The High Court of Jammu & Kashmir and Ladakh has clarified an important point about workers’ compensation. It ruled that an insurance company cannot be forced to pay interest or penalties when an employer delays compensation under the Employees’ Compensation Act, 1923. These extra charges, the Court said, are the employer’s responsibility because they arise from the employer’s failure to meet its legal duty on time.
The case involved the death of Adil Rangzaib, a casual labourer engaged by a contractor at a dam site in Salamabad in 2017. He tragically slipped and fell into the dam while cleaning trash, dying instantly. His dependants were awarded compensation of about Rs 8.98 lakh by the Commissioner under the Act. The Commissioner also directed the insurance company to pay interest, citing Section 4 A of the law.
Live Law explains how the insurer appealed, arguing that its liability was limited to what the insurance contract covered — compensation for employees — and did not extend to penalties or interest. The Court agreed. It noted that the policy covered twelve employees with wages up to Rs 8,000 per month, and Rangzaib was indeed included under this coverage. Therefore, the insurer had to pay the compensation amount. But the Court held that interest and penalties were excluded by the policy terms and must be borne by the employer.
The Court, as reported by Live Law, explained that Section 4 A requires employers to pay compensation within one month of an accident. If they fail, they must pay interest or penalties. Unless the insurance contract specifically covers these charges, insurers cannot be made liable.
By partly allowing the appeal, the Court shifted the burden of interest back to the contractor, reinforcing that insurance covers compensation but not employer defaults.