New India Assurance Co.Ltd vs Balachandran

P.G. Ajithkumar, J.

This is an appeal under Section 30 of the Workmen's Compensation Act, 1923 (now renamed as Employees Compensation Act, 1923). The appellant was the 2nd respondent in W.C.C.No.168 of 2002 before the Commissioner for Workmen's Compensation, Kozhikode. The order dated 29.04.2010 in that compensation case allowing the 1st respondent–claimant compensation of Rs.86,205/- and its interest is under challenge in this appeal.

There was a delay of 142 days in filing this appeal. As per the order dated 05.07.2013, the delay was condoned on payment of a cost of Rs.1,000/-. As per the order dated 29.06.2011 in I.A.No.1635 of 2011, the amount deposited in terms of the impugned order was directed to be kept in a fixed deposit account with a nationalised bank. There was a further direction that the principal amount along with interest accrued thereon should be ordered to be released to the successful party after disposal of this appeal.

When this matter came up for consideration on 23.08.2013, this Court expressing doubt about the correctness of the decision of the Division Bench of this Court in United India Insurance Co.Ltd. v. Abdul Razak [2012 (1) KLT 818] and referred the matter for a decision by a Larger Bench. The relevant portions of the reference order dated 23.08.2013 reads as follows:

“3. In this case, compensation has been ordered on the basis that the applicant was entitled to calculate wages at Rs.5,400/- per month. Compensation has been determined under Section 4(1)(c)(ii) of the Act. In answer to our query as to whether the appellant would be justified in invoking the said Explanation in regard to the compensation ordered under Section 4(1)(c)(ii) as the embargo against reckoning a higher sum than is provided holds good in respect of cases under clauses

(a) and (b), the answer was that the legislature intended the maximum limit even with regard to compensation ordered under Section 4(1)(c)(i) or (ii). The compensation under Section 4(1)(c)(i) is determined with reference to clause (b). Therefore, it cannot be any the different from the law for determining compensation under clause (b). He would submit that this result would inevitable if we see the phraseology used in clause (c):

"(c) where permanent partial disablement result from the injury

(1) in the case of an injury specified in Part II of Schedule I, such percentage of 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 Schedule 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;"

He points out that what the law giver contemplates is that the compensation under 4(1)(c) must be a percentage of the compensation payable in respect of the permanent total disablement which is to be determined on the basis of the percentage of loss of earning capacity caused by the injury with respect to clause (i) and the percentage of such compensation again with reference to the permanent total disablement which is proportionate to the loss of earning capacity, which is assessed by the qualified Medical Officer, in respect of clause (ii). In other words, the case is that even though only clauses (a) and (b) are referred to in Explanation II, the legislature did not expressly refer to clause (c) as compensation payable even under clause (c) is relatable and based on the compensation to be payable under clause (b). The learned counsel for the appellant would bring to our notice, however a judgment of Division Bench of this court in United India Insurance Co. Ltd. v. Abdul Razak [2012 (1) KLT 818]. Therein we notice that the question engaged the attention of the court and it held as follows:

“5. We first proceed to consider the primary plea of the insurer that the monthly income of the workman ought to have been pegged at 4,000/- and the argument on its behalf with reference to Explanation II occurring after clauses (a) and (b) of sub-section (1) of Section 4. A survey of the Act shows that the legislature visualised five contingencies, to start with. They are (1) death; (2) permanent total disablement; (3) permanent partial disablement; (4) temporary total disablement; and, (5) temporary partial disablement. We also see the legislation categorising the injuries as those included in the Schedules, also with deeming provisions. Section 4(1)(a) deals with cases where death results from the injury. Fortunately, this is not such a case. Section 4(1)(b) deals with cases where permanent total disablement results from the injury. To his fortune, the claimant in this case is not permanently totally disabled. It is a case of permanent "partial" disability. The determination of compensation due to the applicant would not, therefore, fall within Section 4(1)(b). It falls, squarely under Section 4(1) (c), which governs cases where permanent partial disablement results from the injury. The limit of 4,000/- fixed in Explanation II to Section 4(1)(a) &

(b) is not applicable to cases which fall under Section 4(1)(c). The appealing insurer's plea that the Commissioner ought to have pegged the monthly income of the workman at 4,000/- applying Explanation II occurring after clauses (a) and (b) of Section 4(1) of the Act, therefore fails."

Learned counsel for the appellant would submit that the said decision is erroneous.

We are also of the view that we may not be justified in subscribing to the view expressed by the Division Bench. We are of the view that there is considerable substance in the argument of the learned counsel for the appellant that even though clause (c) is not expressly mentioned in Explanation II, in view of the fact that clause (c) contemplates compensation payable which in turn is to be determined with reference to compensation under clause 4(1)(b), the legislature has left out reference to clause (c) in Explanation II and any other interpretation is likely to result in an anomalous situation as for a person who suffered total disablement, the wages would be at the maximum of Rs.4,000/-, while if it is a case of permanent partial disablement the person would get compensation but with reference to higher monthly wages. This we would think is not the intention of the legislature. In said circumstances, as we are in disagreement with the view expressed by the Division Bench, we would think that the matter has to be decided by a Larger Bench.”

A Full Bench of this Court accordingly considered the matter. The Full Bench as per the order dated 16.10.2014 affirmed the view taken by the Division Bench in the reference order and overruled the law laid down in United India Insurance Co.Ltd. [2012 (1) KLT 818]. The operative part of the order dated 16.10.2014 [New India Assurance Company Ltd. v. Balachandran (2014 (4) KLT 499)] by which the reference was answered, reads:

“10. There cannot be any dispute to the proposition as laid down by the Apex court in the above case in which there is a casus omissus supplied by the Court. Clause (c)(i) applies to computation of compensation with regard to permanent total disablement as referred to in Section 4(1)(b). Hence there is no case of casus omissus so as to add any word in the Statute by the court. It has lastly been submitted that the Explanation II has suffered several amendment in the Act and ultimately with effect from 18.01.2010 it has been deleted. Explanation II is relevant for the present case since at the relevant time the provision was in the statute book. The fact that it has been deleted may be relevant for subsequent cases but that has no relevance for determining the issues which have arisen in the present case. The Division Bench in United India Insurance (supra) had held that since there is no mention of Explanation II in clause (c), it will not fall in Section 4(1)(b). We are of the view that the views expressed by the Division Bench in United India Insurance (supra) does not lay down the correct law. The view expressed by the Division Bench in the reference order is to be approved.”

The first contention raised by the appellant that the Commissioner went wrong in computing the compensation taking the monthly income as Rs.5,400/- is vindicated by the view taken by the Full Bench. The amount of compensation therefore has to be recomputed applying the monthly income as Rs.4,000/-. The compensation payable to the 1st respondent while computing so is Rs.4,000/- x 60/100 x 166.29 x 16/100 = Rs.63,855/-.

The appellant raised further contentions that the 1st respondent was not an employee of the insured but he was an employee under the sub-contractor. Therefore, the appellant is excluded from the liability by virtue of the contractual conditions in the policy of insurance. The law laid by the Apex Court in New India Assurance Co.Ltd. v. Hansaribhai Amruthbhai Modhiya [(2006) 5 SCC 192].

The contention of the appellant that the claimant was not an employee of the insured was not accepted by the Commissioner. The 3rd respondent M/s.Deepa Construction specifically contended before the Commissioner that they were suppliers of workers and not a sub-contractor. The specific contention was that the 1st respondent claimant was employed by the 2nd respondent Geo Tech Construction Co.Ltd. and while working as an employee of the 2nd respondent, the accident had occurred. The Commissioner, after considering the rival contentions in this regard and the oral testimony given by the 1st respondent-claimant as AW1, held that he was an employee under the 2nd respondent while occurring the accident. No contrary evidence was brought on record. In such circumstances, there is no reason to interfere with the findings of the Commissioner that the 1st respondent was employed by the 2nd respondent at the time of accident.

The appellant raised another contention that in terms of the agreement, in Ext.R1 insurance policy, the liability to pay interest on the compensation amount or penalty for delayed payment cannot be fastened with the appellant. Such a question has only a limited ramification in this case; since the appellant had deposited the amount of compensation before the Commissioner and as per the order of this Court dated 29.06.2011, the said amount is kept in a fixed deposit account. Therefore, the amount of eligible compensation along with interest accrued thereon in the fixed deposit account is liable to be released to the 1st respondent in terms of the said order. Therefore, the questions would only affect the liability to pay interest from the date of accident till the date of deposit. Since the compensation amount was deposited soon after determination of the liability, the question of penalty on account of the delayed payment under Section 4A of the Act also does not arise in this case.

In K.S.E.B. v. Valsala [(1998) 8 SCC 254] it was held that the liability of the employer to pay compensation arises as soon as the personal injury is caused to the workman in the accident. That principle follows that the amount of compensation although quantified later, does carry interest. The question then is can the appellant be directed to pay the interest when there is a contract to the contrary in Ext.R1 insurance policy. The first proviso to condition No.1 in Ext.R1 insurance policy reads “Insurance granted does not extent to include any interest and/or penalty imposed on the insured on account of his/their failure to comply with the requirements laid down under the Workmen's Compensation Act, 1923.” Interpreting such a condition in the policy of insurance, the Apex Court in New India Assurance Co.Ltd. [(2006) 5 SCC 192] held that the insurance company is not liable to pay the interest, however, the employer shall be liable to pay the amount of interest to the claimant. Therefore, the interest at the rate of 9% per annum during the period from the date of accident till the date of deposit of the compensation amount by the appellant before the Commissioner shall be paid by the 2nd respondent Geo Tech Construction Co.Ltd., the employer.

This appeal is allowed in part and the order of the Workmen's Commissioner is modified as above. The appellant insurer is liable to pay the compensation amount of Rs.63,855/-. Its interest at the rate of 9% per annum from the date of accident till date of deposit of the compensation amount by the appellant before the Commissioner shall be paid by the 2nd respondent Geo Tech Construction Co.Ltd. The 1st respondent claimant shall be paid the compensation amount of Rs.63,855/- from the deposit in Bank along with the proportionate interest accrued on that amount in the fixed deposit account and the balance amount in deposit and interest on such balance amount shall be refunded to the appellant.