Permanent disability is not the same as loss of earning capacity, Supreme Court reiterates in compensation case

The Supreme Court has enhanced motor accident compensation awarded to two claimants with high degrees of permanent disability, reiterating that 'permanent disability' and 'functional disability' are distinct concepts under the Motor Vehicles Act compensation scheme. Sunil Kumar, who is totally disabled and was represented through his wife, had been awarded compensation by the tribunal and High Court that the Supreme Court found inadequate against IFFCO Tokio General Insurance Company Ltd., the insurer.

The Court explained that a medical board's assessment of permanent disability gives only an anatomical percentage loss of function, whereas 'functional disability' measures the actual loss of earning capacity, which depends on the claimant's occupation, skills and the real-world effect of the injury on the ability to work — and can be higher than the medical percentage, particularly for manual or skilled workers whose livelihood depends on the very faculties lost. Applying the multiplier method laid down by the Constitution Bench in National Insurance Co. Ltd. v. Pranay Sethi, the Court enhanced the compensation and added a further 25 to 40 percent to the income figure to account for future prospects of advancement, varying by the claimant's age at the time of the accident, before recalculating the final award.