analysis of case sarla verma & others v/s DTC

MACT Compensation Study

Case :- Sarla Verma & Ors Vs DTC •

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On 18-04-1988, Rajinder Prasad aged 38 years died in a motor accident involving a DTC bus. He was employed with ICAR as a scientist on a monthly salary of Rs 3402/- & other benefits. The Family including his widow , three minor children ,parents & grand father filed a claim of Rs16 lacs before MACT ,New Delhi . Judgment came came on 06-08-1993 of of worth Rs 5,94,000 5,94,000 with interest @ 9% per annum from the date of petition.

MACT Judgment •

Calculations:Rs.3402 - Monthly Income Monthly income after Deduction of personal and living expenses: (1/3rd of Rs.3402) = Rs.2250 Total contribution per annum (Rs.2250 * 12) = Rs.27,000 Since 22 yrs of service was left .Thus, 22 was taken as the multiplier. Total compensation compensation (Rs 27000*22) 27000*22) = Rs 5,94,000 /-

Further Proceedings •

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Dissatisfied with the quantum of compensation .They appealed in high court. HC came with Judgment on 15-02-2007 with gross compensation of Rs. 7,19,624/- & 6% interest on increased amt. Differences from MACT are:i) Monthly salary taken Rs.4004/ii ) Annual increments & pay revision taken into account personal & living expenses expenses reduced in lieu of larger family

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Calculations: -

6006- ¼ *(6006 )=4504 *12 = Rs.54048/- per annum and multiplier  as 13 54048*13 =702624/-

Supreme Court Judgment Appellants went to supreme court for following reasons: I.Consideration I.Consideration of future increment aspects of  salary. II.One eighth to be deducted towards personal and living expenses III. Number of multiplier. multiplier.

Questions Raised. a) What What shou should ld be be addi additio tion n to income income for future future prospects ? b) What What shou should ld be deduct deduction ion for person personal al and living expenses ? c) What What shou should ld be be crite criteria ria for select selecting ing Multip Multiplie lierr ? d) How final final compen compensat sation ion will will be be comp compute uted d?

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Calculation of income viewing future prospects.

a) (Actua (Actuall inco income me Income tax) as starting point for  calculating compensation.  –

b) But it led led to discrepancy discrepancy in income calculation in various cases. c) Thus a rule rule of thumb thumb has been been formulat formulated:ed:•

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Thumb rule:If age age belo below w 40 yrs. yrs. & perm perman anent ent Job additi addition on of of 50% 50%

II. If age b/w 40-50 40-50 yrs. yrs. - Addi Additio tion n of of 30% 30% III. If above above 50 50 yrs. yrs. - No addi additio tion n IV. If self employed employed or on fixed salary then only actual actual income at the time of  death

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Deductions of personal & living expenses:-

a) Any evidence evidence in this this behalf behalf will be wholly wholly unverif unverifiable iable and and likely to be unreliable b) This led to deducti deduction on of of 1/3 if decease deceased d was was married married & ½ if  the deceased was a bachelor & is a statute under 163 art. MVA, 1988 c) But this this deduction deduction is flexib flexible le and merely merely a guideli guideline. ne. d) Thus unit unit method method can be implem implemented ented for deduci deducing ng at contribution. e) Two units units are allotted allotted to to each adult adult and one one unit is is allotted allotted to each minor. f) Income Income is divided divided by by total total no. no. of units and the the quotie quotient nt is multiplied by 2 to arrive at personal living expenses

This is further standardized as :1/3 if no. of dependent members are 2 to 3 1/4 if no. of dependent members are 4 to 6 1/5 if no. of dependent members are greater than 6

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What multiplier should be selected:-

a) Multip Multiplilier er repre represen sents ts the the prop proper er numb number er of  of  b) It is det determ ermine ined d by the age of deceas deceased ed & by the the calculation as to what sum it invented at ROI appropriate to stable economy would yield multiplicated multiplicated by way of annual interest .

Supreme Court Final Verdict(2009) •

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1/5 deducted towards Personal expenses of the deceased Total contribution to family= Rs 57658/- p.a Multiplier =15 Loss of Dependency to the Family-=15*57658=Rs.864870/Family-=15*57658=Rs.864870/Total Compensation = Rs.864870+5000(loss Rs.864870+5000(loss of estate)+ 10000( loss of consortium )+5000(funeral expenses)=Rs.884870/expenses)=Rs.884870/Supreme Court awarded awarded Rs. 165246/165246/- (Rs 719624/719624/- earlier awarded) awarded) with the interest @6 % p.a. This increase in compensation awarded by Supreme court is mainly for widow exclusively. exclusively.