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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.

English: The supreme court of india. Taken abo...

English: The supreme court of india. Taken about 170 m from the main building outside the perimeter wall (Photo credit: Wikipedia)

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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