Explained| Compensation under Section 4 of Employee’s Compensation Act, 1923 to be awarded from the date of accident or the date of Commissioner’s order? 

Supreme Court: The bench of MR Shah* and BV Nagarathna, JJ has held that as per Section 4A of the Employee’s Compensation Act, 1923, the liability to pay the compensation would arise from the date on which the deceased died for which he is entitled to the compensation and therefore, the liability to pay the interest on the amount of arrears/compensation shall be from the date of accident and not from the date of the order passed by the Commissioner.

The Court was deciding the case where a sugarcane cutting labourer, engaged by the Labour Contractor who provided sugarcane to a sugar factory, died of a snake bite while cutting sugarcane. Neither the sugar factory nor the contractor paid the compensation due and payable under the Act, 1923. Therefore the heirs of the deceased filed a claim petition before the Workmen’s Compensation Commissioner, who allowed the application and directed the respondents herein jointly and severally to pay the compensation amount of Rs.3,06,180/- alongwith simple interest @ 12% p.a. from the date of 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/-.

The Bombay High Court has though dismissed the appeal insofar as the amount of compensation awarded by the Commissioner, it, however, set aside the penalty and modified the interest awarded @ 12% p.a. from the date of incident and directed that the interest be paid from the period after expiry of one month from the date of Commissioner’s order dated 25.01.2017.

However, going by the scheme of the 1963 Act, the Supreme Court observed that compensation under Section 4 shall be paid as soon as it falls due. 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. Even as per Section 4A(2), in cases, where the employer does not accept the liability for compensation to the extent claimed, he shall be bound to make provisional payment based on the extent of liability which he accepts, and, such payment shall be deposited with the Commissioner or made to the employee, as the case may be, without prejudice to the right of the employee to make any further claim. Therefore, the liability to pay the compensation would arise from the date on which the deceased died for which he is entitled to the compensation and therefore, the liability to pay the interest on the amount of arrears/compensation shall be from the date of accident and not from the date of the order passed by the Commissioner.

As per Section 4A(3)(b), if the Commissioner is satisfied that there is no justification for 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 penalty are different.

The Court noticed that the provision for levy of interest would be under Section 4A(3)(a) and the provision for levy of penalty would be under Section 4A(3)(b). 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 has not at all considered Section 4A(3)(a) and has considered Section 4A(3)(b) only, which is the penalty provision. Hence, the impugned judgment and order passed by the High Court directing the employee 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., 25.01.2017was held to be unsustainable.

[Shobha v. Chairman, Vithalrao Shinde Sahakari Sakhar Karkhana Ltd, 2022 SCC OnLine SC 308, decided on 11.03.2022]


*Judgment by: Justice MR Shah


 

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