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Madhya Pradesh High Court · body

2009 DIGILAW 468 (MP)

UNITED INDIA INSURANCE CO LTD v. LAVKUSH PRASAD

2009-04-13

ABHAY M.NAIK

body2009
Judgment ( 1. ) THIS appeal preferred under section 30 of the workmens Compensation Act, 1923 was admitted on 4. 3. 98 without formulation of substantial question of law. It has been heard today finally on the following substantial questions of law. (1) "whether the learned Commissioner for Workmens compensation, Labour Court Satna has acted illegally in fastening the liability of penalty and interest on the appellant-Insurance Company?" (2) "whether the learned Commissioner for Workmens compensation has power or jurisdiction to levy interest and penalty from the date of occurrence of accident ?" ( 2. ) SHORT facts involved herein are that the respondent no. 1 was in the employment of respondents no. 2 and 3. During the course and arising out of employment, respondent no. 1 met with an accident resulting into non-fatal injuries and disability to the extent of 35%. He filed application under section 10 of the act for seeking compensation before the Commissioner for Workmens Compensation, labour Court Satna. Notices were served by the Commissioner on the appellant and respondents no. 2 and 3. Claim petition was opposed, however, learned Commissioner after framing issues and recording evidence reached to the finding that the respondent no. 1 sustained injuries during the course of employment. Accordingly, respondents including appellant were directed to pay amount of compensation to the tune of rs. 53371/- and interest at the rate of 12% per annum and penalty at the rate of 25% of the amount of compensation within a period of two months. ( 3. ) AGGRIEVED by the same the present appeal has been preferred on the ground that the Commissioner for Workmens Compensation has no power or jurisdiction to award penalty and interest against the Insurance Company under subsection (3) of section 4 (a) of the Act. ( 4. ) SHRI Suresh Raj, learned counsel for the appellant made submissions at length in respect of objections raised in the memo of appeal whereas learned counsel for the respondents supported the impugned award. Substantial question of law no. 1 :- ( 5. ) I may now advert to the legal position in respect of section 4 A of the Act which runs as follow:- 4a. Compensation to be paid when due and penalty for default.- (1) Compensation under section 4 shall be paid as soon as it falls due. Substantial question of law no. 1 :- ( 5. ) I may now advert to the legal position in respect of section 4 A of the Act which runs as follow:- 4a. Compensation to be paid when due and penalty for default.- (1) Compensation under section 4 shall be paid as soon as it falls due. (2) In cases where the employer does not accept the liability for compensation to the extent claimed, he shall be bound to make provisional payment based on the extent of liability which he accepts, and, such payment shall be deposited with the commissioner or made to the workman, as the case may be, without prejudice to the right of the workman to make any further claim. (3) Where any employer is in default in paying the compensation due under this Act within one month from the date it fell due, the commissioner shall- (a) direct that the employer shall, in addition to the amount of the arrears, pay simple interest thereon at the rate of twelve per cent per annum or at such higher rate not exceeding the maximum of the lending rates of any scheduled bank as may be specified by the Central Government, by notification in the Official Gazette, on the amount due; and (b) if, in his opinion, there is no justification for the delay, direct that the employer shall, in addition to the amount of the arrears, and interest thereon pay a further sum not exceeding fifty per cent of such amount by way of penalty: ( 6. ) HONble Supreme Court of India in the Case of Ved Prakash Garg Vs. Premi Devi and others AIR 1997 SC 3854 has observed as under:- "14. . On a conjoint operation of the relevant schemes of the aforesaid twin Acts, in our view, there is no escape from the conclusion that the insurance companies will be liable to make good not only the principal amounts of compensation payable by insured employers but also interest thereon, if ordered by the commissioner to be paid by the insured employers. Reason for this conclusion is obvious. Reason for this conclusion is obvious. As we have noted earlier the liability to pay compensation under the Workmens Compensation Act gets foisted on the employer provided it is shown that the workman concerned suffered from personal injury, fatal or otherwise, by any motor accident arising out of and in the course of his employment. Such an accident is also covered by the statutory coverage contemplated by Section 147 of the Motor Vehicles Act read with the. identical provisions under the very contracts of insurance reflected by the Policy which would make the insurance company liable to cover all such claims for compensation for which statutory liability is imposed on the employer under Section 3 read with Section 4a of the Compensation Act. All these provisions represent a well-knit scheme for computing the statutory liability of the employers in cases of such accidents to their workmen. As we have seen earlier while discussing the scheme of Section 4a of the Compensation Act the legislative intent is clearly discernible that once compensation falls due and within one month it is not paid by the employer then as per Section 4a (3) (a) interest at the permissible rate gets added to the said principal amount of compensation as the claimants would stand deprived of their legally due compensation for a period beyond one month which is statutorily granted to the employer concerned to make good his liability for the benefit of the claimants whose bread-winner might have either been seriously injured or might have lost his life Thus so far as interest is concerned it is almost automatic once default, on the part of the employer in paying the compensation due, takes place beyond the permissible limit of one month. No element of penalty is involved therein. It is a statutory elongation of the liability of the employer to make good the principal amount of compensation within permissible time limit during which interest may not run not otherwise liability of paying interest on delayed compensation will ipso facto follows. Even though the Commissioner under these circumstances can impose a further liability on the employer under circumstances and within limits contemplated by Section 4a (3) (a)still the liability to pay interest on the principal amount under the said provision remains a part and parcel of the statutory liability which is legally liable to be discharged by the insured employer. Even though the Commissioner under these circumstances can impose a further liability on the employer under circumstances and within limits contemplated by Section 4a (3) (a)still the liability to pay interest on the principal amount under the said provision remains a part and parcel of the statutory liability which is legally liable to be discharged by the insured employer. Consequently such imposition of interest on the principal amount would certainly partake the character of the legal liability of the insured employer to pay the compensation amount with due interest as imposed upon him under the Compensation Act. Thus the principal amount as well as the interest made payable thereon would remain part and parcel of the legal liability of the insured to be discharged under the Compensation Act and not de hors it. It, therefore, cannot be said by the insurance company that when it is statutorily and even contractually liable to reimburse, the employer qua his statutory liability to pay compensation to the claimants in case of such motor accidents to his workmen, the interest on the principal amount which almost automatically gets foisted upon him once the compensation amount is not paid within one month from the date it fell due, would not be a part of the insured liability of the employer. " ( 7. ) WHILE discussing the question of liability of penalty Honble Supreme Court in the case of Ved Prakash (supra) has upheld view of the Division Bench of gujrat High Court in following words:- "17. We may now refer to another Division Bench judgment of the Gujarat High Court in the case of Gautam Transport, bhavnagar (1989 Acc CJ 587) (supra) wherein it is held that the insurance company would not be liable to meet the claim arising out of penalty imposed on the insured employer under Section 4a (3) of the Compensation Act as the penalty arose on account of clear violation of statutory provisions of the Compensation Act by the employer and that could never be said to have been contemplated by the insurance company while offering contractual coverage as the said penalty would be the result of the negligence on the part of the insured. In our view, the said decision is in consonance with the schemes of the Compensation Act and the motor Vehicles Act as discussed by us earlier. " ( 8. In our view, the said decision is in consonance with the schemes of the Compensation Act and the motor Vehicles Act as discussed by us earlier. " ( 8. ) FINALLY Honble Supreme court has observed in paragraph 20 as under: "20. The impugned judgments of the High Court will stand confirmed to the extent they exonerate the respondent-insurance companies of the liability to pay the penalty imposed on the insured employers by the Workmens Commissioner under S. 4a (3) of the compensation. Act. But the impugned judgments will be set aside to the extent to which they seek to exonerate insurance companies for meeting the claims of interest awarded on the principal compensation amounts by the Workmens Commissioner on account of default of the insured in paying up the compensation amount within the period contemplated by S. 4a (3) of the compensation Act. Accordingly it must be held that the respondent-insurance company will be liable to meet the claim of the appellant-insured in Appeals Nos. 15698-15699 of 1996 to the extent of Rs. 88,548/- in Claim Case No. 2 of 1992 with interest thereon at the rate of 6% per annum from the date of accident till the date of payment. But the respondent-insurance company will not be liable to meet the claim of penalty of Rs. 44,274/- imposed on the appellant-insured along with the interest of 6% per annum on the said amount of Rs. 44,274/ -. " ( 9. ) LEARNED counsel for the appellant placing reliance on another decision of honble Supreme Court in the case of P. J. Narayan Vs. Union of India and others 2004 ACJ 452 submitted that liability to pay interest cannot be imposed on the Insurance Company. This decision has also been relied on by the Single Bench of this court in the case of Oriental Fire and Genl. Ins. Co. Ltd. Vs. Ramlal and others 2007 ACJ 1649 . In the case of PJ Narayan (supra) it was observed that the contract of insurance provided with the the insurance company will not take on liability for interest. In the light of this exclusion clause it was held that Insurance Company in the absence of any statute to that effect cannot be forced by the court to take liability which they do not want to take. ( 10. In the light of this exclusion clause it was held that Insurance Company in the absence of any statute to that effect cannot be forced by the court to take liability which they do not want to take. ( 10. ) RELIANCE has been further placed on a recent decision of the Supreme Court in the case of Kamla Chaturvedi Vs. National Insurance Co. and others [ 2009 (120) FLR 149 ]. In the case of Kamla Chaturvedi (Supra) the Supreme Court has observed that the parties are free to choose their terms of contract. In that view of the matter contracting out so far as the reimbursement of amount of interest is concerned is not prohibited by a statute. ( 11. ) ON conjoint reading of the decision of Supreme Court in the ease of Ved prakash (supra) and RJ. Narayan (supra), it may be summed up that the liability of the Insurance company to pay interest on the amount of compensation is incidental and it may be avoided only by insertion of exclusion clause like in the case of PJ Narayan (supra ). On the contrary, liability to pay penalty is neither statutory nor incidental and it may not be imposed on Insurance company even in the absence of an exclusion clause about the acceptability of the liability of penalty by Insurance company. It is only when the Insurance Company accepts the liability of penalty in express and specific language of the policy of Insurance, that the liability of penalty may be imposed on the Insurance Company. ( 12. ) IN the present case, it is not the stand of the appellant that Under the subject policy the liability of interest on the amount of compensation was avoided by specific exclusion. In view of this, it cannot be said that the learned Commissioner for Workmens compensation had no power or jurisdiction to impose interest on the appellant -Company in the absence of exclusion clause in the policy of insurance. ( 13. ) SINCE in the present case, this neither has been pleaded nor proved by the insurance Company that the policy contained a clause of exclusion of liability of interest, the appellant cannot avoid the liability of interest in view of law laid down in Ved Prakash Case (supra ). ( 14. ( 13. ) SINCE in the present case, this neither has been pleaded nor proved by the insurance Company that the policy contained a clause of exclusion of liability of interest, the appellant cannot avoid the liability of interest in view of law laid down in Ved Prakash Case (supra ). ( 14. ) AS regards imposition of liability of penalty on the Insurance company, it may be seen that the claimant has nowhere either pleaded or proved that the liability to pay penalty in case of default under section 4 (a) of the Act was ever , accepted by the insurance company. In the absence of any such acceptance by the appellant, the penalty could not have been legally imposed in the light of the decision by Honble Supreme Court in the case of Ved Prakash (supra ). ( 15. ) THUS, substantial question of law no. 1 is answered partly in favour of the appellant and partly against him by holding that the appellant is liable to pay interest on the amount of compensation for want of exclusion clause in the policy of insurance and the learned Commissioner for Workmens Compensation has no power or jurisdiction to impose penalty on the insurance company and to direct to make payment of penalty on the amount of compensation in the absence of any clause in the policy of insurance about the acceptability of such liability, ( 16. ) SUBSTANTIAL question of law No. 2-Learned Commissioner for Workmens compensation has imposed interest and penalty from the date of accident. Sub section (3) of section 4 of the Act enumerates that where any employer is in default in paying the compensation due under this Act within one month from the date it fell due, the Commissioner would be empowered to impose interest as well as penalty as provided in the said sub section. Obviously, the Commissioner would be empowered to impose interest and penalty when a default. regarding payment of compensation is made within a month from the date it fell due. Sub section (3)of section 4 A of the Act was amended by amending Act 30 of 1995 w. e. f. 15. 9. 1995 fixing the minimum rate of interest to be simple interest @ 12% per annum or at such higher rate not exceeding the Maximum of the lending rates of any scheduled bank. ( 17. Sub section (3)of section 4 A of the Act was amended by amending Act 30 of 1995 w. e. f. 15. 9. 1995 fixing the minimum rate of interest to be simple interest @ 12% per annum or at such higher rate not exceeding the Maximum of the lending rates of any scheduled bank. ( 17. ) IN the present case the accident took place on 11. 2. 96 and therefore, rate of interest 12% per annum cannot be legally disputed. However, with regard to imposition of liability of interest and penalty from the date of accident it may be seen that the starting point for such imposition is on completion of one month from the date on which payment of compensation fell due. It is contended that it cannot be date of accident but, it may be safely taken to be the date of adjudication of the claim because the compensation became due when the claim was adjudicated. Reference was made to the decision of the Honble Supreme Court rendered in the case of National Insurance Co. Ltd. Vs. Mubasir Ahmed and another (2007)2 SCC 349 = AIR 2007 SC 1208 wherein it has been held as under:- 9. "but the period as fixed by it is wrong. The starting point is on completion of one month from the date on which it fell due. Obviously it cannot be the date of accident. Since no indication is there as when it becomes due, it has to be taken to be the date of adjudication of the claim. This appears to be so because Section 4-A (1) prescribes that compensation under Section 4 shall be paid as soon as it falls due. The compensation becomes due on the basis of adjudication of the -claim made. The adjudication under section 4 in some cases involves the assessment of loss of earning capacity by a qualified medical practitioner. Unless adjudication is done, question of compensation becoming due does not arise. The position becomes clearer on a reading of sub-section (2) of Section 4-A. It provides that provisional payment to the extent of admitted liability has to be made when employer does not accept the liability for compensation to the extent claimed. The crucial expression is "falls due". Significantly, legislature has not used the expression "from the date of accident". The position becomes clearer on a reading of sub-section (2) of Section 4-A. It provides that provisional payment to the extent of admitted liability has to be made when employer does not accept the liability for compensation to the extent claimed. The crucial expression is "falls due". Significantly, legislature has not used the expression "from the date of accident". Unless there is an adjudication, the question of an amount falling due does not arise. " ( 18. ) CRUCIAL question for deciding substantial question no. 2 is whether the liability to pay interest and penalty commences on completion of one month from the date of accident or from the date of adjudication of claim by the Commissioner, workmens Compensation. ( 19. ) LEARNED counsel for the appellant placing reliance on the decision of Supreme court in the cases of Kamla Chaturvedi (supra) and Mubasir Ahmad (supra)has contended that the compensation became due from the date of adjudication of the claim and not from the date of accident. Decision in the case of Kamla chaturvedi and Mubasir Ahmed (supra) are rendered by two judgt. / bench. Larger bench constituted by four judges has already decided in the case of Pratap narain Singh Deo Vs. Shrinivas Sabata and another AIR 1976 SC 222 that compensation becomes due under the provision of Workmens Compensation act from the date of accident and the same is not suspended until its settlement contemplated by section 19 of the Act. I may profitably reproduce paragraphs 7 and 8 of the said decision. "7. Section 3 of the Act deals with the employers liability for compensation. Sub-section (1) of that section provides that the employer shall be liable to pay compensation if "personal injury is caused to a workman by accident arising out of and in the course of his employment. " It was not the. case of the employer that the right to compensation was taken away under sub-section (5) of section 3 because of the institution at a suit in a civil Court for damages, in respect of the injury, against the employer or any other person. The employer therefore became liable to pay the compensation as soon as the aforesaid personal injury was caused to the workman by the accident which admittedly arose out of and in the course of the employment. The employer therefore became liable to pay the compensation as soon as the aforesaid personal injury was caused to the workman by the accident which admittedly arose out of and in the course of the employment. It is therefore futile to contend that the compensation did not fall due until after the commissioners order dated May 6, 1969 under Section 19. What the Section provides is that if any question arises any proceeding under the act as to the liability of any person to pay compensation or as to the amount or duration of the compensation it shall, in default of agreement, be settled by the Commissioner. There is therefore nothing to justify the argument that the employers liability to pay compensation under Section 3, in respect of the injury, was suspended until after the settlement contemplated by Section 19. The appellant was thus liable to pay compensation as soon as the aforesaid personal injury was caused to the appellant, and there is no justification for the argument to the contrary. 8. It was the duty of the appellant, under Section 4-A (1) of the act. to pay the compensation at the rate, provided by Section 4 as soon as the personal injury was caused to the respondent. He failed to do so. What is worse, he did not even make a provisional payment under sub-section (2) of Section 4 for, as has been stated, he went to the extent of taking the false pleas that the respondent was a casual contractor and that the accident occurred solely because of his negligence. Then there is the further fact that he paid no heed to the respondents personal approach for obtaining the compensation. It will be recalled that the respondent was driven to the necessity of making an application to the Commissioner for settling the claim, and even there the appellant raised a frivolous objection as to the jurisdiction of the and prevailed on the respondent to file a memorandum of agreement settling the claim for a sum which was so grossly inadequate that it was rejected by the Commissioner. In these facts and circumstances, we have no doubt that the commissioner was fully justified in making an order for the payment of interest and the penalty. " ( 20. In these facts and circumstances, we have no doubt that the commissioner was fully justified in making an order for the payment of interest and the penalty. " ( 20. ) THE decision by the aforesaid larger bench was not pointed out before the two judges bench of Supreme Court in the. case of New India Insurance Company Ltd. Vs. V. K. Neelakandancivil Appealnos. 16904-16906 of 1996, D/-6. 11. 1996 (SC) wherein a view was taken that the Workmens Compensation Act being a special legislation for the benefit of the workmen, the benefit as available on the date of adjudication should be extended to the workmen and not the compensation which was payable on the date of the accident. Again three judges Bench of the supreme Court in the case of Kerla State Electricity Board and another Vs. Balsala K. and ana other etc. AIR 1999 SC 3502 observed that the view of two judges Bench in the case of Neelakandan (supra) was without taking into consideration the categorical law laid down by the larger bench in the case of pratap Narain Singh Deo (Supra) and the view taken by two judges bench was not correct. In view of this categoric finding, no benefit can be given to the appellant in the present case. ( 21. ) CONSEQUENTLY,-A"ward of the Commissioner, Workmens Compensation is found to be in consonance with the law laid down in Pratap Narain Singh Deo (supra) with regard to commencement of the liability of interest and penalty from the date of accident. Accordingly, substantial question of law no. 2 is decided against the appellant. ( 22. ) IN the result, appeal stands partly allowed. Appellant/insurance Company is held liable to pay interest as per the award from the date of accident and is not held liable to make payment of penalty. Award stands set aside to the aforesaid extent and further stands modified accordingly. No order as to costs. Appeal partly allowed.