Report No. 62
3.54. Questions to be considered.-
The first question to be considered is whether the power to direct the payment of interest under section 4A(3) is to be exercised only when the Commissioner decides the claim and awards compensation. This apparently is the present position and could be made clear. The second question is whether the interest to be awarded under the sub-section is regarded as a kind of penalty or whether only the "further sum not exceeding 50 per cent." is to be regarded as a penalty. The words "by way of penalty" occurring at the end of section 4A(3) would suggest the former interpretation, while the separate mention in section 30(1)(aa) of "interest or penalty" would suggest the latter interpretation, which is also more appropriate and should be adopted.
Thirdly, in so far as the amount payable under the section is described as a penalty, it would be desirable to provide for notice to the employer before a penal order is passed. Fourthly we are of the view that the rate of interest mentioned at present-6 per cent.-should be increased to 9 per cent. and the Commissioner should be bound to award interest at that rate in every case where the employer is in default.
To carry our the above improvements we recommend the following re-draft of section 4A(3).
[Revised section 4A(3)]
"4A(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-
(a) at the time of ordering payment of such compensation shall direct that the employer shall, in addition to the amount of the arrears, pay simple interest at the rate of nine per cent. per annum on the amount due, and
(b) if, in the opinion of the Commissioner, there is no justification for the delay, may direct that the employer shall in addition to the amount of the arrears 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 reasonable opportunity to the employer to show cause why it should not be passed.