Court Orders Interest and Penalty on Delayed Employee Compensation Payment

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Case Name

Sukhbir Kour vs. Sr. Vice President (P&A) Gammon India Ltd. & Others (High Court of Jammu & Kashmir and Ladakh at Jammu)

MA No. 297/2013

Date: 6th October 2023

Key Takeaways

• Compensation is due immediately on the employee’s death: The court clarified that under Section 4A of the Employee’s Compensation Act, 1923, compensation becomes due as soon as the incident (death) occurs, not when the Commissioner passes an order.
• Interest must be paid on delayed compensation: If the employer delays payment, they must pay simple interest at 12% per annum from one month after the incident until the compensation is paid.
• Penalty for unjustified delay: If there’s no valid reason for the delay, the employer can be ordered to pay a penalty up to 50% of the compensation amount. In this case, the court set the penalty at 10%.
• Supreme Court precedent applied: The court relied on the Supreme Court’s decision in Shobha and others v Chairman, Vithalrao Shinde Sahakari Sakhar Karkhana Ltd. and others, 2022 LiveLaw (SC) 271 to interpret when compensation and interest become due.

Issue

Was the appellant entitled to interest and penalty on the compensation amount from the date of her husband’s death, and was the compensation amount correctly calculated?

Facts

• Parties: Sukhbir Kour (widow of the deceased employee) vs. Gammon India Ltd. (employer) and others.
• Incident: The appellant’s husband died on 06.07.2007 while working at a project site for Gammon India Ltd.
• Initial Award: The Assistant Labour Commissioner (Commissioner under the Employees Compensation Act) awarded Rs. 4,11,900 as compensation but did not grant interest or penalty.
• Appeal: Sukhbir Kour appealed, seeking higher compensation (arguing her husband’s income was under-calculated), interest, and penalty for the delay in payment.
• Employer’s Defense: The employer claimed the death was natural and not work-related, but this was rejected as the death occurred at the work site due to cardiac arrest.
• Timeline: Compensation was deposited only on 26.06.2013, nearly six years after the incident.

Arguments

Appellant (Sukhbir Kour)

• The compensation amount was too low; her husband’s income was under-calculated.
• No interest or penalty was awarded, despite a long delay in payment.
• Sought enhancement of compensation, interest from the date of death, and penalty.

Respondents (Gammon India Ltd. & Others)

• Did not contest the appeal; set ex parte (did not appear in court).
• Earlier, claimed the death was natural and not work-related, but this was dismissed by the court.

Key Legal Precedents

• Section 4A of the Employee’s Compensation Act, 1923:
• Compensation must be paid as soon as it falls due (i.e., on the date of the incident).
• If not paid within one month, employer must pay simple interest at 12% per annum (or higher, up to the maximum lending rate of a scheduled bank).
• If delay is unjustified, a penalty up to 50% of the compensation may be imposed.
• Supreme Court Case:
• Shobha and others v Chairman, Vithalrao Shinde Sahakari Sakhar Karkhana Ltd. and others, 2022 LiveLaw (SC) 271:
• Compensation is due immediately on the employee’s death.
• Interest is payable from the date of the incident, not from the date of the Commissioner’s order.
• Penalty is separate from interest and is imposed if there is no justification for delay.

Judgement

• Court’s Decision: The High Court allowed the appeal.
• Orders:
• The appellant is entitled to interest at 12% per annum on the compensation amount from the date of the incident (06.07.2007) until the date the compensation was deposited (26.06.2013).
• The appellant is also entitled to a penalty, set at 10% of the awarded sum (Rs. 4,11,900), payable by the employer.
• The original award was modified to include these additional amounts.
• Reasoning: The court found that the employer had no justification for the delay and failed to pay even provisional compensation. The law and Supreme Court precedent required interest and allowed for a penalty in such cases.

FAQs

Q1: Why did the court order interest from the date of the incident, not from the date of the Commissioner’s order?

A: Because Section 4A of the Employee’s Compensation Act and the Supreme Court’s decision in Shobha and others make it clear that compensation is due immediately on the employee’s death, so interest accrues from that date.

Q2: How much penalty was imposed and why?

A: The court imposed a penalty of 10% of the compensation amount because the employer had no valid reason for the delay in payment. The law allows up to 50%, but the court exercised its discretion to set it at 10%.

Q3: What does this case mean for other employees or dependents in similar situations?

A: It reinforces that employers must pay compensation promptly after a workplace death or injury, and delays can result in significant financial penalties and interest.

Q4: Did the court increase the compensation amount based on the claimed higher income?

A: The judgment summary focuses on the interest and penalty; it does not indicate that the compensation amount was increased based on a higher income claim.

Q5: What should employers do to avoid such penalties?

A: Employers should pay compensation as soon as it becomes due (within one month of the incident) and, if there is any dispute, at least make a provisional payment to avoid interest and penalties.