Supreme Court settles functional disability assessment in motor accident claim: Sarnam Singh vs. Shriram General Insurance Co. Ltd. (2023) INSC 597 (4 July 2023)

Introduction

Date of the Judgment: 4 July 2023
Citation: (2023) INSC 597
Judges: Abhay S. Oka, J., Rajesh Bindal, J.

How should a court determine the loss of earning capacity when a person suffers a severe injury that prevents them from continuing their profession? The Supreme Court of India recently addressed this question in a case involving a gunman who lost his leg in a road accident. The core issue was whether the High Court was correct in reducing the compensation by assessing the functional disability at 80% instead of 100% as assessed by the Motor Accident Claims Tribunal. The judgment was delivered by a bench comprising Justices Abhay S. Oka and Rajesh Bindal, with Justice Rajesh Bindal authoring the opinion.

Case Background

On November 24, 2013, the appellant, Sarnam Singh, was involved in an accident with a Tempo, resulting in severe injuries. He was hospitalized for about a month and ten days, from November 24, 2013, to January 5, 2014, and continued follow-up treatment for approximately a year. The accident led to the amputation of his right lower limb, resulting in an 85% disability. At the time of the accident, Sarnam Singh was working as a gunman with M/s Bharat Hotels Ltd. He was designated as a Senior Assistant and earned ₹20,774 per month, including a conveyance allowance of ₹800. He had been employed with the company since June 20, 1992. Due to his disability, his services were terminated on May 31, 2015, as he could no longer perform his duties. The Motor Accident Claims Tribunal awarded him a compensation of ₹34,29,800, holding the insurance company liable. The Tribunal considered his functional disability to be 100% with respect to his job.

Timeline

Course of Proceedings

The insurance company appealed the Tribunal’s order to the High Court of Delhi. The High Court, while upholding the Tribunal’s findings on income, age, multiplier, and disability, reduced the compensation by assessing the loss of earning capacity at 80%, despite the amputation of the appellant’s right lower limb. The High Court reduced the compensation by ₹4,92,205, setting the final amount at ₹28,43,000. The appellant then appealed to the Supreme Court against this reduction.

Legal Framework

The core legal issue revolves around the assessment of functional disability in cases of motor accident claims. The Supreme Court considered the principles established in previous judgments regarding how permanent disability affects a person’s ability to earn a living. The court emphasized that the impact of a disability must be assessed in relation to the specific job the injured person was performing. The court referred to the case of Mohan Soni vs. Ram Avtar Tomar And Others [(2012 ) 2 SCC 267], where it was held that the loss of earning capacity should be assessed considering the nature of the work performed by the injured person.

Arguments

Appellant’s Arguments:

• The appellant argued that the High Court erred in reducing the loss of earning capacity to 80%.
• It was contended that since the appellant’s right lower limb was amputated, and he was employed as a gunman, his functional disability should be considered 100%.
• The appellant’s inability to perform his duties as a gunman led to the termination of his services, proving that his functional disability was total.

Respondent’s Arguments:

• The insurance company argued that the Tribunal had incorrectly calculated the compensation based on the disability certificate.
• They contended that the High Court had corrected this error.
• The respondent submitted that the appellant had not appealed for enhancement of compensation, and the High Court’s order was correct.

Issues Framed by the Supreme Court

The primary issue before the Supreme Court was:

1. Whether the High Court was correct in reducing the loss of earning capacity to 80% despite the appellant suffering amputation of his right lower limb and being employed as a gunman.

Treatment of the Issue by the Court

Authorities

Cases Cited:

• Mohan Soni vs. Ram Avtar Tomar And Others [(2012 ) 2 SCC 267] – Supreme Court of India: This case was cited to emphasize that the assessment of functional disability should be made with reference to the nature of the work performed by the injured person. The Court in this case had enhanced the loss of earning capacity from 50% to 90% for a cart puller whose leg was amputated.

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Mohan Soni vs. Ram Avtar Tomar And Others [(2012 ) 2 SCC 267]: The Court followed this authority to emphasize that functional disability must be assessed in relation to the nature of work performed by the injured person. The Court applied the principle that the loss of earning capacity should be assessed considering the nature of the work performed by the injured person.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the nature of the appellant’s job as a gunman and the fact that the amputation of his right leg rendered him completely incapable of performing his duties. The Court emphasized that the assessment of disability must be linked to the individual’s occupation. The Court also noted that the High Court had erred in its calculation of the compensation amount.

Fact:Law Ratio:

Logical Reasoning:

The court’s reasoning was based on the principle that the functional disability must be assessed in relation to the nature of the work performed by the injured person. The court noted that the High Court had erred in reducing the loss of earning capacity to 80%, despite the fact that the appellant’s amputation had made it impossible for him to continue working as a gunman. The court also pointed out an error in the High Court’s calculation of the total compensation amount.

“In fact, any physical disability resulting from an accident has to be judged with reference to the nature of the work being performed by the person who suffered disability.”

“Applying the same principle to the case in hand, we find that the appellant herein was working as a gunman with Bharat Hotel Limited. On account of amputation of his right leg above the knee, he was terminated from service w.e.f. 31.05.2015.”

“Considering the aforesaid facts, in our view, the Tribunal was right in assessing the loss of earning capacity of the appellant at 100% and assessing the compensation accordingly.”

Key Takeaways

• Functional disability in motor accident cases must be assessed in relation to the specific job the injured person was performing.
• Amputation of a limb can result in 100% functional disability if it prevents the injured person from continuing their profession.
• Courts must consider the nature of the job while assessing the loss of earning capacity.
• The judgment clarifies the principles for assessing compensation in cases of permanent disability, ensuring that victims are adequately compensated for their loss of earning capacity.

Directions

The Supreme Court set aside the High Court’s order and restored the award passed by the Tribunal. There was no order as to costs.

Development of Law

The ratio decidendi of this case is that the functional disability of an injured person must be assessed with reference to the nature of their job. The Supreme Court clarified that in cases where a person’s disability prevents them from performing their job, the functional disability can be assessed as 100%. This judgment reinforces the principle that compensation must be commensurate with the loss of earning capacity, taking into account the specific circumstances of the injured person’s employment. This case clarifies the position of law and settles the ambiguity in assessing functional disability in cases where the nature of work is such that the disability prevents the person from continuing in that employment.

Conclusion

The Supreme Court allowed the appeal, setting aside the High Court’s order and restoring the Tribunal’s award. The Court held that the functional disability of the appellant should be assessed at 100% due to the amputation of his right leg and his occupation as a gunman. This judgment reinforces the principle that compensation in motor accident cases must be assessed considering the specific impact of the disability on the injured person’s ability to earn a living.