This is a landmark judgment where in Hon’ble Supreme Court has held out the settle principles in dealing with compensation paid in case of accidental deaths.

In Sarla Verma v. D.T.C. (2009) 6 SCC 121, a two-Judge Bench of this Court took cognizance of the lack of uniformity and consistency in awarding compensation to the victims of accidents caused by motor vehicles, referred to the judgments in U.P.S.R.T.C. v. Trilok Chandra (1996) 4 SCC 362, G.M., Kerala SRTC v. Susamma Thomas (1994) 2 SCC 176 and made the following observations:

To have uniformity and consistency, the Tribunals should determine compensation in cases of death, by the following well-settled steps:
Step 1 (Ascertaining the multiplicand)
The income of the deceased per annum should be determined. Out of the said income a deduction should be made in regard to the amount which the deceased would have spent on himself by way of personal and living expenses. The balance, which is considered to be the contribution to the dependant family, constitutes the multiplicand.

Step 2 (Ascertaining the multiplier)
Having regard to the age of the deceased and period of active career, the appropriate multiplier should be selected. This does not mean ascertaining the number of years he would have lived or worked but for the accident. Having regard to several imponderables in life and economic factors, a table of multipliers with reference to the age has been identified by this Court. The multiplier should be chosen from the said table with reference to the age of the deceased

Step 3 (Actual calculation)
The annual contribution to the family (multiplicand) when multiplied by such multiplier gives the “loss of dependency” to the family.

Thereafter, a conventional amount in the range of Rs 5000 to Rs 10,000 may be added as loss of estate. Where the deceased is survived by his widow, another conventional amount in the range of 5000 to 10,000 should be added under the head of loss of consortium. But no amount is to be awarded under the head of pain, suffering or hardship caused to the legal heirs of the deceased.

From Paras 15 and 16,

In the result, the appeal is partly allowed. The impugned judgment is modified and it is declared that the appellants shall be entitled to compensation of Rs.7,00,000 with interest at the rate of 6% per annum on the enhanced amount with effect from the date of filing petition under Section 166 of the Act.

Respondent No.3 is directed to pay the amount of enhanced compensation and interest within a period of three months by getting prepared two demand drafts of equal amount in the names of appellant Nos.1 and 2. It will be open to respondent No.3 to recover from respondent Nos.1 and 2 their respective shares of the compensation.

Here Respondent No.3 is the insurance company. 🙂