The real rate of interest (difference between current returns on investment or property and rate of inflation) is constant and that alone should be taken as the discount rate (rate of interest) for converting future payments to current values.

L. RATH, J.

( 1 ) THE sole question for which this reference has been made to this Bench is whether in assessing compensation under S. 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 (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 determins 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 s