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Case Number

Miscellaneous First Appeal No. 296 of 1997

Attorney(S)

For Appellant.— Sri Mathews Jacob.
Sri Paulson C. Varghese.

Judges

Sri J.B Koshy
Sri K. Padmanabhan Nair, JJ.

Acts

provisions of the Workmen's Compensation Act, 1923 (hereinafter referred to as the Act).
RESERVE BANK OF INDIA ACT 1934
it.6. Section 4(c)

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Smart Summary

Structured Summary of the Opinion (Koshy, J.)

Factual and Procedural Background

A workman employed as a helper in a factory suffered an accident in the course of employment and lost his thumb, index and middle fingers. The employer notified its insurer promptly. The workman (then aged 22) claimed compensation; a qualified medical practitioner certified 24% loss of earning capacity. The Workmen's Compensation Commissioner, Ernakulam, in W.C.C. No. 117 of 1993 awarded compensation for 100% loss of earning capacity (Rs. 1,10,685) with 6% simple interest and directed deposit by the insurance company; it also directed that failure to pay within 30 days would attract a penalty of 50% of the compensation. Two appeals were filed: M.F.A. No. 547 of 1997 by the workman seeking enhancement, and M.F.A. No. 296 of 1997 by the employer's insurance company challenging the amount as arbitrary and alleging violation of the Workmen's Compensation Act, 1923.

Legal Issues Presented

Whether compensation must be calculated as per the schedule in force on the date of the accident (as contended by the workman).
Whether the Commissioner was correct to award interest at 6% or whether the workman is entitled to 12% interest under the amended S. 4-A(3)/(3A) of the Act.
Whether the Commissioner erred in his approach to imposing (or not imposing) the penalty for delayed payment and whether the insurance company can be mulcted with liability for the penalty.
Whether the Commissioner exceeded his jurisdiction in awarding compensation for 100% loss of earning capacity despite the injury being specified in Schedule I Part II and a medical certificate fixing 24% disability; specifically, what percentage loss of earning capacity applies for the loss of the thumb, index and middle fingers of the right hand under Schedule I Part II.

Arguments of the Parties

Workman's Arguments

The Commissioner should have calculated compensation at the rates applicable on the date of awarding compensation (the workman sought enhancement).
The workman challenged payment of interest at only 6%, contending higher interest should apply given the delay in payment.
The Commissioner should have imposed penalty for default in payment because there was default in payment of compensation.

Insurance Company's / Employer's Arguments

The insurance company contended that the amount ordered by the Commissioner was arbitrary and violated the provisions of the Workmen's Compensation Act, 1923.
The insurer argued the Commissioner exceeded his jurisdiction by granting compensation for 100% loss of earning capacity when the workman lost only three fingers of the right hand and a qualified medical practitioner certified only 24% disability.
The insurer contended that, under the Schedule I Part II entries, loss of three fingers of one hand should attract 30% loss of earning capacity (serial No. 8), and therefore compensation should be limited accordingly (the insurer calculated the applicable loss as 30% or, as argued in the opinion, when considering thumb separately, a combined percentage).

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Kerala State Electricity Board v. K. Vatsala [1999 (4) L.L.N 1183]	Held that compensation has to be calculated as per the schedule existing at the time of the accident.	The court applied this principle to hold that the Commissioner was correct in calculating compensation as per the schedule in force on the date of the accident; the workman's contention on this point had no merit.
Ved Prakash Garg v. Premi Devi [1997 (3) L.L.N 706]	Held that once default in paying compensation extends beyond the permissible limit of one month, liability to pay interest runs automatically; also discussed limits on imposing penalty on insurers.	The court relied on this authority to hold that interest liability arises automatically after the one-month limit and to support that interest is related to the date of payment; the court also referred to Ved Prakash Garg in discussing the limited circumstances in which an insurer can be made liable for penalty and the discretionary nature of penalty.
New India Assurance Company, Ltd. v. Sreedharan [1995 (1) L.L.N 372] (Full Bench)	Held that under S. 4(1)(c)(ii) a Commissioner cannot ignore the certificate of a qualified medical practitioner and fix compensation arbitrarily (applicable to injuries not specified in Schedule I).	The court distinguished the present case because the injuries here are specified in Schedule I; therefore the Full Bench rule that the Commissioner cannot ignore a qualified medical practitioner's certificate applies only when injuries are not in Schedule I and was held inapplicable to the present facts.
Mar Themotheous Birth Centenary Press v. Santhosh Raj [2001 (1) L.L.N 273] (Division Bench)	Illustrated that even if there is no actual loss of earnings and the employer continues to pay wages, the employer is liable to pay compensation for injuries specified in Schedule I as provided under S. 4.	The court referred to this decision (facts described as almost identical) to underscore that mandatory provisions of the statute (Schedule I based compensation) must be followed and that courts/commissioners cannot depart from statutory schedule-based compensation out of sympathy or generosity.

Court's Reasoning and Analysis

The court considered each contention in turn and applied statutory text, schedule entries and cited precedents in the following manner:

Calculation date for compensation:
- The court accepted the principle in Kerala State Electricity Board v. K. Vatsala that compensation must be calculated according to the schedule in force on the date of the accident. The opinion records the date of accident as 23 June, 1993. Because the Commissioner had calculated compensation accordingly, this contention of the workman was dismissed as having no merit.
Rate and computation of interest:
- The court distinguished the timing rule for calculation of the compensation amount from the rule governing payment of interest. It noted that payment of interest depends on the date of payment of compensation and that S. 4-A(3) of the Act was amended (Act 30 of 1995, effective 15 September 1995) to provide for interest at 12% per annum (or at such higher rate not exceeding scheduled bank lending rates as notified).
- The court relied on Ved Prakash Garg to state that once default beyond one month occurs, the liability to pay interest runs automatically. Consequently, the Commissioner was incorrect to award interest at 6%; the court held that the workman was entitled to interest at 12% per annum on the amount of compensation from the date when it fell due (the date of accident) until the date of deposit.
Penalty for delayed payment:
- The court observed that imposition of penalty under S. 4-A(3)(b) is discretionary and is to be exercised after giving a reasonable opportunity to show cause. The statute (sub-sec. (3A)) provides that interest is payable to the workman but any penalty, if imposed, must be credited to the State Government.
- Given that the employer had taken out a workmen's compensation policy, notified the insurer, and had requested payment (facts not disputed), and because the power to impose penalty is discretionary, the court found no justification to interfere with the Commissioner's order on the penalty. The court noted (citing Ved Prakash Garg) that insurers cannot automatically be mulcted with the liability to pay penalties and that penalty liability requires individual consideration.
Quantum of disability and applicability of Schedule I:
- The court analysed S. 4(c) and Explanation II which differentiate between injuries specified in Schedule I (Part II) and those not specified. For injuries specified in Schedule I Part II, the percentage of loss of earning capacity is the percentage set out in the schedule itself (S. 4(c)(i)). For injuries not specified, loss of earning capacity is to be assessed by a qualified medical practitioner (S. 4(c)(ii)), with regard to schedule percentages (Explanation II).
- Because the injury (loss of three fingers including the thumb) is specified in Part II of Schedule I, the court held that the compensation payable must be the percentage provided in the schedule and the court cannot ignore the statutory mandate or act out of sympathy.
- The court analysed the relevant Schedule I Part II entries: serial No. 5 (loss of thumb — 30%), serial No. 9 (loss of two fingers — 20%), and serial No. 8 (loss of three fingers other than thumb — 30%). Since the present loss consisted of the thumb plus two other fingers, the court treated the thumb separately (30%) and the two remaining fingers under serial No. 9 (20%), resulting in an aggregate 50% loss of earning capacity under the schedule.
- Accordingly, the court concluded that instead of the Commissioner's award for 100% loss of earning capacity, the employer's obligation was to pay compensation for 50% loss of earning capacity. The court computed the reduced compensation amount as stated in the opinion and ordered 12% interest from the date specified in the order until the date of deposit; any excess amount deposited by the insurer was ordered to be returned.

Holding and Implications

Core Ruling: The impugned award is modified and both appeals are disposed of.

Specific holdings and immediate effects on the parties:

The court upheld that compensation must be calculated as per the schedule in force on the date of the accident (as per Kerala State Electricity Board v. K. Vatsala) and found no merit in the workman's contention to the contrary.
The court held that the workman is entitled to interest at the rate of 12% per annum on the amount of compensation from the date when it fell due (stated in the opinion as the date of the accident) until the date of deposit; the Commissioner's award of only 6% interest was incorrect.
The court declined to interfere with the Commissioner's exercise of discretion regarding penalty; the penalty provision is discretionary, penalty (if imposed) is to be credited to the State Government under S. 4-A(3A), and insurers cannot automatically be held liable for penalty without consideration (as guided by Ved Prakash Garg).
On the quantum of disability, the court held that the proper schedule-based assessment for loss of the thumb plus two fingers of the right hand is an aggregate 50% loss of earning capacity (30% for thumb + 20% for two fingers). The court reduced the compensation accordingly: the opinion states the revised compensation amount as "Rs. 53,342,50, rounded to Rs. 55,350." The court ordered payment of that amount with 12% simple interest per annum from "23 June, 1995, the date of accident," until 13 February, 1997, the date of deposit by the insurance company; the court further ordered that the balance due after deducting amounts already paid be disbursed to the workman forthwith and any excess deposited by the insurance company be returned to it.

Note on textual dates: The opinion records the date of the accident earlier as 23 June, 1993, yet the court's order (as stated in the opinion) refers to "23 June, 1995" as the date of accident for the purpose of calculating interest. The summary above reproduces both occurrences as contained in the opinion.

Broader implications: The opinion enforces strict application of Schedule I percentages for injuries specified therein and confirms that interest consequences flow from the timing of payment (and the amended statutory rate), while penalty imposition remains a discretionary statutory power. The opinion does not purport to set a novel legal principle beyond application and clarification of existing statutory provisions and cited precedents; it modifies the award as to quantum and interest in the particular case.

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Oriental Insurance Company v. Mohammed

Koshy, J.:— Both these appeals are filed challenging the order of Workmen's Compensation Commissioner, Ernakulam, in W.C.C No. 117 of 1993. M.F.A No. 547 of 1997 was filed by the workman who filed application for compensation claiming enhancement of compensation. M.F.A No. 296 of 1997 was filed by the insurance company of the employer, who was directed to pay compensation, contending that amount ordered was arbitrary violating the provisions of the Workmen's Compensation Act, 1923 (hereinafter referred to as the Act). Claimant workman while employed as a helper in a factory, met with an accident in the course of employment. As a result of the accident arising out of employment he lost his thumb, index and middle fingers. Employer immediately intimated the matter to the insurance company. The workman was only 22 years of age. Medical practitioner certified that he suffered 24 per cent loss of earning capacity. The workman claimed compensation for “total disablement.” Commissioner awarded, compensation for 100 per cent loss of earning capacity accepting the case of the applicant and calculated compensation payable as Rs. 1,10,685 with 6 per cent simple interest. There was also a direction that if the amount is not paid within 30 days of the award, 50 per cent of the compensation amount also shall be realised as penalty. Since insurance was admitted, insurance company was directed to deposit the amount in Court.

2. Facts are not disputed in these appeals by both sides. Three contentions are raised by the workman. The first contention is that Commissioner ought to have calculated the compensation at the rates applicable on the date of awarding compensation. Apex Court in Kerala State Electricity Board v. K. Vatsala, [1999 (4) L.L.N 1183], held that compensation has to be calculated as per the schedule existing at the time of accident. Date of accident was 23 June, 1993. Commissioner calculated compensation as per the schedule existing on the date of accident as held by the Supreme Court. Hence there is no merit in this contention.

3. The second contention was that Commissioner only award 6 per cent interest. It is true that compensation has to be calculated as per the schedule existing at the time of accident. But payment of interest rests on a different footing. Amount of compensation was deposited only after the order of the Commissioner on 13 February, 1997. No compensation was paid to the workman in time despite the matter was informed by the employer to the insurance company in time and claim was given in time. Section 4-A(3) of the Act was amended and Sub-secs. (3) and (3A) were substituted by Act 30 of 1995 with effect from 15 September, 1995 which reads as follows:

“S. 4-A…

(3) Where any employer is indefault 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 Cl. (b) without giving a reasonable opportunity to the employer to show cause why it should not be passed.

Explanation.— For the purposes of this sub-section, ‘scheduled bank’ means a bank for the time being included in the Second Schedule to the Reserve Bank of India Act, 1934.

(3A) The interest payable under Sub-sec. (3) shall be paid to the workman or his dependant, as the case may be, and the penalty shall be credited to the State Government”.

As per S. 4-A(1) compensation under S. 4 shall be paid as soon as it falls due. Permissible upper limit of time in depositing compensation is one month from the date of accident. In Ved Prakash Garg v. Premi Devi, [1997 (3) L.L.N 706], the Apex Court held that once default on the part of employer in paying the compensation due takes place beyond permissible limit of one month, liability to pay interest runs automatically. Payment of interest depends upon the time of payment of compensation. Therefore, we are of the opinion that unlike the amount of compensation which is to be calculated as per the statutory provisions existing on the date of accident [interest has to be calculated on the rates prescribed as per the statute existing on the date of payment Right to get compensation is crystallised on the date of accident itself but interest payable thereon depends upon the date of payment of compensation. Hence rate of interest and amount of interest payable are directly related to the date of payment of interest. Therefore, direction of the Commissioner for Workmen's Compensation to pay 6 per cent interest is incorrect. We hold that workman is entitled to interest at the rate of 12 per cent on the amount of compensation from the date when it fell due, that is, from the date of accident till the date of deposit.

4. The third point raised by the workman is that Commissioner has directed to pay penalty only if the amount is not paid within one month of the order by the insurance company. According to the applicant. Commissioner should have imposed penalty on the employer as there was default in payment of compensation. Unlike payment of interest, payment of penalty is discretionary. Here employer had taken steps to get compensation and informed the insurance company about the accident. To get compensation to the employees employed in the establishment, as and when accident happens, as a prudent employer, he had taken workmen compensation policy eventhough it is not compulsory. He requested the insurance company to pay compensation also immediately. These facts are not disputed. We also note that unlike payment of interest penalty being penal in nature can be imposed after hearing on this aspect and Commissioner is given discretion in the matter of imposing penalty and its quantum in appropriate circumstances. As decided by the Supreme Court in Ved Prakash Garg case, [1997 (3) L.L.N 706] (vide supra), insurance company cannot be mulcted with liability to pay penalty. Under Sub-sec. (3A) of S. 4-A penalty even if imposed, cannot be paid to the claimant but it has to be credited to the State Government as if it is a fine. Considering all circumstances, we are of the opinion that no interference is required in the Commissioner's order imposing penalty. When statute gives discretionary power on Commissioner and it is exercised fairly, no appeal will lie on this point as under S. 30 appeals will lie only against a substantial question of law.

5. Grievance of the insurance company is that Commissioner exceeded his jurisdiction in granting compensation for 100 per cent of loss of earning capacity holding the injuries caused permanent total disablement, eventhough workman lost only three fingers of the right hand. It was contended that qualified medical practitioner certified only 24 per cent disability (A2). A Full Bench of this Court in New India Assurance Company, Ltd. v. Sreedharan, [1995 (1) L.L.N 372], held that in view of S. 4(1)(c)(ii) of the Act, Commissioner cannot ignore the certificate of a qualified medical practitioner and fix compensation arbitrarily. The above judgment as well as S. 4(1)(c)(ii) is applicable only in cases where injuries are not specified in Sch. I. Therefore, the above contention is not acceptable as here injury is specified in Sch. I. For claiming benefit for “total disablement” there should be evidence that disablement is such that “it incapacitates the workman for all work which he was capable of performing at the time of accident” as mentioned in S. 2(1) of the Act or unless it is injury specified in Part II Sch. I (deeming it as an injury resulting in total disablement). Here in this case apart from the loss of three fingers in the right hand, there is no other injuries to any part of the body or other disablement. Certainly, loss of three fingers of right hand will not “totally incapacitate him to do all work which he was capable of performing at the time of accident is difficult to assess. Therefore, legislation has given certain guidelines and Court cannot ignore it.

6. Section 4(c) deals with such situation which is as follows:

(c) Where permanent partial disablement results from the injury (i) in the case of an injury specified in Part II of Sch. I, such percentageof the compensation which would have been payable in the case of permanent total disablement as is specified therein as being the percentage of the loss of earning capacity caused by that injury; and (ii) in the case of an injury not specified in Sch. I, such percentage of the compensation payable in the case of permanent total disablement as is proportionate to the loss of earning capacity (as assessed by the qualified medical practitioner) permanently caused by the injury;

In case of injuries not specified in Part II, S. 4(c)(ii) proved that loss of earning capacity hould be awesse A by qualified medical practitioner. Explanation II to the above sub-clause further states as follows:

“Explanation II.— In assessing the loss of earning capacity for the purposes of Sub-cl. (ii), the qualified medical practitioner shall have due regard to the percentages of loss of earning capacity in relation to different injuries specified in Sch. I.”

Therefore, if the injuries are mentioned in Sch. I, compensation payable under S. 4 of the Act has to be calculated only as provided in the schedule and Court cannot ignore statutory mandate. Commissioners and Courts cannot act as benevolent Kings. Sympathy and consequent generosity cannot be exercised at the expense of others. When there is a mandatory provision in the Act, Court is bound to observe it unless that provision is set aside as unconstitutional, in this connection we refer to the decision of a Division Beach of this Court in Mar Themotheous Birth Centenary Press v. Santhosh Raj, [2001 (1) L.L.N 273], where facts are almost identical. Even if there is no actual loss of earnings and employer continues to employ him without reduction of wages, employer is liable to pay compensation for injuries mentioned in Sch. I as provided under S. 4. Admittedly, injuries suffered by the workmen is not specified in Part I of Sch. I.

7. The workmen lost three fingers of his right hand as a result of the accident. They are thumb, index and middle fingers. Contention of the insurance company is that it will come under Sch. I, Part II, serial No. 8. Loss of earning capacity fixed for loss of three fingers of the right hand is only 30 per cent. Therefore, insurance company pleads that compensation can be calculated in this ease at 30 per cent only. Now we may consider relevant entries in Sch. I Part II.

Serial No Description of injury Percentage of loss of earning capacity 4. Loss of hand or of the thumb and four fingers of one hand or amputation from 4-½″ below tip of olecranon 60 5. Loss of thumb 30 6. Loss of thumb and its metacarpal bone 40 7. Loss of four fingers of one hand 50 8. Loss of three fingers of one hand 30 9. Loss, of two fingers of one hand 20 10. Loss of terminal phalanx of thumb 20 10A. Guillotine amputation of tip of thumb without loss of bone. 10

The above will show that thumb is treated separately with other fingers. Loss of thumb alone attract 30 per cent of loss of earning capacity as per serial No. 5. Serial No. 8 deals with loss of three fingers of one hand other than thumb. Here there is loss of two fingers and thumb. For loss of thumb, loss of earning capacity fixed is 30 per cent as per serial No. 5 and for loss of two fingers, loss of earning capacity is fixed as 20 per cent as per serial No. 9. Therefore, total loss of earning capacity as per Part II, Sch. I, is 50 per cent. Hence employer's obligation is to pay compensation for 50 per cent of loss of earning capacity. Thus compensation payable is reduced by half. Instead of compensation for 100 per cent loss of earning capacity, the workman will get compensation only for 50 per cent of loss of earning capacity. Compensation payable will be Rs. 53,342,50, rounded to Rs. 55,350. The workman is entitled to get the above amount with 12 per cent simple interest per annum from 23 June, 1995, the date of accident, till 13 February, 1997, the date of deposit of the compensation by the insurance company. Balance amount of compensation with interest after deducting the amount already paid should be disbursed to the workman forthwith. Excess amount deposited by the insurance company should be returned to it.

8. The impugned award is modified accordingly and both the appeals are disposed of.

Oriental Insurance Company v. Mohammed

Structured Summary of the Opinion (Koshy, J.)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Workman's Arguments

Insurance Company's / Employer's Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Oriental Insurance Company v. Mohammed

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