The Supreme Court reiterated that the relevant date for the determination of
compensation along-with interest at the rate of 12% payable under Employees
Compensation Act 1923 is the date of the accident.
The Bench of Justice Dhananjaya Y. Chandrachud & Justice Ajay Rastogi while
deciding the Civil Appeal No. 9046 of 2019 (Arising out of SLP (C) No 18110 of
2019) titled K, Sivaraman & Ors. Vs P Sathishkumar & Anr, observed that the
benefit of 2009 amendment of the Act which had deleted the provision that capped
the monthly wages of an employee at Rs 4,000 does not apply to accidents that
took place prior to its coming into force.
The Apex Court was considering an appeal against a Division Bench of the Madurai
Bench of the Madras High Court Judgment which applied the benefit of 2009
amendment to an case in which the accident occurred prior to the date of
amendment. It rejected the contention which sought to distinguish a Three Judge
Bench decision in Pratap Narain Singh Deo v Srinivas Sabata, (1976) 1 SCC 289.
Dealing with the contention that amendments that confer a benefit upon
individuals must be given retrospective application, the bench observed that the
amendments enhancing the compensation payable under the 1923 Act confer a
benefit upon employees; a corresponding burden is imposed on employers to pay a
higher rate of compensation.
Further, the Court noted that, there is nothing in Act 45 of 2009, either
express or implied, to denote an intention of the legislature to confer the
benefit of the amendment to accidents that took place prior to its coming into
While reversing the High Court view, the Bench said:
Prior to Act 45 of 2009, by virtue of the deeming provision in Explanation II
to Section 4, the monthly wages of an employee were capped at Rs 4000 even where
an employee was able to prove the payment of a monthly wage in excess of Rs
4,000. The legislature, in its wisdom and keeping in mind the purpose of the
1923 Act as a social welfare legislation did not enhance the quantum in the
deeming provision, but deleted it altogether.
The amendment is in furtherance of the salient purpose which underlies the 1923
Act of providing to all employees compensation for accidents which occur in the
course of and arising out of employment. The objective of the amendment is to
remove a deeming cap on the monthly income of an employee and extend to them
compensation on the basis of the actual monthly wages drawn by them. However,
there is nothing to indicate that the Legislature intended for the benefit to
extend to accidents that took place prior to the coming into force of the
Relevant Provisions of Employees Compensation Act, 1923
Section 4 (1)(a) of the Act contains the following provision:
4. Amount of compensation-(1) Subject to the provisions of this Act, the
amount of compensation shall be as follows, namely:
(a) where death results from the injury an amount equal to fifty per cent of the
monthly wages of the deceased employee multiplied by the relevant factor; or an
amount of one lakh and twenty thousand rupees, whichever is more;
The proviso to the above provision stipulates that the Central Government may,
by notification in the Official Gazette, from time to time, enhance the amount
of compensation mentioned in clauses (a) and (b). Clause (b) deals with a case
involving permanent total disablement resulting from the injury.
The expression -relevant factor is defined in Explanation I to be the factor specified in
Schedule IV. Prior to Act 45 of 2009, Section 4 contained Explanation II, which
was in the following terms:
Explanation II- Where the monthly wages of a workman exceed four thousand
rupees, his monthly wages for the purposes of clause(a) and clause(b) shall be
deemed to be four thousand rupees only.
By Act 45 of 2009, which came into force on 18 January 2010, Explanation II came
to be deleted. Sub-section (1B) was introduced in Section 4 to read as follows:
(1-B) The Central Government may, by notification in the Official Gazette,
specify, for the purposes of sub-section (1), such monthly wages in relation to
an employee as it may consider necessary.
Substantial and Important Question of Law
The question before Supreme Court was whether the benefit of Act 45 of 2009
deleting the deeming provision in Explanation II which capped the monthly wages
of an employee at Rs 4,000 would also apply to accidents which took place prior
to the coming into force of its provisions i.e. 18 January 2010 and where final
adjudication is pending. In assessing whether the Act 45 of 2009 applies
retrospectively, it is necessary to analyze the relevant precedents of this
In Pratap Narain Singh, the first respondent was in the employment of the
appellant and suffered injuries which arose out of and in the course of
employment. It was contended that the Commissioner committed an error of law in
imposing a penalty on the appellant under Section 4-A (3) of the 1923 Act as the
compensation payable had not fallen due until it was settled‘ by the
Commissioner under Section 19 of the 1923 Act. Section 4A reads:
4-A. Compensation to be paid when due and penalty for default.-
- Compensation under section 4 shall be paid as soon as it falls due.
- In cases where the employer does not accept the liability for
compensation to the extent claimed, he shall be bound to make provisional
payment based on the extent of liability which he accepts, and, such payment
shall be deposited with the Commissioner or made to the employee, as the
case may be, without prejudice to the right of the employee to make any
- Where any employer is in default in paying the compensation due under
the 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 percent 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 arrears and interest
thereon, pay a further sum not exceeding fifty per cent of such amount by
way of penalty...
In terms of Section 4-A (1), compensation under Section 4 is payable - as soon
as it falls due. Section 4-A (2) contemplates a situation, wherein, the
employer, though accepting the liability to pay compensation to the injured
employee, disputes the quantum of compensation payable.
In such cases,
sub-section (2) enjoins the employer to make a provisional payment based on the
extent of accepted liability by depositing it with the Commissioner or by paying
it directly to the employee. Section 4A(3) stipulates that where an employer
defaults in paying compensation within one month from the date on which it falls
due, the Commissioner is empowered to direct the payment of interest as well as
an additional amount as arrears for an unjustifiable delay in making payment.
Section 19 of the Act reads:
19. Reference to Commissioners.- (1) If any question arises in any
proceedings under this Act as to the liability of any person to pay compensation
(including any question as to whether a person injured is or is not an employee
or as to the amount or duration of compensation (including any question as to
the nature or extent of disablement), the question shall, in default of
agreement be settled by a Commissioner...
Section 19 stipulates that any question arising in any proceeding under the Act
shall, in the default of an agreement, be settled by the Commissioner. A Four
Judge Bench of Supreme Court rejected the contention urged by the appellant and
held that compensation - falls due‖ on the date of the accident. Consequently,
the Commissioner was empowered to impose interest or penalty for the duration
prior to the settling of the claim or where there was unjustified delay in
making good the payment of compensation.
The Court held:
18...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 with after the
Commissioners 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 an agreement, be settled by the
Commissioner. There is therefore nothing to justify the argument that the
employers 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. 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 respondents personal
approach for obtaining the compensation. It will be recalled that the respondent
was driven to the necessity of making and 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 setting 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.
The Supreme Court held that though Section 19 empowered the Commissioner to
decide claims or objections under the Act, the obligation to pay compensation to
an injured employee was not suspended until the Commissioner settled the amount
payable in the case of a dispute between the employer and the employee. Section
4A deals with when the obligation for the payment of compensation as required
under the 1923 Act arises.
For the purposes of Section 4-A of the 1923 Act, the
obligation to pay compensation arises on the date of the accident. Where an
employer disputes the quantum of compensation payable, it is enjoined to make a
provisional payment to the Commissioner or the employee pending the settlement
of the claim. This is in order to ensure that an employer does not escape its
obligation to make good the payment of compensation or unduly delay its payment
on frivolous grounds.
Legal Submissions Made By Amicus Curiae
The Learned Amicus Curiae, at a belated stage, sought to distinguish the
Judgments of Supreme Court in Pratap Narain Singh Deo Vs Srinivas Sabata,
(1976) 1 SCC 289 and Kerala State Electricity Board Vs Valsala, (1999) 8 SCC
254 in which it was held that the date relevant for the determination of
compensation payable under the 1923 Act is the date of the accident and that the
benefit of an amendment enhancing the amount of compensation shall not apply to
accidents that take place prior to its coming into force.
To support this, the
amicus curiae relied on the Judgments of Supreme Court in New India Assurance
Company Ltd. Vs Neelakandan, Civil Appeal Nos. 16904-09 of 1996 and National
Insurance Co Ltd. Vs Mubasir Ahmed, (2007) 2 SCC 349.
In New India Assurance Company Ltd. Vs Neelakandan, Civil Appeal Nos. 16904-09
of 1996, the accident had taken place prior to the coming into force of an
amendment to the 1923 Act whereunder the deemed income had been increased from
Rs 1000 to Rs 2000. The question before the Court was whether the benefit of the
amendment would extend to accidents which took place prior to its coming into
force and where the final adjudication of the amount payable was pending.
judge Bench of this Court held that though the accident in question took place
in 1981, the benefit of the amendment would apply to accidents that took place
prior to the coming into force of the amendment in the following terms:
It is not disputed that Section 4 of the Act was amended in 1995 by Amendment
Act 30 whereunder the deemed income has been increased from Rs 1000 to Rs 2000.
Learned counsel for the Insurance Company has vehemently contended that since
the accident took place in the year 1981, the law operating on that date is
applicable and as such the workmen are not entitled to the benefit of the
amendment. We do not agree with the learned counsel.
We are finally determining
the right of workmen today. The Act is a special legislation for the benefit of
the labour. Keeping in view the scheme of the Act we are of the view that the
only interpretation which can be given to the amendment is that is any benefit
is conferred on the workmen and the said benefit is available on the date when
the case is finally adjudicated, the said benefit should be extended to the
workmen. We, therefore, hold that the compensation to be paid to the heirs of
the workmen has to be calculated on the basis of the actual wages – Rs 1800 –
drawn by them..
The Supreme Court noted that the 1923 Act is a social welfare legislation for
the benefit of employees. Consequently, taking into account the scheme of the
Act, the court must adopt an interpretation which extends a benefit to the
employee on the date of the final adjudication of the claim. Where a case is
pending final adjudication and an amendment is enacted increasing the amount of
compensation payable, the enhanced amount would be applicable in the
determination of the quantum of compensation payable. Conspicuous in its absence
in the submission advanced by the learned amicus curiae is how a subsequent
Bench of this Court dealt with the position of law laid down in Neelakandan.
Law Laid Down By Supreme Court
In Kerala State Electricity Board Vs Valsala , (1999) 8 SCC 254 the question
before a Three Judge Bench of Supreme Court was whether an amendment to Section
4 and 4-A of the 1923 Act enhancing the amount of compensation and the rate of
interest would be applicable to cases where the accident took place prior to the
coming into force of the amendment. This Court noted that various High Courts in
the country had taken the uniform position that the relevant date for
determining the rights and liabilities of the parties is the date of the
accident. Relying on the Judgment of Supreme Court in Pratap Narain Singh, the
Court overruled the Judgment in Neelakandan and held that the benefit of an
amendment whereunder the compensation payable was increased, would not apply to
accidents that took place prior to its coming into force.
The Court held:
4. A Two-Judge Bench of this Court in New India Assurance Co Ltd. v. V. K. Neelakandan however, took the view that the Workmen‘s Compensation Act being a
special legislation for the benefit of the workmen, the benefit as available on
the date of adjudication should be extended to the workmen and not the
compensation which was payable on the date of the accident. The Two-Judge Bench
in Neelakandan case however, did not take notice of the Judgment in Pratap
Narain Singh Deo case as it presumably was not brought to the notice of their
Lordships. Be that as it may, in view of the categorial law laid down by the
Larger Bench in Pratap Singh Deo case the view expressed by the two-judge Bench
in Neelakandan case is not correct.
In the course of the Judgment in Valsala, the Three Judge Bench also affirmed
the Full Judge Bench Judgment of the Kerala High Court in Alavi - to the extent
it is in accord with the Judgment of the Larger Bench‖ in Pratap Narain Singh.
The Court held:
5. Our attention has also been drawn to a judgment of the Full Bench of the Kerala High Court in
United India Insurance Co. Ltd v. Alavi wherein the Full
Bench precisely considered the same question and examined both the above-noted
Judgments. It took the view that the injured workman becomes entitled to get
compensation the moment he suffers personal injuries of the types contemplated
by the provisions of the Workmen‘s Compensation Act and it is the amount of
compensation payable on the date of the accident and not the amount of
compensation payable on account of the amendment made in 1995, which is
relevant. The decision of the Full Bench of the Kerala High Court, to the extent
it is on accord with the judgment of the larger Bench of this Court in Pratap
Narain Singh Deo v Srinivas Sabata lays down the correct law and we approve
In Alavi v. Radha Varasyaramma, (1976 Ker LT 601), a Full Judge Bench of the
Kerala High Court was required to adjudicate whether Sections 4 and 4-A of the
1923 Act as amended in 1995 enhancing the amount of compensation and rate of
interest would be applicable to claims in respect of death and permanent
disablement resulting from accidents which occurred prior to 15 September 1995
i.e. the date on which the amended provisions came into force.
In all the
appeals before the Court, the accident as well as settling of the claims by the
Commissioner took place prior to the coming into force of the amending
provisions enhancing the quantum of compensation payable. The Court relied on
the decision of this Court in Pratap Narain Singh and held that the Amending act
enhancing compensation would apply only to accidents that took place after the
coming into force of the amendment.
The Court held:
17. Right to claim compensation as well as the obligation to pay the same are
created by the statute itself. It is well-settled rule of interpretation that if
the law is procedural, there is, no doubt, a presumption that it applies to
pending proceedings. If the law is substantive in nature, the normal presumption
against retrospectivity still holds good, subject to the principle that the
Court must look to the question whether the rights of the parties at the
commencements of the proceedings were intended to be modified either expressly
or by necessary implication: Neeli v. Narayana Pilla [(1992) 2 K.L.J. 937, 950].
If the amended provisions are given effect to in the matter of awarding enhanced
compensation even with regard to the accident which occurred prior to 15
September 1995, and the claim was decided prior to the same date, the law
applicable is the unamended provisions of the Workmen‘s Compensation Act, 1923.
But if the claim could not be settled prior to 15 September 1995 going by the
Division Bench decision in Asokan case (vide supra), those claimants would get
the benefit of the Amendment Act. In other words, the benefit would depend on
when the case is decided either prior to 15 September 1995 or subsequent. This
was never the intention of the Legislature...
The question before the Bench in Kerala State Electricity Board Vs Valsala
(1999) 8 SCC 254 was clearly whether an amendment to Section 4 and 4A of the
1923 Act enhancing the amount of compensation and the rate of interest would be
applicable to cases where the accident took place prior to the coming into force
of the amendment. The Bench held that the benefit of an Amending act enhancing
the quantum of compensation would not apply to accidents that took place prior
to the coming into force of the amendment.
Though the learned amicus curiae
sought to rely on the two judge Bench judgment of this Court in Mubasir Ahmed,
it is sufficient at this stage to note that the subsequent Judgment of Supreme
Court in Oriental Insurance Company Vs Siby George , (2012) 12 SCC 540 noted
that the Judgment in Mubasir Ahmed is contrary to the Judgments of Supreme Court
in Pratap Narain Singh and Valsala and hence not a binding precedent.
The Supreme Court in Saberabibi Yakuubbhai Shaikh & Ors Vs National Insurance
Company Limited & Ors. ,  Acc. C. R 284 (SC), held that the relevant date
for the determination of compensation along-with interest at the rate of 12%
payable under Employees Compensation Act 1923 is the date of the accident.
While reversing and setting-aside the High Court Judgment, the Bench said:
10. We have perused the aforesaid Judgment. We are of the considered opinion
that the aforesaid Judgment relied upon by the learned counsel for the
appellants is fully applicable to the facts and circumstances of this case. This
Court considered the earlier Judgment relied upon by the High Court and observed
that the Judgments in the case of National Insurance Co. Ltd. Vs Mubasir Ahmed
[(2007) 2 SCC 349] and Oriental Insurance Co. Ltd. Vs Mohd. Nasir [(2009) 6
SCC 280] were per incuriam having been rendered without considering the earlier
decision in Pratap Narain Singh Deo Vs. Srinivas Sabata [(1976) 1 SCC 289]. In
the aforesaid Judgment, upon consideration of the entire matter, a Four-Judge
Bench of this Court had held that the compensation has to be paid from the date
of the accident.
11. Following the aforesaid Judgments, this Court in Oriental Insurance Company
Limited Versus Siby George & Ors (supra) reiterated the legal position and held
“11. The Court then referred to a Full Bench decision of the Kerala High Court
in United India Insurance Co. Ltd. Vs Alavi and approved it insofar as it
followed the decision in Pratap Narain Singh Deo.
12. The decision in Pratap Narain Singh Deo was by a Four-Judge Bench and in
Valsala K. 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 K. were not brought to the notice of the Court in the two later
decisions in Mubasir Ahmed and Mohd. Nasir.
13. In the light of the decisions in Pratap Narain Singh Deo and Valsala K., it
is not open to contend that the payment of compensation would fall due only
after the Commissioners 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 K. do not express the correct view and do not make binding
However, invoking Article 142 of the Constitution, the Bench comprising Justice
Dhananjaya Y. Chandrachud & Justice Ajay Rastogi while deciding the Civil Appeal
No. 9046 of 2019 (Arising out of SLP (C) No 18110 of 2019) titled K,
Sivaraman & Ors. Vs P Sathishkumar & Anr declined to interfere with the
award of compensation ordered by the High Court.
The 1923 Act is a social beneficial legislation and its provisions and
amendments thereto must be interpreted in a manner so as to not deprive the
employees of the benefit of the legislation. The object of enacting the Act was
to ameliorate the hardship of economically poor employees who were exposed to
risks in work, or occupational hazards by providing a cheaper and quicker
machinery for compensating them with pecuniary benefits.
The amendments to the 1923 Act have been enacted to further this salient purpose
by either streamlining the compensation process or enhancing the amount of
compensation payable to the employee.
Written By: Dinesh Singh Chauhan, Advocate, High Court of Judicature,
Email: [email protected], [email protected]