Workmen's Compensation Act, 1923
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 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 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 workman or his dependant, as the case may be.]]
Defaulting employer to pay additional amount of compensation
Sub-section (3) of section 4A read with clauses (a) and (b) thereof, makes it clear that additional amount of compensation can be levied against the defaulting employer by way of penalty if it is shown that there is no justification for the delay on his part in making good the compensation amount to the claimant; Ved Prakash Garg v. Premi Devi, JT 1997 (8) SC 229.
Delayed payment or deposit of compensation entails interest as well as penalty
Delayed payment or deposit of compensation entails interest @ 6 % p.a. as well as penalty not exceeding 50% of the amount; Jayanti Lal & Co. v. Garesia Rajvirba, (1992) 1 Lab IC 1225 (Guj).
Payment of compensation either to the workman or to deposit it with the Commissioner
Section 4A (2) makes it clear that, in the first place, the employer has to accept the extent of his liability for payment of compensation and on that basis he has to make payment either to the workman or to deposit with the Commissioner. The requirement of this sub-section is payment to the workman and not to any other person including his heirs and legal representatives. It takes within its sweep the case where the workman has not breathed his last on account of the accident met with by him in the course of his employment; Sumuben v. Patel Industries, 1994 LLR 338 (Guj).
Sub-section (3) of section 4A is a beneficial provision
It is apparent that sub-section (3) of section 4A is beneficial provision made for the benefit of the employee, having regard to the scheme of the Act, the provision for payment of interest and of penalty have been enacted with a view to deter the employer from taking pleas and avoiding payment of the compensation which becomes payable; Divisional Forest Officer v. Baijanti Bai, 1995 I LLJ MP (837).
Sub-section (3) of section 4A is not applicable for fixing rate of interest in a claim under the Motor Vehicles Act.
Section 4A(3) of the Workmen’s Compensation Act is not applicable in the matter of fixing rate of interest in a claim under the Motor Vehicles Act; Abati Bezbaruah v. Dy. Director General, GSI, (2003) 3 SCC 148.