Liability to pay compensation under Employee’s Compensation Act,1923 would arise immediately on death of deceased employee, rules Top Court

Read Judgment: Shobha & Ors. V. The Chairman, Vithalrao Shinde Sahakari Sakhar Karkhana Ltd. & Ors. 

Pankaj Bajpai

New Delhi, March 14, 2022: The Supreme Court has ruled that the liability to pay the compensation under the Employee’s Compensation Act, 1923 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.

A Division Bench of Justice M.R Shah and Justice B.V Nagarathna therefore observed that the liability to pay the compensation would arise immediately on the death of the deceased. 

The observation came pursuant to an appeal preferred by the heirs of the deceased labourer working on sugarcane field, challenging the judgment whereby the Bombay High Court has ordered that the respondents shall be liable to pay interest @ 12 per cent p.a. as leviable u/s 4A(3) of the Employee’s Compensation Act, 1923 from the date after expiry of period of one month from Jan 25, 2017 the date of the order passed by the Commissioner. 

After considering the submissions, the Top Court found that 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 January 25, 2017, the High Court had considered Section 4A(3)(b) only which deals with imposition of penalty. 

However, the High Court had 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, added the Court.

Speaking for the Bench, Justice Shah noted that 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.

The provision for levy of interest would be u/s 4A(3)(a) and the provision for levy of penalty would be u/s 4A(3)(b), added the Bench. 

Justice Shah therefore concluded that while directing the employer to pay the interest from the date of the order passed by the Commissioner, the High Court had not at all considered Section 4A(3)(a) and has considered Section 4A(3)(b) only, which is the penalty provision. 

The Top Court therefore held that the appellants – original 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.