Delhi High Court
Centre For Development Of ... vs Commissioner & Anr. on 24 January, 2014
Author: Valmiki J. Mehta
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ FAO No. 229/2006
% 24th January, 2014
CENTRE FOR DEVELOPMENT OF TELEMATICS ......Appellant
Through: Mr. Ajay Bhatnagar, Advocate.
VERSUS
COMMISSIONER & ANR. ...... Respondents
Through: Mr. Pradeep Gaur and Mr. Amit
Gaur, Advocates for R-4.
CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA
To be referred to the Reporter or not?
VALMIKI J. MEHTA, J (ORAL)
1. This first appeal is filed under Section 30 of the Employees'
Compensation Act, 1923(in short 'the Act') impugning the order of the
Employees Commissioner dated 21.7.2006 awarding interest and penalty
against the appellant/principal.
2. It is undisputed before this Court that the main judgment awarding
compensation was passed by the Commissioner vide the earlier
judgment dated 27.1.2005, and which has become final. By the original
FAO 229/2006 Page 1 of 6
impugned judgment dated 27.1.2005, a sum of Rs. 3,30,000/- was
awarded towards compensation.
3. By the impugned order dated 21.7.2006, interest and
penalty under Section 4-A of the Act have been awarded.
4. Learned counsel for the appellant has argued before this
Court that appellant is not liable because appellant was not the employer
and the workman was the employee of an independent contractor only
who is liable. Another argument raised is that since interest was the
subject matter of the main compensation proceedings, and the said relief
was not granted by the impugned order, at best, only penalty can be
awarded (and which too has been wrongly awarded against the
appellant) but not any amount towards interest.
5. Section 4-A of the Employees Compensation Act, 1923 lays down
the position that in case of any delay in payment of compensation
beyond 30 days of the accident from when the compensation falls due,
interest at 12% per annum and penalty of 50% of the compensation
amount can be awarded. The issue with respect to liability to pay
interest and penalty has been the subject matter of a recent judgment of
the Supreme Court in the case of Oriental Insurance Company Ltd. Vs.
FAO 229/2006 Page 2 of 6
Siby George and Others (2012) 12 SCC 540 wherein the Supreme Court
has held that so far as award of penalty is concerned, the same is only
after issuing of an appropriate show-cause notice under the proviso to
sub-Section 3 of Section 4-A of the Act and which has to be after first
determining whether compensation is payable or not payable in the main
compensation claim proceedings. The relevant para of the judgment of
the Supreme Court in the case of Siby George (supra) is para 8 and
which reads as under:-
"8. It is, thus, to be seen that Sub-section (3) of
Section 4A is in two parts, separately dealing with interest and
penalty in Clauses (a) and (b) respectively. Clause (a) makes the
levy of interest, with no option, in case of default in payment of
compensation, without going into the question regarding the
reasons for the default. Clause (b) provides for imposition of
penalty in case, in the opinion of the Commissioner, there was no
justification for the delay. Before imposing penalty, however, the
Commissioner is required to give the employer a reasonable
opportunity to show cause. On a plain reading of the provisions of
Sub-section (3) it becomes clear that payment of interest is a
consequence of default in payment without going into the reasons
for the delay and it is only in case where the delay is without
justification, the employer might also be held liable to penalty
after giving him a show cause. Therefore, a finding to the effect
that the delay in payment of the amount due was unjustified is
required to be recorded only in case of imposition of penalty and
no such finding is required in case of interest which is to be levied
on default per se."
6. Counsel for respondent no.4-insurance company has shown a
copy of the original compensation application filed by the workman
FAO 229/2006 Page 3 of 6
before the Commissioner and as per which in the main compensation
petition, compensation alongwith interest was prayed for as also penalty.
Therefore, claim of interest was very much of a subject matter of main
proceedings, but the first judgment dated 27.1.2005 which awarded
compensation, did not grant interest although the same was specifically
prayed for. Once the claim was made in the main proceedings and it
was declined, that prayer is deemed to be dismissed or at least not
allowed in view of Explanation (V) to Section 11 CPC. Therefore, I
agree with the counsel for the appellant that once the interest is not
granted in the main award proceedings, it was upon the workman to
challenge the principal award dated 27.1.2005, and which since was not
challenged, no interest thereafter can be granted. This argument accepted
in favour of the appellant is only for theoretical purposes, as the facts
stated subsequently show that though interest is said to be awarded,
actually the amount awarded shows that it is only 50% penalty amount.
7. So far as the grant of penalty of 50% is concerned, in my opinion,
the impugned order rightly awards the same because as per the ratio in
the case of Siby George (supra) the issue of penalty only comes up
subsequent to the award of main compensation and after a show-cause
FAO 229/2006 Page 4 of 6
notice is issued under the proviso to sub-Section 3 of Section 4-A and
which were the subject proceedings under which the impugned order
dated 21.7.2006 has been passed. No justification has been given by the
appellant for non-payment of the compensation and therefore, I do not
find any valid reason to interfere with the impugned order. I do not
agree with the counsel for the appellant that the justification arises
because appellant is not the employer inasmuch as Section 12 of the Act,
with its sub-Sections 1 and 2, are a complete answer to the contention of
the appellant because as per this Section 12, the initial liability for
compensation of a workman of a contractor who works in the premises
of the principal such as the appellant, is of the principal, although, the
workman is engaged by contractor, and the appellant/principal can, after
paying compensation, claim indemnification from the contractor as per
sub-Section 2 of Section 12. I also do not agree with the contention of
the counsel for the appellant that said sub-Section 3 of Section 12 states
that the workman can recover compensation from the contractor
inasmuch as this sub-Section 3 is only an additional provision by which
workman instead of suing the principal can sue the contractor with
whom he was employed. Sub-Section 3 does not prevent the liability of
FAO 229/2006 Page 5 of 6
the principal, and which is so specifically provided in sub-Section 1 of
Section 12.
8. In view of the above, the appeal is partly allowed by setting aside
the impugned order to the extent that the same grants interest however,
the appeal is dismissed to the extent of challenge to the claim of penalty
awarded by the impugned order. I note that the award of compensation
as per the main judgment dated 27.1.2005 is Rs.3,30,000/- and the
impugned order dated 21.7.2006 grants interest and penalty totaling to
Rs.1,65,000/- only and therefore though interest is alleged to be awarded
actually only penalty has been awarded as penalty is 50% of
compensation and Rs.1,65,000/- awarded is thus 50% of Rs.3,30,000/-
and hence in effect only as penalty.
9. Appeal is disposed of in terms of the aforesaid observations,
leaving the parties to bear their own costs.
JANUARY 24, 2014 VALMIKI J. MEHTA, J.
ib
