All HC | Liability of employer and insurer to pay interest on amount awarded but not paid under the Employees’ Compensation Act, whether mandatory? Court answers

Allahabad High Court: Dr Kaushal Jayendra Thaker, J., held the employer and the insurance company liable to pay interest on the amount which was awarded by the Labour Commissioner to the claimants under the Employees’ Compensation Act, 1923, but which was not paid by the employer and the insurance company within one month from the date when it felt due.

The High Court admitted the appeal on the limited question of law framed as follows:

Whether the Commissioner has committed an error of law in not granting any interest despite the fact that the claimants were held entitled to compensation?

The appeal

The present appeal was filed by the claimants challenging the judgment and award dated 16-3-2020 passed by the Commissioner, Employees Compensation Act and the Assistant Labour Commissioner, Muzaffarnagar, in an Employees Compensation Case, awarding a sum of Rs 8,47,160. Since the facts, quantum and liability have attained finality, the appeal was heard and decided only on the question of law mentioned above.

The claimants were represented by Satya Deo Ojha, Advocate; while Pawan Kumar Singh, Advocate, appeared for the respondent-insurer.

Analysis and decision

At the outset, it was noted by the High Court that the employer and the insurance company had not deposited the amount nor it paid the amount within one month from when it feel due. The Court stated:

The Tribunal could have exonerated them for penalty but should the insurance company and the owner be not made liable for payment of interest on the amount accrued after one month of payment is the question posed to decision for not granting interest.

After noting the submission of claimants that no reasons were assigned by the Comissioner for not awarding the interest, the High Court answered that in Section 4-A (“compensation to be paid when due and penalty for default”) of the Employees’ Compensation Act, 1923, the word used is “shall” and therefore amount awarded shall carry 12% interest as per the statute. It was directed that the amount be deposited on or before 20-2-2021.

The Commissioner too was directed to be more vigilant in future and if they feel, interest is not to be granted, they shall record reasons for the same and if they come to the conclusion that amount has been paid on the date of award, the same shall carry interest as per statute. The present order is directed to be circulated to all the Commissioners in State of Uttar Pradesh. [Miskina v. HDFC Ergo General Insurance Co. Ltd., First Appeal from Order No. 1538 of 2020, decided on 26-11-2020]

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