Application of Multiplier Method on Compensation under Motor Vehicles Act

Isha Sawant | Government Law College | 4th August 2020

Erudhiya Priya v/s State Transport Corporation Ltd.

Facts:

The appellant, female, aged 23 (at the time of incident),a software engineer, on 16/08/2011, was travelling by a bus owned by the State Transport Corporation of Tamil Nadu from Chennai to Bangalore, when at 5:40 am the bus collided into a stationary lorry resulting in the death of the driver, injuries to passengers including the appellant. The appellant suffered numerous fractures and was hospitalized for 8 months, suffering a 31.1% permanent disability of the whole body. A FIR was filed in which the bus-driver was held to be the accused, however, the appellant filed a complaint before the (MACT) Motor Accidents Complaint Tribunal, Madurai under section 166 of the Motor Vehicles Act 1988 (“MV Act”) read with Rule 3(1) of the Tamil Nadu Motor Vehicles Accident Claims Tribunal Rules, 1989. The MACT, in its judgement delivered on 20/10/2014, held the respondent state liable and directed them to pay compensation, multiplier method of quantifying loss of earning power, multiplier of 17 was applied to the monthly salary of the appellant as a software engineer, calculating compensation of Rs. 9, 27,424/-, with various heads of extra nourishment, medical expenses, physiotherapy, loss of matrimonial aspects, loss of comfort and amenities, mental agony, and pain and suffering, totalling Rs. 35, 24,288/- along with interest @ 7.5% per annum from the date of petition till the date of realization with costs. The respondent state appealed to the High Court against the decision of the MACT, the appellant filed counter-objections, and the high court also held the state corporation liable but reduced the compensation awarded to Rs. 25, 00,000, stating that the multiplier method in quantifying loss of earning power had been wrongly applied. Thus, the appellant filed an appeal to the Supreme Court against the judgement of the High Court.

Issues:

• Weather multiplier method in quantifying loss of earning power should be applied and if it should be at multiplier of 18 or 17.
• If 31.1% permanent disability would be taken into account for loss in future prospects of life and career.

Legal Provisions:

• Motor Vehicles Act, 1988, Section 166
• Tamil Nadu Motor Vehicles Accident Claims Tribunal Rules, 1989, Rule 3(1)
• Multiplier method affirmed in the National Insurance Company Limited v. PranaySethi and Others, (2017) 16 SCC 680: 2017(4) R.C.R.(Civil) 1009.

Petitioner Contention:

The petitioner challenged the judgement of the high-court reducing the compensation to Rs. 25 lakh, on the grounds that there was no loss of earning power to the appellant as a software engineer due to permanent disability of 31.1%. The petitioner contended that she is entitled to enhancement of compensation of Rs.41, 69,831/-, above Rs. 34 24,288/- awarded by the MACT, along with claiming a revised interest rate of 12% per anum.

Respondent Contention:

The respondent contended that the photographs with petition showing the current physical state of the appellant which are presented before the bench were not put on record in the trail court.

Observations made by the court:

The court held that relying on the judgement set in the National Insurance Company Limited v. Pranay Sethi and Others, which affirmed the use of multiplier method in determining loss of earning power, for victims falling in the age group of 15- 25 years, the multiplier has to be ‘18’ along with factoring in the extent of disability, thus in the present case the multiplier should be applied at ‘18’instead of ‘17’. The court on examining the disability certificate, the photographs assigned with the petition showing the current physical state of the appellant, held merit in the appellant’s contention; and as stated in Sandeep Khanuja case that future prospects in life and career should be taken into consideration while applying the multiplier method for quantifying loss of income. The court thus held that the appellant aged 23 at the time of accident, with a 31.1% permanent disability, the quantification of loss of income according to the National Insurance Company case, should be 50% of the salary in the present case. The appellant during the course of hearing agreed to the interest rate of 9% per anum instead of the previously contended 12%.

Judgement:

The court held that the appellant will be entitled to the compensation of Rs. 4, 69,831/- along with the interest rate of 9% per anum from the date of application to the date of payment. The payment has been ordered to be completed within a maximum period of 6 weeks from the date of the judgment.