The Manager Vs Smt Girija

SMT. H. M. PREMA AGED ABOUT 71 YEARS W/O. VIRUPAKSHA COFFEE PLANTER, EMMEKHAN ESTATE MUTHINAPURA VILLAGE MALLENAHALLI POST-577 131 CHIKKAMAGALURU TALUK

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NOW R/AT RAGHAVENDRA SWAMY TEMPLE ROAD BASAVANAHALLI EXTENSION CHIKKAMAGALURU-577 101

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…RESPONDENTS

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(BY SRI A. S. GIRISH, ADVOCATE FOR R-1 TO R-4; R-5, R-6, R-7 AND R-8 ARE SERVED AND UNREPRESENTED)

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THIS MISCELLANEOUS FIRST APPEAL IS FILED UNDER SECTION 30(1) OF EMPLOYEES COMPENSATION ACT, 1923 AGAINST THE JUDGMENT AND AWARD DATED 10.1.2023 PASSED IN E.C.A NO.23/2020 ON THE FILE OF THE PRINCIPAL SENIOR CIVIL JUDGE AND C.J.M., CHIKKAMGALURU, AWARDING COMPENSATION OF RS.11,53,175/WITH INTEREST AT THE RATE OF 9 PERCENT P.A. FROM THE DATE OF THIS JUDGMENT TILL REALIZATION OF ENTIRE AMOUNT.

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THIS MISCELLANEOUS FIRST APPEAL IS COMING ON FOR FINAL HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:

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CORAM: HON'BLE MR. JUSTICE UMESH M ADIGA

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NC: 2025:KHC:42820 MFA No. 2480 of 2023

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HC-KAR

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ORAL JUDGMENT

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This appeal is filed by the insurer being aggrieved by the judgment and decree dated 10.01.2023 passed by the Principal Senior Civil Judge, CJM and Commissioner, Chikkamagaluru in ECA.No.23/2020(for short 'Commissioner').

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This appeal is admitted to consider the following substantial questions:

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i. Whether the Employees Commissioner

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erred in directing the insurer to pay the entire amount of compensation though the insurer calculated the premium on the basis of wages declared by the insured at Rs.8,000/- per employee?

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ii. Whether the Commissioner erred in

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directing the insurer to pay the interest on the amount for the delayed payment of compensation though there was no such liability on the insurer?

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iii. What order?

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Heard the arguments of both the sides.

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HC-KAR

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Most of the facts are not in dispute; therefore, there is no need to discuss them in detail. The insurer challenges its liability to pay the entire amount of compensation awarded by the Tribunal on the ground that, as per Ex.R1 (which is not mentioned in the annexure of the impugned award), respondent No.3 had declared the monthly wages of the employees as Rs.8,000/- and taken insurance of 18 employees, i.e., temporary workmen. On this basis, the insurer contends that it is liable to pay compensation calculated at Rs. 8,000/- per month. However, the Commissioner determined the income of the deceased as Rs. 15,000/per month and awarded compensation accordingly. Therefore, the insurer submits that it is not liable to pay the entire amount of compensation, but only a portion thereof, i.e., Rs. 6,20,600/-, as calculated in the appeal memo.

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The second contention of the learned counsel for

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the appellant is that the Commissioner erred in directing payment of interest at the rate of 12% and in fastening of

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HC-KAR

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the said liability on the insurer. It is submitted that, in view of Section 4A of the Employees’ Compensation Act, the default is attributable to the employer (respondent No.1, since deceased represented by his legal representatives), and therefore, the insurer is not liable to pay interest as per Ex.P1. Therefore, prayed to set aside the same.

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Learned counsel for the claimant contends that the Commissioner has assessed the income of the deceased at Rs. 15,000/- per month and deducted 50% thereof. Thus, the income taken by the Commissioner amounts to Rs. 7,500/-, which is below the amount mentioned in Ex.R1. Therefore, the contention of the appellant is not maintainable. He further submits that it was the duty of the insurer to calculate the premium in accordance with the Minimum Wages Act, and if it failed to do so, the default lies with the insurer. On that basis, the insurer cannot evade its responsibility to pay the compensation. He also contends that respondent No.3, the insurer, is indemnifying the owner of the establishment and is, therefore, liable to satisfy the

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HC-KAR

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award passed by the Tribunal. The insurer cannot deny payment of interest to the claimants and, at the most, may recover the same from the legal representatives of respondent No.1. With these reasons, prayed to dismiss the appeal.

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The policy of insurance is a contract between the insured and the insurer, and its terms and conditions are specified in Ex.R1. Respondent No.1, the insurer, is disputing its liability to pay the compensation, though it does not dispute the quantum of compensation awarded by the Commissioner. Therefore, even if the appeal is allowed, it would not affect the rights of claimants and amount awarded by the Commissioner.

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Inspite of service of notice, the legal representatives of deceased/claimants remained absent and unrepresented. The terms of the policy, as per Ex.R1, reveal that the insurer had accepted the premium based on the insured’s declaration that he was paying wages of Rs. 8,000/- per month to each temporary worker. On that basis,

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HC-KAR

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respondent No.3 – the insurer – had calculated the premium. Therefore, the remaining amount of compensation, calculated on the basis of the deceased’s income as Rs. 15,000/-, shall be payable by the insured, i.e., the legal representatives of respondent No.1 i.e. respondent No.1(a) to (c) and respondent No.2 herein.

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The contention of the learned counsel for the claimant that the Tribunal has deducted 50% of the income of the deceased and taken only the remaining 50% for calculation of compensation, which is less than the wages declared by respondent No.1, is untenable in law and contrary to the terms of the insurance contract. The policy in question is not one of compulsory insurance. The owner of the estate shared his liability with the insurer by declaring the wages of the employees and paying the premium accordingly. Moreover, while the Minimum Wages Act mandates the employer to pay minimum wages, there is no correlation between the premium fixed by the insurer and the wages prescribed under the Minimum Wages Act. The

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HC-KAR

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terms of policy indicates sharing of liability to pay compensation between the insured and the insurer, in the event of an occurrence of unfortunate incident during the course of employment. Therefore, the said contention is not tenable.

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Section 4(A) of the Employees Compensation Act

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1953 reads as under:

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4A. Compensation to be paid when due and penalty for default.-

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(1) Compensation under section 4 shall be paid as soon as it falls due.

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(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 employee, as the case may be, without prejudice to the right of the employee to make any further claim.

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[(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-

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(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

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HC-KAR

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(b) if, in his opinion, there is no justification for the delay, that the employer shall, in addition to the amount of the arrears an interest thereon, pay a further sum not exceeding fifty per cent. of such amount by way of penalty:

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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.

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As per the above said Section, upon receipt of intimation of the incident within 30 days, the employer is required to calculate the compensation and deposit the same before the Commissioner. If the employer fails to do so, it becomes his responsibility to pay interest and penalty. In the present case, it is not the case of the insured that any such amount was deposited before the Commissioner under the Employees’ Compensation Act. Since respondent No.1 remained absent before the Commissioner and his legal representatives were also absent before this Court, there is no material on record to show that information regarding the accident was immediately furnished to the insurer with a request to deposit the compensation amount. Under such circumstances, the failure to deposit the compensation

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HC-KAR

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constitutes a default of the insured under Section 4A of the Employees’ (Workmen’s) Compensation Act. In view of the terms of the policy, the insurer is not liable to pay interest and penalty on the said amount. Accordingly, the impugned award requires modification.

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For the aforesaid discussions, I proceed to pass the following:

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ORDER

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i. The appeal is allowed in part.

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ii. The judgment and award dated 10.01.2023 passed by the Principal Senior Civil Judge and CJM, Chikkamagaluru, in ECA.No.23/2020 is modified in respect of liability to pay the compensation.

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iii. Respondent No.3-insurer shall pay the compensation of Rs.6,20,600/out of Rs.11,53,175/- and balance amount with interest @ 12% per annum shall be payable by the insured i.e. legal representatives of respondent No.1 and respondent No.2.

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iv. Remaining part of the award is not disturbed.

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v. Whatever the amount deposited by the appellant shall be transmitted to the Commissioner and amount deposited in excess of Rs.6,20,600/shall be refunded to the insurer on due acknowledgement.

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In view of the disposal of the appeal, all the pending I.As

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stands disposed of.

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Sd/-

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(UMESH M ADIGA) JUDGE

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AG List No.: 1 Sl No.: 22

The Manager v. Smt Girija

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The Manager v. Smt Girija

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