The Supreme Court has held that the impact of an injury on a victim’s earning capacity must be evaluated based on “functional disability” rather than merely the percentage of physical disability.
The bench of Justice Prashant Kumar Mishra and Justice N.V. Anjaria has enhanced the compensation payable to a mason who lost his right leg in a road accident from ₹29.01 lakh to ₹40.29 lakh.
The case arose from a road accident that occurred on April 18, 2017, on the Namakkal–Salem National Highway in Tamil Nadu. The claimant, M. Paramesh, was travelling on a bicycle when a lorry allegedly driven in a rash and negligent manner hit him from behind.
The accident caused multiple grievous injuries, including severe injuries to his head, jaw, eye, and right leg. Due to the seriousness of the injuries, his right leg had to be amputated above the knee.
An FIR was registered against the lorry driver, and the Motor Accident Claims Tribunal (MACT) subsequently held the driver negligent and fastened liability on the vehicle owner and insurer.
The claimant approached the MACT seeking compensation of ₹25 lakh, contending that he was around 30 years old and worked as a mason earning approximately ₹20,000 per month.
However, the Tribunal assessed his monthly income at ₹6,000 and awarded compensation of ₹10.84 lakh along with interest at 7.5% per annum.
On appeal, the Madras High Court enhanced the monthly income to ₹12,000 and granted 40% future prospects. It also awarded amounts under additional heads such as attendant charges, loss of amenities, and future medical expenses. Consequently, the compensation was increased to ₹23.86 lakh.
The claimant nevertheless approached the Supreme Court seeking further enhancement.
At the outset, the Supreme Court identified significant computational errors in the High Court’s assessment.
The Court observed that while the High Court had increased the claimant’s monthly income to ₹12,000, it incorrectly calculated future prospects by applying 40% to the Tribunal’s original loss-of-income figure rather than the revised figure determined by the High Court itself.
The Court also noted that amounts awarded under the heads of nutrition, clothing and ornaments, and medical expenses were inadvertently omitted from the High Court’s final computation despite not being disturbed.
The central issue before the Supreme Court concerned the distinction between physical disability and functional disability.
The disability certificate assessed the claimant’s permanent physical disability at 70%. Both the Tribunal and the High Court treated this figure as representing a 70% loss of earning capacity.
The Supreme Court disagreed.
Relying extensively on the landmark judgment in Raj Kumar v. Ajay Kumar (2011), the Court reiterated that compensation cannot be determined by mechanically equating physical disability with economic loss. Instead, tribunals must assess how the disability affects the claimant’s ability to pursue his profession and earn a livelihood.
The Court emphasized that the claimant worked as a mason, a profession requiring continuous physical activity, mobility, and support from both legs.
Since the claimant’s right leg had been amputated above the knee, the Court held that he had effectively lost the ability to continue his occupation.
The Bench observed that there was no evidence suggesting that he could continue working as a mason or that he had any alternative sedentary occupation.
Accordingly, the Court held that while the medical disability was assessed at 70%, the claimant’s functional disabilityfor the purpose of earning capacity had to be treated as 100%.
The judgment underscores that where an injury completely destroys a person’s ability to continue in his chosen profession, the resulting loss of earning capacity may be assessed at 100% even if the physical disability percentage is lower.
The Court further enhanced compensation under the head of future medical expenses.
Recognizing that the claimant would require lifelong maintenance, rehabilitation, and periodic replacement of artificial limbs, the Bench increased compensation for future medical expenses and prosthetic requirements from ₹1 lakh to ₹2 lakh.
After recalculating the loss of earning capacity by treating the functional disability as 100% and correcting the errors in computation, the Supreme Court revised the compensation payable to the claimant to ₹40,29,730.
The Court directed the insurance company to deposit the enhanced amount before the Tribunal within six weeks. The enhanced compensation will carry interest at the same rate of 7.5% per annum as awarded by the High Court.
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