Supreme Court Holds Functional Disability Must Reflect Actual Loss of Earning Capacity; Enhances Compensation to 100% Disability in Motor Accident Case

Case Name: R. Halle v. Reliance General Insurance Company Limited
Citation: 2026 INSC 260
Date of Judgment/Order: 18 March 2026
Bench: Hon’ble Mr. Justice Prashant Kumar Mishra; Hon’ble Mr. Justice Sandeep Mehta

Held: The Supreme Court held that functional disability must be assessed based on the actual impact of injuries on the earning capacity of the claimant, and where medical and neuropsychological evidence demonstrates severe cognitive and physical impairment affecting employability, such disability may be treated as 100% for the purpose of compensation under the Motor Vehicles Act.

Summary: The case arose from a motor accident in 2016 where the appellant sustained severe injuries including head trauma, cognitive impairment, partial blindness, and orthopedic limitations. The Motor Accident Claims Tribunal awarded compensation by treating disability at 63% based on the Medical Board’s certificate, whereas the High Court reduced functional disability to 30% and consequently reduced compensation, as reflected in the comparative chart on page 3 of the judgment. Before the Supreme Court, the core issue was whether such reduction was justified. The Court analysed medical records and neuropsychological reports showing severe memory impairment, frontal lobe dysfunction, and intellectual disability (IQ 65), and applied the principles laid down in Raj Kumar v. Ajay Kumar regarding distinction between physical and functional disability. It found that the High Court had reduced disability without proper reappreciation of evidence or reasons, and that the claimant’s managerial role required cognitive abilities that stood fundamentally impaired. The Court concluded that the injuries resulted in a complete loss of earning capacity.

Decision: The Supreme Court allowed the appeal, set aside the High Court’s reduction of compensation, and recalculated compensation by treating functional disability as 100%, enhancing the total award to INR 97,73,011 with interest at 7.5% per annum; it directed the insurer to pay the amount with liberty to recover from the driver-owner and ordered deposit within six weeks, while modifying the MACT and High Court awards accordingly.