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National Insurance Co. Ltd. v. Rekha .
Factual and Procedural Background
This is an appeal filed by the insurance company against an award of compensation made by the Commissioner for Workmen's Compensation. The Commissioner had assessed the claimant's monthly income at Rs. 4,000, determined loss of earning capacity based on a medical certificate, fixed the index factor by reference to the claimant's undisputed age, and awarded interest and a possible penalty (the latter to be payable by the insurance company if the amount was not paid within the prescribed time). The insurance company raised three principal contentions on appeal: (1) that the monthly income of Rs. 4,000 was taken without basis; (2) that the assessment of loss of earning capacity and related calculations were incorrect; and (3) that the rate/date from which interest should run was wrongly awarded from the date of the accident rather than from the date of the award. The appeal was decided by J.B. Koshy, J., who disposed of the appeal by dismissing it.
Legal Issues Presented
- Whether the Commissioner was justified in adopting Rs. 4,000 as the monthly income of the claimant (a professional heavy vehicle driver).
- Whether the assessment of loss of earning capacity (based on the medical certificate and with index factor fixed according to undisputed age) was proper.
- From which date interest on the awarded compensation should be payable — the date of the accident (date compensation "fell due") or the date of the award — and whether the insurance company is liable for penalty/interest under Section 4-A(3) of the Workmen's Compensation Act.
Arguments of the Parties
Appellant (Insurance Company's) Arguments
- Rs. 4,000 was adopted as the claimant's monthly income without any basis; a commercial heavy vehicle driver would earn more than Rs. 4,000.
- The assessment of loss of earning capacity and related calculations were challenged (details limited to the suggestion that the Commissioner erred in assessment methodology and factual determinations).
- The Commissioner erred in awarding interest from the date of the accident; relying on National Insurance Co. Ltd. v. Mubasir Ahmed (2007 ACJ 845 (SC)), interest should, in the appellant's submission, be awarded only from the date of the award and not from the date of the accident.
- The Commissioner directed penalty to be paid by the insurance company if the award was not paid in time; the appellant relied on Ved Prakash Garg v. Premi Devi (1998 ACJ 1 (SC)) for the proposition that penalty is payable by the employer and not by the insurance company. However, in the present case the court noted the amount was paid in time and no penalty was payable.
Commissioner / Respondent's Position (as reflected in the record)
- The Commissioner assessed monthly income at Rs. 4,000 for the claimant (professional heavy vehicle driver).
- Loss of earning capacity was assessed on the basis of a medical certificate; the index factor was fixed according to the undisputed age of the claimant.
- The Commissioner awarded interest and provided for penalty to be imposed if the compensation was not paid within the prescribed time (the imposition and rate of interest being grounded in Section 4-A(3) of the Workmen's Compensation Act).
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Ved Prakash Garg v. Premi Devi, 1998 ACJ 1 (SC) | Distinction between interest (which is not a penalty) and penalty; penalty is different and requires opportunity to be heard under Section 4-A(3)(b). | Court relied on the principle that interest on compensation is not a penalty and observed that imposition of penalty differs and normally attaches to the employer; noted that in Ved Prakash Garg the Supreme Court affirmed liability to pay interest from the date compensation fell due while setting aside direction to pay penalty by insurance company. |
| National Insurance Co. Ltd. v. Mubasir Ahmed, 2007 ACJ 845 (SC) | Authority discussed in relation to the proper date from which interest should run; in that case interest was directed to run from the date of award on the facts of that case. | The court acknowledged Mubasir Ahmed but observed that it relied on Maghar Singh and that the direction to award interest from date of award was fact-dependent; therefore Mubasir Ahmed did not displace the statutory mandate entitling interest from the date compensation fell due in typical workmen's compensation cases. |
| Kerala State Electricity Board v. Valsala K., 2000 ACJ 5 (SC) | Relevant date for determination of rights and liabilities is the date of the accident (date compensation fell due), not the date of adjudication. | Court applied this as authority that compensation and incidents (like rate of interest) are to be assessed with reference to the date of accident because compensation "fell due" on that date. |
| Pratap Narain Singh Deo v. Shrinivas Sabata, 1976 ACJ 141 (SC) | A reference under Section 19 does not suspend the employer's liability under Section 3 to pay compensation; liability to pay arises as soon as injury is caused. | Cited to support the conclusion that the employer's liability crystallises on the date of the accident and is not suspended by references or proceedings; reinforces that interest liability flows from that date if payment/default occurs. |
| Gopinath v. United India Insurance Company, Ltd., 2000 ACJ 1250 (Kerala) | High Court example of awarding interest from the date of the accident in workmen's compensation matters (following the same line of authority). | Noted as one of various High Court decisions following the principle that interest is payable from the date of the accident; supported the court's view that the long-standing practice conforming to Supreme Court dicta is to award interest from the date compensation fell due. |
| Vaqher Mamad Husein Gadh v. Secretary, Gujarat Electricity Board, 1996 Lab IC 368 | Example of High Court practice awarding interest from date of accident. | Cited among High Court authorities that follow the principle that interest runs from date compensation fell due (date of accident). |
| Divisional Manager, New India Assurance Co. Ltd. v. S.B. Singh, 2003 Lab IC 596 (Orissa) | Another High Court decision illustrating the practice of awarding interest from date of accident. | Used to show consistency among High Court decisions in following the rule that interest is payable from the date compensation fell due. |
| Maghar Singh v. Jashwant Singh, 1997 ACJ 517 (SC) | Supreme Court direction to pay interest from the date of accident; exercise of constitutional power to reduce rate of interest in the interest of justice on facts of long delay. | Cited as a key Supreme Court authority that directed interest from the date of the accident; court relied on it as part of the chain of decisions establishing that interest is payable from the date compensation fell due. |
| Delhi Development Authority v. Skipper Construction Co. (P) Ltd., (1996) 4 SCC 622 : AIR 1996 SC 2005 | Limitation on the availability of wide constitutional powers (Article 142) to courts below the Supreme Court when deciding statutory appeals. | Cited to emphasise that Tribunals and High Courts cannot invoke Article 142 powers in place of statutory mandate; the court used the principle to reject reliance on extraordinary remedies inconsistent with statutory scheme. |
| Suganthi Suresh Kumar v. Jagdheesan, (2002) 2 SCC 420 | Binding force of law declared by the Supreme Court as mandated by Article 141 of the Constitution. | Applied to justify adherence to Supreme Court precedent and to show that this court is bound by Apex Court decisions on the legal questions addressed. |
| Mattutal v. Radhe Lal, (1974) 2 SCC 365 : AIR 1974 SC 1596 | When there is conflict between decisions of the Supreme Court, the decision of the larger Bench prevails. | Invoked to explain that where Supreme Court decisions conflict, the larger Bench's ruling controls and must be followed by lower courts. |
Court's Reasoning and Analysis
The court's analysis proceeds from a close reading of the statute (Section 3 and Section 4-A of the Workmen's Compensation Act) and the Supreme Court decisions interpreting those provisions.
- Statutory framework: Section 3 imposes an immediate liability on the employer to pay compensation when a personal injury is caused by an accident arising out of and in the course of employment. Section 4-A(1) requires payment "as soon as it falls due" and Section 4-A(3) prescribes consequences (interest and possible penalty) where the employer defaults in paying compensation within one month from the date it fell due. The court reproduced the text of Section 4-A(3), stressing its mandatory tenor with respect to interest.
- The dispositive legal question is when compensation "fell due." The court concluded, following binding Supreme Court precedent, that the compensation falls due on the date of the accident itself. Accordingly, the one-month period for payment (and the trigger for interest liability) runs from the date of the accident.
- Reliance on precedent: The court relied on the three-Judge Bench decision in Kerala State Electricity Board v. Valsala K., and on Pratap Narain Singh Deo v. Shrinivas Sabata, to establish that liability to pay compensation is not suspended by references under Section 19 and that the relevant date for rights and liabilities is the date of accident. The court noted a long line of High Court and Supreme Court decisions that have awarded interest from the date of the accident on the basis of statutory mandate.
- Distinguishing conflicting decisions: The appellant relied on National Insurance Co. Ltd. v. Mubasir Ahmed, where interest was directed from the date of award on the facts of that case. The court observed that Mubasir Ahmed relied on Maghar Singh, and that the direction in Mubasir Ahmed was fact-specific. The court also pointed out that extraordinary remedial powers (under Article 142) exercised by the Supreme Court are not available to Tribunals or High Courts, and that this court is bound by the law declared by the Supreme Court under Article 141. Where Supreme Court decisions conflict, the decision of the larger Bench prevails.
- Application to present facts: Applying this statutory and precedential framework, the court held that the Commissioner was correct in treating the date of the accident as the date on which compensation fell due and in awarding interest accordingly. The court also treated the Commissioner’s factual findings (including adoption of Rs. 4,000 monthly income and the medical-certificate-based assessment of loss of earning capacity) as findings of fact not warranting interference in the absence of a substantial question of law or demonstrable error.
- Penalty: The court accepted the legal principle that penalty under Section 4-A(3)(b) is different from interest and that, typically, penalty is a matter for the employer (and entails procedural safeguards like show-cause). In this case, the court noted the payment was made in time, hence no penalty was payable.
- Procedural observation: The court noted that the point about interest (as raised in the appeal) had not been raised before the Commissioner or in the original memorandum of appeal but was added later; nevertheless, on the legal merits the court found no ground to interfere with the award.
Holding and Implications
Holding: APPEAL DISMISSED.
Implications and direct effects:
- The Commissioner's award is upheld in all material respects addressed by the court: the assessment of monthly income at Rs. 4,000 and the assessment of loss of earning capacity (based on the medical certificate and index factor) were treated as findings of fact not warranting interference.
- The court reaffirmed that, under Section 4-A(3)(a) of the Workmen's Compensation Act, interest on unpaid compensation is mandatory from the date the compensation "fell due" — which, as a matter of law and consistent Supreme Court authority, is the date of the accident — if the employer fails to pay within one month of that date (unless payment or provisional payment is made within that period).
- The court accepted the settled principle that penalty under Section 4-A(3)(b) is conceptually different from interest and requires the opportunity to show cause; in the present case, no penalty was payable because the amount was paid in time.
- The decision does not purport to create new law; rather, it applies the statutory provision and follows binding Supreme Court precedent and longstanding High Court practice on the date from which interest is to be computed in workmen's compensation matters.
This summary is strictly confined to the matters and materials contained in the opinion excerpt provided and does not add information from outside sources.
J.B Koshy, J.:— Appeal is filed by the insurance company against the award of compensation by the Commissioner for Workmen's Compensation. Contentions raised are three in number. First contention is that Rs. 4,000 was taken as the monthly income without any basis. He was a professional driver. The amount of Rs. 4,000 assessed by the Commissioner needs no interference as commercial heavy vehicle driver will get more than Rs. 4,000 a month. In any event, it is a finding of fact and no substantial question of law arises. Second contention is with regard to assessment of loss of earning capacity. Commissioner has assessed the same on the basis of medical certificate. Index factor was fixed considering the undisputed age of the claimant. It is submitted that the Commissioner has awarded penalty to be paid by insurance company, if the amount is not paid within the time prescribed. It is well settled law that penalty is not payable by the insurance company but by the employer as held by the Apex Court in Ved Prakash Garg v. Premi Devi, 1998 ACJ 1 (SC). But in this case, the amount was paid in time and no penalty is payable.
2. Final question is what is the rate of interest to be paid. It is argued by learned counsel for appellant insurance company that Commissioner has awarded interest from the date of accident. Based on the decision of the Hon'ble Supreme Court in National Insurance Co. Ltd. v. Mubasir Ahmed, 2007 ACJ 845 (SC), it was argued that interest can be awarded only from the date of award and not from the date of accident. In motor accident claims, usually, interest is awarded from the date of application except in special circumstances. Even though there is no special provision in the Motor Vehicles Act regarding grant of interest on the compensation awarded, interest is awarded on the discretion of the Motor Accidents Claims Tribunal depending upon the rate of percentage of interest and other circumstances to set off erosion in money value, etc. But, award of interest is statutory in workmen's compensation case. Section 4-A (3) reads as follows:
“4-A. Compensation to be paid when due and penalty for default.—
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.—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 (2 of 1934).”
(Emphasis added)
It has been held by the Hon'ble Supreme Court and this court that liability to pay interest from the date compensation fell due as provided under section 4-A(3)(a) is mandatory.
3. When compensation ‘fell due’ is the main dispute. Section 3 mandates payment of compensation by employer immediately when injury occurs to a workman in the course of employment arising out of employment. Section 4-A (1) also casts liability to pay compensation ‘as soon as it falls due’ and section 4-A (3) casts liability to pay interest if it is not paid within one month from the date compensation amount ‘fell due’. It is clear from the statutory provisions that amount of compensation fell due on the date of accident itself. Interest liability can be avoided by making deposit/payment or at least provisional payment/deposit within a month of the accident. If compensation ‘falls due’ only on the date of award, compensation has to be calculated on the provisions of the Act existing on the date of award. Now, it is settled law that compensation has to be calculated with reference to the provisions of the Act as on the date of accident as compensation ‘fell due’ on that date itself. In Kerala State Electricity Board v. Valsala K., 2000 ACJ 5 (SC), a three-Judge Bench of the Apex Court held that relevant date for determination of the rights and liabilities of the parties concerned is the date of accident and not the date of adjudication of the claim. It is true that if there is dispute regarding liability, the matter can be referred to the Commissioner. But, Constitution Bench of the Hon'ble Apex Court in Pratap Narain Singh Deo v. Shrinivas Sabata, 1976 ACJ 141 (SC), held that even a reference under section 19 of the Act does not have the effect of suspending the liability of an employer to pay compensation under section 3 till after adjudication or settlement. It is the duty of the employer to pay/deposit compensation as soon as personal injury is caused to the workman in an accident during the course of employment. If the employer fails to do so within one month of the accident and also makes no provisional payment, he is liable to pay interest from the date of accident. Apex Court held 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 the 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 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 6.5.1969 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 Commis sioner. There is, therefore, nothing to justify the argument that the employer's liability to pay the compensation under section 3, in respect of the injury, was suspended until after the settlement con templated 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.”
(Emphasis added)
Apex Court at para 8, it was observed as follows:
“(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 subsection (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 due to his negligence. Then there is the further fact that he paid no heed to the respondent's personal approach for obtaining 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…”
(Emphasis added)
For the last three decades, this court was following the above decision and interest was being awarded from the date of accident treating the date of accident as the date when ‘compensation fell due’. Various High Courts were also following the above dictum. [See Gopinath v. United India Insurance Company, Ltd., 2000 ACJ 1250 (Kerala); Vaqher Mamad Husein Gadh v. Secretary, Gujarat Electricity Board, 1996 Lab IC 368 and Divisional Manager, New India Assurance Co. Ltd. v. S.B Singh, 2003 Lab IC 596 (Orissa)]. Supreme Court also in large number of cases, held that interest is payable from the date of accident on the basis of statutory mandate. In Ved Prakash Garg v. Premi Devi, 1998 ACJ 1 (SC), it was held that imposition of penalty is different from liability to pay interest from the date compensation fell due. The Hon'ble Apex Court observed as follows at para 9, page 8:
“(9) … Thus even in the scheme of the unamended section 4-A (3) or as per the amended section 4-A (3) read wim clauses (a) and (b) thereof, it becomes clear that additional amount of compensation can be levied against the defaulting employer by way of penalty if it is shown that there is no justification for the delay on his part in making good the compensation amount to the claimant. Interest payable on the principal amount, if not paid when it fell due, is not considered by the legislature to be-a penalty. This is further highlighted by the proviso to section 4-A (3) as substituted by Act 30 of 1995 which clearly indicates that a penalty amount under clause (b) cannot be imposed against the employer without giving him reasonable opportunity to show-cause. No such show-cause notice is contemplated while imposing interest on default of payment of the principal amount on the part of employer as per section 4-A(3)(a). Absence of this provision is obviously based on the legislative intent that interest on the principal amount is not by way of penalty. Therefore, the employer need not be heard in this connection. A simpliciter default in payment of compensation within the time of one month from the date it fell due would automatically attract the provision for simple interest under section 4-A (3) as per the rate prescribed therein and for such imposition of interest no question of justification for the delay is countenanced by the legislature…”
(Emphasis added)
In that case, Apex Court affirmed the liability to pay interest by insurance company from the date of accident, but, direction to pay penalty by insurance company was set aside. No contention was raised by the insurance company in this case that there is specific exclusion of liability to pay interest by the insurance policy. A three-Judge Bench decision in Maghar Singh v. Jashwant Singh, 1997 ACJ 517 (SC) which is relied on in National Insurance Co. Ltd. v. Mubasir Ahmed, 2007 ACJ 845 (SC), Hon'ble Apex Court directed to pay interest from the date of accident. In Maghar Singh's case (supra) accident occurred on 26.7.1984 Application filed by the workman was rejected by the Commissioner and High Court. Apex Court held that the workman was entitled to compensation at the rate applicable on the date of accident. But, when Apex Court allowed the claim, the Act was amended and rate of interest payable was enhanced from 6 per cent to 12 per cent in 1995 by Act 30 of 1995. Hon'ble Supreme Court by using the constitutional power, in the interest of justice, considering the long delay, reduced the interest from 12 per cent to 9 per cent but directed the employer to pay interest from 26.7.1984 till payment. Supreme Court observed as follows:
“(5) The accident occurred way back in 1984 and, therefore, we must decide the rate of interest keeping that factor in mind. We think it would be appropriate to grant interest at the rate of 9 per cent per annum.
(6) In the result, we allow this appeal, set aside the orders of the courts below and hold that the appellant is entitled to compensation of Rs. 24,000 with interest at the rate of 9 per cent per annum from the date of accident, i.e, 26.7.1984 till the date of recovery or actual payment…”
In Mubasir Ahmed's case (supra), Maghar Singh's case (supra) was relied but directed to pay interest from the date of award only on the basis of the facts of that case. Wide powers vested in the Hon'ble Supreme Court under Article 142 of the Constitution of India are not available to the Tribunal or even to the High Courts while deciding a statutory appeal. [See the observations in Delhi Development Authority v. Skipper Construction Co. (P) Ltd., (1996) 4 SCC 622 : AIR 1996 SC 2005]. We are bound by statutory provisions and law declared by the Apex Court as mandated by Article 141 of the Constitution as held in Suganthi Suresh Kumar v. Jagdheesan, (2002) 2 SCC 420. When there is conflict between the decisions of the Supreme Court, decision of the larger Bench will prevail. [See Mattutal v. Radhe Lal, (1974) 2 SCC 365 : AIR 1974 SC 1596]. In view of the statutory provisions and larger Bench decision, we see no ground to interfere in that part of the order in awarding interest from the date of accident. We also note that this ground was not raised before the Commissioner or even in the appeal memorandum but only raised as an additional ground by filing petition dated 7.6.2007 in the appeal filed in the year 1998. However, we see no ground to interfere in the impugned award and hence this appeal is dismissed.
4. Appeal dismissed.
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