Shanti v. National Insurance Company
Background
The appellants (mother and siblings) were the legal representatives of a young man who died while working as a cleaner on a truck owned by his own father. The Commissioner under the Employee's Compensation Act found an employer-employee relationship existed and awarded compensation along with 6% annual interest and a 40% penalty for the employer's delay in paying. The insurance company disputed liability, arguing it should not bear interest arising from the employer's own default, and the case reached the Supreme Court on the narrow question of what interest rate applied.
Decision Breakdown
The Supreme Court held that Section 4A(3)(a) of the Employee's Compensation Act mandates a minimum 12% simple interest per annum when an employer defaults on paying compensation within one month of it falling due: this is not discretionary; the Commissioner's discretion only extends to awarding an even higher rate (capped at the scheduled banks' lending rate), never a lower one. The Court also noted that since the Insurance Company never appealed the original 6% interest award, it could not now avoid liability or seek recovery of the interest from the insured employer. The Court modified the award to apply 12% interest per annum running from the date of the accident.
Lesson Learnt
Under the Employee's Compensation Act, 12% annual interest on delayed compensation payments is a statutory floor, not a matter of judicial discretion, and an insurer that fails to timely appeal an award cannot later re-litigate its liability for interest.