual loss of dependency as the multiplicand to a suitable multiplier as the years of purchase selected having regard to the imponderable factors. In the recent years, the determination of compensation by application of the multiplier system has been increasingly resorted to.
4. The basic principle for determination of compensation is to make available to the persons entitled the equivalent to the loss suffered by them so that their economic dependency or economic gain to which they were entitled otherwise had the deceased continued to live, or in the case of injury the economic loss suffered by the injured on account of the physical incapacitation, is to be meted out as the compensation but however the compensation in either case must not be determined so as to become a source of profit either to the injured or the survivors making the accident a windfall and cause of rejoice than that of sorrow. The need thus arises to determine the compensation which would be equivalent to the loss suffered and not increase it by some methods of calculation so as to confer a benefit which could not have been earned and also not to so decrease it as to diminish the real value of the compensation.
5. There is also no denying the fact that while compensation determined either in the lump sum method or by application of the multiplier system more or less remains the same, the compensation determined on the basis of the prevailing high bank rate of interest as at present makes the same substantially less. A few example would illustrate the point.
In AIR 1977 SC 1189, M.P.S.R.T.C. v. Sudhakar, where the victim was lady employed as a physical instructress and had about thirtyfive years of service when she died and the annual loss of dependency was fixed at Rs. 600/- a year, the Supreme Court applied a multiplier of 20 to reach a figure of Rs. 12,000/- and held that the award of the tribunal for Rs. 15,000/- could not be challenged as being too low. However, if the rate of interest of bank is taken as 6% (which was the rate of interest in 1977 on a fixed deposit for two to three years), a sum of Rs. 10,000/- deposited in a bank as term deposit would have assured an annuity of Rs. 600/-. In a recent case, AIR 1984 Patna 77 (Om Prakash Dalmia v. Smt. Bina Saha) where the loss of dependency was about Rs. 3,000/- a year with reasonable prospects of promotions of the deceased to higher grades, a multiplier of 15 was adopted to reach a figure of Rs. 45,000/ - in view of which a compensation of Rs. 50,000/- determined by the tribunal by adopting some different method was not thought excessive. On the other hand, if the same interest theory is made applicable, only a sura of Rs. 30,000/- would have been sufficient as compensation taking the interest rate at 10%.
6. In view of such wide gap in the amounts of compensation determined under the multiplier system and the interest method, it becomes necessary for a searching analysis as to whether the interest method can be adopted as an alternate mode for determination of compensation and if the answer is in the affirmative, how to rationalise the different methods of fixing compensation.
7. Before such questions are discussed, the development of principles for determination of compensation is worthwhile to be noticed. In a case arising under the Fatal Accidents Act, the Supreme Court in AIR 1962 SC 1 (Gobald Motor Service Ltd. v. R.N.K. Veluswami) held that in the process of estimation of compensation many imponderables enter into the calculation and therefore the actual extent of the pecuniary loss to the dependents may depend upon data which cannot be ascertained accurately, but must necessarily be an estimate, or even partly may be a conjecture. Shortly stated, the general principle is that the pecuniary loss can be ascertained only by balancing on the one hand the loss to the claimants of the future pecuniary benefits and on the other any pecuniary advantage which from whatever source comes to them by reason of the death, that is, the balance of loss and gain to the dependent by the death must be ascertained. In reaching such conclusion, the Court approved the procedure adopted by Viscount Simon in, (1951) AC 201, (Nance v. British Columbia Electric Railway Co. Ltd.) stating :
"Viscount Simon then proceeded to lay down the mode of estimating the damages under the first head. According to him, at first the deceased man's expectation of life has to be estimated having regard to his age, bodily health and the possibility of premature determination of his life by later accidents; secondly, the amount required for the future provision of his wife shall be estimated having regard to the amounts he used to spend on her during his lifetime, and other circumstances; thirdly, the estimated annual sum is multiplied by the number of years of the man's estimated span of life, and the said amount must be discounted so as to arrive at the equivalent in the form of a lump sum payable on his death; fourthly, further deductions must be made for the benefit accruing to the widow from the acceleration of her interest in his estate; and fifthly, further amounts have to be deducted for the possibility of the wife dying earlier if the husband had lived the full span of life; and it should also be taken into account that there is the possibility of the widow remarrying much to the improvement of her financial position....."
Thus, the principle in effect adopted was determination of the annual loss of dependency to be multiplied by the estimated number of years the Victim was to live and the sum so arrived at is to be discounted to its present Value on account of lump sum payment since had the deceased continued to live he would have never received the amount in one instalment and his death had only accelerated the payment to dependents and from the sum further deductions are also to be made for other imponderable factors. The decision was followed in, AIR 1971 SC 1624, (Sheikhupura Transport Co. Ltd. v. Northern India Transporters Insurance Co. Ltd.) reiterating the very same principle. In AIR 1966 SC 1750 (Municipal Corporation of Delhi v. Subhagwanti) the legal position advanced by Lord Wright in, (1942) AC 601 (Davies v. Poweli Duffryn Associated Collieries Ltd.) to the following effect was adopted as also the views of Viscount Simon in, (1961) AC 601 (supra) :
"It is 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 upon 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. 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."
It would be seen that in applying the principles of, (1942) AC 601, the Supreme Court was approving the multiplier system of multiplying the annual loss of dependency by the years of purchase which is otherwise named as multiplier. In AIR 1970 SC 376, (C.K. Subramonia Iyer v. T. Kunhikuttan Nair) the same principles were reaffirmed while emphasising that it must be borne in mind that the damages are not to be given as solatium but are given with reference to a pecuniary loss and that it is sufficient for the plaintiff to prove not a mere loss of speculative possibility of pecuniary benefit, but a loss of reasonable probability of pecuniary advantage. In AIR 1974 SC 1995 (Smt. Hardoop Kaur v. State of Punjab), the Supreme Court again applied the multiplier method to reach the compensation to be awarded. In AIR 1977 SC 1189 (M. P. S. R. T. Corporation v. Sudhakar) the Supreme Court approved the well-known case of Mallett Mc Monagle, (1970) AC 166 (174) in the following words :
"A method of assessing damages, usually followed in England, as appears from Mallett v. Mc Monagle, (1970) AC 166 (supra), is to calculate the net pecuniary loss upon an annual basis and to "arrive at the total award by multiplying the figure assessed as the amount of the annual "dependency" by a number of "year's purchase", (p. 178) that is, the number of years the benefit was expected to last; taking into consideration the imponderable factors in fixing either the multiplier or the multiplicand."
Expounding the principle, the Court also observed that in assessing damages certain other factors are also to be taken note of such as uncertainties of life and the fact of accelerated payment that the claimant would be getting a lump sum payment which but for the death of the victim would have been available in driblets over a number of years. As such allowance must be made for the uncertainties like that the deceased might not have been able to earn till the age of retirement for some reason or other, like illness and hence the amount assessed must be reduced taking into consideration such imponderable factors. Again in AIR 1985 SC 106, N. Sivammal v. Managing Directer, Pandian Roadwawys Corporation the Supreme Court adopted a multiplier of ten years' purchase to reach the compensation deternined. It is to be observed that in that case a multiplier was applied to the total receipt of pay by the victim without any reduction to determine the annual loss of dependency and besides Rs. 5,000/- more was added as customary figure for loss of estate. (The underlining is mine).
8. Either the lump sum method or the multiplier method for determination of compensation basically aims at fixing a lump sum as compensation. While in the first, the annual loss of dependency is multiplied by the estimated span of life the deceased was expected to live and from it certain deductions usually at the rate of 1/6th is made for uncertainties of life in the multiplier system the annual loss of dependency is multiplied by a suitable mulitplier as the years of purchase suitably selected by Judges taking into consideration various imponderable factors as discussed above. But in either of the methods the two factors which predominantly enter into consideration in making the discounts are the uncertainties of life and conversion of the accelerated payment in lump sum to its present value so as to make the claimants ineligible to a higher gain as God sent gift on account of death of the victim. While in the case of lump sum method the deductions are expressly made, in the case of multiplier system such considerations enter into while selecting the suitable multiplier.
9. It has been seen that compensation determined on the basis of the prevailing high interest rate becomes substantially low than that determined by applying a suitable multiplier which usually varies from. 15 to 20 and is either reduced or increased depending upon the circumstances of the case. But selecting a multiplier on the basis of rates of interest now available on investments would make the choice confined to a substantially low multiplier which has however been not adopted by the Judges as has been seen in the cases discussed supra. The high interest rate now made available by the banks and even higher rates of interest offered by different investment schemes or offered by Government or even the slightly low interest rates offered by private investors are undoubtedly incidence of high stride of inflation taking giant leaps over the years as a result of which real value of the currency in terms of its purchasing capacity has been steadily going down and the offer of higher rates of interest is merely intended to offset the evils of such inflation. This has consequently also led to devaluation of money in the international Market and the current value of one rupee in terms of real purchasing capacity is stated to be about 13 paise. An argument is possible to be advanced that the increase in the rate of interest would not always keep pace with the increase in inflation and that the annuity available on investment of the compensation would not be able to purchase the same standard of living for the dependents as was available to them during the lifetime of the victim. There may be occasions also, and it is quite conceivable to imagine, of fall in the bank interest rate as has also been recently declared by the Government over the VI issue of National Saving Certificates and there have been also instances previously when the rate of interest had gone down. Thus while on a fixed deposit of two years or three years the rate of interest in 1974 was 8%, it became 6% in 1977 and 1978 and increased to 7% in 1979. Similarly, while the interest rate in 1985 on a similar deposit was 10.5%, it became 10% on 10-2-86 and thereafter reduced to 9% on 5-5-86 and to 8.5% on 8-8-86. The figures relied on by me are taken from the table of compilation of rates of interest on deposits as per the Reserve Bank of India directive by Shri B.S. Mane, Officer, Operations Department, Indian Banks Association, Bombay which table is annexed to the judgment as an enclosure for reference.
10. It is for such reason that Courts are not very willing to accept the high rate of interest as the basis for determination of compensation and thus keep both the factors, i.e. rising inflation as also the rising interest rate out of consideration in fixing the same. The question was considered by Lord Diplock in Mallett v. Mc Monagle, (1970) AC 166, where he advanced adoption of the interest rate at time of stable currency to be taken as the basis for fixing compensation, a method which has now been widely accepted.
It was observed by Lord Diplock, negativing the submission pressed by the claimant that inflation and increased wage rates are irreversible phanomena in the modern world and that in assessing damages the dependency should be calculated as a continuously increasing amount to allow for the increasing cost in the depreciating currency of equivalent material benefits which the deceased would have provided for his dependents out of his rising wages, by concluding as follows :
"In my view, the only practicable course for Courts to adopt in assessing damages awarded under the Fatal Accidents Acts is to leave out of account the risk of further inflation, on the one hand, and the high interest rates which reflect the fear of it and capital appreciation of property and equities which are the consequence of it, on the other hand. In estimating the amount of the annual dependency in the future, had the deceased not been killed, money should be treated as retaining its value at the date of the judgment, and in calculating the present value of annual payments which would have been received in future years, interest rates appropriate to times of stable currency such as 4 per cent, to 5 per cent, should be adopted."
The Supreme Court in AIR 1977 SC 1189 (supra), approved the method adopted in the case for determination of compensation. This adoption of low rate of interest somewhat representing the difference between the rate of inflation and the present rate of interest on investments has been advocated as the real rate of interest to be applied for the purpose of conversion of the lump sum to its present value in a well researched decision of the Andhra Pradesh High Court in AIR 1988 Andh Pra 99, (Bhagwandas v. Mohd. Arif). Justice Jagannadha Rao, the learned Judge delivering the judgment has on an incisive study, while rejecting the interest method for assessment of compensation as having been rejected by almost all High Courts, followed the development of the real interest theory in England, Australia, Canada, U.S.A., Switzerland as also the opinions of the jurists and economists and pointed out :
"In the result, it is clear that there is a general concensus in all countries among Courts, Jurists and Economists that the real rate of interest (difference between current returns on investment or property and rate of inflation) is constant and that that alone should be taken as the discount rate (rate of interest) for converting future payments to current values."
Discussing the development in India, the learned Judge found that though the Supreme Court has consistently followed the multiplier method in assessing compensation, yet it has neither indicated any real rate of interest for discounting the lump sum nor has indicated any particular multiplier table as appropriate, yet some High Courts like that of Madhya Pradesh, Kerala and Andhra Pradesh have endeavoured to lay down a mathematical basis to reduce the future earnings to its present value. The learned Judge pointed out however that till today neither the Supreme Court nor the High Court have considered what real rate of interest is appropriate to India and what table of multiplier is to be applied in this country.
It is thus seen that there is a general concensus that for qualification of compensation both the questions of future inflation as also the high rates of interest are not to be taken into consideration, the reason being that if the future inflationary trends are taken into consideration it would be really leading to the realm of conjectures and speculations and that consideration of high rates of interest would in effect render the compensation illusory as not being the real or proper compensation payable.
11. While considering the effective rate of the interest on investments as compared to the prevailing rate of interest at present, it is essential that the rate of growth of inflation is duly taken note of. In considering such aspect, the observations made in the publication of the Government of India, Ministry of Finance (Economic Division), titled "Economic Survey, 1986-87" is worth noticing. It was stated in Chapters under the heading "Price Behaviour in 1986-87" as follows :
"5.11 Compared with the preceding year, prices have registered a weak seasonal decline in the current financial year partly because of a poor monsoon and a decline in khariff production. The WPI registered an increase of 5.9 per cent, between 29th March, 1986 and 2nd August, 1986 and further by 1.3 per cent, up to 11th October, 1986. The WPI reached a peak for the financial year on 11th Oct., 1986 when it increased by 7.2 per cent, over end March as against an increase of 3.8 per cent. up to 12th Oct., 1985. The cumulative increase in WPI during the current fiscal year up to 24th Jan., 1987 works out to 5.9 per cent. xxxxx 5.19 The inflationary pressure during the current year is more pronounced at the retail level as may be seen from the movement of the CPI. The CPI has registered an increase of 7.8 per cent, during the first nine months of 1986-87 as against 7.5 per cent, in the corresponding months of 1985-86, The annual rate of inflation, on a point to point basis in terms of the CPI rose from 8.2 per cent, in April, 1986 to 9.2 per cent, in Dec., 1986 (latest available). The rates of increase in the corresponding months of 1985-86 were 6.3 per cent, and 7.1 per cent, respectively.
X X X X X"
In view of such high incidence of inflation, it is without doubt that the high rate of interest offered by investment agencies makes the real value of the return on investments substantially low in purchasing capacity.
12. It is also worthwhile to examine some of the cases besides, (1979) 47 Cut LT 368 (supra) and AIR 1988 Andh Pra 99 (supra), where application of interest theory for determination of compensation has been examined. The matter was considered by a Full Bench of the Punjab & Haryana High Court in AIR J977 Punj & Har 214 (Joki Ram v. Smt. Naresh Kanta) and it was held that the interest theory cannot be adopted as an inflexible principle for the purpose of assessing compensation specially in these days when the purchasing power in terms of money is being eroded after short intervals on account of runaway inflation. In a later Full Bench decision of the same Court in AIR 1970 Punj & Har 50 (Lachhman Singh v. Gurmit Kaur) the earlier Full Bench decision was approved as also the principle of adopting a low rate of interest advocated in the Mallett case, (1970 AC 166) (supra) and was observed as follows (at p. 57 of AIR) :
"In present day India when our economy is not so highly developed as in western countries and the banking system has not taken deep roots especially in the villages, it is too unrealistic to adopt interest theory for determining the damages. In a large number of villages, there are neither any banks nor are the people accustomed to make investments therein. Besides, bank interest rates are not stable and static and the same go on fluctuating in view of the inflationary trends in the economy. Only a decade back, the normal bank interest rate did not exceed 4 per cent. As inflation in course of time becomes an essential part of the economy, the banks, in order to mop up the surplus money in the hands of the people, contrived of the inducement to pay higher rates of interest and these interests have been going up from time to time. The adoption of interest theory presumes that the claimant will invest the amount of claim in the bank which will ensure the amount of monthly dependency. In this manner, the claimants while getting the monthly interest will also be having the capital invested in the bank as intact. This argument may be further advanced for the purpose of further reduction in the total amount of compensation. To my mind, the interest theory is impracticable and unrealiatic and will not be a proper yardstick for determining the correct amount of compensation."
In AIR 1982 Andh Pra 267 (United India Fire and General Insurance Co. Ltd., Nellore v. Pallamparty Indiramma), the submission that compensation should be determined on the basis of interest theory was negatived pointing out that under Section 110-A of the Motor Vehicles Act what is contemplated is payment of compensation for the death or injury and not any substitute for the loss of income and the compensation has to be ascertained in a fair and reasonable manner. In AIR 1982 Madh Pra 62 (Sumanbai v. State of M.P.) the method was also not accepted since the rate of interest is not always the same and varies from time to time in accordance with the policy of the Reserve Bank of India. In 1983 Acc CJ 424 : AIR 1984 Delhi 106) (Satyawati Pathak v. Hari Ram) a case of the Delhi High Court, the plea of determination of compensation at the bank rate of interest was repelled following, AIR 1979 Punj and Har 50 (supra) and AIR 1982 Andh Pra 267 (supra). Similar view was also taken by the Rajasthan High Court in 1986 Acc CJ 23 (Rajasthan State Road Transport Corporation v. Pista Aggarwal).
13. Mr. Y. S. N. Murthy, the learned counsel appearing for the appellant, also sought to rely upon some decisions to contend the interest theory of having been accepted therein. 1974 Acc CJ 234 : (AIR 1974 Mad 318) (Madras Motor and General Insurance Co. Ltd. v. Jagadeswari), a case of the Madras High Court was relied upon to show that where the annual dependency was determined as Rs. 1200/-, a lump sum payment of Rs. 14,000/- was considered sufficient as the amount would secure interest to the claimants. The decision shows that their Lordships were not discussing the issue on principles and had not examined the question from the different aspects as discussed above, but had merely observed that a deposit of Rs. 14,000/- would secure interest to the claimants. In 1974 Acc CJ 150 : (AIR 1974 Madh Pra 181) (Sushila Devi v. Ibrahim) the compensation was determined by application of the multiplier method, i.e. adopting a multiplier of 15 and the lump sum figure arrived at was only cross-checked with the prevailing bank rate of interest of 7% to show that no excessive figure was reached. As would be seen from the table of bank rates of interest, by 1974 the inflation had yet not taken a rapid stride though it was almost the beginning of the same. In 1981 Acc CJ 133 (Karnataka State Road Transport Corporation v. A. R. Satischandra) a multiplier of 10 was selected since the bank rate of interest was 10% and out of the figure so reached again a sum of Rs. 16,000/- was deducted for accelerated payment. With great respect to the learned Judge, since selection of a multiplier itself takes into consideration both the fact of lump sum payment at a time as also other imponderable factors, a deduction again on such account was not justified and also there is no precedent of fixing a multiplier at the same rate as that of interest rate.
AIR 1977 Madh Pra 58 (Balubhai Hirji Gajjar v. Sureshkumar Nathuram) relied upon by Mr. Murty does not advance the Interest theory as a method for determination of compensation and as a matter of fact in the case compensation was determined at Rs. 5,000/- where it was found that the annual dependency was either Rs. 200/- or Rs. 300/- and the expected span of life of the deceased was 15 years at the time of death.
14. Mr. Murty has also relied upon some observations of the Supreme Court in AIR 1979 SC 1862 (Bishan Devi v. Sirbaksh Singh) paras 13 and 21. In para 13 of the judgment the compensation was determined at a lump sum of Rs. 20,000/- with cost of Rs. 2,500/- where it was found that the deceased was contributing Rs. 100/- per month for the household expenses and had many more years to go and that his contribution for the household expenses would have also increased over the years. Having reached such figure, the Court then considered the difficulties experienced by the dependents in obtaining reliefs from the Motor Accidents Claims Tribunals and the necessity of providing for a social insurance which would provide direct payment to the victim and the legislature was urged to consider making the liability of minimum compensation absolute as is provided for to the victims of rail fall and air accidents and that the minimum compensation may be paid every month to the dependents according to their share for the period to which they are entitled. It was observed in para 21, only in that context, that since the insurance companies are now nationalised the necessity of making lump sum payment to secure the interest of the dependents is no longer there and that regular monthly payments could be made through nationalised banks since in most cases it is seen that a lump sum payment is not to the advantage of the dependents as large part of it is frittered away during litigation and by payment to persons assisting in the litigation. Similar view of the observations, as is taken by me was also taken in AIR 1982 Madh Pra 62 (supra), AIR 1985 SC 106 (M. Sivammal v. The Managing Director, Pandian Roadways Corpn.) relied upon by Mr. Murty is not a decision on the point. AIR 1983 Orissa 193 (Commissioner, N.C.C. Group, Cuttack v. Smt. Nirmala Moharana) where the yearly contribution to the family was Rs. 2,160/- and considering the possible variations of rates of interest and deflation, a sum of Rs. 25,000/-which would yield an interest of about Rs. 2,500/- per year was awarded as compensation was cited in support of the proposition, While the decision has not decided that compensation is to be determined on the basis of interest theory, it has also to be observed that the earlier Division Bench judgment reported in (1979) 47 Cut LT 368 (supra) was not cited in the decision. Some other decisions of the Punjab and Haryana High Court in 1973 Acc CJ 166 (Perminder Singh v. Muktasar Janta Cooperative Transport Society Ltd.), 1976 All CJ 66 (Pepsu Road Transport Corporation, Patiala v. Darshan Singh), 1976 Acc CJ 97 (Shakuntla Devi v. Union of India) and 1977 Acc CJ 426 (Nachhatar Kaur v. State of Punjab) were also cited by Mr. Murty, but however these decisions cannot be taken into consideration in view of the two Full Bench decisions of the same Court later on.
15. Adoption of interest theory for determination of compensation was not accept ed in (1979) 47 Cut LT 368 (supra) as has been noted earlier, since (1) the interest rates of banks vary, (2) there is no provision in the Motor Vehicles Act to review the compensation once awarded on the variance of the rate of interest, and (3) the persons entitled to compensation should have control over the compensation amount as there is no justification to keep it out of their reach to make an annuity available to them. It was held in (1986) 62 Cut LT 457 : (AIR 1987 Orissa 110) (supra) that the complaint that the claimant must have control over the amount of compensation would be no more of avail in view of the decision of the Supreme Court in AIR 1986 SC 1199 (Pushpa Thakur v. Union of India) and that since bank rate of interest is almost static for a long period, the apprehensions that such rates fluctuate and that there is no provision for review in the Act would no longer continue and hence the earlier decision must be confined to its own facts.
16. In AIR 1986 SC 1199 (supra) it was not laid down as a proposition that compensation should be determined at such sum which if deposited in a bank would earn interest equivalent to the annual loss of dependency. In the decision compensation was determined only as a lump sum having regard to the nature of injuries suffered but absolutely no basis was laid down in reaching the figure. After such figure was reached, the Supreme Court directed the amount to be deposited by the Tribunal in the name of the appellant in a nationalised bank as a long term fixed deposit and further directed that interest on the said amount shall be paid by the bank to the claimant every quarter with liberty to him to apply to the tribunal to withdraw any part of that amount in case it becomes necessary to do so for sufficient reasons. The decision was not thus one to determine the compensation on the basis of annual loss being guaranteed by the amount of interest that would be payable by putting the sum on a fixed deposit, but on the contrary fixed the compensation as a lump sum only. Besides, it is also not evidenced from the table of interest rates on deposits that such rates have remained static for a long period, and it is seen that there have been frequent variations in the rates with either increase or decrease of the same and hence the apprehension expressed in (1979) 47 Cut LT 368 (supra) cannot be outright rejected as no longer valid. The decision of the Supreme Court also did not state about any power of review by the tribunal but was only vesting an authority in it to periodically allow withdrawal from the deposit by the claimants on their satisfying it about the necessity of the same. Indeed there is no provision in the statute conferring any power on the tribunal to review the compensation amount for variation of circumstances.
17. On the basis of the discussions as aforesaid, the conclusion can be reached that in determining the compensation the interest theory as such is not to be resorted to and that if at all the interest is to be taken into consideration for the purpose of discounting the lump sum to its present value, then a low rate of interest as was available at stable times without the inflationary trends being taken into account is to be taken into consideration. As a matter of fact, in the matter of selection of a suitable multiplier, adoption of such interest rate for the purpose of cross-checking whether the proper multiplier has been applied is always a good workable test. The question would of course arise as to what should be appropriate rate of interest that may be taken into consideration for the purpose. A reference to the table of interests shows that there was slight variation of interests from 1967 to 1974, but however since 23-7-74 there was gradual increase in the rates of interest with decrease in between 1977 to 1978 as also some times in 1986. It would be seen that interest was compounded monthly from 1974 to 23-7-78 and thereafter interest was compounded quarterly with effect from 1-3-78. If a deposit for a term of two years to three years is taken as the criterion, the interest rate is seen to have varied from 6.25% to 7.50% during the period from 1-1-67 to 1-4-74 with periodic decreases in between. Since currency was comparatively stable during the period, it would be safe to adopt 6% as the rate of interest for the purpose of conversion of future earnings to its present value. The compensations determined in the case referred to earlier, in the cases of the Supreme Court and the Patna High Court in AIR 1984 Patna 77 (supra) also a most work out to the same percentage. Thus in AIR 1977 SC 1189 (supra) where the annual dependency was Rs. 600/- and a multiplier of 20 was applied to reach a figure of Rs. 12,000/-, it would be seen that at 6% of interest, a deposit of Rs. 12,000/- would produce an annuity of Rs. 750/- which is slightly higher. The compensation determined by the tribunal at Rs. 15,000/- was however not interfered with. Similarly, in AIR 1971 SC 1624 (supra) where the annual loss of dependency was Rs. 2,400/-, a compensation of Rs. 36,000/- was determined, the deposit of which sum with interest at the rate of 6% would bring an annuity of Rs. 2,160/-. In AIR 1984 Patna 77 (supra) the annual loss of dependency was Rs. 3,000/- and the compensation was determined at Rs. 50,000/-which sum would yield Rs. 3,000/- as annuity at 6% interest.
S.C. Mohapatra, J.
18. Correctness of the decision reported in (1986) 62 Cut LT 457 : (AIR 1987 Orissa 110) (Orissa Road Transport Company Limited v. Umakanta Singh) rendered by a Division Bench is the subject matter of consideration of this Full Bench, para 16 of the referring order on the basis of which Honourable the Chief Justice constituted this larger Bench, reads as follows:--
"Since, however, a Division Bench of this Court has taken a contrary view and has held that the earlier Division Bench case will be confined to its own facts, and has also not taken into consideration Sabia Pati's case (supra) which relied upon two decisions of the Hon'ble Supreme Court, and the question is of wide importance, I feel that those cases should be referred to a larger Bench for decision. As such I direct that the cases be placed before the Hon'ble the Chief Justice for constituting an appropriate larger Bench for the decision of the question involved."
19. On two grounds the correctness of the decision reported in (1986) 62 Cut LT 457: (AIR 1987 Orissa 110) (supra) is doubted. First ground is that it has taken a contrary view to the earlier Division Bench decision reported in (1979) 47 Cut LT 368 (Orissa Road Transport Company Limited v. Sibananda Patnaik) which was held by the later Division Bench to be confined to facts of the case. The following observation of the Division Bench was held to be confined to facts of that case.
"(vi) The next contention advanced by Mr. Murty is that if the claimants were entitled to a compensation of about Rs. 7,800/- per annum at the rate of Rs. 600/- per month, at the prevailing bank rate of nine per cent interest, a sum of about Rs. 30,000/- would have been sufficient and there can be no justification for awarding compensation at a higher rate. Mr. Murty has placed reliance on two Bench decisions. One being of Madhya Pradesh High Court in the case of Susila Devi v. Ibrahim (AIR 1974 Madh Pra 181), and the other of the Madras High Court in the case of Madras Motor and General Insurance Co. Ltd. v. Jagadeswari (AIR 1974 Mad 318). He has also placed reliance on some single Judge decision of different High Courts. No clear principle has been indicated in these decisions as to why such a method of determining compensation should be adopted. Rate of interest varies and there is no provision under the Motor Vehicles Act to obtain review of the compensation once awarded on the basis of variance of the rate of interest. That apart, the persons entitled to compensation should have the control over the compensation amount and there can be no justification to keep it out of their reach and make an annuity available to them. We are, therefore, not prepared to accept the proposition as a general rule in the matter of award of compensation under the Motor Vehicles Act and would not accept the contention."
The later Division Bench was considering the correctness of the decision of a learned single Judge in AIR 1983 Orissa 193 (Commissioner, N.C.C. Group, Cuttack v. Smt. Nirmala Moharana) where it was held (AIR 1987 Orissa 110 para 1) :
"The average bank rate of interest has been 10 per cent in term deposits for a term of three years and above. If Rs. 25,000/- is deposited, it would earn interest of Rs. 2,500/- a year and that should adequately compensate the claimants taking into account the possibility of variation of the rate of interest and the losing value of the rupee on account of deflation."
While considering the question in paragraph 20 of the decision it was held :
"The compensation to be paid on account of non-pecuniary loss and actual expenses and loss of property is to be paid as such. So far as the loss of future pecuniary benefits, the annual loss is to be first determined. In some cases the annual loss is multiplied to the period of its continuance and from the total amount of percentage is deducted on account of the benefit obtained for lump sum payment and taking into consideration the future uncertainties. In some cases the principle of suitable multiplier is applied. The annual pecuniary loss is multiplied by years of purchase. The years of purchase are fixed depending on the length of continuance of the loss. Supreme Court and other courts have applied fifteen years or twenty years purchase depending on the facts and circumstances of the case. The third method of determination of compensation is to fix an amount which would be sufficient to earn the annual loss. The annual loss is made equal to the interest receivable on the available bank rate of interest and the amount which would be sufficient for earning that interest is determined as the compensation. The basic principle being restitutio in interum, one of the methods is applied to the facts and circumstances of each individual case."
In para 25 thereof the conclusion was :
"In conclusion, the non-pecuniary losses as determined are to be paid as such and the pecuniary losses on account of expenses already incurred or damages to the property are to be paid as such.
So far as loss of pecuniary benefit in future any of the three principles can be adopted depending upon the facts and the circumstances of the case. Before applying any of the methods the future annual pecuniary loss on account of the accident is to be determined. It may either be multiplied by the years for which the loss would continue or may be multiplied by a suitable multiplier or an amount can be fixed whose annual yield would be equal to the annual loss, preferably calculating the same on the basis of prevailing bank rate of interest on a fixed deposit for three years."
20. In (1970) 47 Cut LT 368 (supra), the Division Bench did not prefer to determine the just compensation by fixing the amount which would yield the same amount which is equivalent to annual loss of the claimant on the following three grounds :
(i) Variance in the rate of interest.
(ii) Absence of provision of review in the Motor Vehicles Act and variance of rate of interest subsequent cannot be reviewed.
(iii) Loss of control over compensation amount if the case is kept out of reach of the claimants to make the annuity available to them.
As regards the fluctuation of bank rate of interest and absence of power to review, it was held by the Division Bench in (1988) 62 Cut LT 457 : (AIR 1987 Orissa 110) (supra) that the bank rate is almost static now for a long period and absence of the provision for review would not be available to be a ground to apply the said method of determination of just compensation. As regards the loss of control, the decision of the Supreme Court in AIR 1986 SC 1189 (Pushpa Thakur v. Union of India) was relied upon where the amount of compensation determined was directed to be deposited in a nationalised bank on long term fixed deposit with a direction to pay the interest on the amount to the claimant every quarter. Liberty was given to the claimant to apply to the Tribunal for withdrawal of any part of the amount deposited in case it becomes necessary for her to do so for sufficient reasons. Thus, all the three grounds on which the method of determining the compensation which would yield interest equal to the annual loss determined not being available, it was held that the decision in (1979) 47 Cut LT 368 (supra) would be confined to facts and circumstances of this case. I am not able to convince myself that the decision rendered in (1986) 62 Cut LT 457: (AIR 1987 Orissa 110) (supra) is wrong in any manner to hold that (1979) 47 Cut LT 368 (supra) has been decided on its own facts.
21. Next ground for assailing the correct--ness of the decision in (1980) 62 Cut LT 457: (AIR 1987 Orissa 110) (supra) is that it has not taken into consideration the decision reported in 1973 Acc CJ 319 (Orissa) (Sabita Pati v. Rameswar Singh). In the said decision, future prospects of promotion in the employment was taken into consideration. Such a question was not the subject matter of consideration in (1986) 62 Cut LT 457 : (AIR 1987 Orissa 110) (supra). Whether the future prospects of promotion of the deceased would be taken into consideration would depend on the eligibility and suitability for promotion, availability of posts to which the employee can be promoted during his full term of employment. Death of an employee does not make him eligible and suitable and a post is not created for his promotion if there is none.
Uncertainties by death or otherwise or the loss of employment are also to be considered. All these would depend upon materials available on record. No hard and fast rule can be laid down that the deceased employed in a service which has the opportunities of promotion is to be promoted definitely or in all probabilities. Events which are almost certain to happen in future can be taken into consideration, if materials are available on record, to determine the annual loss so that the lump sum compensation which appears to be just can be determined. Decision rendered in (1986) 62 Cut LT 457 : (AIR 1987 Orissa 110) (supra), accordingly, cannot be assailed to be wrong for non-consideration of earlier decision of the Division Bench in 1973 Acc CJ 319 (supra).
22. While considering to determine the compensation under Section 110B of the Act, the Tribunal or the High Court in appeal is not to consider the amount which would be more than the just compensation. Getting more than the compensation which appears to be just amounts to profit. There cannot be any enrichment to the claimant on account of the accident of the motor vehicle. Therefore, Court is not to consider the three methods and thereafter determine the compensation which would be more than the other two methods. Future is uncertain, the period for which a claimant is likely to lose the dependency is also uncertain. Accordingly, there is no difficulty in adopting the method in determining the compensation by finding out the amount which would be yielding the annual loss by way of interest accrued to it if invested properly.
23. Taking into consideration the views of L. Rath, J., I am not able to convince myself that the method of determining the compensation by fixing the multiple gives way to the determination of such compensation by method of finding out the amount which would be sufficient for yielding annually the annual loss of dependency determined by the Tribunal or this Court as has been held in (1986) 62 Cut LT 457 : (AIR 1987 Orissa 110) (supra). Method to be adopted would depend upon the facts and circumstances of each case and no hard and fast principle can be laid down as to the method to be applied. It would depend upon the available facts and circumstances on record. Judicial wisdom of the Tribunal or this Court while considering the question cannot be fettered.
Agrawal, C.J.
24. I have carefully perused the judgment prepared by my learned brothers Rath and Mohapatra.
25. In my opinion, all the three methods are followed by Indian Courts for determining the compensation in motor accident claim cases, namely, (i) lump sum payment after determining the compensation taking into account the annual loss of dependency multiplied by the estimated span of life and making necessary deduction therefrom; (ii) the multiplier system, the system of recent origin where the calculation is made on the basis of the annual loss for dependency multiplied by a suitable multiplier taking into consideration various factors to arrive at a "just compensation; and (iii) the interest system, i.e., awarding a lump sum to secure to the dependants receipt of an amount by way of interest for the annual loss out of the amount of compensation determined by the Court.
26. It may be true that the rate of interest fluctuates, but in that way, the value of life and the value of money also fluctuate. The Court, therefore, cannot find out any solution to hall the fluctuation or secure for the future uncertainties. In that way, even the lump sum determined under the first method may have various appreciations and depreciations in the long run. On that account, the working out of a just compensation cannot by itself be held to be basically unjust as such. The Court has to decide an issue on the basis of the facts and circumstances existing at the time the matter is brought before it. At best, in some appropriate cases it can take into account sub sequent development, if any, taking place in the meantime.
In fact, it all depends upon the facts and circumstances of each case and the attitude of the Court to adopt any of the methods which, in its wisdom, would work out at a "just compensation".
27. Before parting with the case, I would like to add a few words regarding the observations made by my learned brother S. C. Mohapatra in O.R.T. Company Ltd., v. Umakanta Singh, (1986) 62 Cut LT 457 : (AIR 1987 Orissa 110) with respect to certain observations made in the earlier Bench decision in O.R.T. Company Ltd. v. Sibananda Patnaik, (1979) 47 Cut LT 368 to the effect that the said observations should be deemed to be confined to the facts of that case alone. He has quoted the observations made in (1979) 47 Cut LT 368 in para 19 of this judgment. Although I was a party to the decision in (1986) 62 Cut LT 457 : (AIR 1987 Orissa 110), I must say that the force of the observation made in (1979) 47 Cut LT 368 perhaps could not be confined to the facts of that case only. But on that account, it cannot be said that the principles enunciated in the decision in (1986) 62 Cut LT 457 : (AIR 1987 Orissa 110) are incorrect.
28. Let the matter now_go back to the learned single Judge for disposal in the light of the observations made in this judgment.
ANNEXURE Interest Rates on Deposits as per Reserve Bank of India Directives (per cent per annum) Term Deposits for ds/ms/yr & above but less than 1-4-87 1-1-67 7-3-68 1-4-70 11-1-71 1-4-74 1-4-74 23-7-74 1-6-77 1-3-78 13-9-79 2-3-81 1-3-82 26-10-82 2-4-86 17-5-85 22-8-85 FCNR only 18-5-85 FCNR only 5-5-86 FCNR only 8-9-86 FCNR only 25-5-87 FCNR only 15ds--45ds 3.00 150 125 200 275 300 300 300 250 250 300 300 300 300 300 300 300 300 300 300 45ds-91ds 4.00 300 250 250 300 325 350 350 500 300 300 400 400 300 400 400 400 400 400 400 400 91ds-6ms 6.50 450 400 400 425 475 500 550 400 400 400 400 500 500 500 550 650 650 650 650 650 6 ms 9ms 8.00 500 450 450 475 525 550 600 450 450 450 450 600 600 600 600 800 800 800 750 800 9 ms--1 yr 8.00 550 500 500 525 525 625 700 500 500 550 550 700 700 800 800 800 800 800 750 800 1yr-2yrs 9.00 600 550 550 600 600 675 800 600 600 700 750 800 850 850 850 950 950 850 900 950 2yrs--3yrs 10.00 625 575 6004 6501 700 750a 800 600a 600a 750a 850 900 900 900 900 1050 1000 900 850 1000 3yrs-5yrs 10.00 650 600 650b 700b 700 775b 800b 800 750b 850 1000 1000 1000 1000 1000 1100 1050 10001 9001 1050 5yrs & over 10.00 700 650 675 725d 725 800d 1000d 1000 900 1000 1000 1000 1100 1100 1100 1200 11001 _ _ _ Savings Bank 5.00 400 350s 350 400 400 500 500 399 450 500 500 500 500 500 500 _ _ _ _ _ a- inclusive of 3 years a- above 5 years ds-days, ms-months, yrs-years d- above 3 yrs and inclusive of 5 yrs e- inclusive of 5 yrs I- As per IBA guidelines s- above 5 yrs & inclusive of 6 yrs & above 6 yrs. 7% p.a I-5 yrs only, g- w.e.f. 1-4-68 SS-Savings Account with cheque facility b- w.e.f. 1-4-78 for Recurring Deposits SD- Savings Account without cheque facility.
NOTES:
1.
Interest compounded monthly from 23-7-74 to 28-2-78.
2. Interest compounded quarterly with effect from 1-3-78.
3. Unless otherwise stated the rates of interest mentioned above are those applicable to domestic deposits.
4. With effect from 1-3-82 banks are allowed to pay additional 2 per cent interest on 11 on-Resident Rupee Deposits of one year and above.
5. From 1-3-82 to 21-8-85 banks were allowed to pay additional 2 per cent interest on FCNR deposits of one year and above.
6. Rates of penalty for premature withdrawal of sum deposits.
Before 1-4-74 1 per cent 1-4-74 to 23-7-74 1.5 per cent 23-7-74 to 30-4-83 per cent 30-4-83 onwards 1 per cent
7. With effect from 30-4-83 the interest to be paid on premature withdrawal of renewal under re-investment deposits is compounded interest at permissible rate instead of simple interest.
8. Advances against term deposits are considered Margin 25 per cent Interest 2 per cent over deposits rate (for deposit for himself) For the purpose of determination of margin deposits includes principal and interest accrued in Recurring Deposits andRe-investment deposits accounts Compiled by Shri B. S. Mana, Officer, Operations Department, Indian Banks' Association, Bombay [*Case referred to single Bench for disposal]