Jharkhand HC Modifies Labour Court Award, Directs 50% Penalty and Interest From Date of Accident Under Employees' Compensation Act

The Jharkhand High Court held that penalty under Section 4A of the Employees' Compensation Act was mandatory and awarded Rs. 2,91,635 in penalty plus funeral expenses to the widow of a deceased worker.

The High Court of Jharkhand at Ranchi, in M.A. No. 81 of 2015, has partly allowed the appeal of Smt. Sudama Devi, widow of a worker who died after a truck accident on 26 May 2012. Justice Sanjay Kumar Dwivedi, sitting singly, modified the Award dated 31 October 2014 passed by the Presiding Officer, Labour Court, Deoghar in W.C. Case No. 22 of 2013. The Labour Court had awarded Rs. 5,83,270 in compensation but had omitted to direct a penalty under Section 4A of the Employees' Compensation Act, 1923, had not specified the date from which interest would run, and had not provided funeral expenses. The High Court remedied all three omissions, holding that the penalty provision is mandatory and that a beneficial legislation must be applied in full to a dependent widow unfamiliar with its requirements.

The Accident and the Claim Before the Labour Court

On 26 May 2012, Laxman Mandal was directed by his employer, Amjad Nabib Khan, to unload stone chips at Bengabad from a truck bearing registration number GJ-5AT-0629. The truck overturned due to rash and negligent driving of the driver, Anwar Khan. Laxman Mandal sustained serious head injuries and fractures to both legs. He was taken to Navjeevan Nursing Home at Giridih, where he died during treatment.

An FIR was registered as Bengabad P.S. Case No. 62 of 2012, the truck was seized, an inquest was conducted, and Bengabad Police filed a chargesheet against driver Anwar Khan. The offending truck was insured with Sriram General Insurance Company Limited.

Smt. Sudama Devi, the widow and dependent, filed W.C. Case No. 22 of 2013 before the Labour Court, Deoghar. She claimed that Laxman Mandal was earning Rs. 6,000 per month plus Rs. 50 per day as khuraki, was aged about 48 years at the time of the accident, and sought compensation of Rs. 5,00,000 with interest at 12% per annum from 26 June 2012.

The Labour Court allowed the claim against the Insurance Company and, ex-parte, against the owner. It awarded Rs. 5,83,270 and directed payment within 30 days. The owner, O.P. No. 1, did not appear before the Labour Court or before the High Court. A co-ordinate bench of the High Court later dispensed with notice to the owner after finding that liability had been fastened on the Insurance Company and the owner was not a necessary party.

What the Labour Court's Award Left Out

Counsel for the appellant, Mr. Arvind Kumar Lall, identified three specific deficiencies in the Award. First, the Labour Court directed payment of interest but did not state the date from which interest was to run. Second, it passed no order of penalty under Section 4A of the Employees' Compensation Act, which counsel argued is a mandatory provision. Third, no funeral expenses were granted.

Mr. Lall relied on Jugal Kishor Ray v. Ashok Prasad Yadav and Another (Special Leave Petition (Civil) No. 20520 of 2024), a Supreme Court case arising out of the Jharkhand High Court, in which the Court had allowed penalty and interest and rejected a similar resistance from an insurance company.

Mr. Ashutosh Anand, appearing for Sriram General Insurance Company, opposed the claim for penalty and interest. He relied on L.R. Ferro Alloys Ltd. v. Mahavir Mahto and Another, reported in (2002) 9 SCC 450, to argue that the Insurance Company was not liable to pay penalty and interest, and sought dismissal of the appeal.

The Court's Reading of Section 4A

Justice Dwivedi set out the text of Section 4A(3)(a) of the Employees' Compensation Act, which requires that where an employer defaults in paying compensation within one month of it falling due, the Commissioner shall direct payment of simple interest at 12% per annum on the arrears. The Court observed that the accident occurred on 26 May 2012 and the employer did not pay compensation within 30 days. Interest was therefore required to be calculated from the date of the accident.

Section 4A(3)(b) further provides that if the Commissioner finds no justification for the delay, the employer may be directed to pay a further sum not exceeding 50% of the arrears by way of penalty, after giving the employer a reasonable opportunity to show cause.

The Court noted that both precedents cited by the parties are Supreme Court judgments and that they operate as collaterals. On the specific facts, Jugal Kishor Ray was a case arising directly from the Jharkhand High Court, in which the Supreme Court had allowed penalty and interest and rejected the insurance company's argument. The Court also noted that the Insurance Company had not appealed the original Award, which was another relevant circumstance.

The Court found that there was no justification for the delay in payment. It characterised the Employees' Compensation Act as a beneficial piece of legislation, observing that its provisions ought to have been complied with in their entirety, particularly given that a death had occurred and the appellant, a widow, may not have been fully aware of the provisions. The Court additionally noted that the appellant had approached the employer orally for payment, without success.

On the two precedents: the Court did not discard L.R. Ferro Alloys Ltd. in terms of legal principle but found, on the facts before it and in light of Jugal Kishor Ray, that the penalty was payable. The Insurance Company had not mounted any challenge to the original Award, which bore directly on the question of its liability for the enhanced amounts.

Funeral Expenses

The Court noted that in older cases, funeral expenses are fixed at Rs. 5,000. Since no funeral amount had been provided in the Labour Court Award, the Court directed that the appellant be paid Rs. 5,000 as funeral expenses.

Order

Justice Dwivedi modified the Award dated 31 October 2014 in W.C. Case No. 22 of 2013 in three specific directions:

• The appellant shall be paid interest in terms of the Award from 26 May 2012 until actual payment.
• The appellant is entitled to penalty under Section 4A. The awarded compensation being Rs. 5,83,270, the 50% penalty comes to Rs. 2,91,635, which shall be paid within four weeks from 23 July 2026.
• The appellant shall be paid Rs. 5,000 as funeral expenses.

The appeal was allowed in part. Pending interlocutory applications, if any, were disposed of. The Lower Court Record was directed to be transmitted to the court concerned forthwith.