Performance-based incentives form part of actual income for computing motor accident compensation.

On 7 March 2008, the appellant, aged 24, was riding a motorcycle towards Kadi when a truck allegedly came from the wrong side and collided with the motorcycle, causing serious injuries, including a tibia-fibula fracture of the right leg.

He underwent surgery and was assessed as suffering from approximately 53% permanent disability. He filed MACP No. 5 of 2009 claiming compensation of ₹22,24,720. The Motor Accident Claims Tribunal assessed compensation at ₹6,62,000, deducted 10% for contributory negligence, and awarded ₹5,95,800 with interest at 7.5% per annum. The claimant appealed seeking enhancement, particularly on the basis of his salary, incentives, future loss of income, and other heads of compensation.

1. Whether the appellant’s monthly income should be assessed on the basis of the employer’s certificate and salary slip, including performance-based incentives, rather than on a notional basis

2. Whether the appellant was entitled to an addition towards future prospects while computing loss of earning capacity

3. Whether the appellant’s permanent disability justified computation of functional loss of income at 100%, or whether the assessed 53% disability was to be applied

4. Whether the compensation awarded under the heads of future loss of income, actual loss of income, medical expenses, pain and suffering, and attendant, diet and transportation expenses required enhancement

The Court applied the principles governing assessment of compensation for permanent disability under the Motor Vehicles Act, including determination of actual income, future prospects, applicable multiplier, and percentage of disability affecting earning capacity.

It relied on National Insurance Co. Ltd. v. Pranay Sethi, 2017 (16) SCC 680, as extended to injury cases involving permanent disability, for adding 40% towards future prospects in the case of a young person in regular employment.

The Court treated regularly earned incentives as part of actual income where supported by employment records, although it excluded the separate petrol allowance from the computation.

For a claimant aged 24 years, it applied a multiplier of 18, corresponding to the age group of 15–25 years.

The established 53% permanent disability was applied to the prospective annual income for calculating future loss of earnings.

The Court found that Exh.82, the employer’s certificate, established a monthly salary of ₹4,000 and recorded additional incentives, while Exh.83, the December 2007 pay slip, showed gross commission of ₹5,935.

Although the insurer argued that incentives varied according to performance, the Court held that variable incentives nevertheless reflected the claimant’s actual earning capacity and could not be wholly disregarded.

Excluding the ₹700 petrol allowance but considering the salary and incentives, the Court rounded the monthly income to ₹9,000.

Applying 40% future prospects resulted in a prospective monthly income of ₹12,600 and an annual income of ₹1,51,200. Applying 53% disability and the multiplier of 18, the Court calculated future loss of income at ₹14,42,448.

The Tribunal’s awards for medical expenses, special diet, attendant and transportation, and pain, shock and suffering were retained, while actual loss of income was recalculated at ₹9,000.

After aggregating the compensation, deducting 10% contributory negligence, and giving credit for the amount already awarded, the Court determined the enhanced compensation at ₹9,42,253.

The Court did not accept the appellant’s claim for computation on the basis of 100% functional disability and continued to apply 53% disability.

The total compensation was enhanced to ₹15,38,053 after deduction of 10% contributory negligence, resulting in an enhanced amount of ₹9,42,253 over and above the Tribunal’s award.

The insurer was directed to deposit the enhanced amount with interest at 7.5% per annum from the date of the claim petition until realization, within four weeks of receiving the order.

The Tribunal was directed to disburse the awarded amount with accrued interest after due verification and deduction of applicable court fees.