Principal Employer Not Liable For Interest/ Penalty On Delayed Compensation For Accident/ Death Of Contractor's Employee: Bombay High Court

The Bombay High Court recently held that the principal employer's liability in case of accidental death/injury of contractor’s employee is limited to the compensation amount under Section 12 of the Employee Compensation Act and does not include penalty and interest for default.

“...for failure to comply with statutory obligation on the part of the employer he can be saddled with additional liability to pay interest and penalty, however the principal employer, who is made liable to pay compensation by extended arm under Section 12 of the Employee’s Compensation Act cannot be mulcted with the liability to pay the interest and penalty”, the court observed.

Justice SG Chapalgaonkar of the Aurangabad bench, while upholding over 6 Lakhs compensation granted to kin of driver who died of cardiac arrest while on duty, observed that driving tanker to deliver water to villages is a mentally and physically stressful job.

“Block Development Officer specifically admitted in the cross-examination that during the summer season the services of water supply goes on for 24 hours. He admits that the water supply was required to be made within the 60-kilometre radius at wadies and villages. All these circumstances are sufficient to conclude that the work of deceased was involving physical and mental stress”, said the court.

The court was dealing with an appeal under Section 30 of the Employee's Compensation Act, 1923 challenging the award of compensation to kin of deceased under Section 4(1)(a) of the Employee's Compensation Act.

The case arose from the death of one Rafique Khalifa, a driver on a water tanker owned by one Kadarkhan Kasamkhan Pathan. The Zilla Parishad, Ahmednagar, and Block Development Officer, Panchayat Samiti, Akole (appellants) had a contract with Harshawardhan Patil Sahalari Motor Vahatuk Sanstha Limited (contractor) for water supply during the summer of 2013. The contractor hired the services of the water tanker owned by Pathan to execute the contract. Rafique died on April 23, 2013 due to a cardiac arrest while performing his duty as a driver on the said water tanker.

The dependents of the deceased contended that his continuous 24-hour duty of fetching water from distances exceeding 60 kilometres and distributing it to various villages and wadis caused mental and physical stress, leading to his heart attack and subsequent death.

The appellants, however, denied any liability towards the employees on the water tanker, arguing that the responsibility for the employees of the contractor or any person employed on the vehicle used for water supply rested solely with the contractor. They claimed that there was no employer-employee relationship between Rafique and themselves.

The Commissioner for Employee's Compensation ordered the appellants to jointly and severally pay compensation of Rs. 6,39,000/- to the kin of deceased, along with interest at 12% per annum. The appellants were also directed to pay a penalty of 50% of the compensation amount in accordance with Section 4-A(2)(b) of the Employee's Compensation Act.

Existence of Employer-Employee Relationship:

The appellants claimed that they were not responsible for the water supply agreement between the contractor and the District Collector, Ahmednagar, and thus, the application should not have been entertained without the District Collector's involvement.

The High Court relied on the specific admission made by the appellants in their written statement, wherein they acknowledged the contract with the contractor for water supply and the engagement of the water tanker for the said work. The Court upheld the Commissioner's finding that the appellants were the principal employers, and the employment of the deceased was within the scope of their contract with the contractor. The argument about the District Collector being a necessary party was rejected as it was not raised in the written statement.

Cause of Death:

The appellants argued that the cause of Rafique's death, i.e., heart attack, was not proven to be related to employment causes, and the post-mortem report did not disclose the cause of death.

The High Court concluded that the death of Rafique Khalifa was attributable to employment causes. The Court cited previous judgments stating that death by heart attack while performing work-related duties can be considered an "accident" within the scope of the Act.

Liability of Employer To Pay Penalty For Delay In Compensation:

The appellants contended that interest and penalty under Section 4-A(3)(b) of the Employee's Compensation Act could not be imposed on them principal employer (appellants) and they were only liable to pay compensation under Section 12 of the Act.

The Court accepted the appellants' argument that the liability of the principal employer (appellants) for interest and penalty under Section 4-A(3)(b) is not valid.

Thus, the High Court partly allowed the appeal and modified the judgment passed by the Commissioner. It upheld the compensation amount of Rs. 6,39,000/- to be paid jointly and severally by Zilla Parishad, the BDO, the contractor, and the tanker owner.

The court directed the contractor and the owner of the water tanker to pay interest at the rate of 12% per annum on the compensation amount to the kin of the deceased from April 23, 2013 till realization. Additionally, they were ordered to pay a penalty of 50% of the compensation amount.

Case no. – First Appeal No. 3517 of 2022

Case Title – Chief Executive Officer, Zilla Parishad, Ahmednagar and Anr. v. Suraiyya Rafik Khalifa and Ors.