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                                 REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL     APPEAL     NO.     5669      OF     2012   (Arising out of SLP (C) No.9516 of 2010)

The Oriental Insurance Co.Ltd. .....APPELLANT(S)

                                          VERSUS

Siby George & Ors. .....RESPONDENT(S)

JUDGMENT

Aftab     Alam,     J  .

1. Leave granted.

2. The short question that arises for consideration in  

this appeal is when does the payment of compensation under the  

Workmen’s Compensation Act, 1923 (hereinafter the Act) become due  

and consequently what is the point in time from which interest would  

be payable on the amount of compensation as provided under section  

4-A (3) of the Act.

3. In this case, the Commissioner for Workmen’s  

Compensation, Ernakulam, by his order dated November 26, 2008 in  

WCC No.67 of 2006 directed for payment of simple interest at the rate

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of 12% per annum from the date of the accident on July 12, 2006.  

The appellant’s appeal (MFA No.172 of 2009) against the order of the  

Commissioner was dismissed by the Kerala High Court by order dated  

July 22, 2009 as barred by limitation. Against the order of the High  

Court the appellant filed the special leave petition (giving rise to this  

appeal) in which notice was issued “limited to the interest”.   

4. Mr. Mehra, learned counsel appearing for the  

appellant, submitted that the learned Commissioner was wrong in  

directing for payment of interest from the date of the accident and any  

interest on the amount of compensation would be payable only from  

the date of the order of the Commissioner. In support of the  

submission, he relied upon a decision of this Court in National  

Insurance Co. Ltd. vs.  Mubasir Ahmed and Anr. (2007) 2 SCC 349, in  

which it was held that the compensation becomes due on the basis of  

the adjudication of the claim and hence, no interest can be levied prior  

to the date of the passing of the order determining the amount of  

compensation. In paragraph 9 of the decision the Court held and  

observed as follows:-

“9…..In the instant case, the accident took place  after the amendment and, therefore, the rate of 12%  as fixed by the High Court cannot be faulted. But  the period as fixed by it is wrong.  The starting point  is on completion of one month from the date on  which it fell due.  Obviously it cannot be the date  of accident.  Since no indication is there as to  

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when it becomes due, it has to be taken to be  the date of adjudication of the claim. This  appears to be so because Section 4-A (1)  prescribes that compensation under Section 4 shall  be paid as soon as it falls due.  The compensation  becomes due on the basis of adjudication of the  claim made.  The adjudication under Section 4 in  some cases involves the assessment of loss of  earning capacity by a qualified medical practitioner.  Unless adjudication is done, question of  compensation becoming due does not arise. The  position becomes clearer on a reading of sub- section (2) of Section 4-A.  It provides that  provisional payment to the extent of admitted  liability has to be made when employer does not  accept the liability for compensation to the extent  claimed.  The crucial expression is “falls due”.  Significantly, legislature has not used the  expression “from the date of accident”. Unless there  is an adjudication, the question of an amount falling  due does not arise.”        

         (empasis added)

5. Learned counsel also invited our attention to  

another decision of the Court by which a number of appeals and  

special leave petitions were disposed of and which is reported as  

Oriental Insurance Company Limited vs.  Mohd. Nasir and Anr. (2009)  

6 SCC 280. In this decision the Court held that “there cannot be any  

doubt whatsoever that interest would be from the date of default and  

not from the date of award of compensation”  (paragraph 47). It then  

went on to say that the Act does not prohibit grant of interest at a  

reasonable rate from the date of filing of the claim petition till an order  

is passed on it, adding that the higher, statutory rate of interest under  

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sub-section (3) of section 4 would be payable in a case that attracted  

that provision and for which “a finding of fact as envisaged therein has  

to be arrived at”. The Court then referred to paragraph 9 of the  

decision in Mubasir Ahmad (extracted above) but declined to follow it  

observing that the earlier decision had not considered the aspect of  

the matter as was being viewed in the case of Mohd. Nasir.   In Mohd.  

Nasir the Court finally directed for payment of interest at the rate of  

7½%  per annum from the date of filing the application till the date of  

the award, further observing that thereafter interest would be payable  

at the rate as directed in the order passed by the Commissioner. (See  

paragraphs 47 to 50 of the judgment).

6. The view taken by the Court in Mohd. Nasir that  

the rate of interest provided under sub-section (3) of section 4-A  

would apply only in case the “finding of fact as envisaged therein”  is  

arrived at by the Commissioner, it must respectfully be stated, seems  

to result from the mixing up of ‘interest due to default in payment of  

compensation’  and ‘penalty for an unjustified delay in payment of  

compensation’ and is based on a misreading of the sub-section (3) of  

section 4-A.   

Sections 4-A (1) and (3) are as  

under:-

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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) 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. - xxx xxx xxx

(3A) xxx xxx xxx  

7. It is, thus, to be seen that sub-section (3) of  

section 4-A is in two parts, separately dealing with interest and penalty  

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in clauses (a) and (b) respectively.  Clause (a) makes the levy of  

interest, with no option, in case of default in payment of  

compensation, without going into the question regarding the reasons  

for the default. Clause (b) provides for imposition of penalty in case, in  

the opinion of the Commissioner, there was no justification for the  

delay. Before imposing penalty, however, the Commissioner is  

required to give the employer a reasonable opportunity to show  

cause. On a plain reading of the provisions of sub-section (3) it  

becomes clear that payment of interest is a consequence of default in  

payment without going into the reasons for the delay and it is only in  

case where the delay is without justification, the employer might also  

be held liable to penalty after giving him a show cause. Therefore, a  

finding to the effect that the delay in payment of the amount due was  

unjustified is required to be recorded only in case of imposition of  

penalty and no such finding is required in case of interest which is to  

be levied on default per se.  

8. Now, coming back to the question when does the  

payment of compensation fall due and what would be the point for the  

commencement of interest, it may be noted that neither the decision in  

Mubasir Ahmed nor the one in Mohd. Nasir can be said to provide any  

valid guidelines because both the decisions were rendered in  

ignorance of earlier larger Bench decisions of this Court by which the  

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issue was concluded.  As early as in 1975 a four Judge Bench of this  

Court in Pratap Narain Singh Deo. Vs. Shrinivas Sabata and Anr., AIR  

1976 SC 222 directly answered the question. In paragraphs 7 and 8 of  

the decision it was held and observed 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 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 the 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 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 agreement, be settled by the Commissioner.  There is therefore nothing to justify the  argument that the employer’s 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.  

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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  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 respondent’s personal  approach for obtaining the 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 and  prevailed on the respondent to file a memorandum  of agreement settling 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.”

9. The matter once again came up before the Court  

when by amendments introduced in the Act by Act No. 30 of 1995 the  

amount of compensation and the rate of interest were increased with  

effect from 15.9.1995. The question arose whether the increased  

amount of compensation and the rate of interest would apply also to  

cases in which the accident took place before 15.9.1995. A three  

Judge Bench of the Court in Kerala State Electricity Board vs.  

Valsala K., AIR 1999 SC 3502 answered the question in the negative  

holding, on the authority of Pratap Narain Singh Deo, that the  

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payment of compensation fell due on the date of the accident. In  

paragraphs 1, 2, and 3 of the decision the Court observed as follows:

“1.The neat question involved  in these special leave petitions is whether the  amendment of Ss.4 and 4A of the Workmen’s  Compensation Act, 1923, made by Act No.30 of  1995 with effect from 15-9-1995, enhancing the  amount of compensation and rate of interest,  would be attracted to cases where the claims in  respect of death or permanent disablement  resulting from an accident caused during the  course of employment, took place prior to 15-9- 1995?

2.  Various High Courts in the  country, while dealing with the claim for  compensation under the Workmen’s  Compensation Act have uniformly taken the view  that the relevant date for determining the rights  and liabilities of the parties is the date of the  accident.

3.  A four Judge Bench of this  Court in Pratap Narain Singh Deo   v.  Srinivas  Sabata, (1976) 1 SCC 289: (AIR 1976 SC 222:  1976 Lab IC 222) speaking through Singhal, J.  has held that an employer becomes liable to pay  compensation as soon as the personal injury is  caused to the workmen by the accident which  arose out of and in the course of employment.  Thus, the relevant date for determination of the  rate of compensation is the date of the accident  and not the date of adjudication of the claim.

10. The Court then referred to a Full Bench decision  

of the Kerala High Court in United India Insurance Co. Ltd.   vs.  

Alavi, 1998(1) KerLT 951(FB) and approved it in so far as it followed  

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the decision in Pratap Narain Singh Deo.

11. The decisions in Pratap Narain Singh Deo was  

by a four Judge Bench and in Valsala 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 were not brought to the notice of the Court in the two  

later decisions in Mubasir Ahmed and Mohd. Nasir.    

12. In light of the decisions in Pratap Narain Singh  

Deo and Valsala, it is not open to contend that the payment of  

compensation would fall due only after the Commissioner’s 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 do not express the correct view and do not make  

binding precedents.  

13. In light of the discussion made above, we find no  

merit in the appeal and it is dismissed with costs amounting to  

Rs.20,000/-.  The amount of cost must be paid to the respondents  

within six weeks from today.          

………………………….J. (Aftab Alam)

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………………………….J. (Ranjana Prakash Desai)

New Delhi; July 31, 2012.  

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