Damages for accidents

Posted in COMPENSATION by NNLRJ INDIA on November 22, 2009

Link compensation to the cost of living


Owing to negligent driving, a bus ferrying school children broke the railings of the Wazirabad Yamuna bridge and fell into the river, claiming 29 students in 1997. However, it took more than a decade for the athorities to decide the compensatory claims of the parents in 2009 — the basis being ‘fault liability’ of the driver, the bus owner and the insurance company.

The issue to be settled all along right from the Motor Accident Claims Tribunal, through the High Court, and finally to the Supreme Court was how to compensate the loss of the distressed parents.

Loss of life is indeed irrevocable. Nevertheless, to maintain the sanctity of a legal order, an attempt is made to devise some mechanism to compensate even if the loss is irreversible and, therefore, irreparable. This is the enigma that the law courts and the legislature are trying to resolve by evolving principles of compensation.

The most basic principle, evolved on the analogy of commercial contracts, is that the person, who has suffered loss on account of some accident, should be put in the same position by awarding him compensatory damages as if the negligent or tortuous act had not been committed at all!

But what about the loss in case of death of school students who themselves are dependant upon their parents? Most seemingly, the children bestow upon their parents a lot of love and affection and provide them emotional support and satisfaction, but all that deprivation and pain and suffering caused to them due to their accidental death is incalculable in money.

What pecuniary loss the parents have suffered by the untimely demise of their children? Lord Atkinson responded to this interrogative about a century ago when he observed in an English case Taff Vale Rly. Co. v. Jenkins, (1911-13) All England Reporter: “In case of the death of an infant, there may have been no actual pecuniary benefit derived by its parents during the child’s lifetime. But this does not necessarily bar the parents’ claim and prospective loss will found a valid claim provided that the parents establish that they had a reasonable expectation of pecuniary benefit if the child had lived.”

The “prospective pecuniary loss” proposition has been adopted and developed by the Indian courts into at least two basic principles of pecuniary damages and non-pecuniary damages. The first one attempts to compensate, what is termed as, the “dependency loss” of the parents in future. This is the compensation for the loss of money support in terms of money.

The second principle attempts to compensate non-pecuniary damages, say, in the form of incalculable loss of love and affection as distinct from the money loss, but again in terms of money. In both cases, the only measure for determining damages is that the awarded amount should be adequate, just and reasonable.

In the application of these principles, however, the compensatory amount vastly varied. Extreme variation even within one and the same jurisdiction is disturbing. Surely, compensation award is intended neither to be a “bonanza,”  “largesse,” or “a source of profit,” nor “a pittance” to become an apology for compensation. This is how the Supreme Court has recently lamented in Sarla Verma v. Delhi Transport Corporation (2009).

True, this is due to the number of imponderables involved. Nonetheless, such a spectacle weakens the rule of law if we continue to remain in the realm of uncertainties.

To bring certainty and uniformity, the Supreme Court, in the course of its judicial decision-making, has evolved “the multiplier method” for the award of pecuniary compensation, and the concept of “conventional amount” for the award for non-pecuniary compensation.

The multiplier method is based upon the principle that the claimant must be paid a capital sum which would yield sufficient interest income to provide material benefits of the same standard and duration as the deceased would have provided for the dependents if he had lived and earned.

In the calculation of this capital sum, there are involved a number of variables, such as how much personal and living expenses need to be deducted while calculating the yearly loss of dependency, how much effect is given to the future prospects of the deceased, inflation, and general price rise that erodes value and purchasing power of money, how to decide and determine the suitable multiplier on the basis of length of dependency, how to discount for contingencies and uncertainties, et al. Over the years, the courts have standardised the value of various variables by keeping in view the profile of a relatively stable economy.

Likewise, the concept of “conventional sum”, which is paid for loss of life and not loss of future pecuniary prospects, is standardised. This is done by fixing an appropriate amount that the society considers just and proper and which is quite independent of financial position of the victim or the claimant, but dependant on the capacity and the ability of the deceased to provide happiness to the claimant.

The various principles evolved by the courts for eschewing variations have now gained statutory recognition with the incorporation of new provisions by amending Act of 1994 into the Motor Vehicles Act, 1988.  The new Section 163-A, read with Schedule II of the Act, provides for the payment of compensation on structured formula basis.

The tabulated data of this Schedule prescribes compensation to be awarded with reference to the age and income of the deceased. A bare perusal of this data instantly reveals at least two flaws that somehow or the other seemed to have crept in.

One, there is an amiss when a lesser compensation is prescribed where a higher multiplier of 18 (corresponding to the age group of 25-30 years) is applicable, and larger compensation with lower multiplier of 15, 16 or 17 (corresponding to the age group of 15-25 years).

And two, it is inconceivable how the higher compensation is awarded in case where the deceased was having no income on the basis of notional income of Rs 15,000 per annum, whereas lower compensation where the deceased had some income, say, ranging between Rs. 3,000 and Rs. 12,000 per annum!

The said Schedule bears some beneficial features of social security and standardisation that strengthen the rule of law by seeking objectivity in the vast realm of subjectivity. The Centre should review the Second Schedule from time to time keeping in view the cost of living as notified in the Official Gazatte and as envisaged under Sec 163-A of the Motor Vehicles Act.n

The writer, a former Professor and Chairman, Department of Laws, Panjab University, Chandigarh, is presently Director (Academics), Chandigarh Judicial Academy


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2 Responses

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  1. beautyfulsoul said, on November 23, 2009 at 05:56

    Very useful article for accident victims and their family….Lawyers can do service to society by making people aware of their rights and benefits which they can take thru courts.

  2. Nikhilendra said, on March 26, 2010 at 09:54

    In moter v act under 163a ,could court consider income of driver more than 40000?

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