Liability To Pay Interest On Amount Of Compensation Shall Be From Date Of Accident U/s. 4 Of Employees Compensation Act – SC

In this case, the deceased was a sugarcane cutting laborer and was engaged by the Labour Contractor for cutting the sugarcane which was to be supplied to the sugar factory. While cutting the sugarcane he died of a snake bite. Neither the sugar factory nor the contractor paid the compensation due and payable under the Act, 1923.

Thereafter, the Appellants-Heirs of the deceased filed a claim petition before the Commissioner Workmen's Compensation and claimed Rs. 5 lacs. The Commissioner allowed the application and directed the Respondents to jointly and severally pay the compensation amount of Rs.3,06,180/- along with simple interest @ 12% p.a. from the date of the accident, i.e., 29.11.2009 till its full realization. The Commissioner also imposed the penalty of 50% on the compensation amount, i.e., Rs. 1,53,090/-.

Aggrieved, the Respondents approached the High Court, the Court dismissed the appeal in so far as the amount of compensation awarded by the Commissioner was concerned, however, set aside the penalty and modified the interest awarded at 12% p.a. from the date of incident and directed that the interest be paid from the period after expiry of one month from 25.01.2017.

Aggrieved with the order passed by the High Court, the original claimants preferred an appeal before the Supreme Court.

The Apex Court noted that as per Section 4A of the Act, the compensation under Section 4 shall be paid as soon as it falls due. In this context, the Bench opined –

"It can be seen that the liability to pay the interest on the amount of compensation due and payable would be under Section 4A(3)(a) and the penalty would be leviable under Section 4A(3)(b). As per Section 4A(3)(a), the employer shall pay, in addition to the amount of the arrears, simple interest thereon @ 12% p.a. or at such higher rate not exceeding the maximum of the lending rates of any scheduled bank as may be specified on the amount due. As per Section 4A(1) compensation under section 4 shall be paid as soon as it falls due. Therefore, on the death of the employee/deceased immediately, the amount of compensation can be said to be falling due. Therefore, the liability to pay the compensation would arise immediately on the death of the deceased."

Further, the Court held that as per Section 4A(3)(b) if the Commissioner is satisfied that there is no justification or the delay, it can direct the employer, in addition to the amount of the arrears and interest thereon, to pay a further sum not exceeding 50% of such amount by way of penalty. Thus, provision for interest and provision for a penalty is different.

The Court observed that while directing the employer to pay the interest from the date of the order passed by the Commissioner, the High Court did not consider Section 4A(3)(a) and considered Section 4A(3)(b), only which is the penalty provision.

Holding that the impugned order passed by the High Court directing the employer to pay the interest on the amount of compensation as leviable under Section 4A(3)(a) from the date of the order passed by the Commissioner, i.e., 25.01.2017 was unsustainable, allowed the appeal of the original claimants.

Accordingly, the Court set aside and quashed the order of the High Court and held that the Appellants shall be entitled to interest at 12% p.a. on the amount of compensation awarded by the Commissioner from the date of incident i.e., 29.11.2009.

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