Establishment of Employer-Employee Relationship and Strict Liability for Statutory Penalty under the Employee’s Compensation Act

The claimants, legal heirs of the deceased Pradeep Nirmalkar, filed a claim under Section 10 of the Employee’s Compensation Act, 1923, alleging the deceased died in the course of his employment as a driver.

On 30.10.2013, while transporting tractor engines between Bilaspur and Ambikapur for the appellants, the vehicle suffered brake failure and overturned, killing the deceased instantly.

Both appellants (Non-applicants No. 1 and 2) denied the employer-employee relationship, claiming the deceased was not on their rolls.

The Labour Court, Bilaspur, allowed the claim, holding both appellants jointly liable and imposing a 50% penalty for failure to pay compensation on time.

The appellants challenged this award before the High Court of Chhattisgarh.

1. Whether the finding of the Commissioner holding the deceased was an employee of the appellants was perverse in the absence of cogent evidence.

2. Whether the imposition of a 50% penalty under Section 4-A(3)(b) of the Employee's Compensation Act, 1923, was perverse due to alleged non-compliance with the mandatory show-cause notice provision.

The Court primarily applied Section 3(1) of the Employee’s Compensation Act, 1923, regarding employer liability for accidents arising out of and in the course of employment.

It further applied Section 4-A(3), which mandates the payment of compensation within one month of it falling due.

Specifically, under Section 4-A(3)(b), the Commissioner is empowered to impose a penalty not exceeding 50% of the arrears if there is no justification for the delay, provided the employer is given a reasonable opportunity to show cause.

The Court rejected the appellants' contention regarding the lack of an employment relationship, relying on the testimony of an independent witness, Sukhiram Sahu.

The evidence established that the deceased was transporting engines for the business interests of both International Tractor Limited and Lovely Tractors at the time of the accident, satisfying the "course of employment" requirement.

Regarding the penalty, the Court observed that the appellants had appeared before the Labour Court, filed replies, and participated in the full trial.

It held that the "reasonable opportunity" requirement under the proviso to Section 4-A(3)(b) is substantially satisfied when parties are fully aware of the proceedings and contest the claim on merits.

The appellants failed to deposit the compensation or even report the accident within the statutory 30-day window, justifying the imposition of the penalty.

It held that the findings of the Labour Court were based on a proper appreciation of evidence and were not perverse.

The appeals were dismissed, and the award dated 06.12.2019 was affirmed.

The Commissioner was directed to ensure payment of the compensation and penalty to the claimants within 60 days.

Case dismissed with no order as to costs.