Calculation of functional disability depends on victim’s earning capacity in open market – SC

Calculation of functional disability depends on assessing the victim’s earning capacity in the open, competitive market – Supreme Court

In a recent judgment, Hon’ble Supreme Court while increasing the compensation under MC Act 1988 held that the calculation of functional disability depends on assessing the victim’s earning capacity in the open, competitive market, rather than on retention in a specific, highly accommodated role.

ABCAUS Case Law Citation:
5225 (2026) (09) abacus.in SC

Important Case Laws relied upon by Parties:
Sube Singh v. Shyam Singh
Munna Lal Jain v. Vipin Kumar Sharma
Sarla Verma v. Delhi Transport Corporation

In the instant case, the Insurance company (the appellant) had challenged the award of compensation by Motor Accident Claims Tribunal (MACT).

the victim/claimant was a pillion rider of a motorcycle which was hit by a truck running over the driver of the motorcycle and seriously injuring pillion rider (hereinafter the “victim”).

The MACT rejected the victim’s status as a legally wedded wife of the deceased but only a fiancé and also held that the victim had independent standing and was not financially dependent on the deceased. In view of the above, against the claim of Rs. 5 cr, the Tribunal, calculated the loss of future prospects and loss of dependency total Rs. 1 cr.

The award granted by the MCAT was challenged by the Insurance Company before the Hon’ble High Court which was dismissed by the impugned order. However, the Hon’ble High Court High Court increased functional disability from 60 per cent to 80 per cent, and the award of a 50 per cent increase towards future prospects on the proved salary of the Claimant.

The matter was heard by a Division Bench of the Hon’ble Supreme Court. Hon’ble One judge dismissed the appeal holding that in such matters as the present, mathematical precision is not always sought or applied by the Courts and the Tribunals, but the claimants are awarded just and fair compensation and in the process,what is due is not denied.  The other Hon’ble Judge of the Bench noted that the victim had sustained 100% permanent physical disability due to “traumatic bilateral occipital gliosis,” resulting in total, incurable loss of vision. However, notwithstanding the above extent of injuries, in deciding the Claimant’s entitlement to compensation, the MCAT examined the functional and physical disability the Claimant had suffered.

The Hon’ble Supreme Court noted that while the Medical Certificate proved a 100% physical disability, the Insurer brought out during cross-examination that the Claimant was still employed as a Deputy Group Manager and earning a salary.

The Hon’ble Supreme Court directed the Claimant to appear before the multi-disciplinary Medical Board and the report concluded that the Claimant suffered a total permanent physical impairment of 100 per cent of the whole body due to the said incident.

The Insurer contended that the compensation awarded to the Claimant, even assuming, without admitting, that the Claimant suffered 100 per cent permanent physical impairment, was excessive. It was argued that the claimant had neither lost employment opportunities nor earning capacity. Therefore, the functional disability should be the yardstick for determining compensation under the permissible heads.

The Hon’ble Supreme Court observed that as confirmed by the employer, the victim was able to perform her current duties only through specially created software, flexible working hours, and extreme accommodations provided by her employer as an act of corporate compassion.

The Hon’ble Supreme Court opined that the calculation of functional disability depends on assessing the victim’s earning capacity in the open, competitive market, rather than on retention in a specific, highly accommodated role.

The Hon’ble Supreme Court in view of the Medical Board report opined that the compensation calculation would shift from the High Court’s 80% assessment to a 100% functional disability because the Claimant’s capacity to independently secure, sustain, or advance employment in the open labour market has been entirely extinguished.

Accordingly, the appeals were disposed off by increasing the total compensation from Rs. 2.94 cr to 3.78 cr.

Download Full Judgment Click Here >>

• ITAT held 2000 gram jewellery reasonable in view of customary practices & CBDT Instruction
• Documents obtained post search & information obtained from public domain not incriminating material
• No second reopening for unexplained credits in bank due to bank’s name change
• FDCM invites application for empanelment of practising CAs/ Chartered Accountant Firms
• PGRI invites application for CAs for empanelment for Circulation Verification work