K. S. E. BOARD v. SUNDARAM ESTATE — 1986 DIGILAW 452 (KER)

Judgment :- 1. The Kerala State Electricity Board (the "Board") is the appellant. It challenges the order of the Commissioner for Workmen's Compensation (the "Commissioner") in W. C. C. No. 19 of 1980 holding that the first respondent, the employer, was liable to pay the workman (the second respondent in this appeal) a sum of Rs. 18,816/- as compensation under S.4(c) read with S.3 and Part.2 of Schedule.1 and Schedule.4 of the Workmen's. Compensation Act, 1923 (the "Act") and that the employer was to that extent entitled to be indemnified by the Board. This order is challenged only in so far as the Board has been held liable to indemnify the employer. 2. Appearing for the Board, Shri. K. P. G. Menon challenges the jurisdiction of the Commissioner. He contends that the alleged right of the employer to be indemnified by a stranger like the Board is a matter for determination by a civil court, and not by recourse to the summary procedure under S.12(2) of the Act. He, however, submits that the finding of the Commissioner that the injury was caused to the employee by an accident arising out of and in the course of his employment and that the employer was liable to compensate him in the sum determined by the Commissioner is not questioned. 3. The accident occurred on 10-9-1979 at about 9 A. M, when the workman in the course of his employment went on an errand on behalf of his employer. As he came cut of the Estate he stepped on a live stay wire attached to an electric post belonging to the Board, as a result of which his left hand was gravely burned and it had to be amputated just below the shoulder leaving a stump of less than 8 inches. This was when the workman was 23 years of age and earning monthly wages at Rs. 184-60. 4. S.3 of the Act says that an employer is liable to pay compensation when personal injury is caused to a workman by an accident arising out of and in the course of his employment. Subject to certain exceptions, the liability cast under S.3 is absolute and it is unnecessary to prove negligence on the part of the employer. 184-60. 4. S.3 of the Act says that an employer is liable to pay compensation when personal injury is caused to a workman by an accident arising out of and in the course of his employment. Subject to certain exceptions, the liability cast under S.3 is absolute and it is unnecessary to prove negligence on the part of the employer. S.12 makes the employer liable to pay compensation not only to his own workmen, but also to those employed in the execution of his work by his contractor. This liability is, however, subject to his right to be indemnified by his contractor, who in turn is entitled to be indemnified by the sub contractor in case the latter is the immediate employer. S.13 recognises the right of the principal employer who has paid compensation to the workman, and of the contractor who has been called on to indemnify the principal employer, in terms of S.12, to be indemnified by any other person who is legally liable in damages in respect of the injury caused. 5. S.12 provides: "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 workman employed in the execution of the work any compensation which he would have been liable to pay if that workman 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 workman under the employer by whom he is immediately employed. (2) Where the principal is liable to pay compensation under this section he shall be indemnified by the contractor, (or any other person from whom the workman 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 workman 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 workman 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 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." The liability of the principal to pay compensation to the contractor's workman arises where he had, in the course of for the purpose of his trade or business, engaged a contractor for the execution of his work, which is ordinarily part of his trade or business, and a workman employed by the contractor for the execution of such work was injured by an accident which occurred in the principal's premises. An absolute liability is cast on the principal in such circumstances as if the workman was his immediate employee. Sub-s.(2) of the Section, however, entitles the principal to be indemnified by the contractor. These two sub-sections thus simultaneously impose a liability and confer a corresponding right upon the principal. Such right and liability have to be worked out by recourse to the machinery provided under sub-s. (2) and not by any proceeding outside the Act. This means that, in the absence of an agreement between the parties, the Commissioner has exclusive jurisdiction to settle such questions. The scope of sub-section (2) was-consider-ably widened by the insertion of the words, which we have indicated in bracket, by S.9 of Act 15 of 1933. This means that, in the absence of an agreement between the parties, the Commissioner has exclusive jurisdiction to settle such questions. The scope of sub-section (2) was-consider-ably widened by the insertion of the words, which we have indicated in bracket, by S.9 of Act 15 of 1933. As a result of this amendment, the principal is entitled to be indemnified not only by the contractor, as was the pre-amendment position, but also by "any other person from whom the workman could have recovered compensation." Furthermore, it is provided by the amended provision that: "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 workman could have recovered compensation" These two sets of words inserted by the amendment refer to: (1) the right of the principal to be indemnified by "any other person"; and (2) the right of the contractor to be indemnified by a person "standing to him in the relation of a contractor". Two categories of indemnifies are thus added by the amendment. In either of these two cases, the indemnifier is a person from whom the workman could have recovered compensation. In the case of the indemnifier falling under the second category, it is not disputed that he is a sub-contractor who stands in the position of a contractor vis-a-vis the principal's contractor. He is the immediate employer of the workman engaged in the execution of work which he has undertaken to execute under sub-contract with the contractor. Sub-section (2) postulates, in regard to the second category that where the principal's contractor is liable to pay compensation or to indemnify the principal, as provided under the sub-section, such contractor can in turn seek indemnity from his own contractor, who in relation to the principal, stands as a sub-con tractor, and who, being the immediate employer of the workman, is in terms of S.3, liable to pay compensation for the injury caused. So far there is no dispute. But the question is whether "any other person from whom the workman could have recovered compensation" would include a total stranger. 6. So far there is no dispute. But the question is whether "any other person from whom the workman could have recovered compensation" would include a total stranger. 6. According to Shri. Menon "any other person" cannot be a total stranger like the Board, but must be a person having a contractual relationship with the concerned workman. S.12, he says, is not concerned with a total stranger, albeit a tortfeasor. This is an aspect to which we shall presently revert. But we must first refer to S.13 which deals with the liability of a stranger. We shall also refer to two decisions which preceded the amendment of 1933. S.13 reads: "13. Remedies of employer against stranger. Where a workman has recovered compensation in respect of any injury caused under circumstances creating a legal liability of some person other than the person by whom the compensation was paid to pay damages in respect thereof, the person by whom the compensation was paid and any person who has been called on to pay an indemnity under S.12 shall be entitled to be indemnified by the person so liable to pay damages as aforesaid." This Section entitles the principal who has paid compensation and the person who has been called on to pay an indemnity under S.12 to claim indemnity from any other person who has a legal liability to pay damages in respect of the injury sustained by the workman. Two categories of persons are roped in by this Section as indemnifies. One is an immediate employer who is liable in terms of S.3 to pay compensation, although be is neither the principal nor his contractor, but a sub-contractor or still further down the line. S.13 also ropes in a total stranger who is himself the tortfeasor and, therefore, liable to pay damages in respect of the injury. The marginal note to the Section refers to a stranger, but the Section is wide enough to include these two categories of people, namely, the tortfeasor and the immediate employer; the former being liable in the law of Tort and the latter under S.3 of the Act. When these Sections are so understood, the question arises whether the tortfeasor mentioned under S.13, who has no contractual relationship with the workman, is a person against whom any right under this Act can be enforced by recourse to the machinery provided under S.12(2). When these Sections are so understood, the question arises whether the tortfeasor mentioned under S.13, who has no contractual relationship with the workman, is a person against whom any right under this Act can be enforced by recourse to the machinery provided under S.12(2). At common law the tortfeasor is not liable to be proceeded against by the employer in respect of the injury caused to the workman, except for compensation for loss of service, and not for recovery of damages. But the statute created a right in favour of the employer who has paid compensation and the person who has been called on to pay an indemnity under S.12 to be indemnified by a stranger who is in law liable. S.13 does not allow the workman to proceed against a stranger; it confers a right on the person who has paid compensation, and the person liable to pay indemnity, in terms of S.12 to be in turn indemnified by the stranger who is liable in law to pay damages. If the workman has invoked the jurisdiction of the Commissioner under the Act, be is debarred from suing the stranger in a civil court. If he has already sued him in a civil court, he is disentitled to institute a claim under the Act. S.13 excludes the claim of a workman from its purview. It is confined to the right of the person who has paid compensation and the person called on to pay indemnity under S.12. The remedy is provided as against either the tortfeasor or the actual employer where he happens to be a person other than the principal or his contractor. Until the amendment of 1933, the remedy provided under S.13 was not enforceable by recourse to the machinery under S.12(2), and there was no other provision under the Act to aid recovery. It was, therefore, held in the two decisions, which we shall row cite, that the substantive right under Section '3 had to be enforced by means of suit, and, therefore, the bar under S.19 did not stand in the way of a claim under S.13. 7. In Mt. Machunt Bibi v. Jardine Menzles & Co., AIR 1928 Cal. It was, therefore, held in the two decisions, which we shall row cite, that the substantive right under Section '3 had to be enforced by means of suit, and, therefore, the bar under S.19 did not stand in the way of a claim under S.13. 7. In Mt. Machunt Bibi v. Jardine Menzles & Co., AIR 1928 Cal. 399 (2) the scope of S.12(2) was considered by the Calcutta High Court on a reference under S.27 of the Act in the following words: "A undertakes work which is ordinarily part of his trade or business. For the purpose of his trade or business be contracts with B before the execution of part of this work. B similarly contracts with C for the whole or part of the work be himself has contracted for. One of C's workmen is killed by accident. 1. Who, for the purpose of S.12, is the principal? 2. If A is the principal, and is found liable to pay compensation, by whom is be entitled to be indemnified? If by B then is B in his turn entitled to be indemnified by C." Answering these questions in the light of the facts mentioned by the Commissioner, a Division Bench of that court stated: "The principal for the purpose of S.12 is A; in other words, in this case, Messrs. Jardine Menzies & Co. Messrs. Jardine Menzies & Co being the principal, are entitled to be indemnified by the contractor to whom they entrusted the work. That this is so is clear from the terms of S 12(1) of the Act As regards the further question, whether B is entitled in turn to be indemnified by C, the Act does not appear to provide for such a contingency. The contractor referred to in sub-s. (2) of S 12, is the contractor who contracts directly with the principal as defined in S.12(1). If there is any further subletting of the contract, indemnification cannot be obtained under the Act and must be sought by recourse to the civil court. It may be, as observed by the learned Commissioner, that to hold C liable to indemnify A would be the construction most workable in practice, and that it would avoid litigation. If there is any further subletting of the contract, indemnification cannot be obtained under the Act and must be sought by recourse to the civil court. It may be, as observed by the learned Commissioner, that to hold C liable to indemnify A would be the construction most workable in practice, and that it would avoid litigation. We cannot, however, read into the Act something that is not to be found there" The Court thus held that there was no provision in the Act to enforce the indemnity by recovery from the sub-contractor, although a substantive right had been conferred, as against him, upon the person who paid the compensation and the person who was called on to pay indemnity in terms of S.12. His right, therefore, bad to be enforced in a civil court. This decision was followed by the Bombay High Court in Dhanjibhoy v. Gunpa Khandu, AIR 1933 Bom. 338. Referring to S.13, the Court stated: "The words in the section refer to the liability of 'some person other than the person by whom the compensation was paid', whereas the marginal note refers to such a person under the term'stranger' The Courts have got to construe the words of a section as they stand, and it has been held by the Privy Council in Thakurjain Balraj Kanwar v. Jagatpal Singh (1904) 26 All 493-31 IA 132 8 Sar 639 (PC) that a marginal note cannot be referred to in construing the provisions of a section. Do those words, therefore, contemplate a subcontractor? And does S.12(2) contemplate only one principal and only one contractor, or a series of contractors and sub-contractors, each contractor standing to his sub-contractor in the relationship of principal to contractor? The contractor referred to in S.12(2) is the contractor who contracts directly with the principal as defined in S.12(1) If therefore there is any further sub-letting of the contract, an indemnity cannot be obtained under the Act and must be sought by recourse to the civil court" So stating the Court held that the indemnity provided under S.12 (2) was restricted to one indemnity, namely, between the principal and the original contractor. 8. Almost immediately after these two decisions, the Act was amended se as to bring within the scope of S.12(2) any other person or sub-contractor. 8. Almost immediately after these two decisions, the Act was amended se as to bring within the scope of S.12(2) any other person or sub-contractor. The report of the Labour Commission, on the basis, of which S.12(2) was amended in 1933, says: "The provisions of the Act in respect of proceedings against contractors have been shown to be defective in one respect. There is little evidence to show that the defect has much practical effect, but it would be an improvement if sub-s. 12(2) were amended so as to enable a principal to recover compensation from any person from whom the workman could have recovered compensation. Sub-s. (2) of S.12 of the Act provides that where a principal is liable to pay compensation under the section he is entitled to be indemnified by the contractor A recent decision of the Calcutta High Court has made it apparent that no indemnification can be obtained under the Act from a sub-contractor in respect of compensation awarded against the principal for injuries sustained by a sub-contractor's workman. The amendment seeks to remove this defect". See K. D. Srivastava's Commentaries on Workmen's Compensation Act, 1923; 4th Edn., pp. 204 205. (emphasis supplied) The decision of the Calcutta High Court referred to is the report is Mt. Machuni Bibi v. Jardine Menzies A Co., AIR 1928 Cal. 399(2). 9. Shri. Menon does not dispute that the amendment has roped in a sub-contractor. But his argument, forceful as it is, being supported by a number of decisions, is to the effect that a total stranger is outside the ambit of S.12, notwithstanding S.13. The Board being a stranger, its liability, if any, according to him, has to be established and enforced by action in a civil court and not by recourse to the summary procedure under the Act. 10. This argument, in our view, does not take into account the object of the amendment which, as stated in the report of the Labour Commission, was to remedy the evil that was pointed out for the first time by the Calcutta High Court in Mt. Machuni Bibi v. Jardine Menzies & Co., AIR 1928 Cal. 399(2). 10. This argument, in our view, does not take into account the object of the amendment which, as stated in the report of the Labour Commission, was to remedy the evil that was pointed out for the first time by the Calcutta High Court in Mt. Machuni Bibi v. Jardine Menzies & Co., AIR 1928 Cal. 399(2). That evil was the gap in the law which did not provide for the enforcement of the statutory right created under S.13 as against a person other than the principal or his contractor, and it was remedied by the insertion of the words which we have bracketed. Any person, be he a sub-contractor, or a person having no contractual relationship with the workman, but liable to him in damages, is roped in for the purpose of enforcing the indemnity against him. The sub-contractor is specifically referred to in the amended provision as the "person standing to him (the contractor) in the relation of a contractor". If he is, in terms of S.3, a person from whom the workman could have recovered compensation, he is a person against whom indemnity can be enforced. Likewise, if a person, being a total stranger having no contractual relationship, is responsible for the accident by which injury was caused to the workman, or he is a contractor to a sub-contractor and therefore the immediate employer, he is described in the amended provision as "any other person from whom the workman could have recovered compensation". Sub-section (2) of S.12, as amended, thus ropes in all persons contemplated under S.13 to be proceeded against for indemnification, and indemnification can be had against them by recourse to the machinery provided under sub-section (2) of S.12. This means that all questions as to the right and the amount of any such indemnity will, in default of agreement, be settled by the Commissioner. This, in our view, is the result of the amendment. 11. Shri. K.P.G. Menon relies on certain decisions taking a contrary view. In Port Trust, Madras v. Bombay Company, AIR 1967 Mad. 318, the Madras High Court held that S.12(2) permitted the principal employer to recover indemnity from the immediate contractor and the immediate contractor from his sub-contractor. But there it stopped. If there was a sub-contractor further down the line, there was no provision under the Act for recourse against him, even if he was a tortfeasor. 318, the Madras High Court held that S.12(2) permitted the principal employer to recover indemnity from the immediate contractor and the immediate contractor from his sub-contractor. But there it stopped. If there was a sub-contractor further down the line, there was no provision under the Act for recourse against him, even if he was a tortfeasor. The only remedy for enforcement of indemnity against him was by means of a suit. This reasoning was adopted by the Andhra Pradesh High Court in D. F. & G. Insurance Co. v. Union of India, AIR 1975 AP 222. Similarly the Bombay High Court in Trustees, Port of Bombay v. Natwarlal' Parekh, 1979 Lab, IC 272, without noticing the earlier decision of that Court in Dhunjibhoy v. Gunpa Khandu, AIR 1933 Bom. 338 or the decision of the Calcutta High Court in Mt. Machunt Bibi v. Jardine Menztes & Co., AIR 1928 Cal. 399(2) adopted the reasoning of the Madras High Court. The Court held: ".......It would thus appear on a close scrutiny of the preamble and the provisions of S.13 contrasted with the provisions of S.12 and the provisions of S.19 and 30 that the right to be indemnified conferred by S.13 is a statutory right and that right could be enforced against the person who has become liable to pay damages dehors the Act; and since evidently such action could not be disposed of in a summary manner by the Commissioner under the Act, the Act stopped short by only providing for a substantive right to the persons mentioned in S.13, for being indemnified That right therefore has got to be enforced in a Civil Court and could not be decided or settled or dealt with by the Commissioner in a summary manner " With great respect, these decisions in our view, do not seem to have taken into account the object of the" amendment, i. e., to remedy the evil that was judicially pointed out. 12. As we stated earlier, the workman is entitled to institute a claim under the Act only if he abandons his right of suit in a civil court. He submits himself to the summary jurisdiction of the Commissioner. 12. As we stated earlier, the workman is entitled to institute a claim under the Act only if he abandons his right of suit in a civil court. He submits himself to the summary jurisdiction of the Commissioner. On the other hand, if he did not have recourse to the remedy provided under the Act, and he has sustained the injury on account of the negligence or the wrongful act of his employer or a stranger, it would be open to him to proceed against the tortfeasor by means of a suit for damages. But the statute avoids the need to sue and labour in a civil court and burden to prove negligence by providing him with a quick and cheap remedy before the Commissioner. If the workman was employed under a contractor, he could recover under the Act compensation from either the contractor or the contractor's principal. The principal who paid the compensation is entitled to recover the amount paid by him either from the contractor or from "any other person" who is in law liable to compensate the workman. "Any other person" could be a sub-contractor twice or several times removed from the contractor, whether or not a tortfeasor, or a total stranger who is in law liable in damages for the injury caused to the workman. What sub-section (2) of S.12 and S.13 provide for is a right of indemnification and not compensation. Indemnity under the Act is coterminous with compensation. It cannot exceed the amount paid as compensation, and no profit can be made out of the indemnity. S.13 thus operates only where the workman has given up his right to sue the person liable to him in damages, and has chosen the summary remedy under the Act, and it recognises the right of the person who has paid the compensation and the person liable to indemnify under S.12 to recover the same as indemnity from the person who is legally liable to pay damages to the injured workman. The object of the amendment was to avoid litigation in connection with the injury sustained by a workman. All questions arising therefrom are intended to be brought within the ambit of the Act. The object of the amendment was to avoid litigation in connection with the injury sustained by a workman. All questions arising therefrom are intended to be brought within the ambit of the Act. It is to the advantage of the workman that all persons standing to him in contractual relationship or responsible to him as tortfeasors are dealt with and their respective rights and liabilities settled under the Act rather than by prolonged, uncertain and expensive civil litigation. The indemnity provided under S.13 is but an incentive to the person liable under S.12 to pay compensation or indemnity to promptly discharge that liability, and to that end a prompt settlement of the indemnity under S.13 is very much to the advantage of the workman. This was the legislative intent in introducing the amendment to S.12, and the relevant Section must be construed with reference to that intent. 13. We are of the view that the Board, which on the facts of this case was responsible for the injury caused, is liable to indemnify the principal who was found by the Commissioner to be liable to compensate the workman. We see no merit in the appeal. It is dismissed. 14. In the circumstances of this case and particularly because other High Courts have taken a contrary view with which we respectfully disagree, we make do order as to costs.