Employee’s Compensation Act, 1923 – Section 4A(3) – Interest at 12% per annum held to be mandatory on delay in payment of compensation – Insurance Company directed to pay without recovery from employer – No discretion for awarding a lower rate below 12% – Supreme Court modified High Court’s award and granted 12% interest from the date of the accident.

Held –

The interest at 12% per annum is mandatory upon failure to pay compensation within one month from the due date. The Commissioner had no discretion to reduce it below 12%. (Para 5-6)

The Insurance Company, having failed to appeal against the liability imposed on it, cannot now claim exemption or seek recovery from the employer. (Para 8)

The award of interest was modified to 12% per annum from the date of the accident. (Para 9)

Acts and Sections Discussed:

• Constitution of India, 1950 – Article 136 – Special Leave to Appeal
• Employee’s Compensation Act, 1923 – Section 4A(3) – Interest liability of employer – Mandatory nature of interest
• Insurance Act, 1938 – Scope of indemnification – Liability of Insurer

Subjects:

Interest on Compensation – Insurance Liability – Employer’s Default – Statutory Interest – Employee’s Death – Employer-Employee Relationship – Penalty – Provisional Payment

Facts:

a. Nature of the Litigation: Appeal against the High Court’s decision regarding the rate of interest on compensation under the Employee’s Compensation Act, 1923.
b. Who is Asking the Court and for What Remedy? Appellants (legal representatives of the deceased employee) sought enhancement of interest on compensation from 6% to 12% per annum from the date of the accident.
c. Reason for Filing the Case: The Commissioner awarded 6% interest, which the appellants contested, arguing statutory entitlement to 12% interest.
d. What Has Already Been Decided Until Now? High Court upheld 6% interest and declined enhancement. The appellants challenged this before the Supreme Court.

Issues:

1. Whether the statutory interest under Section 4A(3) of the Employee’s Compensation Act, 1923, at 12% per annum is mandatory upon delay in payment of compensation?
2. Whether the Insurance Company can be made liable to pay the statutory interest, or whether it can seek recovery from the employer?
3. Whether the Commissioner and High Court erred in granting only 6% interest despite the statutory mandate?

Submissions/Arguments:

a. Appellants: Argued that interest at 12% per annum is a statutory mandate under Section 4A(3), and the discretion is only for enhancing the rate above 12%, not for reducing it. The Commissioner’s decision to grant only 6% was erroneous.
b. Respondent-Insurance Company: Contended that the insurer cannot be made liable for the default of the employer in not making provisional payments. Further argued that interest, if awarded, should be recoverable from the employer.

Ratio:

• Section 4A(3) of the Employee’s Compensation Act, 1923, imposes a statutory mandate to award interest at 12% per annum, and courts do not have discretion to lower it.
• The insurer, once directed to pay compensation and interest, cannot subsequently challenge its liability in a subsequent appeal by the claimants.