SRINAGAR: The High Court of Jammu Kashmir and Ladakh has upheld compensation of Rs 93,000 awarded to a casual labourer from Banihal who suffered permanent disability after a rolling boulder struck his right leg while he was working on a road project in 2006, but has remitted the case to the labour commissioner to reconsider whether the employer should pay an additional penalty for delaying compensation.
Justice Shahzad Azeem, in a judgment pronounced on October 5, 2026, directed the Assistant Labour Commissioner, Jammu, acting as the Commissioner under the Employees’ Compensation Act, 1923, to examine the question of penalty after hearing both sides and following the prescribed legal procedure. The matter must be decided within three months of receipt of a certified copy of the judgment.
The court partly allowed an appeal filed by Mohi Ud Din, a resident of Shagan village in Banihal tehsil of Ramban district, who had challenged the compensation award dated January 10, 2011, on the grounds that the amount was inadequate, his loss of earning capacity should have been assessed at 100 per cent, and an additional penalty should have been imposed for the delay in payment.
The High Court found no error in the calculation of compensation or the adoption of a 30 per cent loss of earning capacity. However, it held that the labour commissioner had failed to address the separate question of penalty under Section 4-A(3)(b) of the Act, leaving that issue for fresh consideration.
Compensation calculation upheld
According to the judgment, Mohi Ud Din was engaged as a casual labourer by the respondents and was drilling on the Nachalana-Hingni-Bhata road when the accident occurred on September 20, 2006.
He was receiving a monthly wage of Rs 2,520, along with an additional Rs 650 for operating a drilling machine, or jackhammer, taking his total monthly earnings to Rs 3,170. His permanent disability was assessed at 30 per cent.
The Assistant Labour Commissioner had awarded him Rs 93,000 in compensation, along with simple interest at 12 per cent per annum from the date of the accident until January 10, 2011. The interest was calculated at Rs 47,400.
Examining the calculation, Justice Azeem noted that the employee was 47 years old at the time of the accident and that the relevant factor under Schedule IV of the Act was 163.07.
Under Section 4(1)(b), compensation for permanent total disablement is calculated at 60 per cent of monthly wages multiplied by the relevant factor. Applying this formula to the admitted wages and age, the court calculated the amount for permanent total disablement at Rs 3,10,159.
Applying the admitted 30 per cent loss of earning capacity to that figure, the compensation worked out to Rs 93,047.74, which rounds to Rs 93,048.
The court held that the difference between this amount and the Rs 93,000 awarded by the commissioner was attributable to rounding and did not establish an error in the method of calculation.
It also rejected the appellant’s claim that compensation should have been calculated at Rs 2,58,465. The court explained that the figure represented 50 per cent of his monthly wages multiplied by the relevant factor, a formula applicable to death cases under Section 4(1)(a), rather than permanent partial disablement.
Claim of 100 per cent loss of earning capacity rejected
The appellant had argued that, despite the medical assessment of 30 per cent disability, his actual loss of earning capacity was 100 per cent and that compensation should be determined accordingly.
The court declined to interfere with the commissioner’s assessment, observing that the injury was not one for which a specific percentage of loss of earning capacity was prescribed under Part II of Schedule I. Compensation therefore fell to be determined under Section 4(1)(c)(ii), in proportion to the permanent loss of earning capacity caused by the injury.
The respondents had contended that the labourer had subsequently been employed as a watchman, as he had stated before the commissioner, and that the injury had not deprived him of the ability to perform such work.
The High Court said the assessment of functional disability and the evidence relating to earning capacity fell within the commissioner’s domain. No perversity in adopting the admitted 30 per cent figure had been established.
It added that, in an appeal under Section 30 of the Act, it could not reopen that factual assessment in the absence of grounds warranting interference.
The court also found that the interest awarded at 12 per cent per annum was consistent with Section 4-A(3)(a) of the Act and saw no reason to disturb it.
Commissioner must reconsider penalty
The principal issue requiring further consideration was whether the employer should be directed to pay an additional sum as a penalty for the delay in depositing compensation.
Section 4-A(3)(a) provides for interest where an employer defaults in paying compensation when it falls due. Section 4-A(3)(b), however, permits a penalty of up to 50 per cent of the amount in arrears if the commissioner concludes that there was no justification for the delay.
The provision also requires the employer to be given a reasonable opportunity to show cause before a penalty is imposed.
Relying on the Supreme Court’s judgment in *The Oriental Insurance Co. Ltd. v. Siby George and Others* (2012) 12 SCC 540, the High Court distinguished the statutory requirement to pay interest from the separate conditions governing the imposition of a penalty.
Justice Azeem observed that the accident had occurred on September 20, 2006, and the compensation had not been deposited within the statutory period of one month. Once the employee raised the issue of penalty, the commissioner was required to consider it and determine whether the delay was justified.
However, the record showed that no show-cause notice had been issued to the employer under the relevant provision, no evidence had been led to establish that the delay was unjustified, and the commissioner had not recorded an opinion on the matter.
The High Court held that the mere inclusion of a request for penalty in the claim petition and the appeal could not replace the mandatory procedure or establish the factual basis required for imposing it.
It further observed that the High Court could not form the necessary opinion and impose a penalty for the first time in an appeal limited to a substantial question of law.
The appropriate course, it said, was to allow the appellant to approach the commissioner, who could issue a show-cause notice, hear the employer and then determine the question in accordance with the law.
Appeal partly allowed
The court answered in the affirmative the substantial question of law concerning the commissioner’s failure to consider the employee’s entitlement to a penalty under Section 4-A(3)(b).
It upheld the compensation award and the findings on the calculation of compensation, but remitted the matter solely for consideration of the penalty issue.
The commissioner has been directed to hear both parties, comply with the statutory procedure and conclude the proceedings within three months of receiving the certified copy of the judgment.
The Union of India, through the Ministry of Defence, the Officer Commanding, 367 RMP, Khannabal, Kashmir, and the Company Commander, 99 REC, GREF, Udhampur, were arrayed as respondents in the appeal.
