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Liability To Pay Interest On Compensation Amount Is From Date It Falls Due

Citation : Shobha vs Chairman, Vithalrao Shinde Sahakari Sakhar Karkhana Ltd. , CA 1860 OF 2022 

Date of Judgment/Order : 11 March 2022

Court/Tribunal : The Supreme Court

Corum: M.R. Shah, J.

Background

A sugarcane cutting labourer while engaged as a labourer by the Labour Contractor for cutting the sugarcane, which was to be supplied to the sugar factory (Respondent) died from snake bite. The appellants herein – heirs of the deceased filed a claim petition before the Commissioner Workmen’s Compensation when Neither the sugar factory nor the contractor paid the compensation due and payable under the Employee’s Compensation Act, 1923.

The Commissioner on 25.01.2017, allowed the said application and directed the respondent Nos. 1 to 3 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 High Court on appeal set aside the penalty and modified the interest awarded @ 12% p.a. from the date of incident and has directed that the interest @ 12% p.a. shall become payable from the period after expiry of one month from 25.01.2017. Being dissatisfied, original claimants have preferred the present appeal.

Judgment

The Supreme Court held the High Court had taken into consideration Section 4A(3)(b) only which deals with imposition of penalty but should have also noted and/or considered Section 4A(3)(a) of the Act, 1923.

The Supreme 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).

As per Section 4A of the Act, 1923 compensation under Section 4 shall be paid as soon as it falls 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. 


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