Supreme Court Restores Interest on Compensation for Injured Laborer: Ajaya Kumar Das vs. Divisional Manager (2022)

Date of the Judgment: 24 January 2022

Citation: (2022) INSC 43

Judges: Dr. Dhananjaya Y Chandrachud, J and Dinesh Maheshwari, J

Can a High Court interfere with an order awarding interest on compensation under the Workmen’s Compensation Act, 1923, after dismissing an appeal on the grounds of limitation? The Supreme Court of India addressed this question in a recent case involving a laborer who suffered severe injuries in a truck accident. The Court reaffirmed that interest on compensation should be calculated from the date of the accident, not the date of adjudication, and criticized the High Court for its erroneous interference.

Case Background

The first appellant, Ajaya Kumar Das, was employed as a labourer and was engaged by the second respondent for loading and unloading sand from a truck. On 5 June 2000, the truck met with an accident, causing severe injuries to Mr. Das’s abdomen and kidney. He underwent surgery and was discharged from the hospital on 22 June 2000. Following the accident, Mr. Das filed a claim for compensation before the Workmen Compensation-cum-Assistant Labour Commissioner, Odisha. The claim was allowed on 24 May 2016, with the Commissioner determining that Mr. Das had suffered a permanent disability of 85%, which reduced his earning capacity by 100%. The Commissioner calculated the total compensation payable at Rs 2,78,926, along with interest at 12% per annum from the date of the accident until the date of deposit.

Timeline

Course of Proceedings

The first respondent, the insurer, filed an appeal before the High Court of Orissa against the order of the Labour Commissioner, with a delay of 619 days. The High Court dismissed the appeal due to the delay. However, it also directed that the appellants were not entitled to any interest on the compensation, except the accrued interest. The appellants filed a review petition, which was also dismissed on 8 February 2019, because the first appellant had already withdrawn the awarded amount along with the accrued interest. The Supreme Court noted that the High Court’s judgment was inexplicable because after dismissing the appeal on the ground of limitation, there was no reason for the High Court to interfere on merits with the award of interest on compensation under the Workmen’s Compensation Act 1923.

Legal Framework

The Supreme Court referred to Section 4A of the Workmen’s Compensation Act 1923, which states that the Commissioner shall direct the employer to pay interest at 12% per annum, or at a higher rate not exceeding the lending rates of any scheduled bank, if the employer does not pay the compensation within one month from the date it fell due. The Court also cited several precedents, including:

• Saberabibi Yakubhai Shaikh v. National Insurance Co. Ltd. [(2014) 2 SCC 298], where the Court held that interest shall be paid on the compensation awarded from the date of the accident, and not the date of adjudication of the claim.

• Oriental Insurance Co. Ltd. v. Siby George [(2012) 12 SCC 540], which established that compensation falls due from the date of the accident.

• P. Meenaraj v. P. Adigurusamy & Anr. [Civil Appeal No 209 of 2022, decided on 6 January 2022], where the Court reiterated that the applicant is entitled to interest from the date of the accident, rejecting the submission that the award of interest should be after the expiry of 30 days from the date of the accident.

Arguments

The Supreme Court noted that the High Court had erred in deleting the order for payment of interest. The Court observed that the High Court dismissed the appeal filed by the insurer on the ground of limitation, and therefore, there was no justification for it to interfere with the award of interest on compensation under the Workmen’s Compensation Act, 1923. The Court also noted that the High Court had erred on merits as well, as the interest should be calculated from the date of the accident and not the date of adjudication.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame any issues in this case. However, the core issue before the Court was:

1. Whether the High Court was justified in interfering with the order of the Labour Commissioner regarding interest on compensation after dismissing the appeal on the ground of limitation.

Treatment of the Issue by the Court

Authorities

The Supreme Court relied on the following authorities:

The Court also considered Section 4A of the Workmen’s Compensation Act 1923, which stipulates that the Commissioner shall direct the employer to pay interest of 12% or at a higher rate, if the employer does not pay the compensation within one month from the date it fell due.

Judgment

How each authority was viewed by the Court?

The Supreme Court relied heavily on Saberabibi Yakubhai Shaikh v. National Insurance Co. Ltd. [(2014) 2 SCC 298]* and Oriental Insurance Co. Ltd. v. Siby George [(2012) 12 SCC 540]* to affirm that interest on compensation should be calculated from the date of the accident. The Court also used P. Meenaraj v. P. Adigurusamy & Anr. [Civil Appeal No 209 of 2022, decided on 6 January 2022]* to reiterate its position on the matter. These cases were used to reinforce the principle that compensation falls due from the date of the accident.

What weighed in the mind of the Court?

The Supreme Court was primarily influenced by the following factors:

• The High Court’s error in interfering with the Labour Commissioner’s order on merits after dismissing the appeal on the ground of limitation.
• The established legal principle that interest on compensation under the Workmen’s Compensation Act should be calculated from the date of the accident.
• The need to ensure that a labourer receives full and timely compensation for injuries suffered during employment.
• The fact that the insurer, a well-resourced company, had used its position of dominance to evade the cause of justice.

Fact:Law Ratio:

The Court’s reasoning was primarily based on legal principles and precedents, with a lesser emphasis on the specific facts of the case.

The Supreme Court’s decision was based on the premise that once the High Court dismissed the appeal on the ground of limitation, it had no jurisdiction to interfere with the Labour Commissioner’s order on merits, especially when the order was in line with established legal precedents. The Court emphasized that the High Court’s interference was not only procedurally incorrect but also substantively flawed, as it went against the settled position of law regarding the calculation of interest under the Workmen’s Compensation Act.

The Supreme Court stated:

“The judgment of the High Court is inexplicable. Having dismissed the appeal of the insurer on the ground of limitation, there was no occasion for the High Court to interfere on merits with the award of interest on compensation under the Workmen’s Compensation Act 1923.”

“When the appeal was dismissed on the ground of limitation, the High Court could not have entertained it on merits.”

“Thus, there was no legal basis for the High Court to delete the order of payment of interest.”

Key Takeaways

• Interest on compensation awarded under the Workmen’s Compensation Act, 1923, must be calculated from the date of the accident, not the date of adjudication.

• High Courts cannot interfere with the orders of the Labour Commissioner on merits, if the appeal has been dismissed on the grounds of limitation.

• Insurance companies cannot evade their responsibilities by filing appeals with inordinate delays and then seeking relief on merits.

• The Supreme Court has emphasized the need to ensure that labourers receive full and timely compensation for injuries suffered during employment.

Directions

The Supreme Court set aside the High Court’s order that deleted the interest on compensation. The Court restored the order of the Additional Labour Commissioner-cum-Commissioner, Workmen Compensation, which included the payment of interest along with the award of compensation. Additionally, the Court directed the respondent to pay costs of Rs 50,000 to the appellants within four weeks, along with the remaining compensation and interest.

Development of Law

The ratio decidendi of this case is that interest on compensation under the Workmen’s Compensation Act, 1923, must be calculated from the date of the accident, and that High Courts cannot interfere with the orders of the Labour Commissioner on merits, if the appeal has been dismissed on the grounds of limitation. This judgment reaffirms the settled position of law and ensures that labourers receive full and timely compensation for injuries suffered during employment.

Conclusion

In the case of Ajaya Kumar Das vs. Divisional Manager, the Supreme Court of India set aside the order of the High Court of Orissa, which had erroneously deleted the interest component on compensation awarded to an injured labourer. The Supreme Court reaffirmed that interest on compensation under the Workmen’s Compensation Act, 1923, should be calculated from the date of the accident. This judgment underscores the importance of ensuring that labourers receive full and timely compensation and that High Courts do not interfere with orders of the Labour Commissioner on merits when appeals are dismissed on limitation.