Are Employers / Insurers Liable to Pay Interest on Amount Awarded but Unpaid Under the Employees Compensation Act

Whether the liability of an employer and insurer to pay interest on amount awarded but unpaid under the Employees Compensation Act is absolute or not?

The Allahabad High Court in the case of Miskina v. HDFC Ergo General Insurance Co. Ltd., examined the provisions of section 4A of the Employees Compensation Act, 1923 and reiterated the legal position of holding the employer and Insurance company liable for payment of interest on the amount awarded but unpaid.

The instant appeal challenged the judgment and award dated 16.3.2020 passed by the Commissioner under the Employees Compensation Act 1923 wherein a sum of Rs.8,47,160/- was awarded. However, the employer and the Insurance Company failed to not only deposit the amount but also release the payments within one month from when it fell due.

Subsequently, the matter reached the High Court on a pertinent question of law as to whether the employer and Insurance Company can be made liable for payment of interest on the amount accrued.

Whilst dealing with the above questions of law, the provisions of Section 4A of the Employees Compensation Act, 1923, which deals with compensation to be paid when due and penalty for default, were reproduced. As per the provisions of the said section, the term used is ‘shall be paid as soon as it falls due’. Further, the High Court took cognizance of the fact that the Commissioner failed to assign reasons for not awarding any interest.

In light of the above, the judgment and award of the Commissioner stood modified to the extent that the Insurance Company was directed to deposit the decretal amount with interest at the rate of 12% taking into consideration the provisions enumerated in the statute.