Employee's Compensation Act: Liability To Pay Interest On Compensation Amount Is From Date Of Accident: Supreme Court

The Supreme Court observed that the liability to pay the interest on the amount of arrears/compensation under Employee's Compensation Act, 1923, shall be from the date of accident and not from the date of the order.

In this case, the deceased employee was a sugarcane cutting labourer. While cutting the sugarcane, he died of a snake bite. His heirs filed a claim petition before the Commissioner Workmen's Compensation, Beed and claimed Rs. 5 lakhs. The Commissioner directed the employers to pay the compensation amount of Rs.3,06,180/- alongwith simple interest @ 12% p.a. from the date of accident till its full realization. A penalty of 50% on the compensation amount, was also imposed. Partly allowing the appeal filed by employer, the High Court directed that the interest @ 12% p.a. shall become payable from the period after expiry of one month from the date of the Commissioner's order.

In appeal, the Apex Court bench observed that the High Court has not noted and/or considered Section 4A(3)(a) of the Act, 1923, which deals with award of interest when the employer is in default. Referring to Section 4A of the Act, the bench observed

"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 observed 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).  

Allowing the appeal, the court held that the claimants shall be entitled to the interest @ 12% p.a. on the amount of compensation as awarded by the Commissioner from the date of the incident.

Headnotes

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. (Para 4.1)

Appeal against High Court order which directed that the interest @ 12% p.a. shall become payable from the period after expiry of one month from the date of the Commissioner's order - Allowed - 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 - Claimants shall be entitled to the interest @ 12% p.a. on the amount of compensation as awarded by the Commissioner from the date of the incident.

Case details

Shobha vs Chairman, Vithalrao Shinde Sahakari Sakhar Karkhana Ltd. | CA 1860 OF 2022 | 11 March 2022

Citation: 2022 LiveLaw (SC) 271

Coram: Justices MR Shah and BV Nagarathna

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