Disability Is Medical, But Compensation Must Reflect Functional Loss: Supreme Court Affirms 50% Functional Disability Despite 90% Medical Certificate

In a detailed ruling Supreme Court emphasized that functional disability, not merely the medical percentage, must guide compensation in motor accident cases involving income loss. The appellant, a young graduate who lost a leg in a road accident, produced a 90% disability certificate issued by a Medical Board. However, the Court held that while such medical evidence is credible, the test for compensation lies in how the disability impairs actual earning capacity, not in the medical diagnosis alone.

“We have no doubt that the medical board’s certificate can be accepted,” observed the Court, “but the disability to be assessed for the purpose of awarding compensation is the functional disability, which reduces the earning capacity of the claimant.” In this case, the Court accepted the High Court's assessment of 50% functional disability, finding it “reasonable and within parameters” since the claimant had already resumed business using a prosthetic leg.

“When Income Tax Returns Are Documentary Proof, They Cannot Be Disregarded on Surmise”: Supreme Court Recalculates Compensation Based on Actual Declared Income

Reversing the Tribunal’s finding that the claimant’s income tax returns were a ruse created by his parents to evade tax, the Supreme Court held that documentary evidence such as income tax and sales tax returns filed before the accident cannot be discarded without legal basis. The Bench noted that the appellant’s firm was registered in 2006, and the returns for 2005–06 to 2007–08 had been filed well before the accident.

The Court observed:
“It cannot be said that the claimant apprehended an accident and got registration of a firm and filed his income tax returns two years prior.”
It therefore accepted the net income of ₹1,91,000 for the financial year 2007–08 as the basis for computing loss, applied the multiplier of 18, and recalculated the loss of income at ₹17.19 lakh, based on 50% functional disability.

In Anoop Maheshwari v. Oriental Insurance Co. Ltd., the Supreme Court enhanced compensation for a young entrepreneur who suffered a life-altering hemipelvectomy amputation following a motor vehicle accident in April 2007. The claimant, whose business income was doubted by the Tribunal, was denied appropriate compensation under Section 166 of the Motor Vehicles Act, 1988. The High Court marginally enhanced the award, but refused to recognize future medical expenses and failed to restore all heads of claim initially granted.

The Supreme Court stepped in to correct this, holding that “just compensation must include not only past medical expenditure but also future needs arising from permanent disability.” The Court recalculated compensation to ₹48,44,790, granting additional sums for full medical reimbursement, future prosthetic limb servicing, and restoring amounts wrongly omitted.

The claimant met with a severe accident on 09.04.2007, when his motorbike was hit by a negligently driven truck. He underwent a hemipelvectomy, resulting in permanent disability and the need for a prosthetic limb. A claim was filed under Section 166 of the Motor Vehicles Act seeking compensation.

The Tribunal assessed the disability at 45%, doubting both the disability certificate and the income tax returns filed by the claimant’s firm. The Tribunal awarded ₹13.23 lakh, including only partial medical reimbursement and excluding future medical costs.

In appeal, the High Court marginally increased compensation to ₹23.09 lakh, raising the disability to 50% and monthly income to ₹8,000 but rejected claims for future expenses, and disregarded the full invoices for the artificial limb.

Disability and Income Assessment:

The Supreme Court clarified a critical distinction:
“Disability for compensation must be assessed functionally—based on its impact on earning capacity, not merely the medical percentage.”
Though the Medical Board assessed 90% permanent disability, the Court accepted that the functional impairment, due to the use of a prosthetic limb and the claimant's continuation in business, justified a 50% disability for income loss calculation.

Equally significant was the Court's insistence that income tax returns filed prior to the accident must be treated as reliable evidence in absence of proof of fabrication. The Bench firmly rejected the Tribunal’s finding that the business was set up as a front by the parents. The Court noted:
“The sale proceeds being not within the taxable limit is not an indication of the profit accrued, or the income received.”

Medical Expenses and Future Needs: Full Compensation Allowed

In a strongly worded correction, the Court faulted both the Tribunal and the High Court for arbitrarily reducing medical reimbursement. Although invoices of ₹12.54 lakh were submitted, the Tribunal only awarded ₹3.39 lakh, and the High Court enhanced it to ₹8 lakh without any reasoning.

The Court restored the full amount of ₹12.54 lakh, stating:
“In the above facts and circumstances, we are of the opinion that the entire medical expenses claimed, for which invoices were produced, has to be paid to the claimant.”

Further, the Court addressed the future medical burden, acknowledging the prosthetic limb would require regular servicing and periodic replacement, even though precise documentation was not available. It granted ₹10 lakh for future medical needs, noting:
“It is a fact that the claimant would require servicing and replacement of the accessories of the prosthetic limb periodically… an amount of ₹10 lakh would suffice.”

Restoration of Omitted Heads of Compensation:

The Court also found that two significant components—₹1 lakh for attendant care and ₹4.70 lakh for prosthetic limb purchase, both awarded by the Tribunal—had not been reckoned by the High Court. These were restored in full.

Pain and suffering compensation at ₹1 lakh and ₹2 lakh for loss of amenities, as granted by the High Court, were also sustained.

Final Compensation Recalculated at ₹48.44 Lakh With 6% Interest

After recalculating under each head, the Supreme Court awarded a total compensation of ₹48,44,790, with 6% interest per annum from the date of application, to be paid within three months after deducting previously paid amounts.

The Court directed that the insurer transfer the awarded compensation directly to the claimant’s bank account.

The judgment in Anoop Maheshwari v. Oriental Insurance Co. Ltd. is a robust affirmation of functional justice in personal injury claims. It reinforces that compensation must reflect real-world disability, not merely medical terminology, and that concrete documentary evidence like income tax returns must be given due legal weight.

By recognizing not only past but future medical burdens, and correcting the undervaluation of key expense heads, the Supreme Court has affirmed its commitment to a humane, realistic and legally grounded interpretation of “just compensation” under the Motor Vehicles Act.

Date of Decision: 4 September 2025