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Employer Is Statutorily Mandated To Make Payment Of Liability Irrespective Of Bonafide Dispute Regarding Compensation Amount: Bombay HC Air India Charters Ltd. v. Tanja Glusica & Ors.(2024) BHC-AS 42319
FACTS: Captain Zlatko Glusica, a Serbian pilot, was employed by Air India Charters Ltd. through Sigmar Aviation Ltd. and died in a fatal air crash in Mangalore in 2010. His dependents
claimed compensation under the Employees’ Compensation Act, 1923, alleging a monthly salary of $11,000, the amount Air India paid to Sigmar.
. However, Air India contended that Captain Glusica’s actual salary was $9,170. The Commissioner for Employees’ Compensation calculated the compensation based on $11,000 and imposed a 12% interest rate and a 50% penalty. Air India appealed, arguing that the compensation calculation should be based on the actual salary of $9,170, not the amount paid to the contractor, Sigmar.
ISSUES: 1. Whether compensation be calculated based on the higher monthly amount paid to the contractor ($11,000) or the actual salary received by the deceased from Sigmar ($9,170)? 2. Whether interest and penalty should apply when there is a bona fide dispute over the compensation amount?
3. What exchange rate should be applied when converting compensation to Indian Rupees—the accident date or the deposit date? RULE: Section 12 of the Employees' Compensation Act, 1923: When the principal employer (Air India) hires a contractor, liability for compensation is determined by the actual wages paid to the deceased by their direct employer (Sigmar). Compensation cannot exceed the immediate employer's salary to the deceased. Section 4A of the Employees' Compensation Act: This section mandates prompt compensation, penalizing employers for unjustified delay with interest and penalty. OBSERVATION: Salary Determination: The court examined whether the $11,000 monthly amount paid to Sigmar could establish the deceased's salary. Referring to Section 12 of the Employees’ Compensation Act, the court emphasized that compensation calculations are based on the employee’s direct wages. The Apex Court in Pratap Narain Singh Deo v. Shrinivas Sabata: Establishing that compensation becomes due upon injury, not after a Commissioner’s assessment. Here, the evidence included: 1. Testimony that Sigmar paid Captain Glusica $9,170, not $11,000. 2. Contract and email records from Sigmar confirming the $9,170 monthly salary, which went uncontested.
Interest and Penalty: The court upheld the application of Section 4A(3), where interest is “almost automatic” upon delayed payment. The court referenced Ved Prakash Garg v. Premi Devi: holding that interest is mandatory for delayed compensation, distinguishing it from penalties which require explicit justification. Here, the 50% penalty was questioned since Air India claimed they were unaware of the actual salary initially and made a prompt deposit once clarified.
Exchange Rate: Air India contested using the judgment date's exchange rate. Citing Forasol v. ONGC and Renu Sagar Power Co. Ltd. v. General Electric Co. Ltd., the court stated that the exchange rate should protect the value as close to the payment due date as possible. It found that the rate should reflect either the accident date or actual deposit date, whichever favored the dependent, rejecting the Commissioner’s judgment-date approach as it exceeded the statutory obligation. RATIO: The court modified the compensation, applying a monthly salary of $9,170. It allowed the 12% interest but moderated the penalty, acknowledging Air India's bona fide delay explanation. The court also ruled the exchange rate should be the higher of the accident date or
deposit date rate, aligning with fair-value principles. This case reinforces precise compensation calculation rules under Section 12 and the nuanced application of interest and penalties under Section 4A.