Holding

Compensation under s.166 must be assessed on the basis of the extent of incapacity affecting earning capacity, not merely the percentage of disability, and the Tribunal’s award was unreasonably low, warranting enhancement.

Issues considered

Whether compensation under s.166 of the Motor Vehicles Act should be based on the percentage of permanent disability or on the actual loss of earning capacity.
Whether the Tribunal was justified in reducing the claimant’s declared monthly earnings from Rs 4,500 to Rs 3,000.
Whether an additional amount of Rs 2,00,000 is warranted to cover future economic loss, medical expenses, pain and suffering, and loss of amenities.

Legislation cited

Motor Vehicles Act, 1988s. 166

Subjects

motor accidentpermanent disabilitycompensationloss of earning capacityMotor Vehicles ActSection 166insurance claimassessment of disabilityfuture economic loss

Judgment

[2011] 9 S.C.R. 922

A RAMACHANDRAPPA ••
v.
THE MANAGER, ROYAL SUNDARAM ALLIANCE
INSURANCE COMPANY LIMITED
(Civil Appeal No 6481 of 2011)
B AUGUST 9, 2011
~ ~

[G. S. SINGHVI AND H.L. DATIU, JJ.]

MOTOR VEHICLES ACT, 1988:
c
s. 166 - Motor accident - Permanent disability- Suitable
compensation - Expression 'disability' - Connotation of -
Claimant, a coolie, aged about 35 years, suffered grievous
injuries - Permanent physical disability of right upper limb -
D Tribunal awarded total compensation of Rs. 1, 13,9001- - High
Court enhanced the compensation to Rs. 1,33,9001- - Held:
Compensation to be awarded is not measured by the nature,
location' or degree of the injury, but rather by the extent or
degree of the incapacity resulting from the injury - Tribunals
are expected to make an award determining the amount of
E
compensation which should appear to be just, fair and proper
- In the instant case, the claim of claimant that his annual
income was Rs.45001- is honest and bona fide - The doctor
assessed permanent physical disability at 41% and stated that
~ .
the claimant cannot do any manual work as a coolie - Taking
F into consideration the future economic loss, the claimant
would suffer because of permanent partial disability, the
medical expenses incurred, pain and sufferings, loss of
income during treatment, period of loss of future amenities
and discomfort, interest ofjustice will be served if an additional
G amount of Rs.2,00,0001- is granted to the appellant by way of
compensation -Insurance company directed to deposit before .
the Tribunal the enhanced compensation amount together
with interest from the date of petition till the date of deposit.

H 922
RAMACHANDRAPPA~MANAGER,ROYALSUNDARAM 923
ALLIANCE INSURANCE CO. LTD .
• .J
The appellant, who was aged about 35 years and A
was working as a coolie, met with a motor accident and
was grievously injured. He filed a petition stating that his
right hand was completely disabled and he was unable

- .. to do the work of coolie; and claimed a compensation of
Rs. 5,50,000/-. In support of his claim, he examined the B
doctor (PW 2), who deposed that the appellant could not
work as a coolie by using his right hand and could not
do any other manual work. The Tribunal awarded a total
compensation of Rs. 1, 13,900/·. On appeal, the High
Court enhanced the compensation to Rs. 1,33,900/·. c
Partly allowing the appeal filed by the claimant, the
Court
.,
HELD: 1.1 The compensation is usually based upon
the loss of the claimant's earnings or earning capacity, D
or upon the loss of particular faculties or members or use
of such members, ordinarily in accordance with a definite
schedule. The courts have time and again observed that
the compensation to be awarded is not measured by the
nature, location or degree of the injury, but rather by the E
extent or degree of the incapacity resulting from the
injury. The Tribunals are expected to make an award
.. "' determining the amount of compensation which should
appear to be just, fair and proper. [para 8) [928-E-F]
1.2 The term "disability", as so used, ordinarily F
means loss or impairment of earning power and has been
held not to mean loss of a member of the body. ·1f the
physical efficiency because of the injury has substantially
impaired or if the claimant is unable to perform the same
work with the same ease as before he was injured or is G
unable to do heavy work which he was able to do
previous to his injury, he will be entitled to suitable
compensation. Disability benefits are ordinarily graded on
the basis of the character of the disability as partial or
total, and as temporary or permanent. No definite rule can H
924 SUPREME COURT REPORTS [2011] 9 S.C.R.

A be established as to what constitutes partial incapacity ••
in cases not covered by a schedule or fixed liabilities,
since facts will differ in practically every case. [para 9]
[928-G-H; 929-A-B]

B
Ramesh Chandra Vs. Randhir Singh 1990 (3) SCR 1 = ,.
(1990) 3 SCC 723; KG. Poovaiah (Or) v. G.M./Managing '-
Director, Kamataka KSRTC, (2001) 9 SCC 167; Kapi/ Kumar
v. Kudrat Ali, (2002) 4 SCC 337, Raj Kumar v. Ajay Kumar,
=
2010 (13) SCR 179 (2011) 1 sec 343 - relied on.

c 1.3 In the instant case, it is not in dispute that the
appellant was aged about 35 years and was working as
·a coolie and was earning Rs.4500/- per month at the time
of accident. This claim is reduced by the Tribunal to a
sum of Rs.3000/- only on the assumption that wages of
D the labourer during the relevant period viz. in the year
2004, were Rs.100/- per day. This assumption has no
basis. Before the Tribunal, though Insurance Company
was served, it did not choose to appear nor did it
repudiate the claim. Therefore, there was no reason for
E the Tribunal to have reduced and determined the monthly
earning a sum of Rs.3000/- per month. Further, the
appellant was working as a coolie and, therefore, the court
cannot expect him to produce any documentary evidence
to substantiate his claim. In the absence of any other .. ...
evidence contrary to the claim made by the claimant, in
F
the facts of the case, the Tribunal should have accepted
the same. However, in all cases and in all circumstances,
the Tribunal need not accept the claim of the claimant in
the absence of supporting material. It depends on the
facts of each case. In the instant case, the claim was
G honest and bonafide and, therefore, there was no reason
for the Tribunal to have reduced the monthly earning of
the appellant from Rs.4500/- to Rs.3000/- per month. This '*
Court therefore, accepts his statement that his monthly
earning was Rs.4500/-. [para 14] [933-A-G]
H
RAMACHANDRAPPA~MANAGER,ROYALSUNDARAM 925
ALLIANCE INSURANCE CO. LTD.
1.4 The appellant, in so far as disability caused due A
to accident is concerned, has stated in his evidence that
he sustained severe bodily injuries which has resulted in
permanent partial disability, which would affect his future
earning capacity as a coolie. The Doctor (PW-2) has
stated that the appellant has suffered permanent physical B
disability of 41% to right upper limb and in view of the
disability, the claimant cannot work as a coolie and
cannot do any other manual work as a coolie. This part
of the evidence is not controverted by the insurance
company by subjecting the claimant to cross- c
examination. Therefore, it can safely be concluded that
the claimant has become permanently disabled and,
therefore, has lost the future earning capacity
permanently. The Tribunal, while assessing the loss of
income has taken the disability to the whole body as 1/
0
3rd of particular limb and has assessed the loss of
income, at 1/3rd of 41% which comes to about 13.5% (so
the loss of income taken at 13.5% of Rs.3000/-) and has
quantified the loss of future income at Rs.72,900/-. This
quantification arrived at by the Tribunal cannot be E
accepted since the assessment of compensation under
the head of loss of earning capacity is calculated
abysmally on the lower side. Besides, the claimant has
also suffered prolonged medical treatment and
hospitalization. [para 15] [933-H; 934-A-F]
F
1.5 Looking to the amount awarded by the Tribunal,
this Court is of the view that the compensation awarded
is too less. Taking into consideration the future economic
loss, the claimant would suffer because of permanent
partial.disability, which would not permit him to work as G
a coolie or any other job, the medical expenses incurred,
pain and sufferings, loss of income during treatment,
period of loss of future amenities and discomfort, interest
of justice will be served if an additional amount of
Rs.2,00,000/- is granted to the appellant by way of H
926 SUPREME COURT REPORTS [2011] 9 S.C.R.

A compensation. The respondent-Insurance company is ••
directed to deposit before the Tribunal the enhanced
compensation amount together with interest from the
date of petition till the date of deposit. [para 15-16) [934-
F-H; 935-A-B]
B Case Law Reference·:
).

1990 (3) SCR 1 relied on para 10

(2001) 9 sec 167 relied on para 11

c (2002) 4 sec 337 relied on para 12

2010 (13) SCR 179 relied on para 13

CIVIL APPELLATE JURISDICTION : Civil Appeal No.
6481 of 2011.
D
From the Judgment and Order dated 09.12.2009 of the
High Court of Karnataka at Bangalore in MFA No. 10869 of
2006.

V.N. Raghupathy for the Appellant.
E
G. Balaji and Mahalakshmi Pavani (for Mahalakshmi
Balaji & Co.) for the Respondent.
~ ..
The Judgment of the Court was delivered by
F H.L. DATTU, J. 1. Leave granted.
2. This appeal is directed against the Judgment and
Decree passed by the High Court of Karnataka in MFA No.
10869 of 2006 dated 9th day of December, 2009, whereby the
G High Court has partly allowed the appeal and enhanced the
compensation awarded by the Court of Small Causes,
Bangalore ('Tribunal' for short) in MVC Case No. 5124 of 2004
dated 25.03.2006. The Tribunal has awarded a sum of
Rs.1, 13,900/- with interest at 6% p.a. from the date of the claim
H petition till the date of deposit as against the claim of the
RAMACHANDRAPPAv.MANAGER,ROYALSUNDARAM 927
ALLIANCE INSURANCE CO. LTD. [H.L. DATTU, J.J
.. ~
appellant for Rs.5,50,000/-. The High Court, by its impugned A
Judgment and order, has marginally increased the
compensation awarded by the Tribunal. The appellant, being
~
aggrieved by the compensation awarded by the Tribunal and
, the High Court, has filed this appeal.
~
B
3. The facts of the present case are as follows :-

The appellant was working as a Coolie and earning Rs.
4500/- per month. He was riding as pillion on a motorcycle with
one Hanumanthappa, when they met with an accident. Appellant
sustained grievous injuries. He was treated in a private nursing c
home and his treatment continued for a long time. In the claim
petition, it was his case and claim that even after treatment,
his right hand is completely disabled and due to which, his work
' and livelihood completely suffered. Appellant filed an
application under Section 166 of Motor Vehicles Act, 1988 for D
compensation of Rs.5,50,000/- by way of special and general
damages on account of injuries, pain, mental agony, loss of
earning, physical disabilities, shortening of expectation of life
due to injuries sustained in the accident and medical expenses
incurred thereon. Hanumanthappa, who was Respondent No. E
1 in the Claim Petition, though served with the notice of petition,
did not appear before the Court to oppose the relief sought in
~ .. the claim petition. The Tribunal, after considering the evidence
on record, has awarded a compensation of Rs.1, 13,900/- with
interest at 6% per annum from the date of petition till the date F
of deposit as against the claim of the appellant for Rs.5,50,000/
-
4. Aggrieved by the inadequate compensation awarded,
the appellant preferred an appeal before the High Court of
Karnataka. The court, by its order dated 9th of December, G
... 2009, has awarded the compensation of Rs.1.~3,900/-, as
against Rs.1, 13,900/- awarded by the Tribunal, with interest at
6% per annum on the enhanced compensation from the date
of the petition till the date of realization. The appellant, being
dissatisfied with the compensation awarded, is before us in this H
928 SUPREME COURT REPORTS [2011] 9 S.C.R.
••
A appeal.
5. We have heard the learned counsel for the parties to
the lis and perused the records.

6. Before the Tribunal, the appellant had examined himself >
B (PW-1) and one Dr. P.K.Raju, Asst. Professor in Orthopaedics
(PW-2) in support of his claim petition. The Doctor, in his
evidence, has stated that the appellant cannot work as a coolie
by using his right hand and cannot do any other manual work.
Though, he was cross-examined, nothing adverse to the claim
c of the appellant is elicited.
7. The learned counsel for the appellant submits that due
to the injuries sustained by the appellant in the accident, the
appellant is permanently disabled, which would affect his future
D earning capacity as a Coolie. Per contra, learned counsel for
the Insurance Company submits that since the appellant has
suffered only 41% of disability, the High Court was justified in
restricting the claim against the claim made by the appellant.
8. The compensation is usually based upon the loss of the
E claimanfs earnings or earning capacity, or upon the loss of
particular faculties or members or use of such members,
ordinarily in accordance with a definite schedule. The Courts l. ~

have time and again observed that the compensation to be
awarded is not measured by the nature, location or degree of
F the injury, but rather by the extent or degree of the incapacity
resulting from the injury. The Tribunals are expected to make
an award determining the amount of compensation which
should appear to be just, fair and proper.

G 9. The term "disability", as so used, ordinarily means loss
or impairment of earning power and has been held not to mean ~

loss of a member of the body. If the physical efficiency because
of the injury has substantially impaired or if he is unable to
perform the same work with the same ease as before he was
injured or is unable to do heavy work which he was able to do
H
RAMACHANDRAPPAv.MANAGER,ROYALSUNDARAM 929
J. •
ALLIANCE INSURANCE CO. LTD. [H.L. DATIU, J.]

previous to his injury, he will be entitled to suitable A
compensation. Disability benefits are ordinarily graded on the
basis of the character of the disability as partial or total, and
as temporary or permanent. No definite rule can be established
~ as to what constitutes partial incapacity in cases not covered
by a schedule or fixed liabilities, since facts will differ in B
practically every case.
10. In Ramesh Chandra Vs. Randhir Singh (1990) 3 SCC
723, this Court drawing distinction between the compensation
for future loss and pain and enjoyment of life, has observed as
under:
c
•... The incapacity or disability to earn a livelihood would
)
have to be viewed not only in presenti but in futuro on
reasonable expectancies and taking into account deprival
of earnings of a conceivable period. This head being totally D
different cannot in our view overlap the grant of
compensation under the head of pain, suffering and l~ss
of enjoyment of life. One head relates to the impairment
of person's capacity to earn, the other relates to the pain
and suffering and loss of enjoyment of life by the person E
himself."
~
• 11. In K.G. Poovaiah (Dr) v. G.M.!Managing Director,
Kamataka KSRTC, (2001) 9 SCC 167, the appellant was a
Medical Practitioner and was aged about 36 years and had met
with an accident in which his hand was crushed. This Court, F
while considering the nature of his profession and income, has
enhanced the amount of compensation for loss of future
earnings. This Court observed :

.. "There is no reason to doubt the testimony of the
appellant so far as his monthly income is concerned.
G

Being a medical man aged about 36 years on the date
of the accident, the monthly salary received by him
cannot be said to be exaggerated. He has candidly
admitted that he was not assessed to tax. A salary of Rs H
930 SUPREME COURT REPORTS [2011] 9 S.C.R.

3000 per month to a medical practitioner cannot be said
••
to be on the higher side. We, therefore, accept his
statement in this behalf. We also accept the assessment
at Rs 40, 000 for pain and suffering. However, the
assessment of compensation under the head of loss of
earning capacity is very much on the lower side. The >
B
injury to the right hand, which has left a permanent
disability and which has affected the functioning of the
limb and in particular the fingers, is a serious handicap
to a medical practitioner. Patients would be reluctant to
c go to him for treatment and, therefore, the loss of earning
capacity would be substantial. Even if we were to assume
that it would reduce his earning capacity by 50% and
even if we go by his earnings at thf' date of the accident,
the monthly loss would come to Rs 1500 i.e. Rs 18,000
D
per annum. If this monthly loss of earning is multiplied
by 10 years purchase factor the compensation would
work out to Rs 1,80,000. To that must be added the
compensation allowed under certain other heads,
namely, pain and suffering, loss of amenities, medical
expenses, etc. The total amount comes to Rs 2, 38, 000."
E
12. In Kapil Kumar v. Kudrat Ali, (2002) 4 SCC 337, a
student suffered injuries on his hand and the disability of 20%
was assessed by the Doctors. This Court, while upholding the
High Court's observation in relation to compensation for loss
F of future earnings, has held:
"However, the disability sustained was assessed at 20 per
cent. As rightly observed by the High Court, the loss of
earning capacity on account of permanent partial disability
suffered by the appellant cannot be calculated in terms of
G
percentage only. It will have serious repercussions on his
studies and prospects of earning. He will have to face other
handicaps in life. Though the High Court did realise the
need to enhance the compensation, we feel that the extent
of enhancement is still inadequate. The increase of Rs
H
RAMACHANDRAPPAv.MANAGER,ROYALSUNDARAM 931
ALLIANCE INSURANCE CO. LTD. [H.L. DATTU, J.]
), 1
5000 is only marginal. Taking inter alia the table in the A
Second Schedule as the guiding factor; we are of the view
that the compensation on account of disability incurred by
the appellant should be enhanced by Rs 20,000 more; that
means, he will get Rs 40,000 instead of Rs 20,000
-I awarded by the High Court under the first head." B
13. In Raj Kumar v. Ajay Kumar, (2011) 1 SCC 343, this
Court, while considering the award of compensation to the
victim of motor accident for loss of future earning due to some
permanent physical disability, has observed :
c
"Where the claimant suffers a permanent disability as a
result of injuries, the assessment of compensation under
the head of loss of future earnings would depend upon the
effect and impact of such permanent disability on his
earning capacity. The Tribunal should not mechanically D
apply the percentage of permanent disability as the
percentage of economic loss or loss of earning capacity.
In most of the cases, the percentage of economic loss, that
is, the percentage of loss of earning capacity, arising from
a permanent disability will be different from the percentage E
of permanent disability. Some Tribunals wrongly assume
that in all cases, a particular extent (percentage} of
~ ... permanent disability would result in a corresponding loss
of earning capacity, and consequently, if the evidence
produced show 45% as the permanent disability, will hold F
that there is 45% loss of future earning capacity; In most
of the cases, equating the extent (percentage} of loss of
earning capacity to the extent (percentage) of permanent
disability will result in award of either too low or too high a
compensation.
G
What requires to be assessed by the Tribunal is the effect
of the permanent disability on the earning capacity of the
injured; and after assessing the loss of earning capacity
in terms of a percentage of the income, it has to be
quantified in terms of money, to arrive at the future loss of H
932 SUPREME COURT REPORTS [2011] 9 S.C.R.

earnings (by applying the standard multiplier method used
~ .
A
to determine loss of dependency). We may however note
that in some cases, on appreciation of evidence and
assessment, the Tribunal rnay find that the percentage of
loss of earning capacity as a result of the permanent
disability, is approximately the same as the percentage of
,.
B
permanent disability in which case, of course, the Tribunal
will adopt the said percentage for determination of
compensation. (See for example, the decisions of this
Court in Arvind Kumar Mishra v. New India Assurance
c Co. Ltd.4 and Yadava Kumar v. National Insurance Co.
Ltd.5)
Therefore, the Tribunal has to first decide whether there is
any permanent disability and, if so, the extent of such
permanent disability. This means that the Tribunal should
D consider and decide with reference to the evidence:
(i) whether the disablement is permanent or temporary;
(ii) if the disablement is permanent, whether it is permanent
total disablement or permanent partial disablement;
E
(iii) if the disablement percentage is expressed with
reference to any specific limb, then the effect of such
disablement of the limb on the functioning of the entire
body, that is, the permanent disability suffered by the
/.
."
person.
F
If the Tribunal concludes that there is no permanent
disability then there is no question of proceeding further
and determining the loss of future earning capacity. But if
.the Tribunal concludes that there is permanent disability
G then it will proceed to ascertain its extent. After the Tribunal
ascertains the actual extent of permanent disability of the
claimant based on the medical evidence, it has to
determine whether such permanent disability has affected
or will affect his earning capacity."
H
RAMACHANDRAPPA~MANAGER,ROYALSUNDARAM 933
~ i
ALLIANCE INSURANCE CO. LTD. [H.L. oAnu, J.]

14. In the instant case, it is not in dispute that the appellant A
was aged about 35 years and was working as a Coolie and
was earning Rs.4500/- per month at the time of accident. This
claim is reduced by the Tribunal to a sum of Rs. 3000/- only on
the assumption that wages of the labourer during the relevant
"" period viz. in the year 2004, was Rs. 100/- per day. This B
assumption in our view has no basis. Before the Tribunal,
though Insurance Company was served, it did not choose to
appear before the Court nor did it repudiated the claim of the
claimant. Therefore, there was no reason for the Tribunal to have
reduced the claim of the claimant and determined the monthly c
earning a sum of Rs.3000/- per month. Secondly, the appellant
was working as a Coolie and therefore, we cannot expect him
'i to produce any documentary evidence to substantiate his claim.
_ In the absence of any other evidence contrary to the claim made
by the claimant, in our view, in the facts of the present case, D
the Tribunal should have accepted the claim of the claimant. We
hasten to add that in all cases and in all circumstances, the
Tribunal need not~accept the claim of the claimant in the
absence of supporting material. It depends on the facts of each
case. In a given case, if the claim made is so exorbitant or if
E
the.claim made is contrary to ground realities, the Tribunal may
not accept the claim and may proceed to determine the possible
_.. .. income by resorting to some guess work, which may include
the ground realities prevailing at the relevant point of time. In
the present case, appellant was working as a Coolie and in and
around the date of the accident, the wage of the labourer was F
between Rs.100/- to 150/- per day or Rs.4500/- per month. In
our view, the claim was honest and bonafide and, therefore,
there was no reason for the Tribunal to have reduced the
monthly earning of the appellant from Rs.4500/- to Rs.3000/-
. per month. We, therefore, accept his statement that his monthly G
earning was Rs.4500/-.
15. The appellant, in so far as disability caused due to
accident is concerned, had stated in his evidence that he had
H
934 SUPREME COURT REPORTS [2011] 9 S.C.R.

A sustained severe bodily injuries which has resulted in
••
permanent partial disability, which would affect his future
earning capacity as a Coolie. The Doctor, who was examined
as claimant's witness, has stated that the appellant has
sustained malunited fracture 2nd, 3rd, 4th, 5th MCB right and
B malunited fracture scapula right and in his opinion, the appellant
has suffered permanent physical disability of 41 % to right upper
limb and in view of the disability, the claimant cannot work as
a Coolie and cannot do any other manual work as a Coolie.
The Tribunal, while assessing the loss of income has taken the
c disability to the whole body as 1/3rd of particular limb and has
assessed the loss of income, at 1/3rd of 41% which comes to
about 13.5%. So the loss of income taken at 13.5% of
Rs.3000/- and has quantified the loss of future income at
Rs.72,900/-. We cannot accept this quantification arrived at by
D the Tribunal, since the assessment of compensation under the
head of loss of earning capacity is calculated abysmally on the
lower side. On the question of disability caused due to the
accident, the Doctor, who has been examined as claimant's
witness, says that because of the injury sustained by the
claimant, he cannot work as a Coolie and cannot do any other
E manual work. This part of the evidence is not controverted by
the insurance company by subjecting the claimant to cross-
examination. Therefore, we can safely conclude that claimant
has become permanently disabled and, therefore, has lost the
future earning capacity permanently. The claimant has also
F suffered prolonged medical treatment and hospitalization.
Looking to the amount awarded by the Tribunal, we are of the
view that the same is too less and, therefore, we are inclined
to enhance the same. Taking into consideratioo. the future
economic loss, he would suffer because of permanent partial
G disability, which would not permit him to work as a Coolie or
any other job, the medical expenses incurred, pain and
sufferings, loss of income during treatment, period of loss of
future amenities and discomfort, in our view, interest of justice
will b~ served if an additional amount of Rs.2,00,000/- (Rupees
H
RAMACHANDRAPPA v. MANAGER, ROYAL SUNDARAM 935
ALLIANCE INSURANCE CO. LTD. [H.L. DATTU, J.]

Two Lakhs) is granted to the appellant by way of compensation. A

16. The respondent-Insurance company is directed to
deposit the enhanced compensation amount together with
interest from the date of petition till the date of deposit before
the Tribunal within a period of eight weeks from today. The
8
enhanced compensation amount with interest shall be paid to
the claimant on such deposit.

17. The appeal is allowed to the extent indicated above.
Costs are made easy.
c
R.P. Appeal partly allowed.