The Management of Mahalakshmi Builders vs A. Govindaswamy

P. Sathasivam, J.—The Management of M/s Mahalakshmi Builders, Mylapore, Madras-4, aggrieved'' by the order of the Commissioner for

Workmen''s Compensation-I, Madras-6 dated 25.4.1995 made in W.C.No. 204/1994 has filed the above appeal, mainly questioning the grant of

penalty of 50% of the compensation due to the applicant-respondent herein u/s 30 of the Workmen''s Compensation Act, 1923.

Heard both sides.

Even at the outset the learned counsel for the appellant/Management fairly states that they are not questioning the quantum of compensation (Rs.

28,536 arrived by the Tribunal). In other words, according to the appellant, the challenge in this appeal relates to the direction for payment of

penalty to the extent of 50% of compensation. In the light of the limited issue, there is no need to refer to the factual matrix as discussed by the

Commissioner of Workmen''s Compensation. However, it is relevant to refer that after determining the compensation of Rs. 28,536/-, the

Commissioner has concluded that ""though the respondent was aware of the accident and injury sustained by his worker (evidence of AW2) while

on duty in accordance with the provisions of Section 4-A of the Workmen''s Compensation Act, instead of depositing the compensation due to the

applicant, deliberately tried to suppress the facts. In the circumstances in consonance with the powers vested u/s 4-A(3), I order the respondent to

pay a sum of equal to 50% of the compensation due to the applicant as penalty"".

According to the learned counsel for the appellant, though there is a provision for grant of penalty, before passing the order, directing the owner

to pay penalty, certain conditions have to be complied with. In this regard he very much relies on Section 4-A(3)(a)&(b) of Workmen''s

Compensation Act, 1923. In order to appreciate the said contention, it is relevant to refer to the said clause which reads as under:

4A. Compensation to be paid when due and penalty for default:

(1) Compensation u/s 4 shall be paid 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 not should be passed"".

It is clear from the above provisions particularly Sub-clause (3), in case if the employer is in default in paying the compensation within one month

from the date it fell due, the Commissioner is empowered to direct the opposite party/employer in addition to the amount of arrears and interest

thereon, pay a further sum not exceeding 50% of such amount by way of penalty. The proviso to the above sub-section makes it clear that before

passing an order directing the payment of penalty, the employer must be given a reasonable opportunity to show cause why it should not be

passed, A reading of the above said provisions make it clear that before passing an order for payment of penalty, an opportunity must be given to

the employer to put forth his defence/cause. Further, on receipt of objection it is incumbent on the part of the Commissioner to take a specific

decision whether penalty is to be imposed considering the materials placed.

The learned counsel appearing for the appellant also very much relied on the decision of K.P. Sivasubramaniam, J., reported in The

Management of Devi Press, Madras v. S. Selvaraj, 2000 (3) MLJ 344 wherein considering the above referred provisions arid decisions of various

High Courts as well as the Apex Court, arrived a conclusion that the Management is entitled to proper notice as against the imposition of penalty.

In the light of the statutory provisions referred to above, we are in entire agreement with the view expressed by the learned Judge.

In our case, the Commissioner has failed to issue notice and provide an opportunity to the employer before directing it to pay the penalty. The

Commissioner has failed to follow the procedures prescribed under the above mentioned provisions. On this ground, while confirming the quantum

of compensation arrived and the interest awarded, we set aside the order of the Commissioner to the extent of imposing penalty and remit the

matter to him for passing fresh order with regard to penalty after following the conditions as referred above. The Commissioner is directed to

dispose of the same in the context of imposition of penalty within three months from the date of receipt of copy of this order. The

respondent/applicant is entitled to withdraw the entire amount awarded towards compensation including the accrued interest. No costs.