MACT Compensation Study

Case :- Sarla Verma & Ors Vs DTC

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 on 06-08-1993 of worth Rs 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 (Rs 27000*22) = Rs 5,94,000 /-

Further Proceedings
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 reduced in lieu of larger family

Calculations: -

6006- *(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 of future increment aspects of salary.

II.One eighth to be deducted towards personal and living expenses

III. Number of multiplier.

Questions Raised.
a) What should be addition to income for future prospects ? b) What should be deduction for personal and living expenses ? c) What should be criteria for selecting Multiplier ? d) How final compensation will be computed ?

 Calculation of income viewing future prospects. a) (Actual income Income tax) as starting point for calculating compensation. b) But it led to discrepancy in income calculation in various cases. c) Thus a rule of thumb has been formulated:-

Thumb rule:-

I. If age below 40 yrs. & permanent Job addition of 50% II. If age b/w 40-50 yrs. - Addition of 30% III. If above 50 yrs. - No addition IV. If self employed or on fixed salary then only actual income at the time of death

 Deductions of personal & living expenses:a) Any evidence in this behalf will be wholly unverifiable and likely to be unreliable b) This led to deduction of 1/3 if deceased was married & if the deceased was a bachelor & is a statute under 163 art. MVA, 1988 c) But this deduction is flexible and merely a guideline. d) Thus unit method can be implemented for deducing at contribution. e) Two units are allotted to each adult and one unit is allotted to each minor. f) Income is divided by total no. of units and the quotient 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

 What multiplier should be selected:a) Multiplier represents the proper number of

b) It is determined by the age of deceased & by the calculation as to what sum it invented at ROI appropriate to stable economy would yield multiplicated by way of annual interest .

Supreme Court Final Verdict(2009)

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/Total Compensation = Rs.864870+5000(loss of estate)+ 10000( loss of consortium )+5000(funeral expenses)=Rs.884870/Supreme Court awarded Rs. 165246/- (Rs 719624/- earlier awarded) with the interest @6 % p.a. This increase in compensation awarded by Supreme court is mainly for widow exclusively.