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- 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 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 & ½ 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.