A man who doused himself with petrol and set himself alight will get to keep more than $15,000 that ACC says it paid him incorrectly.

In 1997 Santokh Singh, then 29 and an illegal immigrant, argued with his wife after drinking heavily.

Afterwards he poured petrol over himself and ignited it, suffering serious burns to his head, chest, arms, back and thighs.

A claim for ACC cover and entitlements was lodged later that year, but was denied because his injuries were self-inflicted. He did not appeal against the decision, but in 2008 he applied for an independent allowance because of his injuries.

An ACC claims officer, unaware of his previous application, advised him he was eligible and granted him a weekly $30.40 allowance plus about $14,000 backdated to April 1997.

ACC continued to pay Mr Singh, who lives in Auckland, until April 2010, when it reviewed his case and advised him that the decision had been a mistake.

Mr Singh appealed, with his lawyer John Miller arguing that the original decision not to grant cover in 1997 was wrong because Mr Singh was suffering from a mental illness.

But Judge Martin Beattie dismissed the argument, saying there was no evidence that the decision had been made in error.

ACC had been correct to revoke its decision to pay Mr Singh because it had been made in ignorance of his past history, he found.

Mr Singh said he had been in a bad mental state when his injuries occurred. Being declined initially had been tough but to have his entitlement taken away after being paid it for two years was shattering.

His injuries meant he was unable to work, relying on a sickness benefit and the help of his friends.

"My skin's stretched, I have [scar] marks all over my body. Going into the public, people look at you in a different way. It's very tough, honestly it's day by day, it's very hard."

Mr Miller said it was unfortunate Mr Singh had not appealed against the original decision within the required three-month time frame because he would have had a good chance at overturning the decision.

"Because he was in such a bad state he didn't challenge that but I believe the decision was incorrect, they should have paid him."

ACC had decided not to try to recover the money paid to Mr Singh in error, he said.

An ACC spokeswoman said she was unable to discuss Mr Singh's case because of privacy reasons.

The ACC Act states a person who suffers self-inflicted injuries is only covered if they can prove it was the result of a mental injury triggered by a previous physical injury.

When Mr Singh suffered his injuries, a mental injury did not need to be linked to a previous physical injury to qualify.

- © Fairfax NZ News