The Supreme Court has held that functional disability for compensation purposes must reflect the real impact of injuries on a victim’s earning capacity and cannot be mechanically equated with the percentage of physical disability recorded by medical authorities. 

The bench of Justice Prashant Kumar Mishra and Justice Sandeep Mehta has enhanced the compensation payable to an accident victim to ₹97.73 lakh, setting aside the reduction ordered by the Madras High Court.

The Bench found that the High Court had reduced the disability assessment without adequately evaluating the medical evidence on record.

The case arose from a road accident that occurred on May 5, 2016, when the claimant was travelling on his motorcycle along Mettupalayam Road near Periyanaickenpalayam in Coimbatore district. Another motorcycle coming from the opposite direction allegedly driven in a rash and negligent manner collided head-on with the claimant’s vehicle.

The impact caused serious injuries including a head injury, facial injuries and a fracture of the left femur. The victim was admitted to a hospital in Coimbatore and underwent treatment for nearly a month.

Following the incident, a criminal case was registered under Sections 279 and 338 of the Indian Penal Code against the driver of the offending vehicle.

The claimant later approached the Motor Accidents Claims Tribunal (MACT), stating that he was 30 years old and working as a Manager in a private logistics company, earning about ₹25,000 per month. He argued that the accident left him with severe permanent disability affecting his ability to work.

After evaluating medical evidence and testimony, the MACT concluded that the accident occurred due to the rash and negligent driving of the other motorcyclist.

Accepting the Medical Board’s assessment of 63% permanent disability, the tribunal applied the multiplier method and awarded ₹65.53 lakh as compensation along with 7.5% annual interest, directing the insurer to satisfy the award with liberty to recover the amount from the vehicle’s driver-owner. 

Both the claimant and the insurer challenged the MACT’s order before the Madras High Court. While the claimant sought enhancement, the insurer contended that the compensation was excessive.

The High Court partly allowed the insurer’s appeal and reduced the functional disability from 63% to 30%, reasoning that physical disability cannot automatically be treated as loss of earning capacity. Consequently, it reduced the total compensation to ₹35.61 lakh.

The Supreme Court observed that the High Court had reduced the disability assessment without properly examining the medical records, including the findings of the Medical Board and a neuropsychological report.

The medical evidence showed that the claimant had suffered cognitive impairment, partial blindness, severe memory impairment and reduced mobility, along with an IQ score of 65 indicating mild intellectual disability. 

The Court noted that these neurological impairments had a profound impact on the claimant’s functional abilities.

Relying on principles laid down in Raj Kumar v. Ajay Kumar, the Court reiterated that functional disability must be assessed by examining the impact of injuries on the victim’s profession and capacity to earn.

Since the claimant worked as a Manager in a private company, a role requiring cognitive ability, decision-making and memory, the Court held that the neurological damage caused by the accident effectively destroyed his ability to perform managerial functions.

Accordingly, the Bench concluded that for the purpose of compensation the claimant’s functional disability must be treated as 100%, even though the Medical Board assessed physical disability at 63%.

Based on the revised disability assessment, the Court recalculated the compensation and fixed it at ₹97,73,011. The insurer was directed to deposit the balance amount with interest at 7.5% per annum within six weeks before the MACT in Coimbatore.

The Court also emphasised that when appellate courts interfere with findings of the MACT—particularly on issues like disability and earning capacity—they must carefully re-evaluate the evidence and provide clear reasons for departing from the tribunal’s conclusions.

Noting that the Motor Vehicles Act, 1988 is a welfare legislation meant to ensure just compensation to accident victims, the Court allowed the appeal and enhanced the award accordingly.

Case Details

Case Title: R. Halle Versus Reliance General Insurance Company Limited

Citation: JURISHOUR-443-SC-2026 

Case No.: 37186 of 2023

Date: 18/03/2026

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