Report No. 134

3.5. Rate of interest payable in case of delay or default on the part of the employer to pay the amount of compensation.-

Section 4A of the Act enjoins the employer to make payment of the compensation payable by the employer in the event of the death or disablement of the employee as soon as it falls due. The section also provides for payment of interest to the injured workman or the dependant of the deceased workman, entitled to the compensation, in case of default. The provision in this behalf is embodied in sub-section (3) of section 4A, which is reproduced below:-

"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, be recovered from the employer by way of penalty."

(Emphasis added).

It will be seen that the Act provides for payment of interest at 6% on the amount due. This provision was introduced by Act 8 of 1959 with effect from June 1, 1959. The 6% rate of interest has now become outdated with the passage of 30 years since the provision was introduced. It is common knowledge that the rates of interest have risen sharply. The Law Commission in its 62nd Report presented on 15th October, 1974 had in para. 3.54 recommended that rate of interest should be increased from 6 per cent. to 9 per cent. - which recommendation has not yet been accepted.

We are of the opinion that 15 years having elapsed, cognisance should be taken of the presently prevailing rates. What is more, the Central Government itself is obliged to pay interest rate 15% per annum with effect from 1-10-1984 on refunds payable to the assessee in view of amended section 244 of the Income-tax Act, 1961.

The Supreme Court has confirmed the award of interest at 15% in Renade's case.1 There is, therefore, a sound basis for recommending an increase in the rate of interest to dependants of unfortunate workmen who meet with fatal accidents whilst working for the benefit of their employers. Under the circumstances, the provision contained in sub-section (3) of section 4A requires to be modified by substituting the words "simple interest at the rate of fifteen per cent." in place of the words "simple interest at the rate of six per cent.".

1. L.I.C. v. G.V. Ranade, 1989 (2) Scale 499 (505), para. 23.