The Supreme Court has ruled that if a road accident victim cannot prove their income, insurance companies must use the state’s minimum wage to calculate compensation.

A bench of Justices Sanjay Karol and Prashant Kumar Mishra passed the order while hearing a case involving a minor who suffered permanent disability in a 2012 accident in Banaskantha, Gujarat.

The court enhanced his compensation from ?8,65,000, as awarded by the Gujarat High Court, to ?35,90,489, stating that his compensation should be calculated considering the minimum wage of a skilled worker in Gujarat.

Hitesh Nagjibhai Patel, then eight years old, was standing with his father on a roadside in 2012 when he was hit by a vehicle “driven in a rash and negligent manner”. He sustained a brain haemorrhage and later had his left leg amputated, the court order mentions.

The Motor Accident Claims Tribunal (MACT) in Deesa awarded him a compensation of ?3,90,000 in 2021, holding the respondents jointly and severally liable. Unsatisfied with the compensation, Patel, through his father, approached the Gujarat High Court seeking an enhancement.

The High Court later enhanced it to ?8,65,000 in 2024, noting that Patel had suffered “permanent physical impairment/ mental disability to the tune of 70 per cent” and assessing “the total permanent disability to the extent of 90 per cent”.

The family again approached the Supreme Court against the High Court order, contending that it ‘failed to award compensation under the head loss of earnings to the minor appellant”.

The apex court, while passing the order, noted that lower courts have failed to take into account the monthly income of the appellant while determining the quantum of compensation.

 “A minor child who suffers death or permanent disability in a motor vehicle accident cannot be placed in the same category as a non-earning individual for the purposes of assessing the amount of compensation because the child was not engaged in gainful employment at the time of the accident. In such a case, the computation of compensation under the head of loss of income ought to be made by adopting, at the very least, the minimum wages payable to a skilled workman as notified for the relevant period in the respective State where the cause of action arises,” the court observed.

The court fixed the minor’s income at ?6,836 per month, while confirming his disability at 90 per cent. It recalculated compensation under several heads, including ?18.6 lakh for loss of future earnings, ?5 lakh for pain and suffering, ?5 lakh towards the cost of an artificial limb, and ?3 lakh for loss of marriage prospects.

 “We are constrained to observe that appeals to the High Court as well as to this Court were entirely avoidable, since the law had been amply clarified well before the order of the Tribunal was made,” the bench stated.

The top court further directed that in cases where a claimant’s income is not proved, “It shall be the responsibility and obligation of the contesting party, more particularly the insurance company, to furnish before the Tribunal the applicable minimum wage as duly issued by the concerned government.”