Supreme Court clarifies compensation for disability in motor accident cases: New India Assurance Co. Ltd. vs. Gajender Yadav (2017)

Date of the Judgment: July 13, 2017
Citation: Civil Appeal No. 9006 of 2017 (Arising out of SLP(C) No. 25827 of 2015)
Judges: Kurian Joseph, J., R. Banumathi, J.
Can a person who has suffered a disability in a motor accident claim compensation for both physical disability and loss of future earnings? The Supreme Court addressed this issue in a recent case, clarifying the method for calculating compensation in such cases. The court emphasized that compensation should be awarded for the loss on account of disability, not as separate amounts for physical disability and future loss of earnings, thereby avoiding duplication. The judgment was delivered by a two-judge bench comprising Justice Kurian Joseph and Justice R. Banumathi, with Justice Kurian Joseph authoring the opinion.

Case Background

On January 28, 2004, the claimant, Gajender Yadav, suffered a severe accident resulting in the amputation of his left leg below the knee. At the time of the incident, he was 37 years old and employed as a Security Officer at Bennett & Coleman. Following the accident, he was shifted to a less physically demanding role within the company. The claimant sought compensation for the injuries and losses sustained due to the accident. The Tribunal initially awarded Rs. 6,87,000 with 9% interest. The High Court modified this amount, specifying compensation under various heads, which led to the appeal before the Supreme Court.

Timeline:

Course of Proceedings

The case began in the Motor Accident Claims Tribunal, where the claimant was awarded Rs. 6,87,000 with 9% interest. The High Court of Punjab and Haryana, in FAO No. 4219 of 2005, modified the compensation, breaking it down into several categories. Dissatisfied with the High Court’s decision, both the insurance company and the claimant appealed to the Supreme Court.

Legal Framework

The Supreme Court referred to the principles established in previous judgments regarding the assessment of future loss of earnings due to permanent disability. The court highlighted the importance of considering the functional disability and its impact on the person’s earning capacity.

Arguments

Both the insurance company and the claimant presented arguments for reduction and enhancement of compensation, respectively. The arguments were based on interpretations of previous judgments concerning the calculation of compensation for disability.

Issues Framed by the Supreme Court

The primary issue before the Supreme Court was:

1. How to correctly compute compensation for disability in motor accident cases, specifically addressing the issue of duplication in awarding compensation for both physical disability and loss of future earnings.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court considered the following authorities:

Judgment

The Supreme Court modified the High Court’s order, holding that the compensation for disability should be calculated by applying a multiplier to the loss of future earnings.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to ensure fair compensation without duplication. The court emphasized the functional disability caused by the amputation and its impact on the claimant’s earning capacity. The court also considered the fact that the claimant’s future promotions were sealed due to the injury. The court aimed to provide a just and proper compensation by considering the actual loss suffered by the claimant.

The Court’s reasoning was as follows:

The Court noted that the claimant had suffered a serious injury leading to the amputation of his left leg below the knee, which caused a functional disability. The Court also took into account that the claimant’s future promotions were sealed due to the injury. The Court held that the computation of compensation for the disability should be worked out by applying a multiplier. The Court noted that the High Court had awarded separate amounts for physical disability and future loss of earnings, which was a duplication. The Court substituted the total amount of Rs. 21 Lakhs with Rs. 15,12,000, calculated by applying a 40% disability factor to the claimant’s monthly salary and then applying a multiplier of 15.

The Court also considered the need for the claimant to change his artificial limb at least once in two years and awarded an additional amount of Rs. 2,00,000 for this purpose.

The Supreme Court stated, “The High Court, in the pecuniary part, has awarded Rs.8 Lakhs on account of physical disability and for future loss of earnings Rs. 13 Lakhs. This is certainly a duplication. What is to be compensated is only the loss on account of disability.” The Court also noted, “Having heard the learned counsel on both sides and having regard to the fact that the claimant has, in fact, suffered a serious injury leading to amputation of the left leg below the knee and which has certainly caused a functional disability since he had been in employment as a Security Officer… we are of the view that in the facts of this case, the computation of compensation for the disability is also to be worked out by applying a multiplier.” Further, the Court concluded, “Towards the claim for change of artificial limb at least once in two years, we are of the view that it will be just and proper that a further amount of Rs.2,00,000/- (Rupees Two Lakhs) is awarded.”

Key Takeaways

• ✓ Compensation for disability should be calculated based on the loss of earning capacity due to the disability.
• ✓ Duplication of compensation by awarding separate amounts for physical disability and loss of future earnings should be avoided.
• ✓ The multiplier method should be used to calculate the loss of future earnings due to disability.
• ✓ Additional compensation may be awarded for the cost of artificial limbs or other necessary medical expenses.

Directions

The Supreme Court directed that the claimant shall be entitled to a total compensation of Rs. 23,26,835 with interest at the rate of 8% from the date of the claim petition.

Development of Law

The ratio decidendi of this case is that compensation for disability should be calculated by applying a multiplier to the loss of future earnings, while avoiding duplication by not awarding separate amounts for physical disability and loss of future earnings. This judgment reinforces the principle that compensation should be based on the actual loss suffered due to the disability.

Conclusion

The Supreme Court’s judgment in this case clarifies the method for calculating compensation in motor accident cases involving disability. The court emphasized the importance of avoiding duplication and ensuring that compensation is awarded based on the actual loss of earning capacity. The decision provides a clear framework for future cases involving similar issues.