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Case Number

First Appeal from Order No. 135 of 1986

Advocates

For Appellant.— Sri Kailash Chand and Sri A.K Goel.
Sri P.A Sharma.

Judges

Sri P.D Desai, C.J

Acts

provisions of S. 10 A of the Workmen's Compensation Act, 1923, and rule 6 of the rules
S. 30 of the Workmen's Compensation Act, 1923 (hereinafter to be referred as the Act),
provisions of S. 10 A of the Workmen's Compensation Act, 1923,
S. 4-A of the Workmen's Compensation Act, 1923,
Workmen's Compensation Act
Section 4-A, Sub-S sec. (3),

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Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

The appeal is brought by the original claimant (the deceased workman's mother) under S. 30 of the Workmen's Compensation Act, 1923, challenging that part of the Commissioner's award which refused interest on the compensation amount and did not impose a penalty for default in payment.

Key factual and procedural milestones (as stated in the opinion):

The deceased was employed as a junior engineer on monthly wages of Rs. 1,564.40 and died in a work-related accident on 25 July 1984 while travelling on duty.
The claimant instituted a petition on 16 January 1985. The Commissioner issued a notice dated 24 January 1985 under S.10-A calling on the second respondent to furnish particulars and to make "the necessary deposit" within thirty days.
The respondents filed written replies on 11 and 12 February 1985 in which they: (a) indicated an ex gratia payment of Rs. 14,500 had been made and (b) disputed that the claimants were "dependants" under S.2(d), thereby disclaiming liability initially.
An ex parte award of Rs. 88,548 (statutory compensation) was made on 30 January 1986; the award directed payment "forthwith" and did not allow adjustment for the earlier ex gratia payment.
The respondents applied for review on 13 February 1986; a rehearing was granted. At a later stage the respondents admitted liability for compensation subject to deduction of the Rs. 14,500 ex gratia amount.
The compensation was not deposited until 7 April 1986 (ten days before the fresh award on review dated 17 April 1986).
The Commissioner, on review, rejected the appellant's plea for interest (and did not impose penalty), reasoning that respondents had admitted liability and had deposited the compensation in Court.
This appeal challenges the rejection of interest and the failure to impose a penalty under S.4-A(3) of the Act.

Legal Issues Presented

Whether the Commissioner erred in rejecting the appellant's claim for simple interest at 6% per annum on the awarded compensation under S.4-A(3) for the period during which the employer defaulted in payment.
Whether the Commissioner failed to exercise (or misconstrued) her jurisdiction under S.4-A(3) in not imposing a penalty (up to 50% of the amount due) for default in paying compensation within one month of its falling due.
Whether the ex gratia payment of Rs. 14,500 and the offer of employment to the deceased's sister could be treated as a provisional payment under S.4-A(2) or otherwise justify denial of interest or penalty.

Arguments of the Parties

Appellant's Arguments

The respondents disobeyed mandatory provisions of S.10-A and rules framed thereunder by not depositing compensation within the statutory period; therefore interest at 6% per annum under S.4-A(3) is payable from the date compensation became due until payment.
Because of the respondents' deliberate failure to deposit the awarded amount, penalty under S.4-A(3) is also payable.
The ex parte award should be reviewed to grant interest, penalty, and costs (including costs under S.35A CPC).
The ex gratia payment should not be adjusted against statutory compensation (the appellant resisted any deduction).

Respondents' Arguments

The respondents claimed they admitted liability and thus the demand for interest was not justifiable; they asserted a bona fide belief that ex gratia payment and employment provided to the family were to be treated as provisional or mitigating circumstances.
They contended the ex gratia payment (and employment of the deceased's sister) were given as immediate relief and, in their view, might be treated as provisional payment under S.4-A(2).
Respondents also relied on departmental circulars and instructions that suggested ex gratia/benefit schemes were available in lieu of compensation, and relied upon that position in early pleadings.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Pratap Narain Singh Deo v. Shrinivas Sabnta [1976 — I L.L.N 16]	Establishes that an employer's liability to pay compensation under S.3 arises as soon as the personal injury is caused; compensation therefore falls due immediately and the Commissioner may impose interest and penalty under S.4-A(3) where there is default.	The court relied on the precedent to reject the argument that compensation did not fall due until the Commissioner's S.19 determination; it applied the precedent's holding to support that non-payment (and failure to make provisional payment) can justify interest and penalty here.

Court's Reasoning and Analysis

The court's analysis proceeded in a sequence that tied statutory text to the facts:

Statutory framework identified: S.3 (employer's liability), S.4 (formula for compensation), S.4-A (timing of payment, provisional payment, and penalty for default), S.8 (manner of distribution — deposit with Commissioner), S.17 (prohibition on contracting out), and S.19 (reference to Commissioner on disputes).
The court emphasized that, per S.3 and authority cited (Pratap Narain Singh Deo), the employer's liability arises immediately on the occurrence of a compensable injury; compensation falls due at that point, and the employer must pay "as soon as it falls due" under S.4-A(1).
The Commissioner had found that respondents admitted liability and had deposited compensation; the court examined those factual findings and concluded they were incorrect or misleading: respondents disclaimed liability at the initial stage and invoked departmental instructions and ex gratia payment; the deposit in court was made only on 7 April 1986 (long after the time compensation fell due and only ten days before the review award).
The court held that a mere admission of liability, without timely payment or a provisional payment under S.4-A(2), is not a valid ground for denying interest. The discretion under S.4-A(3) to award interest and penalty is judicial and must be exercised vigilantly, reasonably, and according to justice and sound judgment.
The court rejected respondents' contention that the ex gratia payment and employment should be treated as provisional payment under S.4-A(2): (a) S.4-A(2) applies when the employer partially accepts liability and makes a provisional payment based on the accepted extent; here the respondents initially disclaimed liability and asserted ex gratia/payment-in-lieu; (b) S.8 prohibits direct payments of compensation — ex gratia was not a statutory compensation deposit with the Commissioner; (c) respondents' departmental instructions purportedly making ex gratia "in lieu" of statutory compensation conflicted with S.17's prohibition on contracting out, and were therefore invalid to avoid statutory liability.
The court emphasized the respondents' status as a State instrumentality/public sector employer expected to act as a model employer with social responsibility; this weighed against accepting any purported bona fide excuse for delay.
Given the facts — initial denial of liability, delay in deposit until April 1986 despite notice in January 1985, and the respondents' reliance on a departmental scheme inconsistent with the Act — the Commissioner erred both in refusing interest and in failing to exercise jurisdiction to consider and impose penalty under S.4-A(3).
On the appropriate measure of penalty, the court held that maximum penalty (50% of the compensation) was justified on the facts and circumstances, given the absence of justification for the delay and the public character of the employer.

Holding and Implications

Holding: The appeal is allowed. The Court held that the Commissioner committed legal error in rejecting the claim for interest and in failing to impose penalty under S.4-A(3), and directed relief to the appellant.

Direct orders and immediate consequences (as expressly stated in the opinion):

The respondents are directed to pay to the appellant simple interest at the rate of 6% per annum on the statutory compensation sum of Rs. 88,548 from the date of the accident until the date of deposit.
A penalty equal to 50% of the statutory compensation (Rs. 44,274) is ordered to be recovered from the respondents and paid to the appellant.
The respondents are to deposit the amounts becoming due (interest, penalty and the compensation deposit) in the registry of the Court within two weeks from the delivery of a certified copy of the judgment.
Upon such deposit, the case will be listed for settling the usual draft order of investment; the appellant is also awarded costs of the appeal quantified at Rs. 350, which must be deposited along with the other sums.

Implications beyond the parties (as expressed in the opinion):

The opinion stresses that public sector employers are expected to comply strictly with the Act and cannot rely on departmental schemes or ex gratia payments to avoid statutory obligations. The court noted that departmental instructions inconsistent with S.17 (prohibition on contracting out) ought to be withdrawn. The judgment clarifies that admission of liability alone does not absolve an employer from the consequences of delayed payment under S.4-A(3), and that the discretion to award interest and penalty must be exercised judicially.

This summary is strictly confined to facts, arguments, statutory provisions, precedent citation, reasoning and orders expressly contained in the provided opinion. No additional facts or external materials have been introduced.

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Ram Dulari Kalia (Smt.) v. Himachal Pradesh State Electricity Board, Shimla, And Another

1. This appeal by the original claimant (mother of the deceased workman) is instituted under S. 30 of the Workmen's Compensation Act, 1923 (hereinafter to be referred as the Act), against that part of the award of the commissioner, Workmen's Compensation (hereinafter referred to as the Commissioner), Himachal Pradesh State Electricity Board (hereinafter called the H.P.S.E.B), which disallowed the claim of the appellant for the award of interest on the compensation amount and which also failed to impose penalty for default in paying the compensation within the time limited by law.

2. The facts giving rise to the appeal may be briefly stated. The deceased was employed as junior engineer in the Andhra construction Sub-Division No. 1, Chirgaon, on the monthly wages of Rs. 1,564.40. He met with a fatal accident on 25 July 1984, as a result of a fall while travelling on duty in a truck owned by the first respondent (Himachal Pradesh State Electricity Board). On a claim petition having been instituted by the appellant on 16 January 1985, the Commissioner issued a notice, dated 24 January 1985, under Sub-sec. (1) of S. 10-A of the Act to the second respondent (Executive Engineer, Andhra Construction, Sub-division No. 1, Chirgaon), calling upon him to furnish the requisite particulars in the prescribed form and also to make “the necessary deposit” (of compensation) within thirty days of the receipt of the notice. A copy of the application for compensation filed by the appellant was also enclosed with the notice. The second respondent furnished the necessary particulars and filed two written replies on 11 and 12 February 1985. Reading the two documents together, what emerges is that while not disputing that the deceased died when on duty and stating that the amount of compensation, if admissible and decided by the Commissioner, will be duly deposited, the second respondent disclaimed the liability to pay compensation on the grounds that:

(i) an ex gratia grant in the sum of Rs. 14,500 having been made in favour of the appellant and the sister of the deceased having been employed as clerk in the office of the Deputy Chief Accounts Officer, Himachal Pradesh State Electricity Board, no compensation under the Act was payable in view of the instructions issued in that regard by the Himachal Pradesh State Electricity Board, and;

(ii) the claimant (s), who were stated to be the family members of the deceased, were not “dependants” within the meaning of S. 2(d) of the Act.

Ultimately, an ex parte award in the sum of Rs. 88,548 came to be made on 30 January 1986. No adjustment/credit for the ex gratia grant in the sum of Rs. 14,500 was given in the award so made on the ground that it was “not adjustable against the amount of compensation to be awarded under the Workmen's Compensation Act.” The compensation amount was ordered to be paid “forthwith.”

3. The respondents applied for a review of the decision on 13 February 1986, and the application was fixed for hearing. The appellant filed a reply on 17 March 1986, contending that the review application was liable to be dismissed as not maintainable and further stating as follows:

“That the defendant-applicant has defied the mandatory provisions of S. 10 A of the Workmen's Compensation Act, 1923, and the rules framed thereunder particularly rule 6 of the Act aforesaid inasmuch as the defendant has not deposited even a single penny till date towards compensation in this learned Court, though the same is not disputed, within the statutory period of 30 days of the date of occurrence of the accident, therefore, they are also, liable to pay interest at 6 per cent per annum on the awarded amount as envisaged under S. 4-A of the Workmen's Compensation Act, 1923, from the date of compensation having become due till the date of payment for which the claimant-non-applicant prays. Not only this even the defendant has knowingly disobeyed the orders of this learned Court in not depositing the amount of awarded compensation, therefore, they are also liable to pay penalty in addition to interest as envisaged under 3. 4-A of the Act aforementioned, for which the claimant-non-applicant prays, and to this extent the award need be modified”[1976—I L.L.N 16 may be referred and seen.]

A specific prayer was also made on similar lines in the reply in the following words:

“Since the defendant has violated the mandatory provisions of S. 10 A of the Workmen's Compensation Act, 1923, and rule 6 of the rules framed thereunder, statutory interest on the amount of award from the due date to the date of payment besides penalty as envisaged under S. 4-A of the said Act and costs and compensatory costs as per S. 35 A of the code of civil procedure, 1908, by reviewing and modifying the award may kindly be awarded to the claimant against the defendant-applicant…”

The review application was granted and the case having been fixed for rehearing pursuant to the grant of review, the respondents appear to have admitted that the deceased had died as a result of the injury caused to him by an accident arising out of and in the course of his employment and that the appellant was entitled to compensation in accordance with law. The only factor which the Commissioner was requested to take into consideration was that the Himachal Pradesh State Electricity Board had made an ex gratia grant in the sum of Rs. 14,500 to the dependants of the deceased with a view to providing immediate relief soon after the fatal accident and that the said amount was required to be adjusted against the amount of compensation that may be held due and payable in accordance with law to the appellant. On behalf of the appellant, apart from the resistance offered to the claim of deduction as aforesaid, it was strenuously contended before the Commissioner that since the amount of compensation was not paid within one month from the date it fell due, simple interest at the rate of 6 per cent per annum on such amount was liable to be awarded in view of S. 4-A (3) of the Act. The plea relating to the award of interest on the amount of compensation v/as resisted on behalf of the respondents, inter alia on the ground that since no such demand was made by the appellant at any previous stage and the Commissioner had also not awarded interest in his ex parte award and that since they had admitted the liability to pay compensation in the “first reply”, they should not be held liable to pay interest. The Commissioner rejected the plea relating to the deduction of the sum of Rs. 14,500 advanced on behalf of the respondents holding that the ex gratia grant could not be adjusted against the amount of compensation awardable under the relevant provisions of the Act. The plea advanced by the claimant-appellant with regard to the award of interest was also rejected in the following words:

“Since the Himachal Pradesh State Electricity Board had admitted the liability to pay the compensation whatever is to be awarded and they have also deposited the amount of compensation in this Court, therefore, the demand to pay the interest is not justifiable and hence rejected…”

In the present appeal, the sole contention of the appellant is that the rejection by the Commissioner of the plea for the award of interest as well as the failure on his part to impose penalty for making a default in paying the compensation as soon as it fell due or latest within one month from the date it fell due is contrary to the statutory provisions and that the award is to that extent vitiated. The submission is resisted on behalf of the respondents on the ground that since the claim for compensation was not opposed and the liability was admitted and the nonpayment of the whole of the amount of compensation due in accordance with law was under a genuine belief that the ex gratia payment in the sum of Rs. 14,500 would be regarded as provisional payment made under Sub-sec. (2) of S. 4-A of the Act, the plea for the award of interest was rightly rejected. It was also urged that the bona fides of the respondents were also manifest by the reason of the fact that the employment was provided to the unmarried sister of the deceased in a subordinate office in order to help the family tide over the financial difficulties arising on account of the death of the sole earning member of the family and that the said conduct was also relevant for determining whether penalty, if any, should be imposed under S. 4-A(3) of the Act.

4. In order to determine the controversy, it is necessary to make reference to the relevant provisions of the Act. The Act, as its preamble suggests, was enacted to provide for the payment of compensation by certain classes of employers to their workmen on account of personal injury. Section 3 creates the liability against the employer for the payment of compensation in accordance with the provisions of the Act, if personal injury is caused to a workman by accident arising out of and in the course of his employment, subject to certain exceptions. Section 4 prescribes the formula by which the amount of compensation is to be determined in different cases. Section 4-A, which is material for the present case, reads as follows:

“4A. Compensation to be paid when due and penalty for default.— (1) Compensation under S. 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 workman, as the case may be, without prejudice to the right of the workman 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 may direct that, in addition to the amount of the arrears, simple interest at the rate of six per cent per annum on the amount due together with, if in the opinion of the Commissioner there is no justification for the delay, a further sum not exceeding fifty per cent of such amount, shall be recovered from the employer by way of penalty.”

Section 8, Sub-sec. (1), which is also relevant, reads as follows:

“8. Distribution of compensation.— No payment of compensation in respect of a workman whose injury has resulted in death, and no payment of a lump sum as compensation to a woman or a person under a legal disability, shall be made otherwise than by deposit with the Commissioner, and no such payment made directly by an employer shall be deemed to be a payment of compensation:

Provided that, in the case of a deceased workman, an employer may make to any dependant advances on account of compensation not exceeding an aggregate of one hundred rupees, and so much of such aggregate as does not exceed the compensation payable to that dependant shall be deducted by the Commissioner from such compensation and repaid to the employer.”

Section 17 relates to contracting out and reads as follows:

“17. Contracting out.— Any contract or agreement whether made before or after the commencement of this Act, whereby a workman relinquishes any right of compensation from the employer for personal injury arising out of or in the course of the employment, shall be null and void in so far as it purports to remove or reduce the liability of any person to pay compensation under this Act.”

Section 19 provides for reference to the Commissioner if any question arises in any proceedings under the Act as to the liability of any person to pay compensation (including any question as to whether a person injured is or is not a workman) or as to the amount or duration of compensation (including any question as to the nature or extent of disablement) and such question, in default of agreement, is to be settled by the Commissioner.

5. In Pratap Narain Singh Deo v. Shrinivas Sabnta [1976—I L.L.N 16], which was a case of personal injury caused to a workman by an accident which arose out of and in the course of his employment the Commissioner had ordered the payment of penalty to the extent of fifty per cent together with interest at the rate of 6 per cent per annum on the amount of compensation awarded by him. One of the questions raised for consideration on behalf of the employer-appellant in that case was whether the Commissioner had committed an error of law in imposing the penalty under S. 4-A(3) in view of the fact that the compensation had not fallen due until it was settled by the Commissioner under S. 19 by the award there impugned. The submission was considered and rejected in the following words, in Para. 7, at page 18:

“Section 3 of the Act deals with the employer's liability for compensation. Sub-section (1) of that section provides that the employer shall be liable to pay compensation if ‘personal injury is caused to a workman by accident arising out of and in the course of his employment.’ It was not the case of the employer that the right to compensation was taken away under Sub-sec. (5) of S. (3) because of the institution of a suit in a civil Court for damages, in respect of the injury, against the employer or any other person. The employer, therefore, became liable to pay the compensation as soon as the aforesaid personal injury was caused to the workman by the accident which admittedly arose out of and in the course of the employment. It is, therefore, futile to contend that the compensation did not fall due until after the Commissioner's order, dated 6 May 1969, under S 19. What the section provides is that if any question arises in any proceeding under the Act as to the liability of any person to pay compensation or as to the amount or duration of the compensation it shall, in default of agreement, be settled by the Commissioner. There is, therefore, nothing to justify the argument that the employer's liability to pay compensation under S. 3, in respect of the injury, was suspended until after the settlement contemplated by S. 19. The appellant was thus liable to pay compensation as soon as the aforesaid personal injury was caused to the appellant, and there is no justification for the argument to the contrary.

It was the duty of the appellant, under S. 4-A(1) of the Act, to pay the compensation at the rate provided by S. 4 as soon as the personal injury was caused to the respondent. He failed to do so. What is worse, he did not even make a provisional payment under Sub-sec. (2) of S. 4 for, as has been stated, he went to the extent of taking the false pleas that the respondent was a casual contractor and that the accident occurred solely because of his negligence. Then there is the further fact that he paid no heed to the respondent's personal approach for obtaining the compensation. It will be recalled that the respondent was driven to the necessity of making an application to the Commissioner for settling the claim, and even there the appellant raised a frivolous objection as to the jurisdiction of the Commissioner and prevailed on the respondent to file a memorandum of agreement settling the claim for a sum which was so grossly inadequate that it was rejected by the Commissioner. In these facts and circumstances, we have no doubt that the Commissioner was fully justified in making an order for the payment of interest and the penalty.”

6. The present case does not relate to a claim of compensation made by a workman who has sustained only a personal injuiry by an accident arising out of and in the course of his employment but relates to the claim of compensation made by the heirs of a deceased workman who died as a result of such an accident. However, this difference in the fact-situation does not render the decision in Pratap Narain Singh Deo [1976—I L.L.N 16] (vide supra) inapplicable as the liablity of the employer to pay compensation in such cases also is governed by S. 3 of the Act.

7. Against the background aforesaid, it is manifest that in the present case the duty to pay the compensation at the rate provided in S. 4 arose under Sub-sec. (1) of S. 4-A of the Act as soon as the accident resulting in the injuiry to the deceased workman and in his consequential death occurred and that the respondents being in default in paying the compensation due under the Act within one month from the said day the discretion conferred on the Commissioner under Sub-sec. (3) of S. 4-A to award interest on the compensation amount in accordance with law was required to be exercised reasonably and in a judicial manner after taking into consideration all the relevant factors and that if, in her considered opinion, there was no justification for the delay, the penalty was also required to be ordered to be recovered. The Commissioner has held, as earlier pointed out, that since the respondents had admitted the liability to pay the compensation “whatever is to be awarded” and that they had also deposited the amount of compensation in the Court, the claim with regard to the payment of interest was not justified. The question of imposition of penalty does not appear to have been considered at all presumably on the same ground. The question for determination is whether the award suffers from any error of law based, inter alia upon the misconstruction of the relevant statutory provision.

8. Now, in the first place, it is factually incorrect to hold that the respondents had admitted the liability to pay the compensation inaccordance with law. In the initial reply, dated 11 February 1985, filed before the Commissioner, the following contention was taken on their behalf in Para. 5.

“5. I disclaim liability to pay compensation on account of the deceased's death on the following grounds:

(i) As per latest circular/instructions issued, vide Secretary, H.P.S.E.B, Shimla, office Memorandum endst. No. (SECTT) 6-155/84-77661-320, dated 10 July 1984, the dependants of deceased regular employees, should be given the option either to claim compensation under the Workmen's Compensation Act or to opt for new benefits now granted by the Board in lieu of compensation, which has further been modified, vide even No. 110197-356, dated 4 September 1984, and in the above modification, it has been made clear that those who do not opt for the special pensionary benefit scheme, would be entitled for employment to the legal heirs of the deceased employee under the Employment Assistance Scheme plus ex gratia.

(ii) In support of above a copy of Accounts Officer (Funds) H.P.S.E.B Shimla, office letter No. H.P.S.E.B/F&A-Pen/Late Shri Rajinder Kalia, J.E/84-4357-62, dated 24 November 1984, vide which authority for the payment of ex gratia grant of Rs. 14,500 in favour of Smt. Ram Dulari Kalia, mother of late Sri Rajinder Kalia, J.E, was issued to Executive Engineer, City Electrical Division, H.P.S.E.B, Shimla, is sent herewith for favour of information. It has been clearly indicated in the above letter that this authority is valid only if it is certified that no payment of compensation under the Workmen's Compensation Act has been made or is likely to be made in future.

(iii) As regards providing of employment to the legal heir of the deceased employee under the Employment Assistance Scheme, it is to intimate that Miss Rajnesh Kalia, sister of the deceased, has been appointed as clerk and posted in the office of the Dy. Chief Accounts Officer, H.P.S.E.B, Shimla, vide Secretary, H.P.S.E.B, Shimla office Memorandum endst. No. H.P.S.E.B (SECTT) 6-2/84-152920-24, dated 18 December 1984.”

It would thus appear that at the initial stage of the proceedings, the liability to pay compensation was sought to be disclaimed on the basis of the departmental instructions referred to in the extracted portion pursuant to which ex gratia payment in the sum of Rs. 14.500 appears to have been made to the appellant some time in the month of November 1984, and employment was also offered to the sister of the deceased workman sometime in the month of December 1984. Besides, the fact of the deceased having left any dependants was also disputed. It is only at the subsequent stage that Sri K, K. Tatra, Assistant Engineer, Andhra Construction Sub-Division No. I.H.P.S.E.B, Chirgaon, who was examined as a witness on behalf of the respondents on 17 April 1985, made a statement before the Commissioner that whatever compensation was due and payable in accordance with law be ordered to be paid to the person entitled thereto subject to the deduction of the sum of Rs. 14,500 which was earlier paid as ex gratia relief.

9. In the second place, the finding that the amount of compensation was deposited in the Court would seem to indicate that the Commissioner was labouring under the impression that the deposit was made soon after the accident or latest upon the institution of the claim petition. Such a belief, if any, is also erroneous. Although the second respondent was called upon by the Commissioner to deposit the compensation amount as far back as 24 January 1985, the amount was not deposited even after the ex parte award was passed nor along with the application for review. The amount was deposited on 7 April 1986, that is to say, only after the grant of the review application and just ten days before the fresh award upon review was made on 17 April 1986. This would indicate that the compensation was deposited long after it fell due.

10. In the third place, mere admission, if any, of the claim, without the payment of the compensation as and when it fell due, or without making the provisional payment based on the extent of the liability I accepted, would not justify the refusal of the award of interest. Section 4-A, Sub-S sec. (3), vests the Commissioner with a judicial discretion to award such interest in the event of the employer making a default in paying the compensation due under the Act within a period of one month from the date it fell due and such discretion, like any other judicial discretion, has to be exercised with vigilance and circumspection, according to justice, common sense, and sound judgment, and having known through law what is just. The discretion could not be regarded as having been reasonably and judicially exercised in a just and equitable manner, if the award of interest is denied solely on the ground that the employer had admitted the claim, when, in spite of such admission, he makes a default in making the provisional payment or payment of the compensation due in accordance with law within the statutory time limit If such a view is held justified, the very purpose behind the enactment of S. 4-A will be frustrated. Be it appreciated also that where enabling or discretionary power is conferred, the words which are permissive in character should be constructed as involving a duty to exercise the power, if some legal right or entitlement is conferred, or enjoined, and for the purpose of effectuating such right or entitlement, the exercise of such power is essential.

11. In the last place, the respondents could not be regarded as having acted bona fide in making a default in making the provisional payment or the payment of the compensation under the Act as soon as it fell due or within one month thereafter on the ground that ex gratia payment in the sum of Rs. 14,500 had been made and employment was offered to the sister of the deceased workman. The respondents are not private employers but an agency or instrumentality of the State. They are a State enterprise which in a truly welfare State is charged with the social consciousness and responsibility towards its citizens and, more particularly, towards its employees. A public sector enterprise is expected to be a model employer and, on the facts and in the circumstances of the case, the respondents could not possibly have declined to accept the liability for compensation and they cannot justifiably take shelter behind the plea of entertaining a genuine belief that the factum of the ex gratia payment together with the employment of the sister of the deceased (which was a benefit computable in terms of money) would be regarded as provisional payment made under Sub-sec. (2) of S. 4-A of the Act or as an extenuating circumstance while considering the default in making the payment due in accordance with law. A bare reading of Sub-sec. (2) shows that the provisional payment is to be made in cases where the employer does not accept the liability to the extent claimed but partially accepts the same. In the present case, as earlier pointed out, the liability was not accepted in the early stages of the present proceedings precisely on the ground that such payment and employment were in lieu of the statutory compensation payable under the Act. Against the background of the aforesaid stand, it does not lie in the mouth of the respondent to urge that the ex gratia payment and employment were in the nature of provisional payment to the extent of the admitted liability for compensation. Besides, although the liability came to be admitted at the subsequent stage, the compensation due in accordance with law was not paid or deposited immediately and it was deposited only ten days before the Commissioner's impugned decision was rendered. Under the circumstances aforementioned, can the respondents be heard to plead that the default was on account of any bona fide belief or that there are any extenuating circumstances?

12. There are other factors and considerations as well which militate against such a plea. First, the learned counsel for the respondents has fairly stated to the Court that the benefit of ex gratia payment is available to the heirs of an employee who dies while in service irrespective of whether the death was the result of a personal injury caused to the workman arising out of and in the course of his employment. It would thus appear that the said payment has no nexus whatsoever with the compensation which was payable under the provisions of the Act and that it would have been made to the heirs of the deceased workman even if he had not died as a result of the injury sustained by him by accident arising out of and in the course of his employment. The circumstance that such payment was made cannot, therefore, be pressed into service and it cannot be regarded as payment of compensation under the Act or as provisional payment under Sub-sec. (2) of S. 4-A. Secondly, S. 8 prohibits the payment of compensation in respect of a workman, whose injury has resulted in death, to be made otherwise than by deposit with the Commissioner and no such payment made directly by an employer is deemed to be a payment of compensation. The respondents must be attributed the knowledge of this statutory provision and they cannot be, therefore, heard to say that the ex gratia payment of Rs. 14,500 is the payment of compensation due under the Act or the part payment of such compensation which must enter into consideration while determining the liability, if any, arising under Sub-sec. (3) of S. 4-A. Thirdly, in Para. 5 of the reply submitted by the respondents before the Commissioner, there is a reference to the instructions of the respondent-Board that payment of the ex gratia payment and the employment to be offered to the legal heirs of the deceased workman are in lieu of the statutory compensation under the Act and that only those will be entitled to receive such benefit who have not made or are not likely to make such a claim under the Act. The resistance to the claim for compensation in the initial stages on the strength of those instructions was wholly untenable and misconceived. The Act is a legislative enactment conformable to the Directive Principles of State Policy enshrined in Arts. 39(a), 41, 42, 43 and 46 of the Constitution. Its provisions, which are based on public policy, could not have been waived by the heirs of the deceased and any agreement between her/them and the respondents, which has the effect of defeating those provisions, must be regarded as void, being opposed to public policy. Apart from this general principle of law, which is well established, there is in S. 17 of the Act a clear prohibition against contracting out and, accordingly, any contract or agreement whereby a workman relinquishes any right of compensation from the employer for personal injury arising out of or in the course of the employment is to be treated as null and void in so far as it purports to remove or reduce the liability of any person to pay compensation under the Act. The respondents, being enlightened and resourceful employers, could not have been unaware of this settled position of law and they are wholly unjustified in pleading that they were under the genuine belief that the payment of the ex gratia amount of Rs. 14,500 and the employment of a sister of the deceased would protect them from any claim for compensation under the Act or relieve them from the liability arising under Sub-sec. (3) of S 4-A. Indeed, the Court would like to observe that it is high time that the respondents withdrew the instructions, dated 10 July 1984, and 4 September 1984, in so far as they run counter to the injunction contained in S, 17 of the Act.

13. For the foregoing reasons, in my opinion, the Tribunal committed a serious error of law in rejecting the claim for interest advanced by the appellant.

14. The next question which falls for consideration is whether, on the facts and in the circumstances of the case, the Commissioner failed to exercise altogether the jurisdiction vested in her to consider the award of penalty as provided in Sub-sec. (3) of S. 4-A and/or whether her failure to exercise the discretion in that regard is founded on an error of law based, Inter alia upon the misconstruction of the relevant statutory provision. For the self-same reasons and considerations, which have been set out above in the context of the failure on her part to award the interest, no conclusion other than that there was no justification for the delay in the payment of statutory compensation is possible in the present case. No person duly instructed in law could ever come to the conclusion that this was a case where there was the slightest justification for delaying the-payment of compensation due under the Act. Under the circumstances, the Commissioner was not only under a statutory duty to consider the award of penalty but also to award penalty in such sum as could be held just and proper in the circumstances of the case and her failure to do so has vitiated the award by an error of law.

15. The question then is as to what penalty should be ordered to be recovered from the respondents in the factual matrix of this case. The same factors and considerations are again relevant while considering this question. The respondents are not private employers but public sector employers. They are an agency or instrumentality of the State. They are expected to be model employers while dealing with their workmen, it is their duty to implement the beneficent provisions of the Act in their true letter and spirit and to make payment of the compensation as soon as it falls due. In view of the fact that the basic requirement, namely, the death having occurred as a result of the injury sustained in an accident arising out of and in the course of employment, was never in dispute in the present case, it was the duty and obligation of the respondents to pay the compensation due under the Act as soon as it fell due. Both the statutory provisions and the case-law on the subject, a re clear and specific in regard to the precise point of time when the payment is required to be made. In the reply to the application for review, the appellant had drawn their specific attention thereto. Still, however, as found earlier, the liability was not admitted initially and no payment of compensation was made until ten days before the fresh award was announced in the review proceedings, although they were called upon by the Commissioner to deposit the compensation way back in January 1985, when the notice under S. 10-A was issued. All sorts of objections, one of which was based on a contract which was apparently void, were set up and pleaded in support of the denial of liability as well as in justification for the delay. I do not think under such circumstances a public sector employer can be relieved of the rigours of the provision relating to the recovery of penalty up to the maximum extent. I, therefore, regard this to be a fit and proper case where the respondents should be directed to pay penalty to the extent of 50 par cent of the amount of statutory compensation.

16. For the foregoing reasons, the appeal succeeds and it is allowed. The respondents are directed to pay to the appellant simple interest at the rate of six per cent per annum on the sum of Rs. 88,548 which has been determined as the statutory compensation payable to her in accordance with law, from the date of the accident till the date of deposit. In addition, a sum of Rs. 44,274 is directed to be recovered from the respondents by way of penalty and paid to the appellant. The respondents will deposit in the registry of this Court within a period of two weeks from the date of the delivery of a certified copy of this judgment the amount becoming due and payable as a result of this decision. Upon the deposit being made accordingly, the case will be listed before the Registrar for settling the usual draft order of investment. The appellant is also entitled to the costs of this appeal which are quantified at Rs. 350. The costs awarded accordingly will also be deposited in the registry of this Court along with the amount of interest and penalty.

Ram Dulari Kalia (Smt.) v. Himachal Pradesh State Electricity Board, Shimla, And Another

Structured Summary of the Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's Arguments

Respondents' Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Ram Dulari Kalia (Smt.) v. Himachal Pradesh State Electricity Board, Shimla, And Another

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