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2014 DIGILAW 1621 (PNJ)

Oriental Insurance Company Ltd. v. Rachan Kaur

2014-11-25

RAJIV NARAIN RAINA

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JUDGMENT : Rajiv Narain Raina, J. The appellant-Insurance Company has challenged the order dated 10th June 1999 passed by the Commissioner, under the Employees' Compensation Act, 1923, Mohali camp at Ropar, whereby, while awarding compensation and interest to the claimants on account of death of Darshan Singh, penalty to the tune of 25% of the compensation amount was also awarded under Section 4-A(3)(b) of the Employees' Compensation Act, 1923 (for short 'the Act') and the appellant was burdened with the liability to pay such penalty along with compensation and interest. 2. According to the learned counsel for the appellant, the liability to pay penalty, under the provisions of the Act, is of the employer and the appellant cannot be burdened with such a liability. In support of his case, he relies on the dicta in 'Ved Parkash Garg v. Premi Devi'; AIR 1997 SC 3854 ; and on the basis of the aforesaid submissions, learned counsel submits that the appellant-Insurance Company cannot be burdened with the liability to pay penalty under Section 4-A(3)(b) of the Act. 3. It may be noticed that the employer i.e. respondent No. 4 was served with the summons but none appeared on his behalf. The observations of the Supreme Court in Ved Parkash Garg's case (supra) may also be noticed, which read thus: "As a result of the aforesaid discussion, it must be held that the question posed for our consideration must be answered partly in the affirmative and partly in the negative. In other words, the insurance company will be liable to meet the claim for compensation along with interest as imposed on the insured employer by the Workmen's Commissioner under the Compensation Act on the conjoint operation of Section 3 and Section 4-A sub Section (3)(a) of the Compensation Act. So far as additional amount of compensation by way of penalty imposed on the insured employer by the Workmen's Commissioner under Section 4-A(3)(b) is concerned, however, the insurance company would not remain liable to reimburse the said claim and it would be the liability of the insured employer alone." In view of the aforesaid law laid down by the Supreme Court, it is past dispute that liability to pay the penalty amount is of the employer i.e. respondent No. 4 and could not be saddled permanently on the appellant. 4. 4. The main contention of the appellant in the present appeal is that the appellant is not liable to pay the element of interest and penalty on the principal amount as awarded by the Court of the Commissioner. In the present case, respondent No. 4 had taken an insurance policy from the appellant for his goods carriage vehicle i.e. a Truck bearing registration No. PNS-4430, the said policy was effective from 12.7.1995 to 11.7.1996. On 30.6.1996, one Darshan Singh who was employed as a driver with respondent No. 4 was returning to Chandigarh from Karnal. At about 6:00 a.m. that day, on way to Chandigarh, the truck tilted and fell in the ditch resulting in death of Darshan Singh. 5. The employment of Darshan Singh with respondent No. 4 is not disputed. It is a matter of record whether Darshan Singh died while in the course of employment. Respondent No. 4 was proceeded against ex parte before the Court of Commissioner. The factum of employment stands proved by the testimony of Rachan Kaur widow of the deceased and corroborated by the cleaner of the ill-fated truck. The Commissioner awarded Rs. 2,13,570/- as compensation and further awarded interest @ 10% per annum from the date of application till realization. Besides, the payment of interest, the Commissioner also imposed penalty to tune of 25% of the compensation on respondent No. 2, i.e. the appellant before this Court. Cost of Rs. 2500/- was also awarded against the owner and insurance company, respondents No. 1 and 2 respectively. 6. It is a settled law that it is the duty of the employer to pay compensation under Section 4-A (1) of the Workmen's Compensation Act, now Employees' Compensation Act, 1923 at the rate provided by Section 4 as soon as personal injury is caused to the workman. Where the employer fails to discharge liability and also makes no provisional payment under Section 4 (2) but challenges the jurisdiction of the Commissioner, the employer is liable to pay interest and penalty. [Pratam Narain Singh Deo v. Shrinivas Sabata and another; AIR 1976 Supreme Court 222]. 7. Section 4-A of the Employees' Compensation Act, 1923 is as under :- 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. [Pratam Narain Singh Deo v. Shrinivas Sabata and another; AIR 1976 Supreme Court 222]. 7. Section 4-A of the Employees' Compensation Act, 1923 is as under :- 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 [employer] as the case may be, without prejudice to the right of the [employer] to make any further claim. 3. where any employer is in default in paying the compensation 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 percent 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 Govt. 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 percent of such amount by way of penalty. Provided that an order for the payment of penalty shall not be passed under clause (b) without giving a reasonable opportunity to the employer to show cause why it should not be passed. That from Section 4-A (2) as reproduced above, it is clear that it is the employer who has to first make provisional payment based on the extent of liability which the employer accepts. The provisional payment liability applies even if the employer does not accept his liability for the compensation to the extent claimed. In the present case the accident took place on 30.6.1996 and the case was filed before the Workmen's Commissioner sometime in the year 1997. The provisional payment liability applies even if the employer does not accept his liability for the compensation to the extent claimed. In the present case the accident took place on 30.6.1996 and the case was filed before the Workmen's Commissioner sometime in the year 1997. Even if we take it that the claimants approached the Commissioner in the month of January 1997, the claimants were not made any provisional payment as required of the employer for the six months prior to filing of the case for Compensation before the Commissioner. The situation would have been different had the employer in accordance with provision i.e. 4-A (2), the Act stepped in and made provisional payment to the claimants, but this was not done. 8. The Workmen's Commissioner while awarding penalty against respondent No. 2, i.e. Oriental Insurance Company (now the appellant) held that the policy as taken by the insured/owner was such that extra premium was paid to cover legal liability of the insured. 9. The perusal of the applicable terms of the policy require an analysis. The terms as applicable to said legal liability are contained in IMT-17 which is contained in the Schedule of the policy. IMT-17 reads as under : - "Legal liability to persons employed in connection with the operation and/or maintaining and/or unloading of motor vehicles. In consideration of the payment of an additional premium, it is hereby understood and agreed that notwithstanding anything contained herein to the contrary, the company shall indemnify the insured against his legal liability as under : The Workmen Compensation Act, 1923 and subsequent amendments of that Act prior to the date of this Endorsement, the Fatal Accidents Act, 1855 or at common law in respect of personal injury to any paid driver (or cleaner or conductor or person employed in loading unloading but in any case not exceeding seven in number including driver and cleaner) whilst engaged in the services of the insured in such occupation in connection with the and not exceeding six in number (excluding driver) and will in addition be responsible for all costs, and expenses incurred with its written consent. The premium having been calculated at the rate of Rs. 15/- per driver (and/or cleaner or conductor and or persons employed in loading and or unloading but not exceeding seven in number including driver and cleaner). The premium having been calculated at the rate of Rs. 15/- per driver (and/or cleaner or conductor and or persons employed in loading and or unloading but not exceeding seven in number including driver and cleaner). Providing always that : (1) This endorsement does not indemnify the insured in respect of any liability cases where the insured holds or subsequently effects with any Insurance Company or group of underwriters a policy of insurance in respect of liability as herein defined for his general employees. (2) The insured shall take reasonable precaution to prevent accidents and shall comply with all statutory obligations. (3) The insured shall keep a record of the name of each driver, cleaner, conductor or persons employed in loading and/or unloading and the amount of wages, salary and other earning paid to such employees and shall at all times allow the company to inspect such record. 4. In the event of the policy being cancelled at the request of the insured no refund of the premium paid in respect of this endorsement will be allowed. Subject otherwise to the terms, exceptions, conditions and limitations of this Policy except so far as necessary to meet the requirements of Motor Vehicles Act, 1988." 10. A perusal of the IMT-17 shows that it is applicable with respect to persons i.e. driver/cleaners/loaders/un-loaders who do not come under the category of "general employees", meaning thereby that either they are on contract or on call basis and are paid for the time they render the service. Even otherwise, it is not open for the insured to take the plea that their non compliance with Section 4-A (2) of the Act will result in no penalty towards the insured as they have paid extra premium to cover their legal liability. Ends of justice will not be met if the insured does something negative (i.e. not making the provisional payment in time to the claimants) and then claim benefit for the same by taking the aid of IMT-17(supra). 11. With respect to interest, the law laid down by the Supreme Court in Oriental Insurance Company Limited v. Siby George, 2012 (5) SLR 502 is that the interest will fall due from the accident and not from the date of adjudication of claim. 11. With respect to interest, the law laid down by the Supreme Court in Oriental Insurance Company Limited v. Siby George, 2012 (5) SLR 502 is that the interest will fall due from the accident and not from the date of adjudication of claim. As per Pratap Narain Singh Deo's judgment (supra) the interest and penalty is to be paid by the employer, if the employer is found wanting in the discharge of his duties u/s 4-A(2) of the Act. 12. In the light of the above, the order of the Commissioner is not justified with respect to the imposition of penalty and interest on the appellant for the six month period i.e. from the date of accident i.e. 30.6.96 till the date of approaching the Court of the Commissioner which for the want of exact date, has been taken as January, 1997. The Employees' Compensation Act, 1923 being a beneficial piece of legislation, and fact that the claimants are not at fault, the ends of justice will be met if recovery rights with respect to the entire penalty component and interest component for the six months period i.e. from July to December, 1996 are given to the appellant insurance company. Accordingly, the insurance company will be at liberty to recover the amount with respect to the penalty component and the interest component as enumerated above if the same have already been paid to the claimants. It is clarified that there is no dispute with respect to the principal amount i.e. Rs. 2,13,570/- as payable by the appellant. If the penalty component and interest have not yet been paid the appellant is not liable to pay the penalty, and interest for the period as outlined above. However, the appellant will be required to pay interest at the rate specified by the Commissioner from the date of filing the petition till the date of realization. 13. Keeping in view the facts and circumstances of the case, this appeal is partly allowed to the aforesaid extent with the observation that the appellant-Insurance Company is at liberty to recover the aforesaid amount of penalty from the employer i.e. respondent No. 4, though in the first instance it is liable to discharge the award of penalty and interest as a component of compensation awarded. However, it is made clear that this order will have no adverse civil consequence or impact on the rights of the claimants as determined by the Commissioner. But the appellants would have a concomitant right to make a motion before the Employees' Compensation Commissioner in the shape of execution proceedings to recover the penalty on the 'pay and recover' principle as evolved by the Supreme Court in M/s National Insurance Company Limited v. Baljit Kaur and others; (2004) 2 SCC 1 : AIR 2004 SC 1340 in motor accident cases by judicially legislating the salutary principle of "pay and recover" whereby the insurance company first pays the compensation awarded to the claimants but has a right to recover the amount from the insured when there is no liability falling on the insurance company by reason of breach of contract of insurance or any deviation therefrom. The principle is of universal application to protect public money and is extended to the Employees' compensation law. Save and limited to the extent indicated the present is allowed.