Holding

Loss of earning capacity is not a substitute for the percentage of physical disablement and must be assessed by a qualified medical practitioner; the High Court's 100% finding is unsupported, and interest accrues from one month after the compensation falls due, not from the date of accident.

Summary

The respondents, employed as labourers, cleaners or drivers, were injured in a vehicle accident while performing duties and claimed compensation under the Workmen's Compensation Act, 1923. The Commissioner awarded compensation based on the medical assessment of loss of earning capacity (LEC) and functional disability, but the High Court unreasonably held the LEC to be 100% and ordered interest from the date of the accident. The insurer appealed, arguing that LEC is not a substitute for the percentage of physical disablement and that interest should not accrue from the accident date. The Supreme Court held that for injuries not listed in Schedule I, Section 4(1)(c)(ii) requires a qualified medical practitioner to assess LEC, which is only one factor and cannot be set at 100% without basis. The Court also affirmed that, after the 1995 amendment, the statutory interest rate is 12% but it accrues only from the completion of one month after the compensation falls due, i.e., from the date of adjudication, not from the accident. Consequently, the High Court’s order on LEC was set aside and the Commissioner’s award restored, while the interest rate was upheld but the period corrected.

Issues considered

Whether loss of earning capacity can be deemed 100% in the absence of a Schedule I injury under Section 4(1)(c)(ii) of the Workmen's Compensation Act, 1923.
Whether interest under Section 4A(3) is payable at 12% and from what date the interest period commences.

Legislation cited

Workmen's Compensation Act, 1923s. 4(1)(c), s. 4-A(1), s. 4-A(3)

Subjects

Workmen's CompensationLoss of earning capacityPhysical disablementInterest under Section 4ASchedule I injuriesMedical assessmentCompensation due dateDefault interest

Judgment

NATIONAL INSURANCE CO. LTD. A
v.
MUBASIR AHMED AND ANR.

FEBRUARY I, 2007

[DR. ARIJIT PASA YAT AND S.H. KAPADIA, JJ.] B

Workmen's Compensation Act, 1923:

s. 4(1)(c), Explanations I and II-Injuries sustained by employees in
course of employment-Assessment of loss of earning capacity-Held, injuries c
being not specified in Schedule I, case covered by s.4(1)(c)-Loss of earning
capacity is not a substitute for percentage of physical disablement-On facts,
the doctor who examined the claimants also noted about functional
disablement and took note of relevant factors relating to loss of earning
capacity on the basis whereof award was made-High Court without D
indicating any reason or basis erred in holding the loss of earning capacity
as IOO'Yo---Award of Commissioner restored

ss.4-A and 4-A(3)-Rate of interest and period from which interest
would be payable on awarded amount-Held, since the accident took place
after the 1995 amendment to the Act, the rate 12% as fixed by High Court E
cannot be faulted-The date from which interest becomes payable would be
the date of completion of one month from adjudication of the claim and not
from the date of accident-Crucial expression is 'falls due"-Unless there
is an adjudication, question of amount falling due does not arise.

Words and Phrases: F

Expression ''false due" occurring in s. 4-A(I) of Workmen's Compensation
Act, 1923-Connotation of

Respondents no. I in the appeals, who were working with respondent
no. 2 as labour/cleaner/driver of its vehicle were injured in an accident of the G
said vehicle. They were awarded compensation by the Commissioner for
workmen's compensation and Assistant Commissioner of Labour on the basis
of the assessment of loss of earning capacity made by the doctor who examined
the claimants and noted the functional disablement However, the High Court
117 H
118 SUPREME COURT REPORTS [2007] 2 S.C.R.

A held the loss of earning capacity as 100% and accordingly enhanced the
compensation. It also directed interest@ 12% from the date of accident till
actual payment. Aggrieved, the Insurance Company filed the appeals.

Allowing the appeals in part, the Court

B HELD: 1. These cases related to injuries which were not specified in
Schedule I and as such cases are covered by Section 4(1)(c)(ii) of the
Workmen's Compensation Act, 1923. In terms of Explanation II the qualified
medical practitioner has to assess loss of earning capacity having due regard
to percentage of loss of earning capacity in relation to the different injuries.
Loss of earning capacity is, therefore, not a substitute for percentage of the
C physical disablement. It is one of the factors taken into account. In the instant
case, the doctor who examined the claimant also noted about the functional
disablement. The doctor had taken note of the relevant factors relating to
loss of earning capacity. Without indicating any reason or basis the High
Court held that there was 100% loss of earning capacity. Since no basis was
indicated in support of the conclusion, same cannot be maintained. Therefore,
D that part of the High Court's order is set aside ::nd the order of the
Commissioner is restored, in view of the facts situation. jPara Nos. 7-81
1122-F-H; 123-A-BI

2. Interest is payable under Section 4A(3) of the Act, ifthere is default
in paying the compensation due under the Act within one month from the date
E it fell due. By Amending Act, 14 of 1995, Section 4A of the Act was amended,
inter alia, fixing the minimum rate of interest to be simple interest@ 12%.
In the instant case, the accident took place after the amendment and, therefore,
the rate of 12% as fixed by the High Court cannot be faulted. [Para 91
[123-C-D]

F Maghar Singh v. Jashwant Singh, 119981 9 SCC 134, referred to.

3. As regards the date from which the interest would be paid, the starting
point is on completion of one month from the date on which compensation fell
due. Obviously it cannot be the date of accident. Since no indication is there
as to when it becomes due, it has to be taken to be the date of adjudication of
G the clai.m. Section 4A(l) of the Act prescribes that compensation under
Section 4 shall be paid as soon as it falls due. The crucial expression is "falls
due". Significantly, legislature has not used the expression "from the date
of accident". Unless there is an adjudication, the question of an amount falling
due does not arise. [Para 91 [123-D-G]

H CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5623 of2006.
NA TION AL INSURANCE CO. LTD. v. MUBASIR AHMED [PASA YAT, J.] 119

From the Final Judgment and Order dated 13.7.2004 of the High Court A
of Judicature, Andhra Pradesh at Hyderabad in C.M.A. No. 3413/2003.

WITH

C.A. Nos. 5624 and 5625 of2006.
B
P.K. Seth and Sudhir Kumar Gupta for the Appellant.

K. Maruthi J3.ao, Radha and Anjani Aiyagari for the Respondents.

The Judgment of the Court was delivered by

DR. ARIJIT PASAYAT, J. I. Challenge in these appeals is to the
c
judgment rendered in each case by learned Single Judge of the Andhra
Pradesh High Court. Respondent no. I in each case was working as employee
of respondent no.2. Each of them filed a claim petition under Section 22 of
the Workmen's Compensation Act, 1923 (in short the 'Act') claiming
compensation for alleged personal injuries sustained in course of employment. D
In each case the claimant claimed to be either a labour or cleaner or driver
of the vehicle which was involved in the accident. While respondent no. I
in Civil Appeal No.5625 of2006 claimed to be driver of the vehicle No.APJ-
1907, the respondent no. I in Civil Appeal No.5623 of 2006 claimed to be the
cleaner of the vehicle. Respondent no.I in Civil Appeal No. 5624 claimed to E
be employed in a different vehicle. The claim petitions were adjudicated by
the Commissioner for Workmens' Compensation and Assistant Commissioner
of Labour, Nizamabad (hereinafter referred to as the 'Commissioner').

2. In order to prove the nature of injuries sustained and the alleged loss
of earning capacity, a doctor was examined as witness. The doctor who was F
examined, indicated the percentage of permanent and temporary disablement,
functional disability and loss of earning capacity as follows:

Civil Appeal No. 5623 of 2006

Permar cont/partial disability 65%
G
Functional disability 65%

Loss of earning capacity 80%

H
120 SUPREME COURT REPORTS [2007] 2 S.C.R.

A Civil Appeal No. 5624 of2006
Permanent/partial disability 65%

Functional disability 65%

B Loss of earning capacity 65%

Civil Appeal No. 5625 of2006

Permanent/partial disability 65%

Functional disability 7(1%
c
Loss of earning capacity 80"/o

3. The appellant-insurer of offending vehicle did not question correctness
of the award made by the Commissioner. The claimant in each case preferred
D an appeal under Section 30 of the Act. By the impug01ed judgment in each
case the High Court held that there was I 00% loss of earning capacity and,
therefore, awarded compensation. It also directed grant of interest @ 12%
p.a. from date of accident till actual realization.

4. In support of the appeals, learned counsel for the appellant submitted
E that the judgment of the High Court without any discussion on the loss of
earning capacity is clearly unsustainable, and in addition question of payment
of 12% p.a. interest does not arise. The rate of interest is high.

S. Learned counsel for the respondents supported the impugned order
of the High Court in each case.
F
6. In order to decide the basic issues Sections 4 and 4-A of the Act
need to be noted. They read as follows:

"4. Amount of compensation.-( I) Subject to the provisions of this
Act, the amount of compensation shall be as follows, namely :
G (a) where death results from the injury an amount equal to forty per cent
of the monthly wages of the deceased workman multiplied by the relevant
factor; or an amount of twenty thousand rupees, whichever is more;
•
(b) where permanent total disablement results from injury an amount
H equal to fifty per cent of the monthly wages of the injured workman multiplied
NATIONAL INSURANCE CO.LTD. v. MUBASIR AHMED [PASAYA T, J.] 121

by the relevant factor; or an amount of twenty-four thousand rupees, A
f · whichever is more;

Explanation 1 - For the purposes of Cl. (a) and Cl. (b), "relevant
factor", in relation to a workman means the factor specified in the
second column of Sch. IV against th~ entry in the first column of the
schedule specifying the number of years which are the same as the B
completed years of the age of the workman on his last birthday
immediately preceding the date on which the compensation fell due;

Explanation II - Where the monthly wages of a workman exceed
one thousand rupees, his monthly wages for the purposes of Cl. (a)
and Cl. (b) shall be deemed to be one thousand rupees only. C
(c) where (i) in the case of an injury specified
permanent in Pt. II of Sch. I, such percentage
partial of the compensation which would
disablement have been payable in the case of
results from permanent total disablement as is D
the injury specified therein as being the
percentage of the loss of earning capacity
caused by the injury; and
(ii) in the case of an injury not specified
in Sch. I, such percentage of the
compensation payable in the case of E
permanent total disablement as is
proportionate to the loss of earning
capacity (as assessed by the qualified
medical practitioner) permanently caused
by the injury; F
Explanation I Where more injuries than one are caused by the
same accident,' the amount of compensation payable under this head
shall be aggregated but not so in any case as to exceed the amount
which would have been payable if permanent total disablement had
resulted from the injuries: G
Explanation II In assessing the loss of earning capacity for the
purposes sub-clause (ii), of the qualified medical practitioner shall
have due regard to the percentage of loss of earning capacity in
relation to different injuries specified in Sch.I;
H
122 SUPREME COURT REPORTS [2007) 2 S.C.R.

A (d) Where temporary A half-monthly paymet of the
disablement, whether sum-equivalent to twenty-five
total or partial results per cent of monthly wages of
from the injury the workman, to be paid in
accordance with the provisions
B of sub-section (2).

Xx xx xx

4-A. Compensation to be paid when due and penalty for default (l)
c Compensation under Sec. 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 event of liability which he accepts,
and, such payment shall be deposited with the Commissioner or made
D 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 may direct that, in addition to the amount of the arrears,
E simple interest at the rate of six per cent per annum on the amount
due together with, if in the opinion of the Commissioner there is no
justification for the delay, a further sum not exceeding fifty per cent
of such amount, shall be recovered from the employer by way of
penalty."
F 7. These cases related to injuries which were not specified in Schedule
I and as such cases are covered by Section 4(l)(c) (ii) Explanation. In tenns
of Explanation II the qualified medical practitioner has to assess loss of
earning capacity having due regard to percentage of loss of earning capacity
in relation to the different injuries in Schedule I. Explanation I also provides
G that where there are more than one injury, the aggregate has to be taken, so
that the amount which would be payable for pennanent total disablement is
not exceeded.

8. Loss of earning capacity is, therefore, not a substitute for percentage
of the physical disablement. It is one of the factors taken into account. In
H
NATIONAL INSURANCE CO. LTD. v. MUBASIRAHMED [PASAYAT,J.] 123

the instant case the doctor who examined the claimant also noted about the A
functional disablement. In other words, the doctor had taken note of the
relevant factors relating to loss of earning capacity. Without indicating any
reason or basis the High Court held that there was I00% loss of earning
capacity. Since no basis was indicated in support of the conclusion, same
cannot be maintained. Therefore, we set aside that part of the High Court's
order and restore that of the Commissioner, in view of the facts situation. B
Coming to the question of liability to pay interest, Section 4-A(3) deals with
that question. The provision has been quoted above.

'fil· 9. Interest is payable under Section 4-A(3) if there is default in paying
the compensation due under this Act within one month from the date it fell C
due. The question of liability under Section 4-A was dealt with by this Court
in Maghar Singh v. Jashwant Singh, [1998] 9 SCC 134. By Amending Act,
14 of 1995, Section 4-A of the Act was amended, inter alia, fixing the
minimum rate of interest to be simple interest @ 12%. In the instant case,
the accident took place after the amendlT'ent and, therefore, the rate of 12%
as fixed by the High Court cannot be faulted. But the period as fixed by it D
is wrong. The starting point is on completion of one month from the date
on which it fell due. Obviously it cannot be the date of accident. Since no
indication is there as when it becomes due, it has to be taken to be the date
of adjudication of the claim. This appears to be so because Section 4-A(I)
prescribes that compensation under Section 4 shall be paid as soon as it falls E

- due. The compensation becomes due on the basis of adjudication of the
claim made. The adjudication under Section 4 \n some cases involves the
assessment of loss of earning capacity by a qualified medical practitioner.
Unless adjudication is done, question of compensation becoming due does
not arise. The position becomes clearer on a reading of sub-section (2) of
Section 4-A. It provides that provisional payment to the extent of admitted F
liability has to be made when employer does not accept the liability for
compensation to the extent claimed. The crucial expression is "falls due".
Significantly, legislature has not used the expression "from the date of
accident". Unless there is an adjudication, the question of an amount falling
due does not arise.

10. The appeals are allowed to the extent indicated, without any order
as to costs.

RP. Appeals partly allowed.