In Case Of Motor Vehicle Accident Causing Death Or Injury To Employee, Insurer Of Vehicle Cannot Escape Liability To Pay Interest On Compensation Awarded: Jharkhand HC

While deciding an appeal under Section 30 of the Employee's Compensation Act, 1923, which challenged an award by the Labour Court of not including interest which is mandatory under Section 4(A) of the Act, the Jharkhand High Court has in a most learned, laudable, landmark and latest judgment titled Jugal Kishor Ray v. Ashok Prasad Yadav & Anr in M.A. No.227 of 2020 that was pronounced as recently as on September 5, 2023 has explicitly held that compensation is due from the date of the accident, and interest calculations begin from that date. It was made pretty clear by the Court that the insurers of motor vehicles involved in accidents resulting in death or injuries to employees cannot evade the responsibility of paying interest on the principal award. It certainly deserves mentioning that a Single Judge Bench comprising of Hon'ble Mr Justice Pradeep Kumar Srivastava held in no uncertain terms that, “Award of compensation fells due on the date of occurrence/accident and computation of compensation and interest begins from the date, it fell due i.e. the date of accident and not the date of award till its realization. In case of accident out of use motor vehicle causing death or injuries to employee, the insurer of vehicle can't escape liability to pay the interest on principal award.”

At the very outset, this brief, brilliant, bold and balanced judgment authored by the Single Judge Bench comprising of Hon'ble Mr Justice Pradeep Kumar Srivastava sets the ball in motion by first and foremost putting forth in para 1 that, “Heard learned counsel for the appellant and learned counsel for the respondent No.2. Inspite of valid service of notice none appears on behalf of respondent No.1.”

As we see, the Bench points out in para 2 that, “The present miscellaneous appeal has been preferred under Section 30 of the Employee's Compensation Act, 1923 assailing the judgment/award dated 29.02.2020 passed in E.C. Case No.14 of 2016 by the court of Sri Rajendra Bahadur Pal, learned Presiding Officer, Labour Court-cum-Commissioner, Deoghar under Employee's Compensation Act, 1923, whereby and whereunder learned court below has awarded amount of compensation without any interest which is mandatory under Section 4(A) of Workmen's(Employee's) Compensation Act, 1923.”

To put things in perspective, the Bench envisages in para 3 that, “Factual background of the case in a narrow campus is that one Lakhan Ray(deceased) was employed as driver of tractor bearing Reg. No.JH-17D-9017 attached with Trolley No. JH-11D9018 owned by respondent No.1-Ashok Prasad Yadav. On 28.01.2009 while Lakhan Ray was employed as driver by the respondent No.1 for transportation of cement and iron rods loaded on trolley and in the course of employment, he met with an accident near Panchsalvey Forest area and died. In this connection, Tisri P.S. Case No.03 of 2009 was registered and after investigation charge-sheet was submitted, but no compensation amount was given to the legal heirs and dependents of the deceased by the employer within statutory time period. Hence, the case was instituted under the provision of Workmen's Compensation Act, 1923 before the presiding officer labour court-cum-commissioner under the said Act.

The case of the appellant is that the age of deceased was 35 years and he was earning Rs.6,000/- per month salary along with Rs.50/- per day towards diet expenses. It is further alleged that Rs.8 lakhs was claimed as compensation and Rs.25,000/- for cremation along with interest @ 12 % per annum from the date of accident.”

As it turned out, the Bench enunciates in para 4 that, “Learned trial court after taking evidence of the parties and fixing monthly income of deceased as per minimum wages rate at Rs.3336/- only per month due to non-production of any sufficient materials proving income of deceased @ Rs.6,000/- per month, and computed the amount of compensation in accordance with provision of Section 4 of Employee's Compensation Act and arrived at net amount of compensation Rs.3,29,597/- (Three lakhs twenty nine thousand and five hundred ninety seven) which was awarded in favour of claimant without any direction for payment of interest as mandated under Section 4A of the said act which has been assailed in this appeal.”

Going forward, the Bench then stipulates in para 5 that, “The sole substantial question of law has been formulated in this appeal as under:-

“Whether the Commissioner, Employee's Compensation has committed perversity by not awarding any interest to the claimant on the amount of compensation awarded under of Employee's Compensation Act (Workmen Compensation Act)?”

Do note, the Bench notes in para 8 that, “Now coming to the substantial question of law raised in this case as mentioned above, the interest part under the Employee's Compensation Act 1923 is awarded under Section 4A(3) which runs as under:-

“ 4A(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 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.”

While citing a recent and relevant case law, the Bench observes in para 9 that, “In the case of Shobha Vs. The Chairman, Vitthal Rao Shinde in Civil Appeal No.1860 of 2022 decided by Hon'ble Apex Court on 11.03.2022, it has been held that:-

“the amount of compensation can be said to be “falling due” on the death of the employee/deceased and the liability to pay the compensation would arise immediately from the date of death of deceased. Even as per Section 4A(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 to extent of liability which he accepts, and, such payment shall be deposited with the Commissioner or made to the employee, as the case may be, without prejudice to the right of the employee to make any further claim. Therefore, the liability to pay the compensation and interest on the amount of arrears/compensation shall be from the date of accident and not from the date of the order passed by the Commissioner.””

While citing yet another relevant case law, the Bench states in para 10 that, “In the case of Kamla Chaturvedi Vs. National Insurance Co. Ltd. reported in 2009 (1) SCC 487, reiterating earlier principles in para 7 & 8 the Hon'ble Apex Court has held as under:-

“7. In Ved Prakash Garg Vs. Premi Devi & Ors. reported in 1997 (8) SCC (1)- this court observed that the insurance company is liable to pay not only the principal amount of compensation payable by the insured/employer but also interest thereon if ordered by the Commissioner to be paid by the insured/employee. It was however held that it was the liability of insured/employer alone in respect of payment of penalty imposed under Section 4A(3)(b) of the Act.”

“8. In New India Assurance Co.'s Case (supra) and Ved Prakash Garg's case(supra was distinguished on fact). It was observed that in the said case, the court was not concerned with a case where an accident had occurred by the use of motor vehicle in respect whereof the Contract of insurance will be governed by the provisions of the Motor Vehicles Act, 1988.””

Most notably, we need to note that the Bench while dwelling on the cornerstone of this notable judgment mandates in para 11 that, “Award of compensation fells due on the date of occurrence/accident and computation of compensation and interest begins from the date, it fell due i.e. the date of accident and not the date of award till its realization. In case of accident out of use motor vehicle causing death or injuries to employee, the insurer of vehicle can't escape liability to pay the interest on principal award.”

It is worth noting that the Bench lays bare in para 12 that, “After analyzing the law, I must revert back to the findings recorded by Ld. Presiding Officer-cum-Commissioner under Employee's Compensation Act, which categorically show that no amount of interest component has been awarded inspite of statutory mandate of Section 4A(3)(a) and no reason has been attributed for not granting the interest component in the award which is quite illegal and suffers from perversity.”

As a corollary, the Bench holds in para 13 that, “In view of aforesaid discussion and reasons, I find merits in this appeal which, is hereby, allowed and the impugned order is modified to the extent of payment of simple interest @ 12 % per annum from the date of death of deceased i.e. on 28.01.2009 till the date of actual payment on original award amount of Rs.3,29,597/-.”

In addition, the Bench then directs in para 14 stating that, “The respondent No.2-Insurance Company Ltd. is directed to deposit the aforesaid amount of interest within 2 months from the date of this order before the Ld. court below, failing which, the said amount shall be realized through process of court. After deposit of said amount, it shall be disbursed in favour of appellant.”

Finally, the Bench concludes by holding in para 15 that, “The present order is beneficial to all Presiding Officers of Labour Court in the State, hence, Registry is directed to circulate the order to all Presiding Officers of Labour Court in the State of Jharkhand.”

In sum, we thus see in this leading judgment that the Jharkhand High Court has made it indubitably clear in holding precisely that in case of a motor vehicle accident, if death or an injury is caused to the employee, the insurer of vehicle cannot escape liability to pay interest on compensation awarded. Absolutely right! No denying it!