Very urgent

Primary Legal and Financial Liability for an automobile accident is always with the driver of the vehicle at fault, The vehicle owner can also be held financially liable as they enabled the usage. So in most cases the vehicle owners policy will invoke. This is why many people mistakenly assume that the coverage followed the car.Consult with your Insurance Agent for appropriate coverage

Since the car is the name of your wife, she will be vicariously liable for the compensation to be awarded to the driver.  Since there is no death of third party, this case will come under workmen compensation Act and not Motor vehicles Act.  The Legal heirs of the driver will file a case agianst the owner of the vehicle.  If the owner has the insurance, then the compensatin will be paid by the insurance, if there isno insurance, the owner has to pay the compensation.  

how much compensation sir has to be paid by my wife if they filed case? pls tell me. and what is the time limit to file the case for their family?

Here is a small correction, I thought that who dashed the car to the tree is your driver, but after reading your query, he is your friend, thus the case will not come under workman compensation act, but under civil damages only.  Any way the owner of the car has to pay compensation to the deceased.  It will depend upon the income/salary of the deceased.  To my expectation, it may be between 50,000/- to 1,00,000/-.  The Limitation for filing the case is three years from the date of occurence of death. 

1,. No nothing will happen to your wife in this refard,

2.  No charge can be levelled against your wife since  the car was borrowed by your friend for his personal use,

3.  Just lodge a police complaint before your local police informing the matter since your wife's car was driven by your friend who is now dead due the accident caused by him,

4. Relax.

Well said by ganguly sir.