Even If Claim Is Styled Under Section 163A, It Can Be Treated Under Section 166 If Negligence Is Pleaded And Higher Compensation Is Claimed: Supreme Court

"High Court Could Not Have Reduced Disability To 40% Without Appeal By Corporation", On January 6, 2026, the Supreme Court of India delivered a significant judgment enhancing compensation for a motor accident victim and clarifying that a claim styled under Section 163A of the Motor Vehicles Act, 1988, may still be adjudicated under Section 166 if the pleadings and compensation sought suggest it. The Court set aside the High Court’s reduction of disability and recomputed the compensation based on minimum income thresholds, enhancing the total compensation to ₹7,14,000 with 7.5% interest.

The appellant, S. Shakul Hameed, sustained injuries in a motor vehicle accident in 2005 involving a bus operated by the Tamil Nadu State Transport Corporation. He had filed a claim which was captioned under Section 163A of the Motor Vehicles Act, 1988, and sought ₹7,40,000 in compensation, specifically alleging rash and negligent driving by the Corporation's bus driver.

The Motor Accident Claims Tribunal (MACT) awarded ₹2,12,800 and assessed disability at 50%. The High Court marginally enhanced the compensation to ₹2,23,000 but surprisingly reduced the assessed disability to 40% despite no appeal or cross-objection filed by the Corporation. This prompted the claimant to approach the Supreme Court seeking enhancement and restoration of the disability assessment.

The Court examined three key legal questions:

1. Whether a claim styled under Section 163A can be treated as one under Section 166

2. How to assess income in absence of direct proof of earnings

3. Whether the High Court was justified in reducing the disability percentage without challenge from the respondent

On the first issue, the Court observed that despite the application being titled under Section 163A, the substance of the pleadings—particularly the allegations of negligence and the quantum of compensation sought—made it clear that it was in effect a claim under Section 166.

“We are of the opinion that though Section 163A of the MV Act was mentioned in the application, the claim is one under Section 166 of the MV Act,” the Bench comprising Justices Ahsanuddin Amanullah and K. Vinod Chandran held, underscoring that the nomenclature of the provision cited cannot override the substance of the claim. [Para 5]

Minimum Income Must Be Fairly Estimated In Absence Of Proof:

On the second issue, the Court noted that the appellant claimed to be earning ₹8,000 per month as a salesman but had not produced documents to substantiate this. However, relying on the precedent laid down in Ramachandrappa v. Royal Sundaram Alliance Insurance Co. Ltd. [(2011) 13 SCC 236], where a daily wage laborer's income in 2004 was taken as ₹4,500, the Court observed:

"Computing a nominal increase, even a Coolie would be entitled to an income of ₹5,000 per month in the year 2005 when the accident occurred."

Hence, despite the absence of proof, the Court pegged the appellant's monthly income at ₹5,000, also granting 40% addition for future prospects, applying a multiplier of 17 as the appellant was 27 years old at the time of the accident.

Improper Reduction of Disability by High Court:

Crucially, the Court took strong exception to the High Court's unilateral reduction of disability from 50% to 40% in the absence of any challenge by the Transport Corporation. It held:

“The High Court without any appeal by the Insurance Company reduced the disability to 40%, which was improper. Disability as assessed by the Tribunal hence has to be maintained.” [Para 7]

The original disability was based on medical evidence (Exhibit P14) where the doctor assessed it at 60%. The Tribunal’s moderate finding at 50% was reasonable, and the Court saw no justification for the High Court’s interference.

Applying the corrected disability and minimum income computation, the Supreme Court recalculated the compensation for loss of income as follows:

“Loss of income: ₹5,000 x 12 x 17 x 140% x 50% = ₹7,14,000”

This was in contrast to the earlier award of ₹2.23 lakhs. The Court retained the amounts granted under conventional heads by the Tribunal and the High Court and directed that the total enhanced compensation be paid within three months with interest at 7.5% per annum from the date of petition till date of deposit.

The appeal was thus allowed, enhancing the compensation substantially and reiterating the importance of correct application of legal principles in assessing compensation under the Motor Vehicles Act.

This judgment reinforces the Supreme Court's consistent jurisprudence that substance must prevail over form in accident claim cases, and the courts must not deny just compensation merely due to procedural labels. The ruling also sends a strong message against arbitrary reduction in disability without proper challenge or evidentiary basis.

The decision will serve as a useful precedent for claimants whose genuine claims are undermined due to procedural mischaracterizations or unjustified reductions.

Date of Decision: January 6, 2026