Sheela Devi vs Oriental Insurance Company Limited

NON-REPORTABLE 2025 INSC 516 IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. OF 2025 (@ SLP(C) NOS. 21558-21559 OF 2018)

SHEELA DEVI & ANR. APPELLANT(S)

VERSUS

ORIENTAL INSURANCE COMPANY LIMITED & ANR. RESPONDENT(S)

J U D G M E N T

J.K. MAHESHWARI, J.

1) Leave granted.

2) Assailing the impugned orders dated 26.12.2017

& 28.03.2018 of the High Court of Himachal Pradesh

at Shimla in F.A.O. No. 516 of 2017 & C.R.P. No. 13

of 2018 the present appeals have been filed by the

Claimants.

3) In an employees’ compensation claim filed by the

parents of the deceased employee because of untimely Signature Not Verified Digitally signed by NIDHI AHUJA death of their 24-year-old son due to motor accident Date: 2025.04.21 17:10:09 IST Reason:

during the course of employment with Respondent No.

1

2 – Employer, the Employees Compensation

Commissioner, vide its order dated 05.08.2016 had

awarded compensation of Rs. 6,55,410/- along with

interest @ 12% p.a. from the date of filing of the

claim petition till realization and in addition

statutory penalty under Section 4A(3)(b) of the

Employees’ Compensation Act, 1923 (for short “Act”)

amounting to 50% of the award (Rs. 3,27,705/-). The

Commissioner fixed the liability to pay the entire

amount upon the Respondent No. 1 – Insurer.

4) Challenging the order dated 05.08.2016, the

Respondent No. 1 – Insurer filed F.A.O. No. 516/2017.

By passing the impugned order, the High Court has

reduced the compensation amount to Rs. 4,36,940/-

along with interest @ 12% p.a. from the date of

elapsing of one month from the accident and reduced

the statutory penalty to Rs. 30,000/-. Additionally,

the High Court fixed the liability to pay the

statutory penalty amount solely upon the Respondent

No. 2 – Employer.

5) In the present appeals, the Appellants –

2 Claimants are not challenging the reduction of the

compensation amount, rather they are aggrieved by

the reduction of the penalty from 50% of the award

to a fixed amount of Rs. 30,000/-.

6) The Appellants have submitted that the entire

amount as awarded by the Commissioner had already

been paid, and the award had been executed to

finality by the Respondent No. 2 – Insurer, which

had paid the amount to the Appellants prior to filing

of the appeal before the High Court. As such, it is

submitted that at this stage, recovery of the

difference between the amount as awarded by the

Commissioner and the reduced amount awarded by the

High Court should not be directed from the

Appellants. It is also argued that the first appeal

was disposed of by the High Court at the pre-

admission stage without granting an opportunity to

the Appellants to file a counter affidavit.

7) Respondent No. 1 – Insurer has submitted that

the statutory penalty amount under Section 4A of the

Act is discretionary in nature and therefore the

reduction of the amount of penalty by the High Court 3 requires no interference from this Court. Relying

upon the judgement of this Court in Ved Prakash Garg

Vs. Premi Devi and Ors. (1997) 8 SCC 1, it has been

argued by the Insurer that the liability for payment

of penalty amount has rightly been fixed by the High

Court on the Respondent No. 2 – Employer.

8) Similarly, Respondent No. 2 – Employer has also

argued that the statutory penalty amount is

discretionary in nature, and its reduction by the

High Court in exercise of discretion warrants no

interference by this Court.

9) Heard the learned counsel for the parties and

perused the material available on record.

10) It is a settled law that the statutory penalty

which is imposed upon the employer under Section

4A(3)(b) of the Act is not to be indemnified by the

Insurer. In Ved Prakash Garg (Supra), this Court has

held that the Insurance Company shall compensate the

Insured-Employer for the principal amount of

compensation as well as interest thereon, however,

in case any additional amount of compensation is 4 awarded by the Commissioner by way of penalty, the

same would be the liability of the insured-employer

alone and not of the insurance company. The decision

in Ved Prakash Garg (Supra) has been followed in L.R.

Ferro Alloys Ltd. v. Mahavir Mahto, (2002) 9 SCC 450

holding that the Insurer is liable to indemnify the

owner only for the compensation along with interest

thereon and not the penalty imposed on the employer

for default in payment of amount within one month

from the date of incident. In view of the above, the

direction of the High Court, fixing the liability to

pay statutory penalty on the Employer only, requires

no interference from this Court.

11) The only question which remains for our

consideration, therefore, is whether the High Court

was justified in interfering with the penalty amount

directed by the Commissioner to be 50% of the award

amount under Section 4A(3)(b) of the Act and reducing

it to a fixed amount of Rs. 30,000/-.

12) For us in order to answer this question, Section

4A of the Act is relevant and is reproduced hereunder

5 for ready referral:

“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.

(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.” 6

13) It is clear from reading Section 4A(3)(b) that

in case where the Employer has defaulted in payment

of compensation due under the Act within one month

from the date it fell due and the Commissioner is of

the opinion that there is no justification for the

delay, the employer shall be directed to pay a

further sum to the maximum of 50% of the award

amount, by way of penalty. Therefore, the necessary

pre-requisite for imposing the statutory penalty

under Section 4A(3)(b) is that the employer must

default in payment of compensation due and the

Commissioner must reach the conclusion that the non-

payment is not justifiable.

14) From a bare perusal of the impugned order, it

can be observed that the High Court has not given

any reason as to why the penalty amount as directed

by the Commissioner was directed to be reduced to a

lumpsum amount of Rs. 30,000/-. The Commissioner had

come to a specific finding of fact that the

Respondent No. 2 – Employer had not paid any amount

to the Claimants at the time of injury nor had paid

anything when the claim was filed by the Appellants. 7 Such a finding of fact by the Commissioner could not

have been interfered with by the High Court in the

First Appeal without a finding to the contrary that

the Respondent No. 2 – Employer had indeed paid at

least some amount due to the family of the deceased

employee within a period of one month from the date

of accident.

15) In view of the above, and in the peculiar facts

and circumstances of this case, in order to meet the

ends of justice, we direct that the statutory penalty

under Section 4A(3)(b) of the Act shall be fixed at

30% of the compensation amount. The order of the High

Court is modified to that extent without disturbing

the finding of the High Court on the compensation

and interest thereon awarded under Section 4A(3)(a)

of the Act as well as the fixation of liability to

pay the penalty amount on the Respondent No. 2 –

Employer. In the present case, since the compensation

amount as per the Commissioner’s award of Rs.

6,55,410/- has been reduced to Rs. 4,36,940/- by the

High Court, 30% penalty thereon shall amount to Rs.

1,31,082/- for which the Respondent No. 2 - Employer

8 alone shall be liable to pay.

16) In the interest of justice, the entire amount

receivable by the Appellants shall be paid by the

Respondent No. 1 – Insurer who shall recover the

penalty amount of Rs. 1,31,082 from the Respondent

No. 2 – Employer.

17) Since the quantification of the award passed by

the High Court has not been assailed by the

appellants and the award passed by the Commissioner

has been satisfied including the amount of penalty

of 50% by the insurer, therefore, the excess amount

of award as well as the penalty is required to be

repaid by the appellants also.

18) In view of the discussions made in para 16 & 17

above, these appeals are allowed in part and disposed

of with the following directions: -

(i) In terms of para 16, the Insurer shall

recover Rs. 1,31,082/- from the Respondent

No. 2 – Employer;

(ii) In terms of para 17, the Insurer shall

recover Rs. 4,15,093/- being excess 9 compensation and penalty from the

Appellants;

(iii) The Respondent No. 1 – Insurer is at liberty

to take recourse of law as permissible.

19) Pending applications, if any, shall be disposed

of.

…………………………………………………,J.

[J.K. MAHESHWARI]

…………………………………………………,J.

[ARAVIND KUMAR] New Delhi;

April 17, 2025.

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