Permanent-disability compensation must account for functional impact on earning capacity and future prospects.

The claimant, a school teacher, sustained multiple injuries, including fractures, in a road accident and was admitted to hospital on 28 May 2001.

The Motor Accident Claims Tribunal awarded him ₹4,25,400 with interest at 9% per annum, but assessed compensation as a lump sum and did not determine the functional disability or its effect on his earning capacity.

He appealed against that award.

1. Whether the Tribunal’s lump-sum award could stand when it had not assessed the claimant’s functional disability and the resulting impact on his earning capacity.

2. Whether the claim petition should be remanded for fresh assessment of compensation in accordance with the applicable principles.

In assessing compensation for permanent disability, the relevant inquiry is not disability in isolation but whether, and to what extent, it adversely affects the injured person’s earning capacity (Mohd. Sabir @ Shabir Hussain v. Regional Manager, U.P. State Road Transport Corporation, (2023) 20 SCC 774, referring to Sandeep Khanuja v. Atul Dande, (2017) 3 SCC 351).

Functional disability is assessed by reference to earning capacity in the open, competitive market; retention in a particular job does not by itself resolve the inquiry, and career growth, promotion prospects, and workplace accommodations may be relevant (Reliance General Insurance Company Limited v. Priyanka Das, 2026 INSC 950).

The Tribunal must assess functional disability and its effect on earning capacity, consider future prospects, and determine compensation under the permissible heads to arrive at a just, fair, and adequate award.

The Tribunal awarded a lump sum without determining the extent to which the claimant’s injuries affected his functional capacity and earning ability, or considering future prospects.

Applying the cited principles, the High Court concluded that the award did not reflect the required assessment of disability-related loss and could not be sustained.

It therefore ordered a fresh consideration, while leaving the merits and evidence for the Tribunal to assess independently.

The claim petition was restored to the Tribunal for fresh consideration in accordance with law, with liberty to both parties to lead further evidence; the Tribunal was directed to decide the matter within six months of receiving the order and without being influenced by the earlier award or the High Court’s observations.

The parties were directed to appear before the Tribunal on 29 October 2026; deposited funds were to remain in an FDR for six months, and amounts already disbursed were not to be recovered at that stage.