Supreme Court of India
SHOBHA & ORS.versusTHE CHAIRMAN, VITHALRAO SHINDE SAHAKARI SAKHAR KARKHANA LTD. & ORS.
- Citation
- 2022 INSC 298
- Decided
- 11 March 2022
- Disposal
- Appeal(s) allowed
- Bench
- M R SHAH
Holding
Interest under Section 4A(3)(a) of the Employee’s Compensation Act, 1923 is payable from the date the compensation falls due – the date of the accident – and not from the date of the Commissioner’s order.
Summary
The deceased was a sugarcane‑cutting labourer who died from a snake bite while employed by a contractor supplying a sugar factory. His heirs claimed compensation under the Employee’s Compensation Act, 1923 and the Commissioner awarded Rs 306,180 with simple interest at 12% per annum from the date of the accident (29‑Nov‑2009) and a penalty of 50% of the compensation. The employer appealed; the High Court set aside the penalty but altered the interest, directing it to be payable only after one month from the Commissioner’s order dated 25‑Jan‑2017. The appellants challenged this modification before the Supreme Court, contending that interest under Section 4A(3)(a) should accrue from the date the compensation became due, i.e., the date of the accident. The Court examined Sections 4A(1) and 4A(3)(a) and held that liability to pay interest arises as soon as the compensation falls due, not from the order date, and that the High Court erred by applying the penalty provision of Section 4A(3)(b) to interest. Consequently, the Supreme Court allowed the appeal, set aside the High Court’s order on interest, and affirmed that the claimants are entitled to interest at 12% per annum from the date of the accident, with no order as to costs.
Issues considered
- Whether interest under Section 4A(3)(a) of the Employee’s Compensation Act, 1923 is payable from the date of the accident or from the date of the Commissioner’s order.
- Whether the High Court incorrectly applied the penalty provision of Section 4A(3)(b) to the award of interest.
Legislation cited
- Employee's Compensation Act, 1923s. 4, s. 4A(1), s. 4A(2), s. 4A(3)(a), s. 4A(3A), s. 4A(3)(b)
Subjects
Employee’s Compensation Actinterest liabilitypenalty provisionstatutory interpretationemployer defaultcompensation due dateinterest accrual
Judgment
[2022] 1 S.C.R. 761 761
SHOBHA & ORS. A
v.
THE CHAIRMAN, VITHALRAO SHINDE SAHAKARI
SAKHAR KARKHANA LTD. & ORS.
(Civil Appeal No. 1860 of 2022) B
MARCH 11, 2022
[M. R. SHAH AND B.V. NAGARATHNA, JJ.]
Employee’s Compensation Act, 1923: ss. 4, 4A – Award of
compensation under – Entitlement to interest, from the date of the
C
order passed by the Commissioner or from the date of accident –
Held: Liability to pay the compensation would arise from the date
on which the deceased died for which he is entitled to the
compensation, thus, the liability to pay the interest on the amount of
arrears/compensation would be from the date of accident and not
from the date of the order passed by the Commissioner – On facts, D
order passed by the High Court directing the employer to pay the
interest @ 12% p.a. on the amount of compensation as leviable
u/s. 4A(3)(a) from the date of the order passed by the Commissioner
is unsustainable and is set aside.
Allowing the appeal, the Court E
HELD: 1.1 As per Section 4A(1) of the Employee’s
Compensation Act, 1923 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 F
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 G
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
H
761
762 SUPREME COURT REPORTS [2022] 1 S.C.R.
A 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). 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. The
B
impugned judgment and order passed by the High Court directing
the employer to pay the interest @ 12% p.a. on the amount of
compensation as leviable under Section 4A(3)(a) from the date
of the order passed by the Commissioner, is unsustainable, andis
quashed and set aside. The appellants-original claimants would
C be entitled to the interest @ 12% p.a. on the amount of
compensation as awarded by the Commissioner from the date of
the incident. [Paras 4.1, 5, 6][765-B-H; 766-B]
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1860
of 2022.
D From the Judgment and Order dated 12.12.2019 of the High Court
of Judicature at Bombay, Bench at Aurangabad in F.A. No.3008 of 2017.
Ms. Qurratulain, Shivaji M. Jadhav, Brij Kishor Sah, Aditya Jadhav,
Advs. for the Appellants.
E Samrat Krishnarao Shinde, Sarang Aaradhya, Advs. for the
Respondents.
The Judgment of the Court was delivered by
M. R. SHAH, J.
1. Feeling aggrieved and dissatisfied with the impugned
F
judgmentand order passed by the High Court of Judicature at Bombay,
Bench at Aurangabad in First Appeal No. 3008 of 2017 by which the
High Court has partly allowed the said appeal preferred by the respondents
herein and has ordered that the respondents shall be liable to pay interest
@ 12 per cent p.a. as leviable under Section4A(3) of the Employee’s
G Compensation Act, 1923 (hereinafter referred to as the “Act, 1923”)
from the date after expiry of period of one month from 25.01.2017 (the
date of the order passed by the Commissioner), the heirs of the deceased
–labourer working on sugarcane field have preferred the present appeal.
H
SHOBHA v. THE CHAIRMAN, VITHALRAO SHINDE SAHAKARI 763
SAKHAR KARKHANA LTD. [M. R. SHAH, J.]
2. That the deceased was a sugarcane cutting labourer. He was A
engaged as a labourer by the Labour Contractor for cutting the sugarcane,
which was to be supplied to the sugar factory. While cutting the
sugarcane, he died of a snake bite. Neither the sugar factory nor the
contractor paid the compensation due and payable under the Act, 1923
and therefore the appellants herein – heirs of the deceased filed a claim
B
petition before the Commissioner Workmen’s Compensation, Beed being
W.M.C. No. 39 of 2011 and claimed Rs. 5 lakhs. By the order dated
25.01.2017, the Commissioner 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 C
Commissioner also imposed the penalty of 50% on the compensation
amount, i.e., Rs. 1,53,090/-.
2.1 Feeling aggrieved and dissatisfied with the order passed bythe
Commissioner, Workmen’s Compensation, Beed dated 25.01.2017,
respondent Nos. 1 to 3 herein filed the First Appeal No. 3008 of 2017 D
before the High Court. By the impugned judgment and order the High
Court has though dismissed the appeal insofar as the amount of
compensation awarded by the Commissioner is concerned, however,
has 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 E
25.01.2017.
2.2 Feeling aggrieved and dissatisfied with the impugned judgment
and order passed by the high Court restricting the interest @ 12% p.a.
from the date after expiry of period of one month from 25.01.2017, the
original claimants have preferred the present appeal. F
3. We have heard the learned counsel for the respective parties
at length.
4. While holding that the claimants shall be entitled to interest @
12% p.a. from the date after expiry of a period of one month from G
25.01.2017, the High Court has considered Section 4A(3)(b) only which
deals with imposition of penalty. However, 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. Section 4A reads as
under:-
H
764 SUPREME COURT REPORTS [2022] 1 S.C.R.
A “4A. Compensation to be paid when due and penalty
for default.- (1) Compensation under section 4 shall be paid as
soon as it falls due.
(2) In cases where the employer does not accept the liability
for compensation to the extent claimed, he shall be bound to make
B 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.
C (3) Where any employer is in default in paying the
compensation due under this Act within one month from the date
it fell due, the Commissioner shall-
(a) direct that the employer shall, in addition to the amount
of the arrears, pay simple interest thereon at the rate of twelve
D per cent. per annum or at such higher rate not exceeding the
maximum of the lending rates of any scheduled bank as may
be specified by the Central Government by notification in the
Official Gazette, on the amount due; and
(b) if, in his opinion, there is no justification for the delay,
E direct that the employer shall, in addition to the amount of the
arrears and interest thereon, pay a further sum not exceeding
fifty per cent. of such amount by way of penalty:
Provided that an order for the payment of penalty shall
not be passed under clause (b) without giving a reasonable
F opportunity to the employer to show cause why it should not
be passed.”
Explanation.-For the purposes of this sub-section,
“scheduled bank” means a bank for the time being included in
the Second Schedule to the Reserve Bank of India Act, 1934
G (2 of 1934).
(3A) The interest and the penalty payable under sub-section
(3) shall be paid to the employee or his dependant, as the case
may be.”
H
SHOBHA v. THE CHAIRMAN, VITHALRAO SHINDE SAHAKARI 765
SAKHAR KARKHANA LTD. [M. R. SHAH, J.]
4.1 Thus, from Section 4A of the Act, 1923 compensation under A
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.
B
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 C
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
D
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 E
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. As observed hereinabove, the provision for
F
levy of interest would be under Section 4A(3)(a) and the provision for
levy of penalty would be under Section 4A(3)(b). 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.
5. Under the circumstances, the impugned judgment and order G
passed by the High Court directing the employer 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., 25.01.2017 is
unsustainable.
H
766 SUPREME COURT REPORTS [2022] 1 S.C.R.
A 6. In view of the above and for the reasons stated above, the
present appeal succeeds. The impugned judgment and order passed by
the High Court insofar as awarding the interest @ 12% p.a. after the
period of expiry of one month from 25.01.2017, is hereby quashed and
set aside and it is observed and held that the appellants herein – original
claimants shall be entitled to the interest @ 12% p.a. on the amount of
B
compensation as awarded by the Commissioner from the date of the
incidenti.e., 29.11.2009.
Present appeal is allowed accordingly. However, in the facts and
circumstances of the case, there shall be no order as to costs.
C
Nidhi Jain Appeal allowed.
D
E
F
G
H
Search Indian case law
Ask in plain English, not just keywords. 25,000 AI words free, no card.
Try "Employee’s Compensation Act"Sign in to search