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Relevant Date For The Determination of Compensation Payable Under Employees Compensation Act, 1923 I

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 force.

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 amendment.

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 Court.

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.-

  1. Compensation under section 4 shall be paid as soon as it falls due.
  2. 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 further claim.
  3. 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.

A two 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 it.

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. , [2014] 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 as follows:
“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 precedents.”

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, J&K, Jammu.
Email: [email protected], [email protected]

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