2003 JTR(SC) 185
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2003(2) Supreme 178
SUPREME COURT OF INDIA
(From Gauhati High Court)
S.B. Sinha & A.R. Lakshmanan, JJ.
Abati Bezbaruah -Appellant
versus
Dy. Director General Geological Survey of India & Anr. -Respondents
Civil Appeal No. 5193 of 1997
Decided on 14-2-2003
Counsel for the Parties :
For the Appellant : A.P. Mohanty, Advocate.
For the Respondents : Ashok Bhan, Dr. Sita Ram Sharma, Satbir Pillania, D.S. Mahra, Arvind Kumar, Sharma, Advocate (NP)/Advocates.
IMPORTANT POINT
The question as to what should be rate of interest in award of compensation in a motor accident claim depends upon the facts and circumstances of each case taking into account the prevailing bank rate at that time.
Act
Referred
:CIVIL PROCEDURE CODE : S.34
COMPENSATION ACT : S.4(a)(3)
MOTOR VEHICLES ACT : S.171, S.173, S.168, S.166
(A) The Motor Vehicles Act, Sections 166, 168, 171, 173, read with the Compensation Act, Section 4(a)(3), and the Civil Procedure Code, Section 34, govern the computation, payment, and review of compensation in motor accident claims. These provisions collectively provide the statutory framework within which the Tribunal determines compensation based on a structured schedule, guides High Court appellate oversight, and authorizes adjustment for interest under judicial discretion to ensure a just and fair outcome in cases involving death and dependency loss.
(B) Key legal principles include adherence to the structured formula under the Second Schedule of the Motor Vehicles Act, with deviation permitted only in exceptional cases; the calculation of dependency loss by deducting personal expenses from gross income and applying a reasonable life multiplier; and the discretionary award of interest at a just and reasonable rate, informed by precedent, facts, and circumstances, without strict fixation by statute.
Facts of the case:
The deceased, aged 40, died in an accident while riding a scooter, caused by a collision with a jeep. He had a stable income, and the Tribunal applied a life expectancy multiplier of 15, calculated compensation using a multiplier of 15, deducted personal expenses, and awarded a total sum with interest at 6%, later enhanced by the High Court to 8%.
Findings of Court:
The Tribunal and High Court appropriately applied the multiplier of 15. The High Court enhanced the dependency income and interest rate, but the Supreme Court adjusted the yearly income estimate to Rs. 45,000, recalculated dependency loss, and set interest at 9% per annum, emphasizing that compensation must be just and fair, and interest is a consequential entitlement.
Issues:
Whether the rate of interest awarded by the High Court was appropriate; whether the calculation of dependency loss and the application of the multiplier conformed to law; and whether the structured formula under the Motor Vehicles Act was correctly applied.
Ratio Decidendi:
Compensation under the Motor Vehicles Act must follow the structured formula, but adjustments for a higher income estimate and dependency loss are permissible in exceptional cases; interest is awarded at a just and reasonable rate, here 9%, considering case facts and precedents, and no costs are ordered on appeal.
Result:
The appeal is allowed in part with recalculation of compensation; interest is set at 9% per annum, and no order as to costs is made.
(A) The Motor Vehicles Act, Sections 166, 168, 171, 173, read with the Compensation Act, Section 4(a)(3), and the Civil Procedure Code, Section 34, govern the computation, payment, and review of compensation in motor accident claims. These provisions collectively provide the statutory framework within which the Tribunal determines compensation based on a structured schedule, guides High Court appellate oversight, and authorizes adjustment for interest under judicial discretion to ensure a just and fair outcome in cases involving death and dependency loss.
(B) Key legal principles include adherence to the structured formula under the Second Schedule of the Motor Vehicles Act, with deviation permitted only in exceptional cases; the calculation of dependency loss by deducting personal expenses from gross income and applying a reasonable life multiplier; and the discretionary award of interest at a just and reasonable rate, informed by precedent, facts, and circumstances, without strict fixation by statute.
Facts of the case:
The deceased, aged 40, died in an accident while riding a scooter, caused by a collision with a jeep. He had a stable income, and the Tribunal applied a life expectancy multiplier of 15, calculated compensation using a multiplier of 15, deducted personal expenses, and awarded a total sum with interest at 6%, later enhanced by the High Court to 8%.
Findings of Court:
The Tribunal and High Court appropriately applied the multiplier of 15. The High Court enhanced the dependency income and interest rate, but the Supreme Court adjusted the yearly income estimate to Rs. 45,000, recalculated dependency loss, and set interest at 9% per annum, emphasizing that compensation must be just and fair, and interest is a consequential entitlement.
Issues:
Whether the rate of interest awarded by the High Court was appropriate; whether the calculation of dependency loss and the application of the multiplier conformed to law; and whether the structured formula under the Motor Vehicles Act was correctly applied.
Ratio Decidendi:
Compensation under the Motor Vehicles Act must follow the structured formula, but adjustments for a higher income estimate and dependency loss are permissible in exceptional cases; interest is awarded at a just and reasonable rate, here 9%, considering case facts and precedents, and no costs are ordered on appeal.
Result:
The appeal is allowed in part with recalculation of compensation; interest is set at 9% per annum, and no order as to costs is made.
JUDGMENT
S.B. Sinha, J.-The claimant is in appeal before us being aggrieved by and dissatisfied with the judgment and award dated 10th April, 1996 passed by the High Court of Gauhati in M.A. (F) No 208 of 1994 modifying an award passed by the Motor Accidents Claims Tribunal (hereinafter referred to as "the Tribunal"), Shillong in M.A.C. Case No. 20 of 1991.
2. The basic fact of the matter is not in dispute. The husband of the appellant herein late (Dr.) Ramani Kanta Bezbaruah met with a fatal accident on 13th November, 1990 while he was proceeding on a scooter whence a jeep bearing registration No. MLK-5548 dashed against it. The claimant claimed compensation for a sum of Rs. 27,46,000 - before the Motor Accidents Claims Tribunal. The Tribunal, however, having regard to the deceased s salary which at the relevant point of time was Rs. 3500/- per month, calculated the monthly dependency at Rs. 1700/-. The Tribunal calculated the life expectancy of the deceased to be 65 years, and the age of the deceased at the time of accident being 40 years, applied 15 as multiplier. However, from the said amount, 20% was directed to be deducted towards uncertainty of life as well as 10% for getting the lump sum amount and thus on that basis the amount of compensation which would have otherwise come to Rs.3,06,000/- was reduced to Rs.2,14,200/-. A sum of Rs. 3,000/- was, however, awarded as expenses incurred by the family for the treatment of the deceased, and travelling expenses etc. A further sum of Rs. 3,000/- was awarded by way of loss of consortium, Rs. 6000/- towards the expenses of cremation, Rs. 3,000/- for loss of love and affection. On the said basis a total compensation of Rs. 2,50,200/- was awarded. It was further directed that the awarded amount be paid to the claimants with interest at the rate of 6% per annum. The High Court in appeal, however, held that having regard to the income of the deceased, which was Rs.3500/- per month, the loss of dependency should be enhanced to the tune of Rs. 2,000/- per month. So far as rate of interest is concerned, the same was also directed to be enhanced to 8% per annum from the date of filing of the claim till the date of the receipt of the awarded amount.
3. Mr. A.P. Mohanty, the learned counsel appearing on behalf of the appellant raised two contentions in support of this appeal. The learned counsel would firstly submit that the rate of interest prevailing at the relevant time being 10% the High Court erred in granting interest at the rate of 8% per annum. The learned counsel in support of the said contentions relied upon R.L Gupta and Others vs. Jupitor General Insurance Company and Others (1990) 1 SCC 356], Kaushnuma Begum (Smt.) and Others v. New India Assurance Co. Ltd. and Others [(2001) 2 SCC 9] and United India Insurance Co. Ltd. and Others vs. Patricia Jean Mahajan and Others [(2002) 6 SCC 281].
4. The learned counsel would next contend as the appellant was earning about Rs.3500/- per month, i.e. Rs. 42,000/- per year, upon deducting one third thereof from the said amount, a sum of Rs. 28,000/- per annum should have been held to the loss of dependency and in that view of the matter the amount of compensation should have been calculated by applying multiplier of 16 as the age of the deceased at the time of the accident was 40 years.
5. Mr. Ashok Bhan, the learned counsel appearing on behalf of the respondents, on the other hand, would submit that in a case of this nature awarding of interest at the rate of 9% would be fair having regard to the decision of this Court in United India Insurance Co. Ltd. (supra). The learned counsel, would further draw our attention to the fact that multiplier of 10 was applied in that case.
6. The question as to what should be rate of interest, in the opinion of this Court, would depend upon the facts and circumstances of each case. Award of interest would normally depend upon the bank rate prevailing at the relevant time.
7. In R.L. Gupta (supra), interest at the rate of 12% was awarded. However, no reason has been assigned in support thereof.
8. In Kaushnuma Begum (supra) the amount of compensation was directed to be paid with interest at the rate of 9 per cent annum from the date of claim. The same rate of interest was awarded, as noticed hereinbefore, in the case of United India Insurance Co. Ltd. (Supra).
9. We are of the opinion that the amount of interest should, having regard to the facts and circumstances of the case, be paid at the rate of 9% per annum.
10. The structured formula base has been set out in the Second Schedule to the Motor Vehicles Act.
11. It is now a well settled principle of law that the payment of compensation on the basis of structured formula as provided for under the Second Schedule should not ordinarily be deviated from. Section 168 of the Motor Vehicles Act lays down the guidelines for determination of the amount of compensation in terms of Section 166 thereof. Deviation of the structured formula, however, as has been held by this Court, may be resorted to in exceptional cases. Furthermore, the amount of compensation should be just and fair in the facts and circumstances of each case.
12. The victim at the relevant time was 40 years of age. The Tribunal and the High Court, therefore, cannot be said to have committed an error in applying the multiplier of 15. The only question which is required to be considered now is as to how the multiplicand should be arrived at.
13. The deceased at the time of accident was a young man. He had a stable job. A reasonably liberal view of his future prospects should have therefore, been taken into consideration by the High Court as well as by the Tribunal.
14. Having regard to the prospects and advancement of the future career, a higher estimate of the yearly income at Rs. 45,000/- would not be out of place. From the said amount, one-third of the gross income towards personal living expenses should be deducted. The amount of Rs. 30,000/- should, thus be determined as the loss of dependency. The said sum should be capitalized by applying the multiplier of 15, which comes to Rs. 4,50,000/-.
15. This appeal is allowed in part to the extent mentioned hereinbefore.
16. In the facts and circumstances of the case, there shall be no order as to cost.
A.R. Lakshmanan, J.-
17. While concurring with the conclusion arrived at by my esteemed Brother, I would like to add the following few lines.
18. Three decisions were cited before us by Mr. A.P. Mohanty, learned counsel appearing on behalf of the appellant, in support of his contentions. No ratio has been laid down in any of the decisions in regard to the rate of interest and the rate of interest was awarded on the amount of compensation as a matter of judicial discretion. The rate of interest must be just and reasonable depending upon the facts and circumstances of each case and taking all relevant factors including inflation, change of economy, policy being adopted by the Reserve Bank of India from time to time, how long the case is pending, permanent injuries suffered by the victim, enormity of suffering, loss of future income, loss of enjoyment of life, etc., into consideration. No rate of interest is fixed under Section 171 of the Motor Vehicles Act, 1988. Varying rates of interest are being awarded by Tribunals, High Courts and the Supreme Court. Interest can be granted even if claimant does not specifically plead for the same as it is consequential in the eye of law. Interest is compensation for forbearance or detention of money and that interest being awarded to a party only for being kept him out of the money which ought to have been paid to him. No principle could be deduced nor any rate of interest can be fixed to have a general application in motor accident claim cases having regard to nature of provision under Section 171 giving discretion to Tribunal in such matter. In other matters, awarding of interest depends upon the statutory provisions, mercantile usage and doctrine of equity. Neither Section 34 CPC nor Section 4-A(3) of the Workmen s Compensation Act are applicable in the matter of fixing rate of interest in a claim under the Motor Vehicles Act. The courts have awarded the interest at different rates depending upon the facts and circumstances of each case. Therefore, in my opinion, there cannot be any hard and fast rule in awarding interest and the award of interest is solely on the discretion of the Tribunal or the High Court as indicated above.
(N.K.R.) Appeal allowed in part.
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