Road Accident Compensation of ₹40.29 Lakh

When 70% Disability Means 100% Loss of Earning Capacity

Introduction

Can a person assessed as having 70% permanent physical disability be entitled to compensation calculated on the basis of 100% loss of earning capacity?

The Supreme Court of India has answered this question in the affirmative in an appropriate case, emphasising that physical disability and functional disability are not necessarily the same.

In M. Paramesh v. VRL Logistics Ltd. & Anr., 2026 INSC 655, decided on 23 June 2026, the Supreme Court considered the case of a 30-year-old mason who suffered an above-knee amputation of his right leg following a road accident. Although the medical disability certificate assessed his permanent physical disability at 70%, the Court held that his functional disability for calculating loss of earning capacity had to be assessed at 100%.

1. Background: A Mason Suffers an Above-Knee Amputation

The accident caused serious injuries to his head, jaw, eye and right leg. Owing to the severity of the injuries, his right leg was subsequently amputated above the knee.

At the time of the accident, Paramesh was approximately 30 years old and worked as a mason. He claimed that he earned around ₹20,000 per month and that the amputation had left him unable to continue his occupation.

A competent medical authority assessed his permanent physical disability at 70%.

Paramesh filed a compensation claim seeking ₹25 lakh for his injuries and permanent disability.

The Motor Accident Claims Tribunal found that the accident had occurred because of the lorry driver's rash and negligent driving. It awarded compensation of ₹10,84,330, with interest at 7.5% per annum from the date of filing the claim until realisation.

The Tribunal assessed his monthly income at ₹6,000 and calculated his loss of earning capacity by applying the 70% disability assessment.

2. What Is the Difference Between Physical Disability and Functional Disability?

The central issue in the case was the distinction between physical disability and functional disability.

Physical disability

Physical disability refers to the impairment assessed medically. In Paramesh’s case, the competent authority assessed his permanent physical disability at 70%.

This percentage described the medically assessed disability but did not, by itself, establish the exact percentage of income he would lose.

Functional disability

Functional disability examines how an injury affects a person's ability to perform their occupation and earn a livelihood.

For example, a person who works primarily at a desk may retain the ability to work despite a significant lower-limb impairment. By contrast, a construction worker who must stand for long periods, climb, maintain balance and carry materials may lose the practical ability to continue that occupation following the same injury.

Functional disability is therefore assessed by examining the claimant’s occupation, age, education, abilities and the actual consequences of the injury.

3. Why Did the Supreme Court Assess Functional Disability at 100%?

A. Masonry Requires Significant Physical Mobility

The Supreme Court noted that masonry is essentially a manual and physical occupation requiring the continuous use and support of both legs.

The above-knee amputation had substantially impaired Paramesh’s ability to perform this work. His occupation was not incidental to the compensation calculation; it was central to understanding the economic consequences of the injury.

B. The Claimant’s Actual Earning Capacity Was the Relevant Consideration

The assessment requires courts to examine:

1. What activities the injured person can and cannot perform after the injury.
2. The person's occupation, profession, nature of work and age before the accident.
3. Whether the person can continue the same work, undertake work on a reduced scale, or pursue another occupation that enables them to earn a livelihood.

Applying these principles, the Court concluded that simply limiting Paramesh’s loss of earning capacity to 70% because of his medical disability certificate would not reflect the actual economic impact of his injury.

C. No Alternative Sedentary Occupation Was Established

The Supreme Court also noted that it was not the respondents’ case that Paramesh was employed in an alternative sedentary occupation or that his earning capacity remained unaffected despite the amputation.

The Court considered the nature of his established occupation alongside the extent of his injury and concluded that his functional disability should be assessed at 100% for calculating loss of earning capacity.

4. The Supreme Court Also Corrected Errors in the Compensation Calculation

The Supreme Court found that the High Court’s compensation calculation contained errors in addition to the failure to account adequately for the claimant’s functional disability.

A. Future Prospects Were Calculated on the Wrong Amount

The High Court had increased the claimant’s monthly income to ₹12,000 and recalculated loss of earning capacity at 70% disability.

However, when adding 40% for future prospects, it had used the earlier loss-of-income figure calculated by the Tribunal instead of the revised figure based on the higher monthly income.

B. Previously Awarded Expenses Were Omitted

The Court also found that amounts awarded under nutrition, clothing and ornaments, and medical expenses had inadvertently been left out of the High Court’s final calculation.

Since those amounts had not been set aside, they should have remained part of the final compensation.

5. Final Compensation: ₹40,29,730

The Supreme Court recalculated the claimant’s compensation after treating his functional disability as 100% for the purpose of loss of earning capacity, correcting the future-prospects calculation and restoring the amounts omitted from the earlier computation.

The principal figures were as follows:

6. Why Is This Judgment Important for Motor Accident Claims?

The judgment has several practical implications for injured claimants and those handling motor accident compensation proceedings.

A medical disability certificate is not the end of the inquiry

A disability certificate is important evidence of the physical impairment. However, courts must separately examine how the impairment affects the claimant’s ability to earn.

Occupation can materially change the compensation assessment

The same physical injury may affect people differently depending on their work. A mason, construction labourer, driver, professional musician and office worker may experience very different economic consequences from similar physical impairments.

Lifelong medical needs must be considered

Where injuries require artificial limbs, repeated procedures, rehabilitation or continuing treatment, future medical expenses may form an important component of compensation, subject to the evidence and circumstances.

Accurate calculation matters

The Supreme Court’s correction of the future-prospects calculation and omitted expense amounts shows that a claimant’s compensation can be affected by errors in the calculation itself, even where the relevant heads of compensation have been recognised.

7. What Should an Injured Person Establish in a Permanent Disability Claim?

A claimant seeking compensation for permanent disability should, where relevant, preserve evidence relating to both the physical injury and its economic consequences.

Useful material may include:

1. Medical records and a disability certificate issued by the competent authority.
2. Evidence of the claimant’s occupation and the physical or professional requirements of that work.
3. Salary slips, employment records, income tax returns, business records or other evidence of earnings, where available.
4. Medical bills and documents concerning rehabilitation, prostheses, maintenance and future treatment.
5. Evidence of assistance required for daily activities and any resulting loss of amenities.
6. Evidence explaining why the claimant cannot continue the previous occupation or why the injury has reduced earning capacity.

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Disclaimer: This article is for general informational purposes only and does not constitute legal advice. The assessment of disability, loss of earning capacity and compensation depends on the evidence and circumstances of each case.