THE ORIENTAL INSURANCE CO. LTD.versusSIBY GEORGE & ORS.

                       [2012) 6 S.C.R. 1079


            THE ORIENTAL INSURANCE CO. LTD.                                 A
                              v.
                   SIBY GEORGE & ORS.
               (Civil Appeal No.5669 of 2012)
                           JULY 31, 2012
                                                                            B
 [AFTAB ALAM AND RANJANA PRAKASH DESAI, JJ.]

      WORKMAN'S COMPENSA T/ON ACT, 1923:

    ss. 3 and 4-A - Liability to pay compensation and interest              c
on delayed payment - Relevant date - Held: Is the date of
accident and not the date of adjudication of the claim nor the
date of filing of the claim petition - Compensation becomes
payable as soon as the injury is caused.

    The instant appeal was fiied by the Insurance 11
Company challenging the order of the Commissioner
directing it to pay simple interest@ 12% per annum ·from
the date of accident Relying upon the decision in Mubasir
Ahmad1 and Mohd. Nasir2 , it was contended for the
appellant that the Commissioner erred in directing for E
payment of interest from the date of the accident and not
from the date of the order.

      Dismissing the appeal, the Court

    HELD: 1.1. As has been held by this Court in Pratap                     F
Narain Singh Deo's* case and Valsala's** case 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. Compensation becomes payable as soon as
                                                                            G
1.   National Insurance Co. Ltd. vs. Mubasir Ahmed and Anr. 2007 (2) SCR
     117.
2.   Oriental Insurance Company Limited vs. Mohd. Nasir and Anr. 2009 (8)
     SCR 829.

                                 1079                                       H
    1080    SUPREME COURT REPORTS               [2012) 6 S.C.R.

A the injury is caused. It cannot be said 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
s contrary view to the earlier decisions in Pratap Narain
  Singh Deo and Valsa/a do not express the correct view
  and do not make binding precedents. [para 8, 9 and 12]
  [1088-A-B; 1088-E-F]
       *Pratap ·Narain Singh Deo. Vs. Shrinivas Sabata and
C Anr., 1976 (2) SCR 872: AIR 1976 SC 222; **Kera/a State
  Electricity Board vs. Valsala K., . 1999 (2) Suppl. ·
              =
  SCR 657 AIR 1999 SC 3502 - relied on
         United India Insurance Co. Ltd. vs. Alavi, 1998(1) KerLT
0   951 (FB) - stood approved
         National Insurance Co. Ltd. vs. Mubasir Ahmed and Anr.
                        =
     2007 (2) SCR 117 (2007) 2 SCC 349 Oriental Insurance
    Company Limited vs. Mohd. Nasir and Anr. 2009
    (8) SCR 829 = (2009) 6 SCC 280 - stood disapproved.
E
       1.2. Sub-s. (3) of s. 4-A of the Workman's
  Compensation Act, 1923 is in two parts, separately
  dealing with interest and penalty in clauses (a) and (b)
  respectively. Clause (a) makes the levy of interest, with
  no option, in case of default in payment of compensation,
F 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. On a plain reading of th.e
  provisions of sub-s. (3) it becomes clear that payment of
G 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
H delay in payment of the amount due was unjustified is
ORIENTAL INSURANCE CO. LTD. v. SIBY GEORGE 1081
                 & ORS.

required to be recorded only in case of imposition of              A
penalty and no such finding is required in case of
interest which is to be levied on default per se. [Para 7]
(1085-A-E]

                     Case Law Reference:                           B
  2007 (2) SCR 117              stood disapproved para 4
  2009 (8 ) SCR 829             stood disapproved para 5
  1976 ( 2) SCR 872             relied on             Para 8
                                                                   c
  1999 (2 ) Suppl. SCR 657 relied on                  para 9
  1998 (1) Ker LT 951 (FB)      approved              para 10

    CIVIL APPELLATE JURISDICTION : Civil Appeal No.
5669 of 2012.                                                      D

    From the Judgment & Order dated 22.7.2009 of the High
Court of Kerala at Ernakulam in MFA No. 172 of 2009.

    Vishnu Mehra, Sakshi Gupta (for Pramod Dayal) for the
Appellant.                                                         E

    Renjith B. Marar (for Sajith P .) for the Respondents.

    The Judgment of the Court was delivered by

    AFTAB ALAM, J. 1. Leave granted.                               F
    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         G
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           H
    1082    SUPREME COURT REPORTS                   (2012] 6 S.C.R.


A interest at the rate 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
B 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
c 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
D 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 ,
E 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
F
        from the date on which it fell due. Obviously it cannot be
        the date of accident. Since no indication is there as to
        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
G       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
H       adjudication is done, question of compensation becoming
ORIENTAL INSURANCE CO. LTD. v. SIBY GEORGE 1083
           & ORS. [AFTAB ALAM, J.]

    due does not arise. The position becomes clearer on a             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     B
    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)        C

    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         D
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   E
it, adding that the higher, statutory rate of interest under 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            F
~bove) 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 7Y2%
per annum from the date of filing the application till the date of    G
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       H
    1084     SUPREME COURT REPORTS                  [2012] 6 S.C.R.


A   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
s   the sub-section (3) of section 4-A.

        Sections 4-A (1) and (3) are· as under:-

        4-A. Compensation to be paid, when due and penalty for
        default. - (1) compensation under section 4 shall be paid
C       as soon as it falls due.

        (2) xxx                       xxx                xxx
        (3) Where any employer is in default ln paying the
        compensation due under this Act within one month from
D       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
E        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
F
        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:

G             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.

H
        Explanation. -                xxxxxxxxx
 ORIENTAL INSURANCE CO. LTD. v. SIBY GEORGE 1085
            & ORS. [AFTAB ALAM, J.]

    (3A) xxx xxx xxx                                                   A

      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 in
clauses (a) and (b) respectively. Clause (a) makes the levy of
interest, with no option, in case of default in payment of             B
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                    C
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          D
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.
                                                                       E
     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               F
decisions were rendered in ignorance of earlier larger Bench
decisions of this Court by which the 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           G
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        H
    1086    SUPREME COURT REPORTS                 [2012] 6 S.C.R.


A the course of his employment." It was not th.e case of the
  employer that the right to compensation was taken away u·nder
   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
B 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
c 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 an9 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
0
  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
E was caused to the appellant, and there is no justification for
  the argument to the contrary.

       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.
F 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
G 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
H as to the jurisdiction of the Commissioner and prevailed on the
ORIENTAL INSURANCE CO. LTD. v. SIBY GEORGE 1087
           & ORS. [AFTAB ALAM, J.)

respondent to file a memorandum of agreement settling the             A
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."                                                         B

     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              C
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
Kera/a State Electricity Board vs. Valsa/a K., AIR 1999 SC
3502 answered the question in the negative holding, on the
authority of Pratap Narain Singh Deo, that the payment of             D
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             E
     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 wnere the claims in respect of death or permanent       F
     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          G
     relewnt date for determining the rights and liabjlities 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              H
    1088       SUPREME COURT REPORTS                [2012] 6 S.C.R.


A          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
B          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,
C 1998(1) KerLT 951(FB) and approved it in so far as it followed
  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
D Court in Mul1asir 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.
E
         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
F   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. ~n light of the discussion made above, we find no merit
G 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.

    R.P.                                         Appeal dismissed.

H