Bombay High Court
Air India Charters Ltd vs Ms. Tanja Glusica And Ors (Respresented ... on 23 October, 2024
Author: Sharmila U. Deshmukh
Bench: Sharmila U. Deshmukh
2024:BHC-AS:42319
FA 1854-13 (J).doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
FIRST APPEAL NO. 1854 OF 2013
Air India Charters Ltd, ]
IInd Floor, Finance Bldg., ]
Old Airport, Santacruz (East), ]
Mumbai - 400 029. ] ...Appellant.
Versus
1. Ms. Tanja Glusica ]
2. Ms. Dunja Glusica. Jakovo, ]
Savaska 112, Belgrade, Serbia ]
3. Aleksander Glusica, ]
Jakovo, Savaska 78, Belgrade, Serbia ]
4. Merima Glusica ]
Jakovo, Velimira Manica 16, ]
Belgrade, Serbia ]
Represented by Constituted Attorney ]
Mr. Yeshwant Shenoy, 1003, ]
Sarathi Palace, Plot 25 D, ]
Sector 7, Kamothe, ]
Navi Mumbai - 410 209. ] ...Respondents.
------------
Mr. Firoz Bharucha, Mr. Jehan Lalkaka, Faiyaz Khan i/b Mulla & Mulla and CBC
for the appellant.
Mr. Rishi Ashok, Ms. Arya Krishnan i/b Bekay Legal for the respondents.
------------
Coram : Sharmila U. Deshmukh, J.
Reserved on : October 16, 2024
Pronounced on : October 23, 2024.
Judgment :
1. The appeal is at the instance of original Respondents in
Application (WCA) No. 336/B-65/2013 filed by the legal heirs of
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deceased pilot Zlatko Glusica under Section 22 read with Sections 3, 4,
4A and 10 of the Employees Compensation Act, 1923 [for short "EC
Act"].
FACTUAL MATRIX:
2. The Respondents are Serbian nationals and the family members
and dependents of deceased Zlatko Glusica, who was working as pilot
with the Appellant-Company and expired while on duty on 22 nd May
2010 in an unfortunate accident which occurred at Mangalore. On 27 th
September, 2012 the Appellant-Company deposited with the office of
Labour Commissioner (Workmen's Compensation) sum of Rs.
3,32,15,589/- along with relevant Form "A" prescribed under Rule 6(1) of
Employees Compensation Act, 1923.
APPLICATION NO 336/B-65/2013:
3. From the record it appears that the application under Section 22
of Employees' Compensation Act, 1923 was filed on 11 th October, 2012.
The Appellant filed their reply dated 4 th May, 2013 to the said
application. The application filed on 11th October, 2012 was not pressed
and subsequently on 3rd July, 2013 another application was filed by the
Respondents claiming compensation amount of USD 745580, maximum
penalty of 50% and maximum interest of 12%. The contentions raised
was that the deceased was in employment with the Appellant-Company
through a contract executed by the Appellant-Company with one Sigmar
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Aviation Ltd. The services of deceased were made available to the
Appellant-Company and the deceased was working under the direct
supervision of Appellant-Company. The Appellant-Company had
declared that the salary paid to the contractor, i.e., Sigmar Aviation Ltd
was USD 11,000 per month and the Respondents were not aware as to
what the actual salary was paid by the contractor to the deceased. The
salary of the deceased is deemed to be USD 11,000 per month and the
relevant multiplier is 135.56. The Respondents filed the claim through
their constituted attorney pleading difficulty in coming to India. The
Respondents, after meeting the Constituted Attorney became aware of
their rights and through the Constituted Attorney lodged a claim with
the Appellant-Company by e-mail on 21st May, 2012. There was no
payment of interim compensation and no deposit by the Appellant-
Company even after 2 years of accident.
APPLICATION UNDER SECTION 8 OF EC ACT:
4. An application came to be filed by the Respondents under Section
8 of EC Act on 11th October, 2012 for immediate distribution of
deposited compensation amount to the Respondents. The Appellant-
Company filed its composite reply dated 4 th May, 2013 to the Section 8
Application as well as to the Application under Section 22 of EC Act
contending that the Appellant-Company is not concerned with the issue
of distribution and payment of compensation. It was contended that
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deposit by the Appellant was on the basis of estimated salary of USD
11,000 and there was excess deposit as the salary of deceased as per
the contract of 7th October, 2009 between the deceased and Sigmar
Aviation Ltd was USD 9,170. The Appellant sought refund of the excess
amount. The record indicates that on 20 th December, 2012 the
Employees Compensation Commissioner passed an order of distribution
of compensation and apportionment between the legal heirs.
5. The Appellant-Company filed their reply dated 8 th July, 2013 to
the application dated 3rd July, 2013 filed by the Respondents under
Section 22 read with Section 3, 4,4A and 10 of EC Act. It was contended
that the accident in question had resulted in huge casualty and claims
had to be settled on urgent basis after assessing separately proof of
loss. They were not aware of the actual salary of the deceased so as to
compute the requisite amount to be deposited as the deceased was
employed through an external agency Sigmar Aviation Ltd. The deposit
was ultimately made on basis of amount payable to Sigmar Aviation Ltd
claiming however a refund of excess amount. They were not aware of
the family members and persons to whom the interim compensation of
Rs.10,00,000/- had to paid. There is sufficient cause for non deposit
earlier and no penalty be imposed.
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EVIDENCE:
6. The Constituted Attorney was examined on behalf of
Respondents. Two Affidavits in lieu of examination in chief were filed on
4th May, 2013 and 6th July, 2013. The witness deposed that the deceased
was 55 years old at the time of his death and was paid USD 11,000 and
other allowances per month. He further deposed that the Appellants
were principal employer and liable to pay compensation in same
currency in which his salary was paid.
7. In the cross examination, the Constituted Attorney stated that
after the crash he had visited Belgrade and he received the agreements
between the deceased and Sigmar Aviation Ltd and agreement between
the deceased and Nightangle Aviation. He deposed that the
agreements were taken out from the deceased's laptop and the
agreements were unsigned and therefore its legality and reliability was
not believed. He further deposed that he came to know about the
deceased receiving salary of USD 11,000 on the basis of covering letter
with which the Appellant had deposited the compensation before the
Commissioner. He admitted that he confirmed with the Respondents
about the deceased's salary based on the Appellant's letter dated 5 th
October, 2012. He has stated that the bank did not give the bank
statement of deceased and he did not ask for the income tax return of
deceased.
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8. The Appellants examined their officer who deposed that the
deceased was providing services by virtue of his agreement dated 7 th
October, 2009 with Sigmar Aviation Ltd, which was made available to
the Appellant by Sigmar Aviation Ltd only after the plane crash. The
Appellant was not aware of the actual salary earned by the deceased
and therefore on 27th September, 2012, the compensation was
deposited on basis of amount paid by the Appellant to Sigmar Aviation
Ltd. The witness produced the emails sent by Appellant to Sigmar
Aviation Ltd and the response enclosing the statement containing the
breakdown of the deceased's payments showing the monthly salary at
USD 9,170.
9. In the cross-examination, the witness admitted that the
Appellant-Company does not have copy of the agreement between the
deceased and Sigmar Aviation Ltd. He has admitted that as per the
agreement between the Appellant and Sigmar Aviation Ltd, the
Appellant was making payment of USD 11,000 to Sigmar Aviation Ltd
against monthly salary of the deceased. The witness has deposed that
Sigmar Aviation Ltd has been paid fees for providing manpower to
Appellant.
10. By the impugned judgment dated 18th October 2013, the
Commissioner for Employees Compensation passed the following
order :
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"1] It is hereby declared that late Captain Zlatko Glusica
died of an injury in an accident arising out of and in the course of
his employment on 22nd of May 2010.
2] Opponent Air India Charters Ltd is hereby directed to
deposit in Court US Dollars 745580/-, i.e., INR 463,37,797/-
together with 50% penalty of the amount of compensation and
12% interest per annum on aforesaid amount of compensation
from the date of accident till the date of depositing said amount
in Court.
3] The Opponent has deposited Rs.332,15,589/- in the
office of the Court on 27-9-2012. Opponent to deposit in Court
balance amount immediately."
SUBSTANTIAL QUESTIONS OF LAW:
11. The First Appeal came to be admitted on 29 th November, 2019 on
the following substantial questions of law:
"(i) Whether dependents of an employee engaged to provide services
under a contract can be awarded compensation that is calculated at
an amount higher than the amount actually payable to the deceased
Captain under the contract?
(ii) Whether the said compensation can be calculated on the basis of
any agreement between the principal employer and the agent who
supplies manpower, which the deceased employee was not privy to?
(iii) When compensation payable under Section 4-A of Employee's
Compensation Act, 1923 falls due in cases where there is a bonafide
dispute with respect to the amount of compensation payable?
(iv) When compensation is payable in foreign currency whether the
exchange rate at which the compensation is calculated in Indian
Rupees can be of the date on which the payment is actually made or
the date of the order?
(v) Whether interest and penalty on the amount of compensation is
payable at all, in cases where the amount of compensation is in fact
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adjudicated pursuant to any inquiry conducted by the Labour
Commissioner?
ADDITIONAL SUBSTANTIAL QUESTIONS OF LAW:
12. During the hearing of Appeal, following additional questions of
law were framed and the parties were duly heard:
(vi) Whether the findings of the Employees Compensation
Commissioner with regard to the monthly salary drawn by the
deceased suffers from perversity?
(vii) Whether the liability to pay interest and penalty under Section 4-
A(3)(b) of the EC Act, can be imposed on the Appellant, who is the
principal employer and has been held liable to pay compensation by
virtue of Section 12 of EC Act ?
SUBMISSIONS:
13. Mr. Barucha, learned counsel appearing for the Appellant would
submit that it is undisputed that the deceased was employed with the
Appellant-Company by virtue of his contract with Sigmar Aviation Ltd.
He would further submit that the Appellant was paying USD 11,000 per
month to Sigmar Aviation Ltd and the contract between the deceased
and Sigmar Aviation Ltd was for USD 9,170 per month. Pointing out to
Section 12 of EC Act, he submits that the amount of compensation is
required to be calculated with reference to the wages of employee
under the employer by whom he is immediately employed and the
deceased was drawing salary of USD 9,170 from Sigmar Aviation Ltd. He
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submits that by misconstruing the deposition of Appellant's witness
that Sigmar Aviation Ltd has been paid fees for providing the manpower
to the Appellant , the Employees Compensation Commissioner has
come to a finding that separate fees were being paid to Sigmar Aviation
Ltd by the Appellant apart from USD 11,000. He would further point
out the case of the Respondents in the main application was based on
the admission of Appellant that the monthly payment to the contractor
i.e. Sigmar Aviation Ltd was USD 11,000 and therefore the salary of
deceased has to be deemed to be USD 11,000 per month. He submits
that in the cross-examination of Respondent's witness, the witness has
admitted that he came to know about the salary of USD 11,000 per
month on the basis of Appellant's covering letter while depositing the
amount. Drawing attention of this Court to the admissions of the
Respondent's witness, he submits that the Respondents are not aware
of the salary of deceased and has not discharged the burden of proving
that the monthly salary of the deceased was USD 11,000. He would
further point out the agreement between the deceased and Sigmar
Aviation Ltd which is annexed at page 114C of the compilation of
documents and would point out that the deceased was paid salary of
USD 9,170 per month by Sigmar Aviation Ltd. He would further point
out that the agreement has been signed by the deceased and on behalf
of the Sigmar Aviation Limited for and on behalf of the Colton
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Enterprises Limited Assistant, Secretary of Sigmar Aviation Ltd. He
submits that the same agreement was found by the Respondents on the
laptop of deceased and the agreements are signed by both the parties.
He would further point out that the contract between Sigmar Aviation
Ltd and the deceased was marked as exhibit and although no objection
was taken and no dispute about the signature was raised, the
Employees Compensation Commissioner has held that the agreement
was not authenticated by the original and had defective signature page.
He would point out the emails exchanged between Sigmar Aviation Ltd
and the present Appellant and would submit that the Sigmar Aviation
Ltd has replied that the salary amount was USD 9,170 per month.
14. He would further submit that by relying on the provisions of the
Contract Labour Act and the Payments of Wages Act, the Employees
Compensation Commissioner has held that there are unauthorised
deductions by presuming that the salary of deceased was USD 11,000
per month and after deductions, a sum of USD 9,170 per month was
being paid.
15. He would further submit that the Employees Compensation
Commissioner has levied interest at the rate of 12% which is not
disputed due to the delay in deposit. He would however dispute the
levy of penalty @ 50% of the amount of compensation from the date of
accident till the date of depositing the amount in the Court for absence
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of explanation for the delay, whereas in paragraph 5 of Appellant's
reply, the delay has been explained. He would submit that being
unaware of actual salary of deceased as he was employed through a
contractor, when the deposit was ultimately made it was on the basis of
amount paid to Sigmar Aviation Ltd however with a caveat to claim
refund. He submits that it is clearly pleaded that an interim
compensation of Rs.10,00,000/- which was paid to others could not be
paid in the present case as the Appellant was not aware of the
dependents of deceased. He submits that the copy of agreement of
Sigmar Aviation Ltd and the deceased was obtained subsequently and
therefore the Appellant was not aware about the whereabouts of the
dependents of deceased as it was a contractual employment. He
submits that it was open for the Respondents to withdraw the
deposited amount, which has not been done and levy of penalty is
unjustified.
16. He would further submit that while calculating the exchange rate
the Employees Compensation Commissioner has considered the
exchange rate which is one day prior to the judgment date, however, as
the amount had been deposited prior to the judgment, the exchange
rate as of that day will have to be considered.
17. Per Contra, Mr. Rishi Ashok, learned counsel appearing for the
Respondents would submit that the issues involved in the present
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appeal consists of 4 components i.e., amount of salary, interest, penalty
and exchange rate. He would submit that as far as the salary is
concerned the provisions of Section 4A(2) read with Section 8(1) the
Employees Compensation Act, 1923 would indicate that the employer
has to deposit the accepted liability before the commissioner under
Form-A. He submits that the Appellants have deposited the amount by
considering the monthly salary of deceased to be USD 11,000 and
therefore there cannot be any further adjudication of the said amount.
He submits that Section 4A(2) speaks about the extent of liability which
the employer accepts and in the present case by depositing the salary at
the rate of USD 11,000 per month, the Appellants have accepted the
same. He would further submit that the witness for Appellants have
repeatedly accepted that as per the agreement between the Appellant
and Sigmar Aviation Ltd the payment of USD 11,000 per month was
against the salary of pilot. He points out the admission of the
Respondent's witness that Sigmar Aviation Ltd has been paid fees for
providing manpower to the Appellant and would submit that apart from
the salary of USD 11,000 per month paid by the Appellant to Sigmar
Aviation Ltd , separate fees were paid for providing the manpower. He
would further submit that the statutory provisions provides for levying
of interest in case of delay in deposit and the explanation tendered that
due to number of deaths there is delay is not acceptable. He submits
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that there was no justifiable reason for the delay as it was a simple case
of computation as the salary was known to the Appellant and the
multiplier method was also known to the Appellant. He submits that as
far as the penalty is concerned, the same is imposed by reason of delay
and maximum penalty has been rightly imposed.
18. As far as the issue of exchange rate is concerned, he would submit
that it is a settled position in law that the exchange rate will have to be
calculated on the date when the judgment was delivered on the amount
over and above what has been deposited by the Appellant. He draws
support from the decision of the Apex Court in the case of Triveni
Kodkany v. Air India Limited1 which relates to the same unfortunate
Mangalore air crash. He would further point out Page 136 of the
Petition which is the cross examination of the Appellant's witness that
they have paid the other employees compensation, interest and
penalty. He submits that in view thereof the Appellant cannot deny the
same to the present Respondent. He would further point out that the
finding of the Commissioner about the exchange is based on decision of
Forasol vs Oil & Natural Gas Commission 2 and Renu Sagar Power Co.
Ltd vs General Co. Ltd3.
19. In rejoinder Mr. Bharucha would submit that the deposit under
1 SC Civil Appeal No.2914 of 2019 dtd. 3rd March 2020.
2 AIR 1984 SC 241.
3 (1994 Supp (1)( SCC 644)
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Form-A is under Rule 6(1) of the Workmen's Compensation Rules, 1924
and the deposit is not under Section 4A of the EC Act. He submits that
even assuming that deposit is made under section 4A of the EC Act,
where the employer under a bonafide mistake deposits excess amount,
it cannot be said that there cannot be any further adjudication. He
submits that there cannot be any unjust enrichment and the
compensation has to be distributed in accordance with the applicable
salary of pilot. He would further submit that though the interest and
penalty was paid to other employees, the same can be disputed on the
ground that it is not legally payable.
20. In sur-rejoinder, Mr. Ashok would submit that Section 8 of the EC
Act cannot be read in isolation of Section 4A and only by way of Form A
under the provisions of section 4A or Section 8(1) of the Employees
Compensation Act, 1923 the amount has been deposited.
FINDINGS:
SUBSTANTIAL QUESTIONS OF LAW NO (i), (ii) and (vi):
(i) Whether dependents of an employee engaged to provide services under
a contract can be awarded compensation that is calculated at an amount
higher than the amount actually payable to the deceased Captain under
the contract?
(ii) Whether the said compensation can be calculated on the basis of any
agreement between the principal employer and the agent who supplies
manpower, which the deceased employee was not privy to?
(vi) Whether the findings of the Employees Compensation Commissioner
with regard to the monthly salary drawn by the deceased suffers from
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perversity?
21. These three questions are interlinked and are therefore
considered together. The undisputed fact is that the services of
deceased were obtained by the Appellant-Company through an external
agency Sigmar Aviation Ltd. Section 12 of the EC Act imposes the
liability on principal employer for payment of compensation to the
employee of the contractor with right to recover the same from the
contractor and reads thus:
"12. Contracting.--(1) Where any person hereinafter in this
section referred to as the principal in the course of or for the
purposes of his trade or business contracts with any other person
(hereinafter in this section referred to as the contractor) for the
execution by or under the contractor of the whole or any part of
any work which is ordinarily part of the trade or business of the
principal, the principal shall be liable to pay to any employee
employed in the execution of the work any compensation which
he would have been liable to pay if that employee had been
immediately employed by him; and where compensation is
claimed from the principal, this Act shall apply as if references to
the principal were substituted for references to the employer
except that the amount of compensation shall be calculated with
reference to the wages of the employee under the employer by
whom he is immediately employed.
(2) Where the principal is liable to pay compensation under
this section, he shall be entitled to be indemnified by the
contractor ,or any other person, from whom the 1 employee could
have recovered compensation and where a contractor who is
himself a principal is liable to pay compensation or to indemnify a
principal under this section he shall be entitled to be indemnified
by any person standing to him in the relation of a contractor from
whom the 1 employee could have recovered compensation and all
questions as to the right to and the amount of any such indemnity
shall, in default of agreement, be settled by the Commissioner.
(3) Nothing in this section shall be construed as preventing
a employee from recovering compensation from the contractor
instead of the principal.
(4) This section shall not apply in any case where the
accident occurred elsewhere than on, in or about the premises on
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which the principal has undertaken or usually undertakes, as the
case may be, to execute the work or which are otherwise under
his control or management"
22. Sub-Section (1) of Section 12 EC Act makes it clear that the
amount of compensation payable by the principal employer shall be
calculated with reference to the wages of employee under the
employer by whom he is immediately employed. To put it simply, the
basis for computation of compensation in cases of payment of
compensation to the employee of contractor is the wages of employee
which is paid by the contractor to the employee.
23. It is an admitted position in the present case, that the services of
the deceased was made available to the Appellant by Sigmar Aviation
Ltd which would make the Appellant the principle employer and under
Section 12 of EC Act, the basis for compensation would be the salary
that the deceased was drawing from his immediate employer i.e. Sigmar
Aviation Ltd. Whether the monthly salary was USD 11,000 or USD, 9170
is the pivotal issue to be determined on the evidence which has come on
record. On the aspect of salary of deceased, the oral evidence of the
Appellant's witness is that by virtue of the agreement of deceased with
Sigmar Aviation Ltd dated 7th October, 2009, his services were provided
to the Appellant-Company. He has further deposed that as the witness
for the Respondents had disputed the authenticity of agreement dated
7th October, 2009, confirmation was sought about the actual amount of
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salary paid to the deceased by email from Sigmar Aviation Ltd. The
witness has produced the copy of the emails exchanged between the
Appellant and Sigmar Aviation Ltd, which are marked as Exhibit U-5.
24. In the cross-examination, the witness has admitted that as per the
agreement with Sigmar Aviation Ltd, the Appellant was making
payment of USD 11,000 against salary of the deceased per month. He
has further admitted that Sigmar Aviation Ltd has been paid fees for
providing manpower to the Appellant. He has admitted that he is not
aware as to how much amount was being paid to the deceased by
Sigmar Aviation Ltd.
25. Coming to the evidence of the Respondents, the Respondents
has examined their Constituted Attorney who has admitted in the
cross-examination that he had not seen the deceased and had met the
dependents of deceased for the first time after the death of deceased.
He has admitted that when he went to Belgrade, Serbia, he received
two agreements, one executed between the deceased and Sigmar
Aviation Ltd and the other between the deceased and Nightangale
Aviation. He has further admitted that he came to know about the
salary of deceased being USD 11,000 based on the covering letter of the
Appellant accompanying the deposit of compensation in the Court. He
has further admitted that he confirmed from the Respondents about
the wages paid to the deceased based on the covering letter of deposit
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by the Appellant. He has deposed that the bank refused to give bank
statement of the deceased and he had not asked for income tax returns
of the deceased. He has further admitted that the agreement Exhibit C-
1-B is the copy of agreement between the deceased and Sigmar
Aviation Ltd which was found unsigned on the laptop of the deceased
and were taken out from the laptop of the deceased in Belgrade.
26. The evidence on record discloses that the Respondents claim
compensation calculated on monthly salary of USD 11,000 based on the
Appellant's covering letter while depositing the amount in the Court.
The Respondents were in possession of best evidence available in the
form of bank statements and income tax returns of the deceased which
would have proved the monthly remittances by the Sigmar Aviation Ltd
to the deceased. However no such documents has been produced by
the Respondents to establish the salary of the deceased.
27. The documentary evidence on record is the agreement dated 7th
October, 2009 between Sigmar Aviation Ltd and deceased with which
the Respondent's witness was confronted and he has admitted that the
said document Exhibit C-1-B is copy of the agreement found unsigned
on laptop of deceased. The Appellant's witness has produced the emails
exchanged between the Appellant and Sigmar Aviation Ltd. The
Respondents have not produced any documentary evidence on record.
The oral evidence is by the Constituted Attorney who was not
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acquainted with the deceased and has no personal knowledge about
the monthly salary of the deceased. The Respondents solely relies upon
the deposit made by the Appellant treating the monthly salary at USD
11,000. On the other hand, the Appellant's witness has produced the
emails exchanged between Sigmar Aviation Ltd and the Appellant
giving the breakup of the salary paid to the deceased. There is no cross-
examination on these emails and the deposition of the Appellant's
witness remains uncontroverted. The emails establishes that on 24 th
July, 2013, the Appellant has communicated with Sigmar Aviation Ltd
seeking clarification about the actual salary being remitted to the
deceased. In that email there is reference to the signed contract
forwarded by Sigmar Aviation Ltd with the Respondents showing the
salary of deceased at USD 9,170. The reply email of Sigmar Aviation Ltd
confirms that the salary amount is correct as per the contract dated 7 th
October, 2009 and the email of 24th July, 2013 sent by Sigmar Aviation
Ltd to the Appellant encloses the break up of payment showing the
monthly remittance of USD 9,170 to the deceased as salary from Sigmar
Aviation Ltd .
28. There is no discussion in the impugned judgment on the
documentary evidence produced in the form of emails which contains
the break up of the remittances. The statement annexed to the emails
establishes that the deceased was being paid monthly salary of USD
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9,170 by Sigmar Aviation Ltd and medical fees of USD 100.
29. Section 8 of the EC Act deals with the distribution of
compensation and provides that no payment of compensation shall be
made otherwise than by deposit with the Commissioner and no such
payment made directly by an employer shall be deemed to be payment
of compensation with the exception of making of payment of advances
on account of compensation in case of deceased employee to the
extent of three months wages. Under Rule 6 of the EC Rules, the
employer depositing compensation under Section 8(1) is required to
furnish statement in Form "A". Perusal of the prescribed Form "A"
indicates that the same includes a statement about the estimated
monthly wages of the deceased. Form "A" is the prescribed form
whether the deposit is made by the immediate employer or the
principal employer. Where the deposit is made by the principal
employer, the possibility of the monthly salary paid by the contractor to
the employee not being within the knowledge of the principal
employer cannot be ruled out. Form "A" especially in cases where the
principal employer deposit the compensation cannot be stated to form
the basis of the computation of compensation without being
corroborated by cogent evidence.
30. In the present case, the witness for the Respondents has deposed
that he became aware of the salary of USD 11,000 on the basis of Form
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"A". The estimation of the wages was on the basis of the payment which
were made by the Appellant to Sigmar Aviation Ltd which was USD
11,000 and the witness for Appellant has deposed that they were not
aware as to how much amount was being paid to the deceased by
Sigmar Aviation Ltd. The prescribed format of Form "A" includes a
statement about the estimation of the monthly wages. Perusal of Form
"A" filed by the Appellant-Company shows that the Appellant estimated
the monthly wages at USD 11,000 and it is stated that the deceased was
hired through other agency M/s Sigmar Aviation Ltd and the payment
was made to them. The deposit with Form "A" was made on 25 th
September, 2012 and immediately on 5th October, 2012, communication
was addressed to the Commissioner for Employee's Compensation that
the monthly wages are only estimated and that there would have been
some charges retained by Sigmar Aviation Ltd. It is further stated that
they have deposited the full amount of USD 11,000 as they do not have
information about the actual wages received by the deceased from
Sigmar Aviation Ltd and sought credit for the amount overpaid by them.
In light of this communication it cannot be said that the liability was an
admitted liability under Section 4-A(2) of EC Act.
31. The Employees Workmen Commissioner has not considered the
uncontroverted emails exchanged between Sigmar Aviation Ltd and the
Appellant-Company produced on record by the Appellant-Company
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which enclosed the statement of remittances to the deceased by Sigmar
Aviation Ltd showing the monthly remittance of USD 9,170.
32. Under Section 12 of EC Act, it is not the payment made by the
principal employer to the contractor which would form the basis of
computation but the actual salary drawn by the deceased from his
immediate employer. In the present case, there is no evidence brought
on record by the Respondents to show that the deceased was drawing a
salary of USD 11,000 from Sigmar Aviation Ltd. There is nothing to
demonstrate that apart from USD 11,000 separate payments were
made by the Appellant to Sigmar Aviation Ltd for providing manpower.
The agreement for supply of manpower was not a tripartite agreement
executed between Appellant, Sigmar Aviation Ltd and deceased and
therefore the amount mentioned in the said agreement cannot
constitute the monthly salary of the deceased to form the basis of
computation of compensation.
33. The Employees Compensation Commissioner while accepting the
monthly wages to be USD 11,000 has misconstrued the admission of the
witness for the Appellant that Sigmar Aviation Ltd has been paid fees
for providing manpower to the Appellant-Company as a payment of fees
apart from USD 11,000. There is no pleading to that effect and nobody's
case that apart from USD 11,000 any separate payment was made to
Sigmar Aviation Ltd by the Appellant-Company.
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34. The Employees Compensation Commissioner has supported the
finding of monthly salary being USD 11,000 per month by considering
that under Section 21 of the Contract Labour Act read with the Rules
and under the provisions of Section 7 of the Payment of Wages Act,
1936, unauthorised deductions are not permissible and it is not
explained by the Appellant that the deductions are authorised by law.
There is no pleading to that effect and no evidence on record to support
the said finding.
35. In light of the above discussion, the findings of fact by the
Commissioner suffers from perversity and warrants interference.
Accordingly Question Nos. (i), (ii) and (vi) are answered thus:
(i) The undisputed position being that the services of the
deceased were made available by Sigmar Aviation Ltd to the
Appellant-Company, Section 12 of EC Act provides for
computation of compensation based on the actual salary paid by
Sigmar Aviation Ltd to the deceased. The provisions of Section 12
of EC Act makes it clear that the dependents of the deceased are
not entitled to compensation computed on basis of an amount
which is higher than the salary paid to the deceased by the
contractor i.e., Sigmar Aviation Ltd . The evidence on record
establishes that the monthly remittances by Sigmar Aviation Ltd
to the deceased was USD 9,170 per month and the compensation
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had to be calculated on the basis of USD 9,170 which was the
monthly salary paid by Sigmar Aviation Ltd to the deceased and
not on USD 11,000 which was the amount which was paid by the
Appellant to Sigmar Aviation Ltd.
(ii) In the absence of deceased being a party to the manpower
supply agreement executed between the principal employer and
the contractor, the consideration payable by the Appellant for
supply for manpower cannot constitute the basis for computation
of monthly salary of the deceased especially when there is no
cogent evidence to arrive at a conclusion that apart from the
consideration of USD 11,000 there were separate charges paid by
the Appellant to Sigmar Aviation Ltd for their services.
(vi) The finding of the Employees Compensation Commissioner
that the monthly salary of the deceased was USD 11,000 suffers
from perversity for the following reasons:
(a) There is no evidence on record to support the finding
that separate fees was paid by Appellant to Sigmar Aviation
Ltd for supplying manpower.
(b) Form "A" contains statement by the employer about
the estimation of the monthly salary and cannot form basis
for a conclusive finding of monthly salary of deceased
without the same being substantiated by cogent evidence.
(c) The finding that there were unauthorised statutory
deductions as the monthly salary was USD 11,000 and the
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deceased was paid USD 9,170 is without any pleading or
evidence to that effect.
Substantial Question No (iii):
(iii) When compensation payable under Section 4-A of
Employee's Compensation Act, 1923 falls due in cases where
there is a bonafide dispute with respect to the amount of
compensation payable?
36. The provisions of Section 4-A of EC Act sets out the due date for
payment of compensation and provides for interest and penalty for
default in compliance. Section 4A of EC Act reads thus:
4A. 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 employee, as the case may be,
without prejudice to the right of the employee 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
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
(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:
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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.
Explanation.--For the purposes of this sub-section,
"scheduled bank" means a bank for the time being included in
the Second Schedule to the Reserve Bank of India Act, 1934 (2 of
1934).
(3A) The interest and the penalty payable under sub-section
(3) shall be paid to the employee or his dependant, as the case
may be."
37. Section 19 of EC Act provides for reference to Commissioners
where any question arises in any proceedings under the EC Act as to the
liability of any person to pay compensation or as to the amount or
duration of compensation. The Apex Court in Pratap Narain Singh Deo
Vs Shrinivas Sabata4 in the context of the submission raised that
penalty cannot be imposed under Section 4-A(3) as the compensation
had not fallen due until it was settled by the Commissioner under
Section 19 of EC Act held as under:
"Section 3 of the Act deals with the employer's liability for
compensation. Sub-section (1) of that section provides that the
employer shall be liable to pay compensation if "personal injury is
caused to a workman by accident arising out of and in the course of
his employment." It was not the case of the employer that the right
to compensation was taken away under sub-section (5) of section
3 because of the institution of a suit in a civil court for damages, in
respect of the injury, against the employer or any other person.
The employer therefore became liable to pay the compensation as
soon as the aforesaid personal injury was caused to the workman
by the accident which admittedly arose out of and in the course of
the employment. It is therefore futile to contend that the
compensation did not fall due with after the Commissioner's order
dated May 6, 1969 under Section 19. What the section provides is
that if any question arises in any proceeding under the Act as to the
4. AIR 1976 SC 222.
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liability of any person to pay compensation or as to the amount or
duration of the compensation it shall, in default of a agreement, be
settled by the Commissioner. There is therefore nothing to justify
the argument that the employer's liability to pay compensation
under section 3, in respect of the injury, was suspended until after
the settlement contemplated by section.
. The appellant was thus liable to pay compensation as soon as
the aforesaid personal injury was caused to the appellant, and
there is no justification for the argument to the
contrary."((Emphasis supplied)
38. The Four Judge Bench of the Apex Court in unequivocal words has
settled the position that the employer's liability to pay compensation is
not suspended till settlement of the dispute by Commissioner under
Section 19 of EC Act.
39. Considering the well settled position in law, it cannot be debated
that liability of the employer to pay compensation arises as soon as the
personal injury is caused to the workmen by the accident. Coming now
to the provisions of Section 4A of EC Act, Sub-Section (3) provides for
payment of interest and penalty in event of default on part of the
employer to pay the compensation due within one month from the date
it falls due. The statutory mandate is to make the payment of
compensation within period of one month from the date of accident.
Sub Section (2) permits the employer to make the payment of the
admitted liability in case of dispute about the extent of the liability,
however, the same does not carve out any exception to the due date
for payment of compensation which is on date of accident and the
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period for payment of compensation which is within one month from
date of accident.
40. Hence, irrespective of a bonafide dispute as to the amount of
compensation payable, the employer is statutorily mandated to make
the payment of the admitted liability within period of one month from
the date of compensation and the making of payment is not suspended
till adjudication of the claim by the Commissioners under Section 19 of
EC Act.
SUBSTANTIAL QUESTION OF LAW NO.(iv):
"(iv) When compensation is payable in foreign currency whether the
exchange rate at which the compensation is calculated in Indian Rupees
can be of the date on which the payment is actually made or the date of
the order?
41. In the present case, the accident has occurred on 22nd May 2010
whereas the amount has been deposited on 5 th December, 2012 in
Indian currency which was calculated in accordance with the exchange
rate as on the date of accident. The Employees Compensation
Commissioner has relied upon the decision of the Apex court in the case
of Forasol (supra) and Renu Sagar Power (supra) to grant compensation
at the exchange rate prevailing on the day before the date of judgment.
42. In Forasol (supra), a drilling contract was entered into between a
French Company and ONGC. The proceedings arose out of arbitration
award and the Apex Court observed that in an action to recover an
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amount payable in foreign currency, five dates compete for selection by
the Court as the proper date for fixing the rate of exchange at which the
foreign currency amount has to be converted into the currency of the
country in which the action has been commenced and decided. These
dates are:
(1) the date when the amount became due and payable;
(2) the date of commencement of the action;
(3) the date of the decree;
(4) the date when the court orders execution to issue; and
(5) the date when the decretal amount is paid or realized.
In a case where a decree had been passed by the court in
terms of an award made in a foreign currency a sixth date also
enters the competition, namely, the date of the award.
43. The Apex Court held that the Court must select a date which puts
the Plaintiff in the same position in which he would have been, had the
defendant discharged his obligation when he ought to have done. The
Apex Court held that in cases where the Plaintiff has made a prayer for a
decree to be paid to him in foreign currency and the payment is not
made in foreign currency, the rate of exchange applicable would be the
rate prevailing at the time of the judgment. In Renu Sagar Power
(supra), the three judge Bench affirmed the application of law laid down
in Forasol (supra).
44. In Forasol (supra), the issue arose in the context of the rate of
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exchange applicable to an Award passed under the Arbitration Act,
1949. The Arbitration Act does not provide for mandatory deposit of
the amount of claim or the period for the deposit. Considering the
nature of claim, the Court was tasked with the duty of deciding the
applicable date for computing the rate of exchange in case of Award in
foreign currency. The said issue arises where there are different dates
in zone of consideration as enumerated in Forasol (supra). Whereas
under the EC Act, Section 4-A itself provides for the date on which the
compensation is due and payable and the mandated deposit period.
Even in case of Forasol (supra), what weighed with the Apex Court was
the principle that the Plaintiff must be put in the same position in which
he would have been had the Defendant discharged his obligation when
he ought to have done. The crucial observation is the discharge by the
Defendant of his obligation when the same falls due.
45. Under the EC Act, where the employer duly complies with the
legislative mandate and discharges his obligation by depositing the
amount within the prescribed period, the applicable rate of exchange
would be the rate prevailing on the prescribed date i.e. within one
month from date of the personal injury.
46. Coming to the present case, the compensation had to be
deposited within one month from 22nd May, 2010 , whereas it has been
deposited on 5th December, 2012. If the compensation would have been
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deposited within the period of one month, upon the obligation being
discharged as per the statute, then there would be no occasion for the
Commissioner to consider the applicable rate of exchange. The principle
applicable is that the party should be placed in the same position in
which he would be if the obligation is discharged by the Appellant on
the due date. However, in the present case, the deposit is after a period
of about two years and six months.
47. Considering that the obligation has been discharged though with
delay, the dates which would be compete for consideration of rate of
exchange under the EC Act is the date on which the obligation ought to
have been discharged and the date on which it was actually discharged.
In no event, the date of passing of judgment would be a relevant date
for consideration as the obligation already stood discharged by the
deposit. The applicability of rate of exchange on the date of judgment
would apply firstly where the statute does not provide for any such
mandatory deposit and secondly where in spite of the statute
prescribing the due date for deposit, there is total non compliance by
the party bound to make the deposit. In my opinion, the higher of the
rate of exchange prevailing on the due date of deposit i.e. one month of
the accident and the date of deposit would be applicable for the reason
that if the rate of exchange had fluctuated from the due date to the
date of deposit on the lower side, the employer cannot be permitted to
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take advantage of its default in depositing the amount on due date. As
far as the submission raised that the exchange rate will have to be
calculated on the date of judgment on amount payable over and above
deposited, during the hearing Mr. Bharucha, had tendered a
comparative chart showing the amount deposited on basis of USD 9,170
and USD 11,000. The compensation deposited if calculated on the basis
of USD 9,170 covers the amount due and therefore there is no question
of any amount due and payable over and above the deposited amount.
SUBSTANTIAL QUESTIONS OF LAW NO. (v) and (vi):
(v) Whether interest and/penalty on the amount of compensation is payable
at all, in cases where the amount of compensation is in fact adjudicated
pursuant to an inquiry conducted by the Labour Commissioner ?
(vi) Whether the liability of interest and penalty under Section 4-A(3)(b) of EC
Act can be imposed against the Principal Employer who is held liable under
Section 12 of EC Act ?
48. The Employees Compensation Commissioner has levied interest
@ 12% from the date of accident till the date of deposit of
compensation in Court. This levying of interest is not disputed by Mr.
Bharucha. He would however dispute the imposition of penalty @50%
from date of accident till date of depositing said amount in Court
without considering the explanation tendered for the delay. The
question of law which has been framed is as regards the liability for
payment of interest and penalty where the amount is adjudicated
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pursuant to an inquiry conducted by the Labour Commissioner and the
liability of the principal employer to pay the penalty and interest under
Section 12 of EC Act.
49. The submissions canvassed by Mr. Bharucha dwell on the
sufficiency of explanation tendered and are in the realm of re-
appreciation of evidence as is permissible for final fact finding authority
in usual First Appeals. However, the present case is an Appeal under
Section 30 of the EC Act which provides for an appeal to the High Court
on substantial question of law and will carry the same meaning as is
commonly understood and there is no distinction between substantial
question of law for purpose of first appeal and one for second appeal.
(See Om Parkash Batish vs Ranjit Alias Ranbir Kaur5).
50. Reverting to the questions of law framed, the levying of penalty
and interest is a legal consequence of failure to deposit the
compensation within the period prescribed under Section 4A of the
Employees Compensation Act, 1923. I have already held in answer to
Point No (iv), that irrespective of a bonafide dispute as to the amount of
compensation payable, the employer is statutorily mandated to make
the payment of the admitted liability within the period of one month
from the date of compensation and the making of payment is not
suspended till adjudication of the claim by the Commissioners under
5. (2008) 12 SCC 212.
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Section 19 of EC Act.
51. As regards the liability of payment of interest, Section 3 of the EC
Act provides that if personal injury is caused to the workman, his
employer shall be liable to pay compensation in accordance with
provisions of Chapter II. Sub Section 3 of Section 4-A provides for
payment of interest and penalty. There are thus three different
components recognised by the statute. Compensation has been
defined in Section 2(1) (c) of EC Act as compensation as provided for by
EC Act which is referable to compensation payable under Section 3
which is to be awarded under Section 4 and is different from interest
and penalty. In the context of liability of Insurance Company, it has been
held by the Apex Court in Ved Prakash Garg v. Premi Devi6; that the
Insurance Company is liable to pay not only the principal amount of
compensation payable by the insurer employer but also interest
thereon if ordered by the Commissioner to be paid by the employer. The
Insurance company is liable to meet claim for compensation along with
interest as imposed on insurer employer by the Act on conjoint
operation of Section 3 and 4A(3)(a) of the Act. The relevant para of the
aforesaid judgment is reproduced as under : -
"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
6. AIR 1997 SC 3854.
Patil-SR (ch) 34 of 39
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by insured employers but also interest thereon, if ordered by
the Commissioner to be paid by the insured employers. Reason
for this conclusion is obvious. As we have noted earlier the
liability to pay compensation under the Compensation Act gets
foisted on the employer provided it is shown that the workman
concerned suffered from personal injury, fatal or otherwise, by
any motor accident arising out of and in the course of his
employment. Such an accident is also covered by the statutory
coverage contemplated by Section 147 of the M.V. Act read with
the identical provisions under the very contracts of insurance
reflected by the policy which would made the insurance
company liable to cover all such claims for compensation for
which statutory liability is imposed on the employer under
Section 3 read with Section 4-A of the Compensation Act. All
these provisions represent a well-knit scheme for computing
the statutory liability of the employers in cases of such
accidents to their workmen. As we have seen earlier while
discussing the scheme of Section 4-A of the Compensation Act
the legislative intent is clearly discernible that once
compensation falls due and within one month it is not paid by
the employer then as per Section 4-A(3)(a) interest at the
permissible rate gets added to the said principal amount of
compensation as the claimants would stand deprived of their
legally due compensation for a period beyond one month which
is statutorily granted to the employer concerned to make good
his liability for the benefit of the claimants whose breadwinner
might have either been seriously injured or might have lost his
life. 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 but otherwise
liability of paying interest on delayed compensation will ipso
facto follow. Even though the Commissioner under these
circumstances can impose a further liability on the employer
under circumstances and within limits contemplated by Section
4-A(3)(a) still the liability to pay interest on the principal
amount under the said provision 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 dehors 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
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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. No question of
justification by the insured employer for the delay in such
circumstances would arise for consideration. It is of course true
that one month's period as contemplated under Section 4-A(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 4-A(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 4-A(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 4-A(3)(a) of the Compensation Act."
52. As regards grant of penalty, the Supreme Court in Ved Prakash
Garg (supra) held as under:
"But similar consequence will not follow in case where
additional amount is added to the principal amount of
compensation by way of penalty to be levied on the employer
under circumstances contemplated by Section 4A(3)(b) of the
Compensation Act after issuing show cause notice to the
employer concerned who will have reasonable opportunity to
show cause why on account of some justification on his part for
the delay in payment of the compensation amount he is not
liable for this penalty. However if ultimately the Commissioner
after giving reasonable opportunity to the employer to show
cause takes the view that there is no justification for such delay
on the part of the insured employer and because of his
unjustified delay and due to his own personal fault he is held
responsible for the delay, then the penalty would get imposed
on him. That would add a further sum upto 50% on the
principal amount by way of penalty to be made good by the
defaulting employer. So far as this penalty amount is
concerned it cannot be said that it automatically flows from
the main liability incurred by the insured employer under
the Workmen's Compensation Act.
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53. The provisions of Section 12(1) of EC Act under which the liability
is imposed on principal employer is limited to the payment of
compensation which has been defined under Section 2(1)(c) of the EC
Act. As held in Ved Prakash Garg (supra), the imposition of interest is
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 but otherwise liability of paying interest on
delayed compensation will ipso facto follow.
54. As said by the Apex Court, the penalty does not automatically
flow from the main liability incurred by the employer. It is only if the
Commissioner after giving reasonable opportunity to the employer to
show cause takes the view that there is justifiable reason for delay on
part of the employer that the penalty would get imposed on him. In the
decision in Chief Executive Officer vs Suraiyya Rafik Khalifa (supra),
the decision of Ved Prakash Garg (supra) which has held that interest is
statutory elongation of compensation was not brought to the notice of
the learned Single Judge.
55. In my view, irrespective of whether the adjudication of
compensation is pursuant to inquiry conducted by the Commissioner,
the interest is liable to be paid in default of deposit of the admitted
liability within period of one month from date of accident. The payment
of interest is not suspended till adjudication of the claim by the
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Commissioners under Section 19 of EC Act. The Appellant is therefore
liable to pay interest about which no dispute has been raised by Mr.
Bharucha.
56. As far as payment of penalty is concerned, the decision of Apex
Court Ved Prakash Garg (supra) makes it evident that penalty does not
automatically flow from compensation. As Section 12(1) of EC Act
makes the principal employer liable for compensation, the principal
employer has been held liable for payment of compensation which
would include the imposition of interest but no penalty can be imposed
on principal employer. The admission in the cross examination that the
Appellant had paid compensation, interest and penalty to the other
employees would not deviate from the legal position that the liability to
pay penalty cannot be imposed on the principal employer.
57. The substantial questions of law are answered accordingly.
Resultantly, the First Appeal is allowed in following terms:
(a) The compensation is to be computed on the
basis of USD 9,170 multiplied by the relevant multiplier
of 135.56.
(b) The rate of exchange will be the higher of the
rate of exchange on the date of accident or the date of
deposit by the Appellant-Company in accordance with
Section 4-A of the EC Act.
(c) The Appellant will be liable to pay interest @
12% from the date of accident till the date of
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depositing compensation amount before the
Commissioner under Section 4-A(3)(a) of EC Act.
(d) As per Section 12(1) of EC Act , there cannot be
any imposition of penalty upon the principal employer.
[Sharmila U. Deshmukh, J.]
Patil-SR (ch) 39 of 39
Signed by: Sachin R. Patil
Designation: PS To Honourable Judge
Date: 23/10/2024 21:02:30
