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A Comment on U.P.S.T.C. v. Trilok Chandra
by B.R. Ranad, Advocates*

Cite as : (1998) 6 SCC (Jour) 15

The decision given by Ahmadi, C.J. (with N.P. Singh and M.K. Mukherjee, JJ.) in U.P. State Road Transport Corporation v. Trilok Chandra1 assumes much importance.

In this case, one Prem Chandra aged 26 years was fatally knocked down by an omnibus of the U.P. State Road Transport Corporation on 1-8-1977. His legal representatives preferred a claim for compensation under the Motor Vehicles Act, 1939. The Claims Tribunal awarded them an amount of Rs 57,600 by way of compensation.2

The High Court raised the compensation to Rs 81,600 by enhancing the number of years of loss to 34 years from 24 years.3 The Corporation went in appeal to the Supreme Court.

The question before the Supreme Court, according to itself, was whether it was the Tribunal or the High Court which was right in employing the multiplier. In other words, the issue was whether it was 24 years or 34 years.

The Supreme Court held that the multiplier employed by the High Court was excessive. It also opined that the High Court had used a very low multiplicand as the loss of dependency. However, the Court felt that if it were to correct the multiplicand and use the correct multiplier, the compensation would work out to nearabout the same figure. It held that the Tribunal/Court fell into an error in the choice of the multiplier and allowed the appeal to that extent but, in the circumstances of the case, did not interfere with the quantum of compensation.

The appeal having been thus decided, the judgment ought to have ended there. But it did not. Instead, the Supreme Court analysed Section 163-A and Section 163-B and also the table in the Second Schedule of the Motor Vehicles Act, 1988 as amended by the Amendment Act of 1994. This exercise, with respects, was unnecessary for deciding the case. However, it may have repercussions. It would, therefore, be desirable to examine them in the light of the facts of the case.

The Motor Vehicles Act, 1939 initially provided for the award of compensation on the principle of "fault" only. The Supreme Court in Manushri Raha v. B.L. Gupta4 and the Law Commission of India5 recommended the introduction of "no fault" liability. The 1939 Act was accordingly amended by Motor Vehicles (Amendment) Act, 1982 incorporating Sections 92-A to 92-E to provide, for the first time payment of compensation on the principle of "no fault".

The 1939 Act, as amended by the 1982 Amendment Act, was however, later repealed. A new Act "Motor Vehicles Act, 1988" (Act 59 of 1988) was enacted. It came into force from 14th October, 1988. In this Act were enacted Sections 140 to 144 (corresponding to earlier Sections 92-A to 92-E). The Act also provided for award of compensation resulting from an accident arising out of the use of motor vehicles under the following three cases:

(a) In cases of hit and run motor accidents (Section 161)

(b) In case of right of just compensation on the principle of "Fault" (Sections 166 and 168)

(c) In case of award of compensation on the principle of "No Fault" (Chapter X Sections 140 to 144).

All these three sets of provisions are independent and are mutually exclusive. The Motor Vehicles Act, 1988 has been amended by the Amendment Act 54 of 1994. It came into force on November 14, 1994. By this Amendment Act, Sections 163-A and 163-B have been inserted in Chapter XI entitled "Insurance of Motor Vehicles against Third-Party Risks".

These two new sections were inserted to provide for payment of compensation in motor accident cases on a "predetermined formula" given in the Second Schedule.

Section 163-A and Section 140

Section 163-A is captioned "Special Provisions as to Payment of Compensation on Structured Formula Basis". Section 140 of the Act is captioned a "Liability to pay Compensation in Certain Cases on the Principle of No Fault". Section 163-B states that "where a person is entitled to claim compensation under Section 140 and Section 163-A, he shall file the claim under either of the said sections and not under both". In other words, it is optional for an applicant to file an application for compensation either under Section 140 or under Section 163-A. In other words, Section 163-A is in pari materia with Section 140, both the sections providing for compensation on the principle of "No Fault".

1. Under Section 140, the amount of compensation to be awarded is a fixed pre-determined Rupees fifty thousand in case of death and Rupees twenty-five thousand in case of permanent disablement whereas under sub-section (1) of Section 163-A, compensation as indicated in the Second Schedule is payable.

2. "Permanent disablement" for the purposes of Section 140 shall be deemed to have resulted in case of any injury or injuries involving-

(a) permanent privation of the sight of either eye or the hearing of either ear, or privation of any member or joint; or

(b) destruction or permanent impairing of the powers of any member or joint; or

(c) permanent disfiguration of the head or face. (Vide Section 142.)

3. Explanation to sub-section (1) of Section 163-A provides that "Permanent disability" shall have the same meaning and extent as in the Workmen's Compensation Act, 1923 [vide Explanation to sub-section (1) of Section 163-A].

Part I of Schedule 1 of the Workmen's Compensation Act, 1923 describes six injuries "deemed to result in permanent total disablement" resulting in one hundred per cent loss of earning capacity of the victim. (These are the same as described in Section 142 and are in pari materia.) Part II of Schedule I of the said Act describes forty-eight different injuries and gives the corresponding deemed percentage of loss of earning capacity of the victim.

Therefore, a person claiming compensation for "Permanent Disablement" under Section 140 can do so only if he has suffered by reason of the accident, any injury or injuries specified in Section 142 whereas under Section 163-A, he can claim compensation even for all the various forty-eight types of injuries described in Part II of Schedule I of the Workmen's Compensation Act, 1923 and which are not as grave as specified under Section 142 of the Act.

Second Schedule

The Second Schedule inserted by the Amendment Act of 1994 (54 of 1994) is as below:

See next page for the Table]

2. Amount of compensation shall not be less than Rs 50,000

3. General Damages (in case of death):

The following General Damages shall be payable in addition to compensation outlined above:
  (i) Funeral expenses - Rs 2000
  (ii) Loss of Consortium, if beneficiary is the spouse - Rs 5000
  (iii) Loss of Estate - Rs 2500

Medical Expenses - actual expenses incurred before death supported by bills/vouchers but not exceeding - Rs 15000

4. General Damages in case of Injuries and Disabilities:

(i) Pain and Sufferings
  (a) Grievous injuries - Rs 5000
  (b) Non-grievous injuries - Rs 1000

(ii) Medical Expenses - actual expenses incurred supported by bills/vouchers but not exceeding as one time payment - Rs 15000

5. Disability in non-fatal accidents:

The following compensation shall be payable in case of disability to the victim arising out of non-fatal accidents:

Loss of income, if any, for actual period of disablement not exceeding fifty-two weeks.

PLUS either of the following:

(a) In case of permanent total disablement the amount payable shall be arrived at by multiplying the annual loss of income by the Multiplier applicable to the age on the date of determining the compensation, or

(b) In case of permanent partial disablement such percentage of compensation which would have been payable in the case of permanent total disablement as specified under Item (a) above.

Injuries deemed to result in Permanent Total Disablement/Permanent Partial Disablement and percentage of loss of earning capacity shall be as per Schedule I under Workmen's Compensation Act, 1923.

6. Notional Income for compensation to those who had no income prior to accident:

Fatal and disability in non-fatal accidents:
  (a)     Non-earning persons - Rs 15,000 p.a.
  (b)      Spouse
- Rs 1/3rd of income of the earning surviving spouse

In case of other injuries only "General Damages" as applicable. (emphasis supplied)

It is in the context of the legislative history of the Motor Vehicles Act that the observations of the Supreme Court have to be viewed.

The Supreme Court after analysing the precedents found that the principle on which the multiplier method for computing compensation was developed has been lost sight of and once again a hybrid method based on the subjectivity of the tribunal/court has surfaced introducing uncertainty and lack of reasonable uniformity in the matter of determination of compensation. The learned Chief Justice advocated the formula in Davies case6. His Lordship observed: (SCC pp. 370-71, para 17)

"17. The situation has now undergone a change with the enactment of the Motor Vehicles Act, 1988, as amended by Amendment Act 54 of 1994. The most important change introduced by the amendment insofar as it relates to determination of compensation is the insertion of Sections 163-A and 163-B in Chapter XI entitled "Insurance of Motor Vehicle against Third-Party Risks". Section 163-A begins with a non obstante clause and provides for payment of compensation, as indicated in the Second Schedule, to the legal representatives of the deceased or injured, as the case may be. Now if we turn to the Second Schedule, we find a table fixing the mode of calculation of compensation for third-party accident injury claims arising out of fatal accidents.

The first column gives the age group of the victims of accident, the second column indicates the multiplier and the subsequent horizontal figures indicate the quantum of compensation in thousand payable to the heirs of the deceased victim. According to this table, the multiplier varies from 5 to 18 depending on the age group to which the victim belonged."

The case under review related to an accident that took place on 1-8-1977. At that time, only Section 110-B of the then Motor Vehicles Act, 1939 fixing "just" compensation on "fault" was applicable. Neither Section 92-A nor Section 140 explained above signifying liability on "no fault" was thus applicable. To be sure, the facts did not call for consideration of Section 163-A.

The Court seems to be mistaken about the computation of compensation in the Schedule. Ahmadi, C.J. observed: (SCC p. 371, para 18)

"18. We must at once point out that the calculation of compensation and the amount worked out in the Schedule suffer (sic) from several defects. ... in Item 1 for a victim aged 15 years, the multiplier is shown to be 15 years and the multiplicand is shown to be Rs 3000. The total should be 3000 x 15 = Rs 45,000 but the same is worked out at Rs 60,000. Similarly, in the second item the multiplier is 16 and the annual income is Rs 9000; the total should have been Rs 1,44,000 but is shown to be Rs 1,71,000."

The learned Chief Justice multiplied the "Annual Income" with the corresponding multiplier shown against the age group of the victim under the assumption that the various figures of the "Annual Income" in the first row of the table indicate and are the multiplicand. This assumption, it is submitted, seems erroneous for the following reasons:

(a) The table in the Second Schedule indicates "predetermined figures providing for compensation in case of death". The multipliers shown there are not to be used for computing compensation in fatal accidents cases as Parliament has provided for "predetermined figures" of amounts of compensation in case of death" to be paid (in Fatal Accidents) commensurate with the age of the victim and the annual income.

(b) The learned Chief Justice has followed the formula advocated by Lord Wright in Davies case7 and subsequently adopted by the Supreme Court itself for calculating compensation. The formula was that:

"(1) The loss has to be ascertained by first determining the monthly income of the deceased; (2) To deduct therefrom the amount spent on the deceased, and thus assess the loss to the dependants of the deceased; (3) The annual dependency thus assessed in this manner is then to be multiplied by the use of an appropriate multiplier."

What needs to be noted is that the method contemplates the multiplication of the "Annual Dependency" by an appropriate multiplier and not the multiplication of the "Annual Income" by the appropriate multiplier. It is precisely because of the latter erroneous multiplication that the learned Chief Justice concluded that there are mistakes in the calculations in the table in the Second Schedule. In fact, as the table gives the predetermined figures, the question of making any calculations does not arise.

(c) If as contemplated by Justice Ahmadi, the Second Schedule contemplates products of the "multiplier" and the corresponding figure of the "Annual Income", the whole of the table giving various predetermined figures becomes redundant. In that case, only the column of the multiplier and the first row showing the annual income of the victim, with a clear indication that the product thereof is to be found out by the courts/tribunals would have been sufficient. There was no need to call upon the court/tribunals to work out the product of the multiplier with the corresponding figures of the Annual Income and at the same time also to state the actual calculations i.e. products of such multiplications.

(d) The Second Schedule prescribes the multiplier which is to be used ONLY for arriving at the additional amount payable in case of permanent total/partial disablement (besides the amount of compensation to be paid for actual loss of income) and for no other purpose. In other words, in indicating/determining compensation in fatal accidents cases under Section 163-A, the multiplier in the table is not at all to be used. This is understandable because the compensation under Section 163-A is on the principle of "No Fault". It is true that the formula advocated in Davies case7 and later adopted by the Supreme Court uses the multiplier method in arriving at just compensation under Section 168 of the Act. But it needs to be noted and emphasized that just compensation under Section 168 is on the principle of "Fault" whereas the compensation under Section 163-A is on the principle of "No Fault".

The learned Chief Justice has stated that the table abounds in mistake and has stated: (SCC p. 371, para 18) "Neither the tribunals nor the courts can go by the ready reckoner. It can only be used as a guide". One fails to understand the logic of this statement. And one may be tempted to ask: If the said table abounds in mistakes8 and the tribunals/courts cannot go by the said ready reckoner, how can it be used as a "guide". It seems that the learned Chief Justice was confusing the compensation on the basis of "fault" and that on the basis of "no fault" principle.

The learned Chief Justice has further stated that the selection of multiplier cannot in all cases be solely dependent on the age of the deceased. This observation holds good while determining compensation in cases based on the principle of "Fault". But this is totally inapplicable while considering Section 163-A and the Second Schedule which are based on the principle of "No Fault".

The multiplier method was never statutorily prescribed for determining compensation in accident cases. Judicial decisions have adopted various methods for determination and calculation of compensation in fatal accident actions. The Supreme Court in G.M. Kerala S.R.T.C. v. Susamma Thomas9 reiterated that the multiplier method i.e. formula in Davies case7 was logically sound and legally well established. The Amendment Act 54 of 1994 for the first time introduced the multiplier in the Second Schedule - not for fatal accidents but to be used only in case of total/partial disablement and only for the limited purpose of determining the additional amount of compensation and for no other purpose.10 The multipliers in the table in the Second Schedule have a very limited scope and purpose. These multipliers are not related to the annual income or the "dependency". This aspect of the nature of the multipliers in the Second Schedule was lost sight of and hence the error in the observation of the learned Chief Justice to the effect "what we propose to emphasize is that the multiplier cannot exceed 18 years".

The judgment as published does not indicate whether the counsel appearing in the case had advanced any arguments relating to Section 163-A and the Second Schedule. The probability is that they did not do so for the simple reason that that was not necessary. But if the learned Judges decided to consider these provisions and particularly when they were convinced that the table in the Second Schedule (which is a part of a statute passed by Parliament) abounded in such mistakes, the Union/States should have been heard on the point of the correctness or otherwise of the figures in the said table and the rationale behind the same? The judgment does not indicate that the Attorney General or the Union/States were heard in the matter. The judgment and the said observations will lead to a chaotic condition because all over India, the tribunals and the courts are dealing with and deciding accident claims cases in hundreds everyday and hence the danger of wrong principles being followed.

We have seen that it has been an accepted legal proposition that the multiplier should not exceed 16. If the Supreme Court wanted to change it and prescribe that the multiplier would not thereafter exceed 18, one would think that such a change could be made in a case wherein such specific issue was raised and the Court was called on to decide as to the advisability or the reasonableness or the legality of the earlier maximum multiplier of 16. The figure of 18 appears to have been taken from the table in the Second Schedule because the maximum figure in the list of multipliers given therein is 18. According to the learned Chief Justice, the earlier figure of 16 as the maximum multiplier was on the basis that "... usually English Courts rarely exceed 16 as the multiplier. Courts in India too preferred the same pattern till recently ...". No reasons have been given as to why the earlier figure of 16 as the maximum multiplier is to be given up to be substituted by 18. The maximum multiplier of 16 is judicially accepted and followed in India on the principle of English decisions. However the learned Chief Justice now says that the figure of 16 is changed to 18 by legislation merely because the maximum figure in the "multiplier" column in the Second Schedule happens to be 18. The well-accepted rule of "harmonious interpretation" was not followed. The figures in the Second Schedule were not considered in the proper perspective and hence the doubtful conclusion that the table in the Second Schedule abounds in mistakes.

By now one is well accustomed to the courts making certain observations giving findings or expressing their views in the nature of "obiter dicta" (and even the obiter dicta of the Supreme Court is binding on the subordinate courts). But one would expect that even in the pronouncement of such "obiter dicta", the courts would exercise a little more care. The learned Chief Justice has made his observations because he felt that "it has ... become necessary to examine the law and to state the correct principles to be followed". In this connection, the following excerpt from a recent Supreme Court judgment in State of Bihar v. Bihar Distillery Ltd.11 speaks for itself: (SCC p. 466, para 17)

"Now coming to the reasoning in the impugned judgment, we must say with all respect that we have not been able to appreciate it. The approach of the court, while examining the challenge to the constitutionality of an enactment, is to start with the presumption of constitutionality. The court should try to sustain its validity to the extent possible. It should strike down the enactment only when it is not possible to sustain it. The court should not approach the enactment with a view to pick holes or to search for defects of drafting, much less inexactitude of language employed. Indeed, any such defects of drafting should be ironed out as part of the attempt to sustain the validity/constitutionality of the enactment. After all, an Act made by the legislature represents the will of the people and that cannot be lightly interfered with. The unconstitutionality must be plainly and clearly established before an enactment is declared as void. The same approach holds good while ascertaining the intent and purpose of an enactment or it scope and application. Now, the result of the impugned judgment is that the Amending Act has become an exercise in futility - a purposeless piece of legislation. And this result has been arrived at by pointing out some drafting errors and some imperfection in the language employed. ... To call the entire exercise a mere waste is, to say the least, most unwarranted besides being uncharitable. The court must recognise the fundamental nature and importance of legislative process and accord due regard and deference to it, ...."

Ironically enough, one did not have to wait for long for the apprehensions about the possible consequences of the impugned judgment to manifest themselves. The Supreme Court in its recent judgment in Adikanda Sethi v. Palani Swami Saran Transports12 has relied on a proposition in the impugned judgment, namely, "... what we propose to emphasize is that the multiplier cannot exceed 18 years' purchase factor" when, as discussed above, this proposition seems erroneous and untenable.

One is tempted to recall the caution of Justice William H. Rehnquist in his dissenting opinion in Roe v. Wade (1973): "The Court's opinion will accomplish the seemingly impossible feat of leaving this branch of the law more confused than it found it."

*Advocate, Hon. Director, Symbiosis Society, Dr Ambedkar Institute for Research in Law and Development, Pune Return to Text

  1. (1996) 4 SCC 362 Return to Text
  2. The Tribunal arrived at this figure by way of the following computation:
      (a) Monthly earning capacity Rs 300
      (b) Monthly spending on family Rs 200
      (c) Life expectancy 60 years
      (d) No. of years of deprived earnings 24 years

    Total loss for 24 years by multiplying the purchase factor Rs 57,600

    Return to Text
  3. The High Court applied the multiplier of 34 years (60-26=34) and arrived at 200 x 12 x 34 = Rs 81,600 Return to Text
  4. (1977) 2 SCC 174 Return to Text
  5. See Indian Law Commission, 85th Report, (1980) Chap. 3 Return to Text
  6. 1942 AC 601 : (1942) 1 All ER 657 Return to Text
  7. Davies v. Powell Duffryn Associated Collieries Ltd., (1942) 1 All ER 657 : 1942 AC 601 Return to Text
  8. In fact, according to the method adopted by the learned C.J. 241 figures out of the total of 256 in the Schedule are wrong. Return to Text
  9. (1994) 2 SCC 176 at p. 183 Return to Text
  10. Entry 5 Return to Text
  11. State of Bihar v. Bihar Distillery Ltd., (1997) 2 SCC 453 Return to Text
  12. (1997) 5 SCC 435 Return to Text
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