Case: Kamla Chaturvedi Vs. National Insurance Co.

Challenge in the Misc. Appeal before the High Court was to the Award made by the Commissioner for Workmens Compensation, Labour Court No.1 Gwalior (in short the `Commissioner). A sum of Rs.2,21,370/- along with interest at the rate of 12% per annum was awarded. The liability to make the payment was fixed on the Insurance company. In appeal the only ground raised was that in a claim arising under the Workmens Compensation Act, 1923 (in short the `Act) interest is not payable by the Insurance company as there was no contract by the insurer with the insured with regard to the payment of interest. High Court accepted the stand placing reliance on a judgment of this Court in New India Assurance Co. Ltd. v. Harshadbhai Amrutbhai Modhiya [2006(5) SCC 192]. It was held that the direction for payment of interest by the insurance company was not sustainable and it was held that the insurance company was not liable to pay any interest and if so advised the amount of interest could be recovered by the claimant from the employer.

Court's reasoning:
In National Insurance co. Ltd. v. Mubasir Ahmed & Anr. [2007(2) SCC 349] it was, inter alia, held asis 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 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 30 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 amendment and, therefore, the rate of 12% as fixed by the High Court cannot be faulted. But the period as fixed by it 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 to 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(1) prescribes that compensation under Section 4 shall be paid as soon as it falls due. The compensation becomes due on the basis of adjudication of the claim made. The adjudication under Section 4 in 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 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 notview of what has been stated in Mubasir Ahmeds case (supra) the liability for interest would be in terms of what has been stated in paragraph 9 of the judgment.