Gauhati High Court
Oriental Insurance Co. Ltd. vs Subhash Barman And Anr. on 4 May, 2007
Equivalent citations: 2007(3)GLT147
JUDGMENT B.D. Agarwal, J.
1. This appeal under Under Section 30 of the Workmen's Compensation Act, 1923 has been filed by the Insurance Company against the judgment and award dated 15.03.2005 passed by the learned Commissioner, Workmen's Compensation Act ("the Commissioner" in brief) in WC Case No. 36 of 2004. By the impugned judgment, the Commissioner has awarded a sum of Rs. 5,12,568/- on account of injuries sustained by the OP No. 1. Since the offending vehicle No. AS-25-B-5016, owned by O.P. No. 2, was duly insured with Oriental Insurance Co. Ltd., the said insurance co./appellant has been directed to satisfy the award. It is also mentioned here that as per the impugned award, the compensation amount would carry interest @ 9% per annum from the date of the order.
2. I have heard Shri B.C. Das, learned senior counsel for the appellant and Shri K.K. Dey, learned Counsel for the claimant/OP No. 1. The owner of the vehicle i.e. OP No. 2 did not appear to contest the appeal despite service of notice by registered post. I have also perused the impugned judgment and the record of the claim proceedings before the Commissioner.
Upon hearing the learned Counsel for both the sides, the following substantial questions of law arise for adjudication:
(i) Whether loss of earning capacity is referable to the percentage of disability and how such loss of earning capacity can be ascertained by the Commissioner in case of non-scheduled injuries?
(ii) Whether Insurance Company is liable to pay interest upon the principal amount of compensation Under Section 4-A(3)(a) of the W.C. Act? and
(iii) If so, whether the interest is payable from the date of accident or from the date of award of the Commissioner?
3. Before proceeding to examine the substantial questions of law involved in the appeal, it would be just and proper to have a glance over the facts of the case. As could be gathered from the record, at the relevant time, the O.P. No. 1 was engaged by OP No. 2 to drive his private car bearing Registration No. AS-25-B-5016 (Maruti Van). On 10.01.2004, at about 2.30 pm, the vehicle met with an accident at a place known as Silonijan under Bokajan Police Station. As a result of the accident, the driver sustained grievous injuries on his person. As per the medical evidence, the claimant had sustained fracture of right femur and fracture of right tibial condyle. The claimant/OP No. 1 took treatment at Guwahati Medical College Hospital for a period of five weeks. According to the claimant, due to the aforesaid fractures, he has become permanently disabled and unable to do the job of driving. The claimant had also examined one doctor as PW No. 2, who also confirmed that the claimant had become virtually physically handicapped. The doctor further opined that the claimant will not be in a position to drive any vehicle in future and as such, his loss of earning capacity can be assessed at 100%, although the physical disability was to the extent of only 45%. On the basis of the claimant's version and with the aid of medical opinion, the Commissioner has assessed the compensation taking 100% loss of earning capacity. It would be worthwhile mentioning here that though the Insurance Company contested the case by filing written objection and cross-examining the claimant's witnesses but no independent evidence was given either to deny its liability or to disprove the fact of disability of loss of earning capacity.
4. As noted earlier, the liability of the Insurance Company is emanating from the insurance coverage of the offending vehicle. There is also no dispute that at the relevant time, the offending vehicle was duly insured with the appellant's Insurance Company. A photocopy of the Insurance certificate is also available in the record. Besides this, the Insurance Company has admitted its liability arising out of the accident, albeit under Motor Vehicles Act. The relevant portion of paragraph 14 of the written objection can be usefully extracted below:
That the liability of the insurer to pay the compensation, if any, is subject to issue of certificate of Insurance and the fulfillment of the terms/conditions thereof including the MV Act and the rules framed thereunder by the insured. The insurer shall not be liable to indemnify the insured for the violation of any of the conditions of Certificate of Insurance.
5. The above apart, the Insurance Company did not take any plea in their written statement that their liability would be restricted to the principal amount of compensation without interest. Above all, no evidence was laid to prove that the owner of the vehicle had violated any material terms and conditions of the policy so as to absolve itself from the liability flowing from the policy. This is broadly the back-drop of the case.
6. Findings:
Point No. (1): Loss of earning capacity Shri Das, learned Counsel appearing on behalf of the appellant submitted that according to the doctor, the physical disability was only 45% and as such, there cannot be 100% loss of earning capacity. The learned Counsel for the appellant further contended that loss of earning capacity should not confine to the job of the workman, which he was performing at the time of accident. In other words, it was the submission of the learned Counsel that loss of earning capacity should be assessed on the basis of the capability of performing any other job at the time of accident. On the basis of this analogy, the learned Counsel submitted that the Commissioner has committed manifest error in assessing compensation on the basis of 100% loss of earning capacity, relying upon the medical opinion that the claimant was rendered incapable to drive any vehicle in future.
7. On the other hand, Shri Dey, learned Counsel for the claimant, submitted that since compensation is assessed on the basis of medical opinion and calculated as per the formula given in Schedule-IV of the W.C. Act there is no scope for any interference therewith.
8. It is true that the claimant had examined the doctor to prove the percentage of disability and loss of earning capacity. From the evidence of the doctor (PW No. 2), I find that this medical officer had not treated the claimant at GMCH. In other words, it appears to me that PW No. 2 has issued the disability certificate (exhibit No. 94) merely on the basis of treatment documents of GMCH. In the cross-examination, the doctor has admitted that he has assessed the loss of earning capacity only on the ground that the wound has developed infection. It is necessary to reproduce the admissions, made by the doctor, in his chief as well as in the cross-examination, which runs as below:
In my opinion, he will not be able to drive any vehicle in future. I assess his physical disability to the extent of 45% and as a driver his loss of earning capacity is assessed at 100%.
xxxx I stated that his loss of earning capacity is 100%. It is just because he has infection in his right leg and is suffering from Osteomyelities hence he may lose his leg.
9. Long back, in the case of New India Assurance Co. Ltd. v. Sanjit Kumar 2002 (2) GLT 567, this Court has mandated that the examination of doctor is necessary to determine the percentage of loss of earning capacity. It is true that in the present case a doctor has given an opinion about the loss of earning capacity, but his opinion is confined to the driving profession only. To say it differently, the medical officer has not opined that the claimant cannot earn anything from a different profession.
10. In my considered opinion, the percentage of disability and percentage of loss of earning capacity are two different things and deal with two different issues. In the case of Shivalinga S. Patil v. Erappa B. Bhavihala , Karnataka High Court has also held that the examination of doctor is necessary to ascertain the loss of earning capacity. It has also been held that before awarding the compensation, the learned Commissioner has to examine the loss of earning capacity and it is referable to any work which the workman was capable to do at the time of accident and loss of earning capacity should not confine to incapability to do the particular work, which the injured was doing at the time of accident. The relevant observations of Karnataka High Court in this regard are reproduced below for ready reference.
13Though the Commissioner could have assessed the loss of earning capacity on the basis of the medical report to be submitted by the medical practitioner, the legislature in its wisdom thought it fit that if a Commissioner could assess the loss of earning capacity on the basis of Schedule-I, a duly qualified doctor could also do the same. Therefore, as the employer has to pay the compensation even in respect of injuries sustained which are not mentioned in the Schedule-I immediately after the accident the legislature thought it fit to confer on the medical practitioner the power to assess the loss of earning capacity also as that would serve the purpose of the Act better.
23. Now the words employed in Section 2(1)(1) make it clear that in order to determine the total disablement, whether of a temporary or permanent nature, what is to be seen is whether the injury complained of incapacitates a workman for all work which he was capable of performing at the time of the accident resulting in such disablement. Therefore, it is clear the question is not whether the workman is incapacitated to do the work which he was doing before the accident. Even though he was doing a particular work if he was capable of performing other work at that point of time, the question is whether after the accident even though he is disabled from performing the work which he was performing before the accident whether he is able to perform the other work which he was capable for performing before the accident. In that view of the matter, it is not possible to accept the contention that once it is shown that the injured is not capable of doing the work which he was performing before the accident, it amounts to total disablement.
11. I entirely concur with the proposition of law laid down by the Karnataka High Court. Be that as it may, in the case before me, the doctor has not specifically declared that the injured has suffered permanent total disablement.
12. Part-I of Schedule-I of the W.C. Act lays down 100% loss of earning capacity for certain specified injuries, in the nature of permanent total disablement. Part-II of the same schedule prescribes different percentages of loss of earning capacity for different nature of permanent partial disablement. Broadly, the criteria to bring an injury within the parameters of "permanent total disablement" is that the injured must suffer from the loss of both limbs or total disfigurement of face or absolute deafness etc., whereas in the case of partial disablement, the physical disability is lesser. The percentage of loss of earning capacity for lesser physical disability depends upon the nature and extent of loss. The case before me do not fall under any of the injuries specified in Part-I or Part-II of Schedule-I. Hence, in ordinary course, it would have been proper to remand the case to the Commissioner for fresh assessment of loss of earning capacity in accordance with law. However, keeping in mind the spirit of the law and also considering the fact that if the matter is relegated back to the Commissioner for the aforesaid purpose, it would certainly cause further hardship to the injured. In the circumstances and also in consonance with the doctrine of substantial justice I myself assessing the loss of earning capacity to 70%, as an exceptional case.
13. Point No. (ii): Insurance Company's liabilities:
Shri Das, learned senior counsel for the appellant submitted that under Sub-section (3) of Section 4-A of the W.C. Act, if the employer makes default in paying compensation to the employee, the Commissioner can penalize the employer by imposing interest upon the total compensation. According to the learned Counsel, since it is not the liability of the Insurance Company to make any final or provisional payment to the employee, they cannot be penalized for paying interest from the date of accident. In support of this submission, the learned Counsel for the appellant has relied upon the judgment of Gauhati High Court rendered in the case of National Insurance Company v. Kanhai Das Gupta 2006 (4) GLT 287. Learned Counsel for the appellant also relied upon the judgment of Hon'ble Supreme Court rendered in the case of New India Insurance Company v. Harshadbhai Amrutbhai Modhiya and the case of P.J. Narain v. Union of India .
14. At this stage itself, the view taken by the learned single Judge of this Court in the case of K.D. Gupta (supra) can be reproduced below, which runs as under:
11. From a careful reading of Clause (a) of Sub-Section (3) of Section 4A, it becomes abundantly clear that the Insurer has no statutory liability to pay interest on the amount of compensation payable by the employer. When the statute does not make the insurer liable to pay interest, it is for the employer to show that there is a contract whereunder the insurer has assured the insured (i.e. the employer) that the Insurer would be liable to pay interest. The onus, thus, in a proceeding under the WC Act, lies on the employer to show that the insurer is liable to pay interest. If the employer does not show that the Insurer is liable to indemnify the employer in respect of the amount, which the employer is liable to pay as interest, the Commissioner, Workmen's Compensation Act. cannot impose any liability on the insurer to pay interest on the compensation awarded to the workman or his legal representative. A reference, in this regard, may be made to the case of P.J. Narayan v. Union of India , wherein the Apex Court has observed thus:
There is no statutory liability on the Insurer. The statutory liability under the Workmen's Compensation Act is on the employer. An insurance is a matter of contract between the Insurer and the insured. It is always open to the Insurer to refuse to insure. Similarly, they are entitled to provide by contract that they will not take on liability for interest. In the absence of any statute to that effect, Insurer cannot be forced by Courts to take on liabilities which they do not want to take on.
15. In the case of Harshadbhai (supra), the Apex Court has held that the employer can contract-out his liabilities with the Insurance Company and similarly, the Insurance Company is also entitled to contract out its liability from paying interest on the amount of compensation. The relevant observations of the Apex Court can be profitably extracted below, which are as follows:
15. The terms of a contract of insurance would depend upon the volition of the parties. A contract of Insurance is governed by the provisions of the Insurance Act. In terms of the provisions of the Insurance Act, an insured is bound to pay premium which is to be calculated in the manner provided for therein. With a view to minimize his liability, an employer can contract out so as to make the insurer not liable as regards indemnifying him in relation to certain matters which do not strictly arise out of the mandatory provisions of any statute. Contracting out, as regards payment of interest by an employer, therefore, is not prohibited in law.
16. The case of P.J. Narain (supra) has also been referred in the case of Harshadbhai (supra) as well as in the judgment of this Court given in the case of Kanai Dasgupta (supra).
17. Per contra, Shri Dey, learned Counsel for the claimant/OP No. 1 submitted that the liability of the Insurance Company would run parallel to that of the liability of the employer and the Insurance Company is liable to satisfy the award in toto. In support of this submission, the learned Counsel relied upon the authority of the Apex Court given in the case of Ved Prakash Garg v. Premi Devi and Ors. .
18. At this stage, it would be useful to reproduce Section 4-A of the W.C. Act which deals with the liability of the employer to make provisional payment within a period of 30 days and the default liability to pay interest and in appropriate cases, penalty as well, which may be imposed by the Commissioner. Section 4-A runs as under:
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 workman, as the case may be, without prejudice to the right of the workman to make any further claim.
(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 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 the arrears, and interest thereon pay a further sum not exceeding fifty percent 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 as reasonable opportunity to the employer to show cause why it should not be passed.
(3A) The interest payable under Sub-section (3) shall be paid to the workman or his dependant, as the case may be, and the penalty shall be credited to the State Government.
19. In the case of Ved Prakash (supra), the Apex Court was called upon to decide the legal question whether the phrase "liability arising under the Compensation Act" as employed by proviso to Section 147(1) of the Motor Vehicle Act and as found in proviso to Clause (i) of Sub-section (1) of Section (II) of the Insurance Policy would cover only the principal amount of compensation computed under the W.C. Act and made payable by the insured employer or whether it could also include interest and penalty imposed on the insured employer under contingencies contemplated by Section 4-A(3)(a) and (b) of the W.C. Act.
20. After thorough analysis of the scheme of the W.C. Act, the Apex Court has held that the liability of the Insurance Company would include payment of principal amount and also interest under certain circumstances but not the penalty levied under Section 4-A(3)(b). Since the question posed before me regarding payment of interest is squarely covered by the aforesaid decision, it would be just and proper to extract the relevant observations of the Apex Court in the case of Ved Prakash (supra), which are as follows:
14. On a conjoint operation of the relevant schemes of the aforesaid twin Acts, in our view, there is no escape from the conclusion that the Insurance Companies will be liable to make good not only the principal amounts of compensation payable by insured employers but also interest thereon, if ordered by the Commissioner to be paid by the insured employers.... Thus so far as interest is concerned, it is almost automatic once default, on the part of the employer in paying the compensation due, takes place beyond the permissible limit of one month. No element of penalty is involved therein. It is a statutory elongation of the liability of the employer to make good the principal amount of compensation within permissible time limit during which interest may not run otherwise liability of paying interest on delayed compensation will ipso facto follows. Even though the Commissioner under these circumstances can impose a further liability on the employer under circumstances and within limits contemplated by Section 4A(3)(a) still the liability to pay interest on the principal amount under said proviso remains a part and parcel of the statutory liability which is legally liable to be discharged by the insured employer. Consequently, such imposition of interest on the principal amount would certainly partake the character of the legal liability of the insured employer to pay the compensation amount with due interest as imposed upon him under the Compensation Act. Thus the principal amount as well as the interest made payable thereon would remain part and parcel of the legal liability of the insured to be discharged under the Compensation Act and not de hors it. It, therefore, cannot be said by the Insurance Company that when it is statutorily and even contractually liable to reimburse the employer qua his statutory liability to pay compensation to the claimants in case of such motor accidents to his workmen, the interest on the principal amount which almost automatically gets foisted upon him once the compensation amount is not paid within one month from the date it fell due, would not be a part of the insured liability of the employer.
21. The aforesaid proposition of law has been thoroughly approved by the Hon'ble Supreme Court in the case of L.R. Ferro Alloys Ltd. v. Mahavir Mahato and Anr. and also in the recent case of Harshadbhai (supra).
22. It appears to me that the Apex Court's judgment regarding liability of the Insurance Company to pay interest with the principal amount rendered in the case of L.R. Ferro Alloys Ltd. (supra) and Harshadbhai (supra) were not placed before the learned Single Judge of this Court in the case of Kanai Dasgupta (supra). As such, there is no option before me but to treat this decision as perincurium. Even otherwise the law laid down by the Hon'ble Supreme Court is binding upon me under Article 141 of the Constitution of India. I have to accept the ratio of law laid down in the case of Ved Prakash (supra) and other judgments of the Hon'ble Apex Court, in preference to the ratio laid down by the learned Single Judge of this Court.
23. What I find that the learned Single Judge of this Court has absolved the Insurance Company from payment of interest on the ground that there should be a specific stipulation in the policy fastening the liability of payment of interest by the insurer and only then the insured employer can be indemnified from such liability. This proposition has been taken on the basis of the judgment of P.J. Narain (supra). In my considered opinion, both in the case of P.J. Narain (supra) and Harshadbhai (supra), the Apex Court has held that the Insurance Companies are free to contract out its liability, in absence of any statutory liability upon the insurer under the W.C. Act. Both these cases have stemmed out of the Insurance contract, other than policies under M.V. Act. In both the cases, the Insurance Company had contracted out their liability to pay any interest or penalty imposed upon the employer under the W.C. Act and this has been approved by the Apex Court. However, in the case before me, the learned Counsel for the appellant neither pleaded nor could show that there was any exclusion clause in the statutory motor vehicle policy. In my considered opinion, in absence of any such exclusion clause in the policy, the liability of the Insurance Company would extend to payment of interest along with principal amount of compensation, as provided in Section 4-A(3)(a) of the W.C. Act, reproduced above.
24. Point No. (iii): Date of interest.
The third question I am called upon to answer is whether the Insurance Company can also be directed to pay interest upon the compensation amount retrospectively, i.e. from the date of the accident on behalf of the employer. This question is arising out of the cross-objection filed by the claimant under Order 41, Rule 22 of the Code of Civil Procedure, which has been registered as Cross Objection No.3 of 2005. The answer to this question may be conveniently found in the observations of the Hon'ble Apex Court made in the case of Ved Prakash (supra) in the following words:
It is of course true that one month's period as contemplated under Section 4A(3) may start running for the purpose of attracting interest under Sub-clause (a) thereof in case where provisional payment has to be made by the insured employer as per Section 4A(2) of the Compensation Act from the date such provisional payment becomes due. But when the employer does not accept his liability as a whole under circumstances enumerated by us earlier then Section 4A(2) would not get attracted and one month's period would start running from the date on which due compensation payable by the employer is adjudicated upon by the Commissioner and in either case the Commissioner would be justified in directing payment of interest in such contingencies not only from the date of the award but also from the date of the accident concerned. Such an order passed by the Commissioner would remain perfectly justified on the scheme of Section 4A(3)(a) of the Compensation Act.
25. According to the Hon'ble Supreme Court, the employer may disown his liability to pay compensation under certain circumstances, which have been spelt out, in the case of Ved Prakash (supra), in this way:
A mere look at the aforesaid provision shows that Section 4A deals with the time for payment of compensation as required to be computed under Section 4. Sub-section (1) thereof mandates that compensation shall be paid as soon as it falls due. Sub-section (2) thereof contemplates a situation wherein the employer though accepting his liability to pay compensation to his injured workman disputes the extent of the claim of compensation and in such a case Sub-section (2) enjoins him to make provisional payment based on the extent of accepted liability by depositing it with the Commissioner or to pay it directly to the workman. It is obvious that such an obligation of the employer would not arise under Section 4A Sub-section (2) if he totally disputes his liability to pay on grounds like the injured person being not his employee or that the accident was caused to him at a time when he was not in the course of employment or that the accident caused to him did not arise out of his employment.
26. To buttress his point that interest is payable from the date of accident, the learned Counsel for the claimant also pressed into service another judgment from the Apex Court rendered in the case of Pratap Narain Singh v. Shrinivas Sabata and Anr. . In this case, it has been held that if the employer does not plead that employee's right to compensation has been taken away Under Section 3(5) of the Act, because of institution of a suit in Civil Court for damages, the employer would be liable to pay compensation from the date of the accident.
27. It is true that in the case before me, the Commissioner has imposed interest @ 9% per annum prospectively, without assigning any reason as to why the interest was not made payable from the date of the accident. In my considered opinion the Commissioner under W.C. Act can waive payment of retrospective interest only if he finds that the employee had resorted to an action under Section 3(5) of the Act or if the employer can establish any one of the three grounds, culled-out in the case of Ved Prakash (supra).
28. On perusal of the record, I find that the employer has admitted in his written statement that the claimant was his employee and that the accident of his vehicle took place while being driven by the claimant. However, the employer attempted to wriggle out of his liability by stating that at the time of the accident, the driver was not in the course of employment. Except making this allegation in the written statement, nothing was brought on record to prove the aforesaid fact. Hence, I hold that there was no legal excuse for the employer to make provisional payment as required Under Section 4-A(2) of the W.C. Act. Consequently, the employer can not be absolved from payment of interest on the amount of compensation from the date of accident.
29 In view of my reasoning, findings and observations given hereinbefore, the appeal stands dismissed and the cross-objection stands allowed, with the following modifications in the impugned judgment and award of the Commissioner:
(i) the employee/claimant shall be entitled to compensation, calculated on the basis of 70% loss of earning capacity;
(ii) the principal compensation amount shall carry simple interest @ 9% per annum from the date of the accident, i.e., 10.01.2004;
(iii) M/s Oriental Insurance Company Limited, with whom the offending vehicle was insured at the relevant time, would be liable to pay the entire amount of compensation and interest throughout.
30. I do not propose to impose any penalty upon the employer Under Section 4-A(3)(b) of the W.C. Act for which neither there is any prayer from the O.P. No. 1 nor there is any such order from the Commissioner. Similarly, I do not propose to award costs of this appeal against the appellant or in favour of the OP No. 1