Bombay High Court: Unregistered Agreement Can’t Be Enforced Under Employees Compensation Act To Seek Higher Compensation

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An unregistered agreement between an employer and employee cannot be enforced to seek more compensation than what is already prescribed for cases of disability under the Employees Compensation Act 1923 (ECA), the Bombay High Court held.

“Section 29 thus reinforces the principle that compensation is required to be paid in accordance with provisions of the Act, 1923, save and except in a case where the agreement is registered under section 28,” the court held.

However, clauses in service conditions can be enforced before a Civil Court instead and would not be barred under Section 19(2) of the Act.

Justice NJ Jamadar observed that section 28(1) of the Act requires an employer to send the agreement to the Employees Compensation Commissioner for registration at the time of execution. This is done to ensure employers don’t contract employees out of beneficial provisions of the Act using disingenuous methods.

However, in the present case, a seafarer lost out ten times the compensation amount due to his employer’s failure to register the agreement under Section 28. The HC upheld the Labour Court’s 2019 order and dismissed an appeal filed by the seafarer, disabled over 85%, from receiving compensation according to his ITF Uniform TCC Agreement. A TCC Agreement is drafted on international standards and considered the most costly form of agreement for any shipowner.

Facts of the Case

The appellant Mosa Rajulu suffered a spine injury during mooring operations while onboard the ship MV Providence on March 30, 2014. After two hospital stays in the USA the seafarer was signed off from the ship on April 7. He was then operated on at the Breach Candy hospital in Mumbai but couldn’t regain strength. A medical board later declared him 85% permanently disabled.

He claimed compensation of Rs 1,20,10,194 citing the TCC Agreement, under section 15 (relating to Masters and Seamen) of the ECA.

The Commission held that there was 100% loss of income. The seafarer was drawing salary of 1700 USD, therefore he was entitled to compensation of 8,97,120 at 12% interest and 50% compensation as penalty u/s 4 of the Act. However, the Commissioner said the TCC agreement would not apply for compensation.

Arguments

Advocate Devendranath Joshi for the seafarer submitted that the Commissioner had jurisdiction to award the compensation according to section 15 of the Act, 1923 which carves out special provisions relating to the Master and Seamen, and is an exception to section 4 under which compensation is granted.

Advocate Tariq Baig for the respondent submitted that the issue was not res integra and it was an issue decided by various judgements. The Commissioner can only award compensation in accordance with the Employees Compensation Act, 1923.

Observations

The court agreed with Advocate Tariq Baig’s submissions. Justice Jamadar noted that section 15 would not apply as it dealt with limitation, procedure and no entitlement of compensation if it is covered by another Act like in the case of gratuity.

Emphasising the importance of a registered agreement, the court held that section 28(1) empowers the Commissioner not to register the agreement on account of the inadequacy of compensation so agreed, or, if he finds that, such an agreement has been entered into by fraud or undue influence or other improper means.

“The registration of the agreement incorporating the quantum of compensation agreed to be paid is thus not an empty formality…. The legislature expects the learned Commissioner to register such an agreement only when he is satisfied about its genuineness,” the court observed.

The court further relied on section 29, which states that if the employer fails to get the agreement registered, the employer shall pay the full amount of compensation that he is liable to pay under the provisions of the Act, 1923.

The court relied heavily on the Supreme Court judgement in the case of B.T. Shipping London Ltd. And Anr. vs. Arti Narayanan where the court held that compensation must be awarded in accordance with provisions of the Employees Compensation Act.

Case Title – Mosa Anand Rajulu vs. M/s. V. Ships Monaco and Another

Case Number – FA 902 OF 2019

Citation – 2022 LiveLaw(Bom) 15

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