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Tuesday, July 31, 2012

when does the payment of compensation under the Workmen’s Compensation Act, 1923 (hereinafter the Act) become due and consequently what is the point in time from which interest would be payable on the amount of compensation as provided under section 4-A (3) of the Act.A four Judge Bench of this Court in Pratap Narain Singh Deo v. Srinivas Sabata, (1976) 1 SCC 289: (AIR 1976 SC 222: 1976 Lab IC 222) speaking through Singhal, J. has held that an employer becomes liable to pay compensation as soon as the personal injury is caused to the workmen by the accident which arose out of and in the course of employment. Thus, the relevant date for determination of the rate of compensation is the date of the accident and not the date of adjudication of the claim.The decisions in Pratap Narain Singh Deo was by a four Judge Bench and in Valsala by a three Judge Bench of this Court. Both the decisions were, thus, fully binding on the Court in Mubasir Ahmed and Mohd. Nasir, each of which was heard by two Judges. But the earlier decisions in Pratap Narain Singh Deo and Valsala were not brought to the notice of the Court in the two later decisions in Mubasir Ahmed and Mohd. Nasir.In light of the decisions in Pratap Narain Singh Deo and Valsala, it is not open to contend that the payment of compensation would fall due only after the Commissioner’s order or with reference to the date on which the claim application is made. The decisions in Mubasir Ahmed and Mohd. Nasir insofar as they took a contrary view to the earlier decisions in Pratap Narain Singh Deo and Valsala do not express the correct view and do not make binding precedents.



                                                                  REPORTABLE
                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION


                       CIVIL APPEAL NO. 5669  OF 2012
                  (Arising out of SLP (C) No.9516 of 2010)






      |The Oriental Insurance Co.Ltd.            |.....APPELLANT(S)        |
|                                          |                         |
|VERSUS                                    |                         |
|Siby George & Ors.                        |.....RESPONDENT(S)       |








                                  JUDGMENT




       Aftab Alam, J.


       1.   Leave granted.
       2.   The short question that arises for consideration in this appeal
       is when  does  the  payment  of  compensation  under  the  Workmen’s
       Compensation  Act,  1923  (hereinafter  the  Act)  become  due   and
       consequently what is the point in time from which interest would  be
       payable on the amount of compensation as provided under section  4-A
       (3) of the Act.
       3.   In this case,  the  Commissioner  for  Workmen’s  Compensation,
       Ernakulam, by his order dated November 26, 2008 in WCC No.67 of 2006
       directed for payment of simple interest at the rate of 12% per annum
       from the date of the accident on  July  12,  2006.  The  appellant’s
       appeal (MFA No.172 of 2009) against the order  of  the  Commissioner
       was dismissed by the Kerala High Court by order dated July 22,  2009
       as barred by limitation. Against the order of  the  High  Court  the
       appellant filed the special leave  petition  (giving  rise  to  this
       appeal) in which notice was issued “limited to the interest”.
       4.    Mr.  Mehra,  learned  counsel  appearing  for  the  appellant,
       submitted that the learned Commissioner was wrong in  directing  for
       payment of interest from the date of the accident and  any  interest
       on the amount of compensation would be payable only from the date of
       the order of the Commissioner. In  support  of  the  submission,  he
       relied upon a decision of this Court in National Insurance Co.  Ltd.
       vs.  Mubasir Ahmed and Anr. (2007) 2 SCC 349, in which it  was  held
       that the compensation becomes due on the basis of  the  adjudication
       of the claim and hence, no interest can be levied prior to the  date
       of the passing of the order determining the amount of  compensation.
       In paragraph 9 of the  decision  the  Court  held  and  observed  as
       follows:-


                 “9…..In the instant case, the accident took place after the
                 amendment and, therefore, the rate of 12% as fixed  by  the
                 High Court cannot be faulted. But the period as fixed by it
                 is wrong.  The starting point is on completion of one month
                 from the date on which it fell due.  Obviously it cannot be
                 the date of accident.  Since no indication is there  as  to
                 when it becomes due, it has to be taken to be the  date  of
                 adjudication of the claim. This appears to  be  so  because
                 Section 4-A (1) prescribes that compensation under  Section
                 4 shall be paid as soon as it falls due.  The  compensation
                 becomes due on the basis of adjudication of the claim made.
                  The adjudication under Section 4 in  some  cases  involves
                 the assessment of loss of earning capacity by  a  qualified
                 medical practitioner. Unless adjudication is done, question
                 of compensation becoming due does not arise.  The  position
                 becomes clearer on a reading of sub-section (2) of  Section
                 4-A.  It provides that provisional payment to the extent of
                 admitted liability has to be made when  employer  does  not
                 accept  the  liability  for  compensation  to  the   extent
                 claimed.   The   crucial   expression   is   “falls   due”.
                 Significantly, legislature  has  not  used  the  expression
                 “from  the  date  of  accident”.   Unless   there   is   an
                 adjudication, the question of an amount  falling  due  does
                 not arise.”
                                                  (empasis added)




       5.   Learned counsel also invited our attention to another  decision
       of the Court  by  which  a  number  of  appeals  and  special  leave
       petitions were  disposed  of  and  which  is  reported  as  Oriental
       Insurance Company Limited vs.  Mohd. Nasir and  Anr.  (2009)  6  SCC
       280. In this decision the Court held that “there cannot be any doubt
       whatsoever that interest would be from the date of default  and  not
       from the date of award of compensation” (paragraph 47). It then went
       on to say that the Act does not prohibit  grant  of  interest  at  a
       reasonable rate from the date of filing of the claim  petition  till
       an order is passed on it, adding that the higher, statutory rate  of
       interest under sub-section (3) of section 4 would be  payable  in  a
       case that attracted that provision and for which “a finding of  fact
       as envisaged therein has to be arrived at”. The Court then  referred
       to paragraph 9 of the decision in Mubasir  Ahmad  (extracted  above)
       but declined to follow it observing that the  earlier  decision  had
       not considered the aspect of the matter as was being viewed  in  the
       case of Mohd. Nasir.   In Mohd. Nasir the Court finally directed for
       payment of interest at the rate of 7½%  per annum from the  date  of
       filing the application till the date of the award, further observing
       that thereafter interest would be payable at the rate as directed in
       the order passed by the Commissioner. (See paragraphs 47  to  50  of
       the judgment).


       6.   The view taken by the Court in Mohd. Nasir  that  the  rate  of
       interest provided under sub-section (3) of section 4-A  would  apply
       only in case the “finding of fact as envisaged therein”  is  arrived
       at by the Commissioner, it must respectfully  be  stated,  seems  to
       result from the mixing up of ‘interest due to default in payment  of
       compensation’ and ‘penalty for an unjustified delay  in  payment  of
       compensation’ and is based on a misreading of the sub-section (3) of
       section 4-A.
                       Sections 4-A (1) and (3) are as under:-
                       4-A.  Compensation to be paid, when due  and  penalty
                 for default. – (1) compensation under section  4  shall  be
                 paid as soon as it falls due.


                       (2)   xxx  xxx   xxx


                       (3)   Where any employer is in default in paying  the
                 compensation due under this Act within one month  from  the
                 date it fell due, the Commissioner shall -




                       (a)   direct that the employer shall, in addition  to
                 the amount of the arrears, pay simple interest  thereon  at
                 the rate of twelve per cent per annum  or  at  such  higher
                 rate not exceeding the maximum of the lending rates of  any
                 scheduled  bank  as  may  be  specified  by   the   Central
                 Government, by notification in the Official Gazette on  the
                 amount due; and


                 (b)   if, in his opinion, there is no justification for the
                 delay, direct that the employer shall, in addition  to  the
                 amount of the arrears and interest thereon, pay  a  further
                 sum not exceeding fifty per cent of such amount by  way  of
                 penalty:


                       Provided that an order for  the  payment  of  penalty
                 shall not be passed  under  clause  (b)  without  giving  a
                 reasonable opportunity to the employer to show cause why it
                 should not be passed.


                       Explanation. -   xxx xxx xxx


                 (3A)  xxx xxx xxx




       7.   It is, thus, to be seen that sub-section (3) of section 4-A  is
       in two parts,  separately  dealing  with  interest  and  penalty  in
       clauses (a) and (b) respectively.  Clause  (a)  makes  the  levy  of
       interest,  with  no  option,  in  case  of  default  in  payment  of
       compensation, without going into the question regarding the  reasons
       for the default. Clause (b) provides for imposition  of  penalty  in
       case, in the opinion of the Commissioner, there was no justification
       for the delay. Before imposing penalty, however, the Commissioner is
       required to give the  employer  a  reasonable  opportunity  to  show
       cause. On a plain reading of the provisions of  sub-section  (3)  it
       becomes clear that payment of interest is a consequence  of  default
       in payment without going into the reasons for the delay  and  it  is
       only in case where the delay is without justification, the  employer
       might also be held liable to penalty after giving him a show  cause.
       Therefore, a finding to the effect that the delay in payment of  the
       amount due was unjustified is required to be recorded only  in  case
       of imposition of penalty and no such finding is required in case  of
       interest which is to be levied on default per se.
       8.   Now, coming back to the  question  when  does  the  payment  of
       compensation  fall  due  and  what  would  be  the  point  for   the
       commencement of interest, it may be noted that neither the  decision
       in Mubasir Ahmed nor the one in Mohd. Nasir can be said  to  provide
       any valid guidelines because both the  decisions  were  rendered  in
       ignorance of earlier larger Bench decisions of this Court  by  which
       the issue was concluded.  As early as in 1975 a four Judge Bench  of
       this Court in Pratap Narain Singh  Deo.  Vs.  Shrinivas  Sabata  and
       Anr., AIR 1976 SC 222 directly answered the question. In  paragraphs
       7 and 8 of the decision it was held and observed as follows:-


                       “7. Section 3 of the Act deals with  the  employer’s
                  liability  for  compensation.  Sub-section  (1)  of  that
                  section provides that the employer shall be liable to pay
                  compensation if “personal injury is caused to  a  workman
                  by accident arising out of  and  in  the  course  of  his
                  employment.” It was not the case of the employer that the
                  right to compensation was taken  away  under  sub-section
                  (5) of Section 3 because of the institution of a suit  in
                  a civil court for damages,  in  respect  of  the  injury,
                  against the employer or any other  person.  The  employer
                  therefore became liable to pay the compensation  as  soon
                  as the  aforesaid  personal  injury  was  caused  to  the
                  workman by the accident which admittedly arose out of and
                  in the course of the employment.  It is therefore  futile
                  to contend that the compensation did not fall  due  until
                  after the Commissioner’s order dated May  6,  1969  under
                  Section 19.  What the section provides  is  that  if  any
                  question arises in any proceeding under the Act as to the
                  liability of any person to pay compensation or as to  the
                  amount or duration  of  the  compensation  it  shall,  in
                  default of agreement, be  settled  by  the  Commissioner.
                  There is therefore nothing to justify the  argument  that
                  the  employer’s  liability  to  pay  compensation   under
                  Section 3, in respect of the injury, was suspended  until
                  after the settlement  contemplated  by  Section  19.  The
                  appellant was thus liable to pay compensation as soon  as
                  the  aforesaid  personal  injury  was   caused   to   the
                  appellant, and there is no justification for the argument
                  to the contrary.


                       8. It was the duty of the appellant, under Section 4-
                  A(1) of the Act, to pay  the  compensation  at  the  rate
                  provided by Section 4 as soon as the personal injury  was
                  caused to the respondent.  He failed to do  so.  What  is
                  worse, he did not even make a provisional  payment  under
                  sub-section (2) of Section 4 for, as has been stated,  he
                  went to the extent of taking the  false  pleas  that  the
                  respondent was a casual contractor and that the  accident
                  occurred solely because of his negligence. Then there  is
                  the further fact that he paid no heed to the respondent’s
                  personal approach for  obtaining  the  compensation.   It
                  will be recalled that the respondent was  driven  to  the
                  necessity of making an application  to  the  Commissioner
                  for settling the claim,  and  even  there  the  appellant
                  raised a frivolous objection as to  the  jurisdiction  of
                  the Commissioner and prevailed on the respondent to  file
                  a memorandum of agreement settling the claim  for  a  sum
                  which was so grossly inadequate that it was  rejected  by
                  the Commissioner. In these facts  and  circumstances,  we
                  have no doubt that the Commissioner was  fully  justified
                  in making an order for the payment of  interest  and  the
                  penalty.”




       9.   The matter  once  again  came  up  before  the  Court  when  by
       amendments introduced in the Act by Act No. 30 of 1995 the amount of
       compensation and the rate of interest  were  increased  with  effect
       from 15.9.1995. The question arose whether the increased  amount  of
       compensation and the rate of interest would apply also to  cases  in
       which the accident took place before 15.9.1995. A three Judge  Bench
       of the Court in Kerala State Electricity Board vs.  Valsala K.,  AIR
       1999 SC 3502 answered the question in the negative holding,  on  the
       authority  of  Pratap  Narain  Singh  Deo,  that  the   payment   of
       compensation fell due on the date of the accident. In paragraphs  1,
       2, and 3 of the decision the Court observed as follows:


                       “1.The neat question involved in these special leave
                  petitions is whether the amendment of Ss.4 and 4A of  the
                  Workmen’s Compensation Act, 1923, made by  Act  No.30  of
                  1995 with effect from 15-9-1995, enhancing the amount  of
                  compensation and rate of interest, would be attracted  to
                  cases where the claims in respect of death  or  permanent
                  disablement resulting from an accident caused during  the
                  course of employment, took place prior to 15-9-1995?


                       2.   Various  High  Courts  in  the  country,  while
                  dealing  with  the  claim  for  compensation  under   the
                  Workmen’s Compensation Act have uniformly taken the  view
                  that the relevant date for  determining  the  rights  and
                  liabilities of the parties is the date of the accident.


                       3.  A four Judge  Bench  of  this  Court  in  Pratap
                  Narain Singh Deo   v.  Srinivas Sabata, (1976) 1 SCC 289:
                  (AIR 1976 SC 222:  1976  Lab  IC  222)  speaking  through
                  Singhal, J. has held that an employer becomes  liable  to
                  pay compensation as soon as the personal injury is caused
                  to the workmen by the accident which arose out of and  in
                  the course of employment. Thus,  the  relevant  date  for
                  determination of the rate of compensation is the date  of
                  the accident and not the  date  of  adjudication  of  the
                  claim.



       10.  The Court then referred to a Full Bench decision of the  Kerala
       High Court in United India Insurance Co. Ltd.   vs.  Alavi,  1998(1)
       KerLT 951(FB) and approved it in so far as it followed the  decision
       in Pratap Narain Singh Deo.


       11.  The decisions in Pratap Narain Singh Deo was by  a  four  Judge
       Bench and in Valsala by a three Judge Bench of this Court.  Both the
       decisions were, thus, fully binding on the Court  in  Mubasir  Ahmed
       and Mohd. Nasir, each of which was heard by  two  Judges.   But  the
       earlier decisions in Pratap Narain Singh Deo and  Valsala  were  not
       brought to the notice of the Court in the  two  later  decisions  in
       Mubasir Ahmed and Mohd. Nasir.
       12.  In light of the  decisions  in  Pratap  Narain  Singh  Deo  and
       Valsala, it is not open to contend that the payment of  compensation
       would fall due only after the Commissioner’s order or with reference
       to the date on which the claim application is made.   The  decisions
       in Mubasir Ahmed and Mohd. Nasir insofar as  they  took  a  contrary
       view to the earlier decisions in Pratap Narain Singh Deo and Valsala
       do not express the correct view and do not make binding precedents.
       13.  In light of the discussion made above, we find no merit in  the
       appeal and it is dismissed with costs amounting to Rs.20,000/-.  The
       amount of cost must be paid to the respondents within six weeks from
       today.


                                        ………………………….J.
                                        (Aftab Alam)



                                        ………………………….J.
                                        (Ranjana Prakash Desai)
       New Delhi;
       July 31, 2012.


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