Sunday, March 8, 2020

EC Act 1923 - Supreme Court on wages and ceiling on wages for computation


Misfortunes can occur at any workplace harming those at work. Duty is cast on the  Employer to pay compensation arising out of  personal injury  / death  caused to a workman at such workplace.  Employees Compensation Act 1923  provides for payment of compensation by the employer to his employees (or their dependents in the event of fatal accidents) in respect of personal injury due to accidents arising out of and in the course of their employment.   


Have posted at length the excerpts of  judgment of Madras High Court in Dec 2014 in a case between United India Insurance Vs Seethammal pronounced by Hon’ble Justice Mr S Vaidyanathan.  The impugned judgment touched on significant aspects of Appeal – payment of award as a pre-requisite  more specifically when interest part was not satisfied ; the impact of deletion of explanation ii in 2009 and how wages are to be computed  - in that significant judgment Madras High Court struck down the appeal by the Insurer and directed them to deposit the entire compensation together with interest @ 12 pa. 

The most recent judgment (13.2.2020) of Supreme Court of India in Civil Appeal no. 9046 of 2019 is of great relevance to all Employers, Employees, HR consultants, contractors and Insurers.  This was an appeal on a judgment of a Division bench of Madurai of Madras High Court in June 2017. 

In an appeal arising from a decision of the Deputy Commissioner for Employee‘s Compensation, the High Court had enhanced the compensation payable under the Employee‘s Compensation Act 1923 from Rs.4,33,060 to Rs 8,86,120. The High Court also  awarded interest at the rate of 12% per annum from the date of the accident.  The Court here had directed that an amicus curiae be nominated by the Supreme Court Legal Services Committee. Accordingly, Mr S Mahendran, learned counsel, was nominated as the amicus curiae.

The appellants are the parents, siblings of a person who died in an accident on 31.1.2008.  The deceased was 26 years of age and was a driver of a truck and died in a road accident.  A WC claim was lodged against his employers before DY Commissioner for EC at Madurai in 2013.  Aggrieved with the value of award of Dy Commr, the appellants filed appeal before Madras High Court seeking enhanced compensation.  Madras High Court in Nov 2015  remanded the proceedings to the Deputy Commissioner for determination afresh. While before remanding the proceedings, the High Court noted that though the appellants had filed a salary certificate as Exhibit P5 to establish that the monthly income of the deceased was Rs 32,000/- no witness was examined on behalf of the employer to prove the salary certificate. However, acceding to the request of the appellants that they should be furnished with an opportunity to examine the employer‘s witness in support of Exhibit,  the High Court considered it in the interests of justice to remand the proceedings.

On remand, the Commissioner for Workmen‘s Compensation, Madurai, maintained the award of compensation in the amount of Rs. 4,33,060. Before the Commissioner, on remand, the appellants examined PW2, the owner of the vehicle who confirmed the salary and that vehicle was insured with Reliance General at the material time.  The Commissioner, however, proceeded on the basis that in terms of the notification issued under Section 4(1B) of the 1923 Act, whatever be the monthly pay received by a person, the jurisdiction of the adjudicating authority was subject to a ceiling of Rs 4,000 per month in computing the monthly wages of the employee. Taking the monthly salary at Rs 4,000, the Commissioner applied a multiplicand of 215.28 in terms of Schedule IV (the deceased being 26 years of age) and arrived at a figure of Rs 4,30,560 to which an additional amount of Rs 2,500 was added towards funeral expenses. A total award in the amount of Rs 4,33,060 was decreed as compensation.

The High Court on appeal observed the salary to be 32000 pm; accident occurred on 31.1.2008 but petition for compensation had been filed on 28.1.2011 and decided by Commissioner on 4.3.2016.  The notification of Central Govt in May 2010 enhanced the monthly wages to be Rs.8000/-  High Court opined that having due regard to the legislation being a social welfare concept, enhanced income @ 8000 should form the basis of computation and thus enhanced the compensation to Rs.886120/-

In the appeal before Apex Court,  the learned amicus curiae urged that both the Commissioner and the High Court have erred - the Commissioner having adopted a figure of Rs 4,000 per month and the High Court, Rs 8,000 per month. The learned amicus curiae submitted that in terms of the provisions of Section 4(1)(a) of the 1923 Act, where death has resulted from injury, the compensation payable is an amount equal to fifty per cent of the monthly wages of the deceased employee multiplied by the relevant factor. The relevant factor is specified in Schedule IV and for the deceased who was 26 years old on the date of the accident, the multiplicand would be 215.28. Amicus curiae further submitted that under sub-section (1B) of Section 4, the Central Government is empowered to issue a notification specifying, for the purposes of sub-section (1), the monthly wages in relation to an employee as it may consider necessary. However, it was submitted that the notification does not impose a cap or ceiling on the monthly wages which form the basis of calculating the compensation due and payable. Where the actual wages of an employee are proved to be in excess of the amount which is specified in the notification, there is no bar in adopting the monthly wages so proved in terms of Section 4(1)(a). The learned counsel buttressed this submission by adverting to Act 45 of 2009, which took effect from 18.1.2010 and deleted the deeming provision in Explanation II to Section.

The question before this Court is 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. 

The 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. The 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.

The  Court held, in line with settled precedent of the Court, that where (i) a legislation confers a benefit on some persons, (ii) without inflicting a corresponding detriment on some other persons or the public generally and (iii) where the conferral of such benefit appears to be the intention of the legislature, the presumption of prospective application may stand displaced. Though 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. It is presumably for this reason that the three judge Bench of this Court in Valsala and the Kerala High Court in Alavi held that the benefit of an amendment enhancing the rate of compensation does not have retrospective application to accidents that took place prior to the coming into force of the amendment. Further, as we have already noted, 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.

Dwelling at length on various precedents, the Court concluded that the  compensation will be payable as applicable on the date of the accident with interest as may be considered reasonable from time to time on the same pattern as in accident claim cases. If the amount so calculated is less than the amount prescribed as on the date of the award of the Tribunal, the claimant will be entitled to higher of the two amounts.   In the present case, the accident occurred on 31.1.2008  i.e. prior to the coming into force of Act 45 of 2009. Consequently, the High Court erred in extending the benefit of Act 45 of 2009 which deleted Explanation II to Section 4 to the present case. The High Court was required to determine the compensation payable on the date of the accident on which date, the deemed cap of Rs 4000 as monthly wages was applicable. Though the accident took place in 2008, the appeal is being decided over 12 years later. We take note of the fact that following the order of remand by the High Court, the employer deposed as PW2 and stated that the deceased had worked in his establishment for about three years. The employer duly proved Exhibit P5 in the course of his evidence which was the monthly pay certificate indicating that the deceased was drawing a monthly wage of Rs 32,000, including expenses towards food. Significantly, no appeal was filed by the respondents against the judgment of the High Court enhancing the compensation. In this view of the matter, we are not inclined to interfere with the award of compensation ordered by the High Court in exercise of the inherent jurisdiction of this Court to do complete justice under Article 142 of the Constitution. Having clarified the law as noted above, the appeal shall stand dismissed.  The total compensation payable to the appellant shall stand quantified at Rs.8,86,120 on which interest shall be payable at 12% per annum from the date of the accident. The liability for the payment of compensation shall be joint and several.

There are several implications and this judgment perhaps touches on some of the aspects.

With regards – S. Sampathkumar
4th Mar 2020.

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