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2025 DIGILAW 1153 (KAR)

Kanakaraju, S/o. S. Govindan v. B. H. Dinesh Pai

2025-11-13

UMESH M.ADIGA

body2025
JUDGMENT : UMESH M ADIGA, J. 1. This is an appeal filed by the employee/petitioner in ECA No.22/2017 being aggrieved by the judgment and award dated 06.11.2019 passed by the I Additional Senior Civil Judge and Commissioner (for short 'Commissioner') under Employees Compensation Act, 1923. 2. For the sake of convenience, the parties are referred to as per their rankings before the Trial Court. 3. The brief facts of the case are that the petitioner was an employee of respondent No.1 and on 05.06.2017 at about 12.30 p.m., during the course of his employment, he met with an accident and sustained grievous injuries. He filed a claim petition before the 'Commissioner' for awarding compensation of Rs.15,00,000/-. Respondent No.1 is an employer and respondent No.2 is an Insurer. Both respondents have appeared and filed their respective written statements, putting forth their contentions. They have also denied their liability to pay the compensation etc. 4. The Commissioner framed necessary issues and recorded evidence and on appreciation of the materials available on record, by the impugned judgment and award, allowed the claim petition in part and held that the claimant - petitioner was entitled for compensation of Rs.3,78,355/- and respondent No.2 shall pay the said amount within a period of two months. The claim made against respondent No.1 was rejected and the same is challenged in the present appeal by the petitioner - employee on the ground that as per Section 4A(3) of the Employees' Compensation Act, 1923 (for short 'EC Act'), the Commissioner ought to have awarded interest at the minimum rate of 12% p.a. along with penalty, if any. But, the Commissioner, without any justifiable reasons, denied the interest and therefore, the claimant - petitioner prayed to direct the respondents to pay the interest at the rate of 12% per annum from 30 days after the incident till realization of the entire amount. 5. After the arguments were advanced by the learned counsel appearing for both the sides, it came to the knowledge that no substantial questions of law is framed at the time of admitting the appeal on 15.11.2023. Hence, substantial questions of law are framed. In the normal circumstances, if any substantial questions of law are framed on that day, the matter needs to be adjourned to give an opportunity to both parties to prepare to answer the said substantial questions of law and hear the matter. Hence, substantial questions of law are framed. In the normal circumstances, if any substantial questions of law are framed on that day, the matter needs to be adjourned to give an opportunity to both parties to prepare to answer the said substantial questions of law and hear the matter. On enquiry, the learned counsel appearing for both sides submits that they have understood substantial questions of law involved and already argued the matter. They do not wish to add anything more and matter may be disposed of. In view of the same, this matter is taken up for final disposal. 6. This appeal is admitted to consider the following substantial questions of law; 1. Whether the Commissioner under the Employees' Compensation Act, 1923 has a discretion to refuse the interest even though there is a delay in payment of the compensation? 2. What order? 7. Point No.1 :- The contention of the learned counsel for the claimant - petitioner is that as per Section 4A(3) of 'EC Act', it is duty of the employer to assess the compensation and thereafter, he has to deposit the amount within a period of 30 days. In the event, if the employer fails to do so, then he is liable to pay the interest and penalty. In this case, admittedly, the respondents have not deposited any amount before the Commissioner under the Employees' Compensation Act and it is a right given to the employee to receive the interest. Without any justifiable reasons, the respondents have not deposited the compensation amount. The Commissioner, without considering the same, denied the interest and he has no such jurisdiction or Authority to deny the interest to the employee. Therefore, this Court may answer substantial question of law in favour of the appellant - claimant and direct the respondents to pay the interest on the said amount from 30 days after the incident till the date of deposit of the amount. 8. Learned counsel for the employer-respondent No.1 contends that at the time of purchasing the Insurance Policy, respondent No.2 - Insurer has not clearly disclosed to them that if death or injury caused to any employee by accident, then the employer shall deposit the provisional compensation amount. If employer fails to do so, then Insurers are not liable to pay interest and penalty. If employer fails to do so, then Insurers are not liable to pay interest and penalty. Respondent No.1 innocently believing that any liability arising out of the employment, respondent No.2 - Insurer will pay the same. Even though the incident has been informed to respondent No.2 -Insurer within two days of the incident, respondent No.2 - Insurer did not pay the said amount. Therefore, it was a default of the respondent No.2 - Insurer in not calculating and paying the amount as per Section 4A of the 'EC Act' and employer - Insured is not liable to pay interests and penalty. 9. He further contends that respondent No.1 - the employer has paid medical expenses amounting to Rs.1,52,708/- to the claimant - employee immediately after incident. As per Section 4A of the 'EC Act', respondent No.1 - employer may either deposit the compensation amount before the Commissioner or pay the same directly to the employee. In this case, medical expenses paid to claimant immediately after the incident shall be considered as part of the compensation for which claimant was entitled and it shall be considered as compliance of Section 4A of the 'EC Act' and hence, respondent No.1 is not liable to pay interest. With these reasons, he prays for dismissal of the appeal. 10. Learned counsel for respondent No.2 submits that as per Section 4A of the 'EC Act', it is the primary duty of the employer to deposit/pay compensation. If he does not deposit, then it is his liability to pay the interest and penalty. In this case, respondent No.2 has produced Insurance Policy at Ex.R.11 and in the said Policy, there is a special condition that in the event of any unfortunate event happens, then respondent No.2 - Insurer is not liable to pay penalty and interest. It was a contractual liability between respondent Nos.1 and 2 and therefore, in any event, respondent No.2 is not liable to pay penalty and interest. Therefore, prays to dismiss the appeal against Insurer. 11. Looking at the rival contention of the parties, it is necessary to refer Section 4A of the 'EC Act'. "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. Therefore, prays to dismiss the appeal against Insurer. 11. Looking at the rival contention of the parties, it is necessary to refer Section 4A of the 'EC Act'. "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 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. (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 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, 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 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 (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." (emphasis supplied) 12. 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 (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." (emphasis supplied) 12. On reading of Sections 4A(2) and 4A(3) of the 'EC Act', it is a mandatory duty of an employer to calculate the compensation and provisionally deposit the same before the Commissioner within 30 days from the incident and in case of the default, he is liable to pay the interest as well as penalty as provided under Section 4A(3)(a) of the 'EC Act'. The contention of the learned counsel for respondent No.1 that unless the disability is assessed by the concerned Doctor, it may not be possible for the employer to assess the compensation and deposit it before the concerned Authority, is not tenable. 13. Section 4A(2) of the 'EC Act', which is referred above, clearly states that even if the employer disputes his liability to pay the compensation, he is bound to make a provisional payment based on the extent of liability, which he accepts. Therefore, it may not be an actual liability, but it is a provisional liability, which is accepted by the employer and employer cannot contend that since he was unable to ascertain disability and hence did not deposit the amount. 14. The repeated contention of the learned counsel for the appellant - claimant is that a sum of Rs.1,52,708/- was paid by respondent No.1 may be considered as a part of the provisional deposit amount. In fact, the said amount was paid to the employee for attending immediate medical urgency. The said contention is also not tenable. The explanation given to Section 4 of the 'EC Act' reads as under; "Explanation:- Any payment or allowance, which the (employee) has received from the employer towards his medical treatment shall not be deemed to be a payment or allowance received by him by way of compensation within the meaning of clause (a) of the proviso." (emphasis supplied) 15. The said explanation clearly says that if any amount paid towards the medical expenses that cannot be considered as a part of the compensation. The said explanation clearly says that if any amount paid towards the medical expenses that cannot be considered as a part of the compensation. According to the pleadings and evidence, it is the contention of respondent No.1 that he has paid the amount to meet the medical expenses. Therefore, such a payment made in the hands of victim employee cannot be considered as part of compensation under Section 4A of the 'EC Act'. The said contention is also not tenable. 16. When an Insured purchases an Insurance Policy, he enters into a contract with the Insurance Company subject to specified terms and conditions, for a consideration namely premium paid. Having accepted the policy, he cannot later contend that he didn't understood its terms. It was a contractual liability between respondent No.1 and respondent No.2. He cannot make grievance that at the time of selling the Insurance Policy, respondent No.2 did not explain that the Insurer would not be liable to pay interest and penalty in case of non-deposit of the amount within a period of 30 days from the date of accident. Moreover, merely he had intimated to respondent No.2 about the incident immediately after its occurrence is not a ground to refuse to pay the interest. As stated above, Sub Sections (1)(2) of Section 4A of the 'EC Act' clearly says "the Employer has to deposit the said amount". Employer cannot shift his liability to deposit the amount on Insurer. 17. On going through Section 4A of the 'EC Act', the Employer has to calculate compensation, which he accepts and deposit it within a period of 30 days. The grace period given to the employer is 30 days from the date of incident. In this case, admittedly, the respondents have not calculated and deposited the provisional compensation amount or paid to the claimant stating that it was a part of the compensation, which they have calculated. Looking to the facts and circumstances of the case, there is a violation of the provision of the Section 4A of 'EC Act' by the employer. The Commissioner ought to have directed the respondents to pay the interest. There is no discretion power given to Commissioner to refuse to award the interest. However, the Commissioner in para No.31, without giving justifiable reasons for denial of the interest, observed that the claimant/employee entitled for the compensation without any interest. The Commissioner ought to have directed the respondents to pay the interest. There is no discretion power given to Commissioner to refuse to award the interest. However, the Commissioner in para No.31, without giving justifiable reasons for denial of the interest, observed that the claimant/employee entitled for the compensation without any interest. Hence, the order passed by the Commissioner referred supra is not in accordance with law and calls for interference by this Court. 18. Learned counsel for respondent No.1 submits that since respondent No.1 has paid an amount of Rs.1,52,708/-, he may be permitted to set off against interest. He also contends that the said amount may be considered as compensation. The said submission is not tenable in view of the provision of Section 4A of the 'EC Act' since it is specifically mentioned in Section 4A of the 'EC Act that any amount paid towards the medical expenses shall not be considered as a part of the compensation. Hence, the said contention is not tenable to deny interest. The Commissioner erroneously denied the interest for which the claimant is entitled under Section 4A of the 'EC Act'. For above said reasons, substantial question of law is answered in favor of the claimant/appellant. 19. Accordingly, I proceed to pass the following: ORDER i) The Appeal is allowed ii) The judgment and award dated 06.11.2019 passed in E.C.A No.22/2017 by the 1 st Additional Senior Civil Judge and J.M.F.C at Chikkamangaluru, stands modified. iii) The respondent No.1 - employer is liable to pay interest at the rate of 12% p.a. on the compensation amount from 30 days after the incident till date of the deposit of the said amount. iv) Since the respondents have already deposited compensation amount of Rs.3,78,355/-, they are not liable to pay the same. Respondent No.1 being employer is liable to pay the interest. Insurer shall indemnify the employer in terms of the Insurance Policy. vi) Draw award accordingly. Registry is directed to send back the records along with a copy of this judgment to the concerned Court.