The statutory penalty under the Employees’ Compensation Act is discretionary and must reflect the employer's default, with the court modifying the penalty to 30% of the compensation amount.

JUDGMENT

J.K. MAHESHWARI, J.

1. Leave granted.

2. Assailing the impugned orders dated 26.12.2017 & 28.03.2018 of the High Court of Himachal Pradesh at Shimla in F.A.O. No. 516 of 2017 & C.R.P. No. 13 of 2018 the present appeals have been filed by the Claimants.

3. In an employees’ compensation claim filed by the parents of the deceased employee because of untimely death of their 24-year-old son due to motor accident during the course of employment with Respondent No. 2 – Employer, the Employees Compensation Commissioner, vide its order dated 05.08.2016 had awarded compensation of Rs. 6,55,410/- along with interest @ 12% p.a. from the date of filing of the claim petition till realization and in addition statutory penalty under Section 4A(3)(b) of the Employees’ Compensation Act, 1923 (for short “Act”) amounting to 50% of the award (Rs. 3,27,705/-). The Commissioner fixed the liability to pay the entire amount upon the Respondent No. 1 – Insurer.

4. Challenging the order dated 05.08.2016, the Respondent No. 1 – Insurer filed F.A.O. No. 516/2017. By passing the impugned order, the High Court has reduced the compensation amount to Rs. 4,36,940/- along with interest @ 12% p.a. from the date of elapsing of one month from the accident and reduced the statutory penalty to Rs. 30,000/-. Additionally, the High Court fixed the liability to pay the statutory penalty amount solely upon the Respondent No. 2 – Employer.

5. In the present appeals, the Appellants –

Claimants are not challenging the reduction of the compensation amount, rather they are aggrieved by the reduction of the penalty from 50% of the award to a fixed amount of Rs. 30,000/-.

6. The Appellants have submitted that the entire amount as awarded by the Commissioner had already been paid, and the award had been executed to finality by the Respondent No. 2 – Insurer, which had paid the amount to the Appellants prior to filing of the appeal before the High Court. As such, it is submitted that at this stage, recovery of the difference between the amount as awarded by the Commissioner and the reduced amount awarded by the High Court should not be directed from the Appellants. It is also argued that the first appeal was disposed of by the High Court at the pre- admission stage without granting an opportunity to the Appellants to file a counter affidavit.

7. Respondent No. 1 – Insurer has submitted that the statutory penalty amount under Section 4A of the Act is discretionary in nature and therefore the reduction of the amount of penalty by the High Court requires no interference from this Court. Relying upon the judgement of this Court in Ved Prakash Garg Vs. Premi Devi and Ors. (1997) 8 SCC 1, it has been argued by the Insurer that the liability for payment of penalty amount has rightly been fixed by the High Court on the Respondent No. 2 – Employer.

8. Similarly, Respondent No. 2 – Employer has also argued that the statutory penalty amount is discretionary in nature, and its reduction by the High Court in exercise of discretion warrants no interference by this Court.

9. Heard the learned counsel for the parties and perused the material available on record.

10. It is a settled law that the statutory penalty which is imposed upon the employer under Section 4A(3)(b) of the Act is not to be indemnified by the Insurer. In Ved Prakash Garg (Supra), this Court has held that the Insurance Company shall compensate the Insured-Employer for the principal amount of compensation as well as interest thereon, however, in case any additional amount of compensation is awarded by the Commissioner by way of penalty, the same would be the liability of the insured-employer alone and not of the insurance company. The decision in Ved Prakash Garg (Supra) has been followed in L.R. Ferro Alloys Ltd. v. Mahavir Mahto, (2002) 9 SCC 450 holding that the Insurer is liable to indemnify the owner only for the compensation along with interest thereon and not the penalty imposed on the employer for default in payment of am