Principles for Computation of Compensation in Fatal Motor Accidents: A Case review of Sarla

Verma v. DTC, (2009) 6 SCC 121.

I. Facts of the Case:
On 18-04-1998 a man of 38 years old named Rajinder Prasad died in the motor accident. He was a scientist
and was employed at ICMR on a monthly salary of Rs. 3402/- The family members of the deceased filed a
suit for compensation amounting Rs. 16 Lakhs before MACT. On 06-08-1993 the judgement was passed
and only Rs. 5,94,000/- with the interest @ 9% p.a was granted. They were dissatisfied with the
compensation awarded so they challenged the same before the Hon’ble High Court. The High Court passed
an order and awarded Rs. 702624/- as compensation. The petitioners were again dissatisfied from the order
of H.C and went to Supreme Court for enhancement of compensation.
II. Issues raised before the supreme court:
1. What should be the addition to income for future prospects? (2) How the deductions for personal and
living expenses shall be made? (3) What will be the criteria for selecting the multiplier? (4). How the
final compensation shall be calculated?
III. Judgment:
The supreme court held that the term ‘Just compensation’ shall be not just in terms of law, it shall be just
and fair compensation. Since there was a lot of irregularities in computation of compensation the supreme
court made the following guidelines to be followed while computing the compensation.
1. For calculation of income which shall include the future prospects a thumb rule has been
formulated:
(a). If deceased is age below 40 yrs. & permanent Job addition of 50%. (b)If deceased is age b/w 40-50 yrs.
- Addition of 30%. (c) If deceased is above 50 yrs. - No addition. (c) If deceased is self-employed or on
fixed salary, then only actual income at the time of death.
2. For Calculation of deductions in personal and living expenses it was standardized as under:
(a).1/3 of annual income if no. of dependent members is 2 to 3. (b)1/4 of annual income if no. of dependent
members is 4 to 6. (c)1/5 of annual income if no. of dependent members is greater than 6
3. For Selection of Multiplier
The court held that the multiplier should be chosen from the said table with reference to the age of the
deceased. Finally, the multiplier to be used should start with an operative multiplier of 18 (for the age groups
of 15 to 20 and 21 to 25 years), reduced by one unit for every five years, that is M-17 for 26 to 30 years, M-
16 for 31 to 35 years, M-15 for 36 to 40 years, M-14 for 41 to 45 years, and M-13 for 46 to 50 years, then
reduced by two units for every five years, that is, M-11 for 51 to 55 years, M-9 for 56 to 60 years, M-7 for
61 to 65 years and M-5 for 66 to 70 years.
4. Computation of final compensation:
(a). Deduction towards personal expense. (b)Total Contribution to family(c). Multiplier as per age range (c)
Loss of dependency to the family (d). Addition to it Rs. 5,000/- as loss of estate + Rs. 10,000/- as loss of
consortium + 5,000/- as funeral expense.
Therefore, the final formula is: -
Total compensation = Total contribution to family * multiplier + Loss of estate + Loss of Consortium
+ Funeral Expense.
Now applying the formula in the present case
The total compensation = 57658*15+5000+10000+5000 = 884870/-
(Supreme Court awarded Rs. 165246/- (Rs 719624/- earlier awarded) with the interest @6 % p.a.)

The Supreme Court finally settled the law and laid down the principle for the ‘Just Fair and Equitable’
Compensation for fatal motor accidents.