Reimagining Compensation Under The Motor Vehicles Act: Allahabad High Court Holds Permanently Disabled Minor Entitled To Wages Of A Skilled Workman

Introduction

The Motor Vehicles Act, 1988 is a social welfare legislation enacted with the primary object of ensuring that victims of road accidents receive “just compensation” for the loss, injury, or disability suffered by them. Over the years, Indian Courts have consistently emphasized that compensation under the Act must not be reduced to a rigid mathematical exercise, but must reflect the real impact of the accident on the life, dignity, earning capacity, and future of the victim.

In a significant and progressive ruling, the Allahabad High Court, in “Sangam Lal v. The New India Assurance Co. Ltd. & Anr” (First Appeal from Order Nos. 697 of 2015 and 892 of 2015), has reaffirmed this principle by holding that even an unemployed minor who suffers 100% permanent functional disability is entitled to compensation calculated on the basis of minimum wages payable to a skilled workman.

The judgment not only clarifies the law relating to functional disability, future prospects, and loss of earning capacity, but also strengthens the protective framework available to permanently disabled minors and child victims under the Motor Vehicles Act, 1988.

Statutory Framework: Understanding the Legal Basis of Compensation

Under Section 166 of the Motor Vehicles Act, 1988, a person who has sustained injury in a motor accident, or their legal representatives, may file a claim petition before the Motor Accident Claims Tribunal (MACT). The Tribunal, under Section 168, is required to determine and award “just compensation”.

The expression “just compensation” has been deliberately left undefined by the legislature, enabling the courts to interpret it in a manner that is fair, reasonable, and equitable, depending on the facts of each case. The Supreme Court has repeatedly held that compensation should neither be arbitrary nor conservative, but should adequately reflect the actual loss suffered by the victim.

Appeals against the awards of the tribunal lie under Section 173 of the Act, which permits both claimants and insurers to challenge the adequacy or correctness of the compensation before the High Court.

In the present case, an additional statutory provision assumed the importance is Rule 220-A of the Uttar Pradesh Motor Vehicles Rules, 1998, which provides for future prospects in cases of permanent disability. This rule recognises that even an injured claimant, if alive, would have progressed in life and income but for the accident, and therefore allows the enhancement of compensation on that basis.

Facts of the Case

The Claimant, Sangam Lal, was merely 16 years old when he met with a devastating motor accident on 29^th March 2009, involving a truck insured with the respondent insurance company. At the time of the accident, he was working as a Khalasi, a job involving strenuous physical labour.

The injuries suffered by the claimant were severe and life-altering. His right leg was amputated from the knee, and two toes of his left foot were also amputated. These injuries permanently impaired his mobility and rendered him incapable of performing any manual or physical work in the future and as per the certificate issued by the CMO, Pratapgarh, he has suffered 60% permanent disability. The certificate has been issued by the duly constituted medical board whose authenticity has not been challenged by the appellant-insurance company by filing any contra evidence. Importantly, these certificates were never challenged by the insurance company through any contrary medical evidence.

The claimant has further submitted another certificate issued by Department of Physiotherapy, B.Y.L. Nair Charitable Hospital & T.N.M. College, Bombay, which discloses that he has suffered 75% permanent disability in right lower limb due to right knee disarticulation and 5% permanent disability in left lower limb due to 4th-5th ray amputation, due to which the claimant has suffered total disability of 80%.

Tribunal’s Award and the Competing Appeals

The Motor Accident Claims Tribunal (MACT) awarded the compensation of Rs. 5,03,310, along with the interest at 7% per annum. While determining compensation, the Tribunal assessed the claimant’s functional disability at 80%, applied a multiplier of 16, and did not award any amount towards the future prospects. The amounts awarded under non-pecuniary heads such as pain and suffering were minimal.

Aggrieved by the award, both the parties approached the Allahabad High Court

The insurance company contended that:

• The disability was only partial in nature and had been wrongly assessed.
• The claimant was a minor and not in the gainful employment.
• The income assessed by the Tribunal was excessive for the minor.

On the other hand, the claimant sought enhancement of compensation, arguing that:

• He had suffered 100% functional disability.
• His loss of earning capacity was total and not in partial in nature.
• The correct multiplier applicable in this case is 18, considering the age of the victim and not 16.
• The compensation under non-pecuniary heads was grossly inadequate.

Judicial Reasoning: Functional Disability as the Governing Standard

Justice Sandeep Jain, speaking for the Court, undertook a detailed examination of the law relating to disability and compensation under the Motor Vehicles Act, 1988. Relying on the Supreme Court’s decision in the case of Raj Kumar Vs. Ajay Kumar & Another (2011) 1 SCC 343 has held that the tribunal should not mechanically apply the percentage of permanent disability as the percentage of economic loss or loss of earning capacity and in each case, the tribunal has to independently assess the earning capacity loss of the claimant by ascertaining what activities the claimant could carry on in spite of the permanent disability and what he could not do as a result of his injuries.

The Court further reiterated that medical disability and functional disability are the two distinct concepts.

The Court emphasised that:

• Medical disability reflects the physical impairment.
• Functional disability reflects the loss of earning capacity.

What matters for compensation is how the injury affects the victim’s ability to earn, considering the nature of work he was performing or capable of performing.

In the present case, the claimant’s occupation involved physical labour, and the amputation of his leg effectively ended any possibility of such work in the future. The Court therefore held that, irrespective of the medical percentage of the disability, the claimant had suffered 100% disability reviewing his condition.

Recognition of a Minor as a Skilled Workman

One of the most significant aspects of the judgment is the Court’s treatment of the claimant as a skilled workman, despite the facts that he was a minor and not formally employed at the time of the accident.

The Court held that:

“Even if it assumed that the Claimant was only 16 years old and was not in any gainful employment at the time of the accident, even then, he is entitled to get compensation on the basis that he was a skilled workman.”

This conclusion was drawn by applying binding Supreme Court precedents, including Kajal vs. Jagdish Chand & Ors. (2020) 4 SCC 413, Master Ayush vs. Branch Manager, Reliance General Insurance Co. Ltd. & Anr. (2022) 7 SCC 738, Baby Sakshi Greola vs. Manzoor Ahmad Simon & Anr. 2024 SCC OnLine SC 3692 and Hitesh Nagjibhai Patel vs. Bababhai Nagjibhai Rabari & Another 2025 INSC 1070, where it was held that in cases of 100% permanent functional disability, compensation for loss of income must be based on minimum wages of a skilled workman, rather than on a notional income.

The Court thus rejected the insurer’s argument that the claimant’s age or lack of formal employment disentitled him from such assessment.

The High Court also addressed the Tribunal’s failure to award the compensation towards future prospects. Referring to Pappu Deo Yadav vs. Naresh Kumar (2022) 13 SCC 790 and Sidram vs. Divisional Manager, United India Insurance Co. Ltd. & another (2023) 3 SCC 439:

“It is now a well-settled position of law that even in cases of permanent disablement incurred as a result of a motor accident, the claimant can seek, apart from compensation for future loss of income, amounts for future prospects as well.”

Hence, the Court clarified that future prospects are equally applicable in cases of permanent disability, as denying such compensation would amount to denying the possibility of progress in the life of a living victim.

Applying the Rule 220-A of the UP Motor Vehicle Rules, 1998, the Court awarded 50% future prospects, considering that the claimant was below 40 years of age.

Further, the Court corrected the Tribunal’s error in applying a multiplier of 16, holding that the appropriate multiplier for a 16-year-old claimant is 18, in accordance with the National Insurance Co. Ltd. v. Pranay Sethi, (2017) 16 SCC 680.

Enhancement of Non-Pecuniary Compensation

The Court found the compensation awarded under the non-pecuniary heads to be wholly inadequate. Keeping in view the permanent nature of the disability and its impact on the claimant’s personal and social life, the Court enhanced compensation towards:

• Pain and suffering
• Loss of amenities of life
• Special diet
• Loss of marriage prospects

However, the Court declined to award compensation for future medical expenses in the absence of evidence regarding the use of artificial limbs or anticipated treatment.

Final Order

After reassessing all the components, the Allahabad High Court enhanced the total compensation to Rs. 16,59,510, along with interest at 7% per annum from the date of filing of the claim petition. The insurer’s appeal was dismissed, and the claimant’s appeal was allowed.

And finally in view of the statutory laws and the precedents cited by the Court, the compensation payable to the Claimant is as follows, having been redetermined:

Sr. No.	Compensation Head	Amount Awarded (in Rs.)
1.	Monthly Income of the claimant on the basis of minimum wages of skilled workman	4500/-
2.	Annual income of the claimant	4500 x 12= 54,000/-
3.	Add future prospects @50% since claimant was about 16 years old on the date of the accident.	27,000/-
4.	Total annual loss of future income	81,000/-
5.	Multiplier applied since age of claimant was about 16 years	18
6.	Total future loss of income due to 100% functional disability	81,000 X 18= 14,58,000/-
7.	Medical expenses	26,510/-
8.	Compensation towards pain, suffering and loss of amenities	1,00,000/-
9.	Special diet expenses	25,000
10.	Loss of future marriage prospects	50,000/-
11.	Total Compensation	16,59,510/-

Conclusion

The judgment in Sangam Lal v. New India Assurance Co. Ltd. is a powerful reaffirmation of the humane and purposive approach that courts must adopt while dealing with motor accident compensation claims. By recognising that a permanently disabled minor’s future cannot be valued on a notional or conservative basis, the Allahabad High Court has ensured that the promise of “just compensation” under the Motor Vehicles Act is not reduced to an empty formality.

The ruling serves as an important precedent for Tribunals and insurers alike, reinforcing that functional disability, not technical employment status or age, must guide compensation, especially where the accident has irreversibly altered the course of a young life.

For more details, write to us at: contact@indialaw.in