Mool Chand Garg, J.@mdashThis appeal has been filed by the insurance company the Appellant against the order dated 24.05.2007 passed by
the Workmen Commissioner whereby a claim filed by Respondents No. 1 & 2 against the Appellants and the third Respondent being the owner of
the truck was allowed and directions were given to the Appellants and the third Respondent to pay a sum of Rs. 3,69,165/-along with interest
from the date of the filing of the claim till its realization @ 12% per annum.
2. It is the second portion of the award i.e. awarding of interest and fixing the liability to pay the sum on the insurance company which has been
assailed by the Appellants in this appeal before this Court by stating that the liability to pay interest can only be that of the employer and not of the
insurance company.
3. Briefly stating the facts of this case are that the deceased Krishan Kumar who was employed as a driver by the third Respondent on Toyota
Qualis bearing No. HR-55BT-0935 insured with the Appellant in the name of the third Respondent met with an accident and succumbed to the
injuries. Since the vehicle was covered on payment of an additional premium with the Appellant, the liability to pay compensation was fastened on
the Appellants.
4. That Respondent No. 3 in their written statement admitted that the deceased was employed by him as driver and that he died during the course
of employment. Liability to pay the compensation was denied by him as the vehicle was insured with the Appellant for the period from 25.04.2003
to 24.04.2004 and thus he stated that the liability to pay compensation to the dependents of the deceased workman lies with the
Appellant/insurance company. The Appellants vide their written statement have denied that the deceased was employed as a driver with
Respondent No. 3 or had died on account of the accident during the course of employment. They have further denied that Respondent No. 1 and
2 are the dependants of the deceased but are only legal heirs. But they have admitted that the vehicle bearing registration No. HR-55BT-0935 was
insured with them in the name of the Respondent No. 3 and prayed for the claim to be dismissed.
5. The Workmen Commissioner was satisfied with the case of the dependents of the deceased regarding the claim of compensation. After the
pleadings were complete and the evidence was recorded, the following conclusions were drawn by the Workmen Commissioner:
6. I have gone through the material available on record. Respondent No. 1 has admitted that deceased Krishan Kumar was employed by him as
driver on his Toyata Qualis bearing registration No. HR-55BT-0935 and died on 28.09.2003 on account of the accident while driving the said
vehicle during the course of employment. Admittedly, the deceased Krishan Kumar was being paid salary @ Rs. 3550/- P.M. The date of birth of
deceased Krishan kumar mentioned in the License Card is 26.08.1973 years and as such at the time of his death on 28.09.2003 he had
completed his 30 years of age. The claimants have filed affidavit stating therein that they are legal heirs of the deceased Krishan Kumar and the
same is no where disputed. In view of the above admitted facts, the compensation payable to the claimants is computed as follows:
A. Relevant factor laid down under
Schedule-IV of the Act for
30 years of age. : 207.98
B. 50% of the last drawn monthly Wages @ Rs. 3550/-
: Rs. 1775/-
C. Amount of compensation payable
to the petitioners : Rs. 3,69,164.5 or
say Rs. 3,69,165/-
On the basis of the above findings, I hold that the claimants are entitled to receive compensation amounting to Rs. 3,69,165/- (Rupees three lakhs
sixty none thousand one hundred and sixty five) only on account of death of deceased krishan Kumar on 28.09.2003 in the course and out of his
employment with Respondent No. 1.
7. As per the provisions of the Act, the amount of compensation is payable to the workman/dependents within one month of the date of which
compensation becomes dues. In this case, the incident has taken place on 28.09.2003 and the amount of compensation would have been paid to
them by 27.10.2003 but the same has not yet been paid. Therefore, as per the provisions of Clause (a) of Sub-section-(3) of Section-4A of the
Act, the claimants are also entitled to receive simple interest @ 12% p.a. on the amount of compensation of Rs. 3,69,165/- (Rupees three lakhs
sixty nine thousand one hundred and sixty five) only w.e.f. 28.09.2003 till its realization.
8. The Respondent No. 2 has admitted that Toyota Qualis bearing registration No. HR-55BT-0935 was insured with them comprehensively.
Therefore, Respondent No. 2 is liable to indemnify its insured i.e. Respondent No. 1, under the terms of policy and the liability of payment of
compensation and interest thereon, to the claimants lies with Respondent No. 2.
6. The learned Counsel for the Appellant has relied upon a judgment delivered by the Hon''ble Supreme Court in the case of New India Assurance
Co. Ltd. Vs. Harshadbhai Amrutbhai Modhiya and Another, . In view of the aforesaid judgment, based upon the policy which expressly excludes
payment of interest and penalty to be imposed upon the injured employer on account of his failure to comply with the requirement of the Act, it
was held that the insurance company could not be fastened with the liability to pay interest. Relevant paragraphs are 19, 20 and 21 and read as
under:
19. As indicated hereinbefore, a contract of insurance is governed by the provisions of the Insurance Act. Unless the said contract is governed by
the provisions of a statute, the parties are free to enter into a contract as for their own volition. The Act does not contain a provision like Section
147 of the Motor Vehicles Act. Where a statute does not provide for a compulsory insurance or the extent thereof, it will bear repetition to state,
the parties are free to choose their own terms of contract. In that view of the matter, contracting out, so far as reimbursement of amount of interest
is concerned, in our opinion, is not prohibited by a statute.
20. The views taken by us find support from a recent judgment of this Court in P.J. Narayan Vs. Union of India (UOI) and Others, wherein it was
held:
(1). This writ petition is for the purpose of directing Insurance Company to delete the clause in the Insurance Policy which provides that in case of
compensation under the Workmen''s Compensation Act, 1923, the Insurance Company will not be liable to pay interest. We see no substance in
the writ petition. There is no statutory liability on the Insurance Company. The statutory liability under the Workmen''s Compensation Act is on the
employer. An insurance is a matter of contract between the Insurance Company and the insured. It is always open to the Insurance Company to
refuse to insure. Similarly they are entitled to provide by contract that they will not take on liability for interest. In the absence of any statute to that
effect, insurance Company cannot be forced by Courts to take on liabilities which they do not want to take on. The Writ Petition is dismissed. No
order as to costs.
21. For the reasons aforementioned, the impugned judgment cannot be sustained. It is set aside accordingly. The appeal is allowed. The Appellant
is not liable for the interest. However, we make it clear that the employer shall be liable to pay the amount of interest to the claimant. In the facts
and circumstances of the case, there shall be no order as to costs.
7. However, the learned Counsel appearing for Respondents 1 & 2 have submitted that this is not the correct legal position. It has been submitted
that there is nothing on record which excludes the insurance company from payment of interest as per the policy. It is further submitted that once
there is a liability of payment of compensation on the insured i.e. the owner of the vehicle, the liability of the insurance company is co-extensive if
the payment is not made within time as prescribed by the Act, the said amount is liable to be paid along with interest, of course penalty imposed if
the payment of compensation is made subsequently may not be fastened upon the insurance company. It is submitted that the position of law has
been clarified in the case of Ved Prakash Garg Vs. Premi Devi and others, by the Apex Court. In the said judgment the Apex Court in the context
of Workmen Compensation Act has been pleased to observe as follows:
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. As we have noted earlier the
liability to pay compensation under the Workmen''s 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 u/s 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 but otherwise liability of paying interest on delayed compensation will ipso facto follow. 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 dehors 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. No question of justification by the insured employer
for the delay in such circumstances would arise for consideration
...
But similar consequence will not follow in case where additional amount is added to the principal amount of compensation by way of penalty to be
levied on the employer under circumstances contemplated by Section 4A(3)(b) of the Compensation Act after issuing show cause notice to the
employer concerned who will have reasonable opportunity to show cause why on account of some justification on his part for the delay in payment
of the compensation amount he is not liable for this penalty. However if ultimately the Commissioner after giving reasonable opportunity to the
employer to show cause takes the view that there is no justification for such delay on the part of the insured employer and because of his unjustified
delay and due to his own personal fault he is held responsible for the delay, then penalty would get imposed on him. That would add a further sum
up to 50% on the principal amount by way of penalty to be made good by the defaulting employer. So far as this penalty amount is concerned it
cannot be said that it automatically flows from the main liability incurred by the insured employer under the Workmen''s Compensation Act. To that
extent such penalty amount as imposed upon the insured employer would get out of the sweep of the term '' liability incurred'' by the insured
employer as contemplated by the proviso to Section 147(1)(b) of the Motor Vehicles Act as well as by the terms of the Insurance Policy found in
provisos (b) and (c) to Sub-section (1) of Section II thereof. On the aforesaid interpretation of these two statutory schemes, therefore, the
conclusion becomes inevitable that when an employee suffers from a motor accident injury while on duty on the motor vehicle belonging to the
insured employer, the claim for compensation payable under the Compensation Act along with interest thereon, if any, as imposed by the
Commissioner Sections 3 and 4A(3)(a) of the Compensation Act will have to be made good by the insurance company jointly with the insured
employer. But so far as the amount of penalty imposed on the insured employer under contingencies contemplated by Section 4A(3)(b) is
concerned as that is on account of personal fault of the insured not backed up by any justifiable cause, the insurance company cannot be made
liable to reimburse that part of the penalty amount imposed on the employer. The latter because of his own fault and negligence will have to bear
the entire burden of the said penalty amount with proportionate interest thereon if imposed by the Workmen''s Commissioner.
8. I have examined the judgments cited by the counsel for the Appellant wherein the judgment delivered in the case of Ved Prakash Garg (Supra)
has been referred to but it has not been distinguished. The observations made by the Apex Court in the case of New India Assurance Co. Ltd. Vs.
Harshadbhai Amrutbhai Modhiya and Another, in the context of judgment delivered by the Apex Court in Ved Prakash Garg are reproduced
hereunder:
17. Yet again in L.R. Ferro Alloys Ltd. (supra), this Court opined that if an amount of compensation is not deposited within a period of one month,
the insurance company shall be liable to reimburse the owner only the amount of compensation with interest therefrom but not the penalty imposed
on insurer - employer for default of payment of amount stating:
The only contention put forth before us is that the entire liability including penalty and interest will have to be reimbursed by the insurance company
and this aspect has not been examined by the learned Single Judge in the High Court and needs examination at our hands. In Ved Prakash Garg v.
Premi Devi this Court after examining the entire scheme of the Act held that payment of interest and penalty are two distinct liabilities arising under
the Act, while liability to pay interest is part and parcel of legal liability to pay compensation upon default of payment of that amount within one
month. Therefore, claim for compensation along with interest will have to be made good jointly by the insurance company with the insured
employer. But, so far as the penalty imposed on the insured employer is on account of his personal fault the insurance company cannot be made
liable to reimburse penalty imposed on the employer. Hence the compensation with interest is payable by the insurance company but not penalty.
Following the said decision and for the reasons stated therein, we modify the order made by the High Court to that extent. The appeal is allowed in
part accordingly.
18.We are, in this case, not concerned with a case where an accident has occurred by use of a motor vehicle in respect whereof the contract of
insurance would be governed by the provisions of the Motor Vehicle Act, 1988.
9. Thus, the judgment in the case of Ved Prakash Garg (supra) remained in existence and therefore holds the field. It may be observed here that
the judgment in the case of Ved Prakash Gart (supra) delivered by the Apex Court pertains to Workmen Compensation Act and is not under the
Motor Vehicles Act.
10. The aforesaid judgment further makes it clear that 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 hence it cannot be said that the insurance company will
not pay the interest since the interest on the principal amount gets automatically foisted upon them once the compensation amount is not paid within
a month from the date it fell due.
11. Bare perusal of Section 3 of The Workmen''s Compensation Act, 1923 states the employer''s liability for compensation states that:
3. Employer''s liability for compensation - (1) If personal injury is caused to a workman by accident arising out of and in the course of his
employment, his employer shall be liable to pay compensation in accordance with the provisions of this Chapter
12. In view of the aforesaid, considering the judgment of the Hon''ble Supreme Court in Ved Prakash Garg, which has not been superseded by the
later judgment, and the provisions contained u/s 3 of the Workmen Compensation Act and this case being the case of Workmen Compensation
Act, it cannot be said that the insurance company is not liable to pay the interest along with the amount of compensation inasmuch as in terms of the
contract entered into by the insurance company with the owner of the vehicle they are liable to indemnify the insured and thus to pay compensation
along with interest to the dependents of the deceased. Accordingly the appeal is dismissed.
13. TCR be sent back along with a copy of this order.
CM No. 10063/2007
The balance amount of the compensation amount deposited with the Workmen Commissioner shall be released to the Respondents along with
accrued interest forthwith.