FAO No. 2084 of 2008 1
IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH
--
FAO No. 2084 of 2008
Date of decision: 2nd December 2009
ICICI Lombard General Insurance Company Limited ........ Appellant
Versus
Smt. Sanjida and another .......Respondent(s)
Coram: Hon'ble Ms Justice Nirmaljit Kaur
-.-
Present: (In FAO No.2084 of 2008)
Mr.Ashwani Talwar, Advocate
for the appellant.
Mr.Sandeep Jasuja, Advocate
for respondents 1 to 3
Mr. Parshant Bhardwaj, Advocate
for respondent No. 4
(In FAO No.1023 of 2009)
Mr. Vinod Chaudhari, Advocate
for the appellant.
(In FAO No.320 of 2009)
Mr. Munish Mittal, Advocate
for the appellant.
Mr. Suneet Jain, Advocate
for respondent No.1.
Mr. Gopal Mittal, Advocate
for respondent No.2.
(In FAO No.4131 of 2005)
Mr. N.K. Khosla, Advocate
for the appellant.
Mr. N.S. Dhillon, Advocate
for respondents No.1 and 2.
Mr. Sanjiv Pandit, Advocate
for respondent No.3.
FAO No. 2084 of 2008 2
(In FAO No.3004 of 2005)
Mr. Neeraj Khanna, Advocate
for the appellant.
Mr. Nikhil Sharma, Advocate
for respondent No.1.
(In FAO No.755 of 2009)
Mr. Gopal Mittal, Advocate
for the appellant.
Mr. Rajesh Kumar, Advocate
for Mr. Pritam Saini, Advocate
for respondent No.1.
Mr. Sanjay Jain, Advocate
for respondents No.2 to 4.
(In FAO No.1025 of 2009)
Mr. Gopal Mittal, Advocate
for the appellant.
Mr. Rajesh Kumar, Advocate
for Mr. Pritam Saini, Advocate
for respondents No.1 to 4.
Mr. J.S. Cooner, Advocate
for respondent No.6.
(In FAO No.2718 of 2008)
Mr. Ashwani Talwar, Advocate
for the appellant.
(In FAO Nos.176 and 177 of 1989)
Mr. Neeraj Khanna, Advocate
for the appellant.
Mr. R.A. Yadav, Advocate
for the respondent.
(In FAO No.4693 of 2009)
Mr. Paul S. Saini, Advocate
for the appellant.
(In FAO No.800 of 2008)
Mr. Neeraj Khanna, Advocate
for the appellant.
Mr. Amit Rawal, Advocate
for respondent No.2.
(In FAO No.801 of 2008)
Mr. Neeraj Khanna, Advocate
for the appellant.
Mr. Amit Rawal, Advocate
for respondent No.4.
(In FAO No.2451 of 2008)
Mr. D.P. Gupta, Advocate
for the appellant.
Mr. K.S. Chahal, Advocate
for respondents No.1 to 3.
Mr. R.S. Dhaliwal, Advocate
for respondent No.4.
FAO No. 2084 of 2008 3
(In FAO No.2573 of 2009)
Mr. Paul S. Saini, Advocate
for the appellant.
Mr. R.S. Malik, Advocate
for the respondents.
-.-
1. Whether Reporters of local papers may be
allowed to see the judgement?
2. To be referred to the Reporter or not?
3. Whether the judgement should be reported in
the Digest?
Nirmaljit Kaur, J.
This order shall dispose of all the connected appeals bearing
FAO Nos. 176, 177 of 1989, 3004, 4131of 2005, 800, 801, 2451, 2718 of
2008, 320, 755, 1023, 1025, 2573, 4693 of 2009 as common question of law
is involved. However, for the sake of reference, the facts are being taken
from FAO No. 2084 of 2008 and FAO No. 320 of 2009.
The award is challenged as a whole. However, in view of the
findings of the Commissioner and law applicable, learned counsel for the
parties restrict the relief to the grant of interest only. Hence, the following
questions are required to be determined:-
a) Party liable to pay the interest;
b) Party liable to pay the penalty; and
c) The date of interest.
FAO No. 2084 of 2008 has been filed by the Insurance Company
against the award dated 26.03.2008 passed by the Commissioner, under the
Workmen’s Compensation Act, 1923.
Deceased-Mubin died on 16.02.2007 in the accident which
FAO No. 2084 of 2008 4
occurred on the same day. Yet no compensation was paid to the claimants
despite the lapse of more than one year. Under Section 4-A of the Workmen’s
Compensation Act, 1923 (in short the 1923 Act), the compensation has to be
paid as soon as it falls due. Where the employer does not pay the same within
one month from the date of it falls due, the Commissioner is empowered to
direct under Sub Section (a) of Section 4-A (i) of 1923 Act, to pay interest at
the rate provided therein and also penalty as contemplated by sub clause (b)
thereof.
After taking into consideration the pleadings of the case as well
as the evidence, the Commissioner, under the Workmen’s Compensation Act,
1923 vide order dated 26.03.2008 disposed of the claim petition filed by the
claimants by holding that:-
“In view of the findings of above case law, this case law
(FAO No. 5582/2004) is fit to rely upon in the present case
because there was not any such clause in the insurance cover
note EX A/1 and in the absence of such material available on
record file in my opinion the insurance company is also liable
to pay interest @ 12% per annum from the date of death i.e.
12.02.2007 till the date of this order in view of the
observations made in 2008 TAC (1) page 184. Accordingly,
this issue is decided in favour of the applicants and against
respondent No. 2.”
Feeling aggrieved by the aforesaid order, the present appeal has
been filed by the Insurance Company submitting that the appellant-Company
is not liable to pay any interest as there is no direct relationship with the
FAO No. 2084 of 2008 5
claimants and the Company has to indemnify the insured to the extent of
compensation provided as per the Workmen’s Compensation Act, 1923 only.
The liability under Section 4-A of the 1923 Act is on the owner of the vehicle.
As such, the interest component added in the compensation is against the
terms and conditions of the Insurance Policy. Reliance has also been placed
on the judgements rendered by the Hon’ble Supreme Court in the cases of P J
Narayan v. Union of India-2004 (1), PLR Page 3, New India Assurance Co.
Ltd. v. Harshadbhai Amrutbhai Modhiva- 2006 RCR (Civil) 814, wherein the
earlier judgement rendered by Hon’ble Supreme Court in the case of Ved
Parkash Garg was duly considered.
Section 4-A of the 1923 Act reads as under:-
“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
FAO No. 2084 of 2008 6
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;
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.
Explanation – For the purposes of this subsection, “scheduled
bank” means a bank for the time being included in the Second
Schedule to the Reserve Bank of India Act, 1934(2 of 1934).
(3A) The interest and penalty payable under sub-Section (3)
shall be paid to the workman or his dependent, as the case
may be.
A mere look at the aforesaid provision shows that Section 4-A
deals with the time for payment of compensation as required to be computed
under Section 4. Sub section (1) thereof mandates that the compensation
shall be paid as soon as it falls due. Sub-section (2) thereof contemplates a
situation wherein the employer though accepting his liability to pay
compensation to his injured workman disputes the extent of the claim of
FAO No. 2084 of 2008 7
compensation and in such a case sub section (2) enjoins him to make
provisional payment based on the extent of accepted liability by depositing it
with the Commissioner or to pay it directly to the workman. It is obvious that
such an obligation of the employer would not arise under Section 4-A sub
Section (2) if he totally disputes his liability to pay on grounds like the
injured person being not his employee or that the accident was caused to him
at a time when he was not in the course or employment or that the accident
caused to him did not arise out of his employment. If such disputes are raised
by the employer then his obligation to make provisional payment under sub
Section (2) of Section 4-A would not arise and his liability would depend
upon the final adjudication by the Workmen’s Commissioner at the end of the
trial. In para 19 and 20 of Ved Prakash Garg’s case, the Apex Court held as
under:-
“19. 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
FAO No. 2084 of 2008 8reimburse the said claim and it would be the liability of the
insured employer alone.
20. In view of the aforesaid conclusion of ours the present
appeals will have to be partly allowed. The impugned
judgements 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 Workmen’s Commissioner under Section 4-
A (3) of the compensation Act. But the impugned judgements
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
Workmen’s Commissioner on account of default of the insured
in paying up the compensation amount within the period
contemplated by Section 4-A (3) of the Compensation Act.
Accordingly, it must be held that the respondent-insurance
company will by 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.
Thus, holding that the Insurance company was not liable to pay
the penalty but held the Insurance company liable to pay the interest awarded
on the principle amount of compensation by the Workmen’s Commissioner on
account of default of the insured in paying up the compensation amount
FAO No. 2084 of 2008 9
within the period contemplated by Section 4-A (3) of the 1923 Act.
Thereafter, Hon’ble the Supreme Court in the case of New India Assurance
Co. Ltd. v. Harshadbhai Amrutbhai Modhiya (supra) after taking into
consideration the judgement rendered in the cases of Ved Parkash Garg and
P.J.Narayan (supra) in para 19 of the judgement, held 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 statue, 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 Motor Vehicles Act. Where a statue does not provide
for a compulsory insurance or the extent thereof, it will bear
repetition of 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.
Accordingly, the appeal was allowed and the Insurance
Company was held not liable for the interest and the liability was fastened on
the employers. However, it was left open to the contract parties to choose
their own terms of contract. Meaning thereby, until and unless, there was a
specific clause in the Insurance Policy for payment of interest by the
Insurance Company, the Company shall not be liable for the same.
Thereafter, Hon’ble the Supreme Court in the case of
Kamla Chaturvedi v. National Insurance Co Ltd. and others, 2009 ACJ 115
after taking into consideration various judgements rendered in the cases of
FAO No. 2084 of 2008 10
Maghar Singh v. Jashwant Singh, 1997 ACJ 517 (SC), National Insurance
Co. Ltd. v. Mubasir Ahmed, 2007 ACJ 845 (SC), New India Assurance Co.
Ltd. V Harshadbhai Amrutbhai Modhiya 2006 ACJ 1699 (SC), P J Narayan
v. Union of India 2004 ACJ 452 (SC) and Ved Prakash Garg v Premi Devi
1998 ACJ 1 (SC), observed as under:-.
“….The act does not contain a provision like Section 146 of
the M.V. Act where a statute does provide for a compulsory
insurance or accident thereof. 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. This position have
been reiterated in P.J. Narayan v. Union of India, 2004 ACJ
452 (SC). In the instant case the position is different. The
accident in question arose on account of vehicular accident
and provisions of M.V. Act are clearly applicable. We have
gone the policy of insurance and we find that no such
exception as was the case in Harshadbhai Amrutbhai
Modhiya’s case (supra) was stipulated in the policy of
insurance. Therefore, the insurance company is liable to pay
the interest.”
Thus, it is evident that there is no statutory liability under the
provisions of the 1923 Act to pay interest. Hence, the Insurance Company is
not liable for the same. This Court in its own decision dated 07.04.2008
rendered in FAO No. 3071 of 2005 titled as New India Insurance Company
Limited v. Mahabir Singh and others after relying on the judgements rendered
FAO No. 2084 of 2008 11
by the Hon’ble Supreme Court in the cases of ‘P.J.Narayan and Harshadbhai
Amrutbhai Modhiya (supra), came to the following conclusion:-
” In view of the dictum of the aforementioned judgements of
the Apex Court, the appellant has no liability to pay the
interest. The award to the extent it directs the Insurance
Company to satisfy the interest component and costs of the
award is hereby set aside. However, the respondent-claimant
Nos.1 and 2 are at liberty to recover the interest and costs
from the employers i.e. respondent Nos. 3 and 4. The award
is modified to the extent indicated above.”
From the reading of the aforesaid judgement, following
conclusion is arrived at:-
As there is no statutory liability under the 1923 Act as
envisaged under the Motor Vehicles Act, the Insurance
Company is not liable to pay the interest under the
Workmen’s Compensation Act, 1923 unless there is a
specific clause or provision in the Insurance Policy.
FAO No. 320 of 2009
The aforesaid appeal has been filed by the Claimants, in which,
neither the interest nor the penalty was granted. While challenging the order
dated 15.09.2008 passed by the Commissioner, under the Workmen’s
Compensation Act, 1923, a prayer was made to grant the interest on the
awarded amount of compensation from the date of accident as well as the
penalty under Section 4-A (3) of the 1923 Act.
FAO No. 2084 of 2008 12
In this appeal, the accident occurred on 23.06.2007 and the
injured succumbed to his injuries on the same day i.e. 23.06.2007. Deceased-
Raj Pal was 20 years of age. The minimum wages were taken into
consideration as there was no documentary evidence of the earning of the
deceased. However, it was admitted by respondent No. 1, the owner of Canter
No. HR 58C-2777, that the deceased was his employee and driver of the
Canter. Accordingly, the amount of compensation to the tune of Rs.3,48,721
was granted to the claimants without interest and penalty vide order dated
15.09.2008. The aforesaid order has been challenged by the learned counsel
for the appellants on the ground that the appellants were entitled to penalty
and interest from the date of the accident.
Although no ground for the payment of penalty has been made
out, there is merit in the submission of the learned counsel for the appellants
with respect to the grant of interest from the date of accident till the payment.
In order to substantiate that the appellants were entitled to the grant of interest
from the date of the accident, reliance has been placed on the judgement of a
Larger Bench of the Apex Court in the case of Pratap Narain Singh Deo v.
Shrinivas Sabata and another-1976 ACJ 141, wherein, it was held as under:-
“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
FAO No. 2084 of 2008 13contractor and that the accident occurred solely because of his
negligence. Then there is the further fact that he paid no heed
to the respondent’s 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 Commissioner and prevailed on the respondent to file a
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.”
Learned counsel for the Insurance Company, however, disputed
the same and referred to the judgement rendered in the case of Kamla
Chaturvedi (supra), wherein the Apex Court after relying on the judgement
rendered in the case of ‘National Insurance Co. Lt. v. Mubasir Ahmed,’ 2007
ACJ 845 (SC), held that under the crucial expression is ‘falls due’.
Significantly, legislature has not used the express ‘from the date of accident’.
Unless there is an adjudication, the question of an amount falling due does not
arise. Thus, in para 9 of Kamla Chaturvedi’s case, it is held that:-
“In view of what has been stated in Mubasir Ahmed’s
case, 2007 ACJ 845 (SC), the liability for interest would be in
terms of what has been stated in para 9 of the judgement.”
Hon’ble Supreme Court while interpreting Section 4-A (1) of the
FAO No. 2084 of 2008 14
Act explained the expression “falls due” in para 9 of Mubasir Ahmed’s case,
2007 ACJ 845 (SC), observed as under :-
“9. Interest is payable under Section 4A(3) if there is
default in paying the compensation due under this Act within
one month from the date it fell due. The question of liability
under Section 4A was dealt with by this Court in Maghar
Singh v. Jashwant Singh, J.T. 1998(7) S.C. 544: 1998(9)
S.C.C. 134. By amending Act 14 of 1995, Section 4A of the
Act was amended, inter alia, fixing the minimum rate of
interest to be simple interest @ 12%. In the instant case, the
accident took place after the amendment and, therefore, the
rate of 12% as fixed by the High Court cannot be faulted. 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 4A(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
FAO No. 2084 of 2008 15Section 4A. 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.”
Learned Single Bench of this Court in the case of New India
Assurance Company Limited. v. Manphool Singh and others, 2008 (1) PLR
706 after considering the various judgements of the Hon’ble Supreme Court
rendered in the cases of National Insurance Co. Ltd. v Mubasir Ahmed-(2007-
2) 147 PLR (SC), Maghar Singh v Jashwant Singh-JT 1998 (7) SC 544,
Partap Narain Singh Deo v. Srinivas Sabata-(1976) 1 SCC 289, State of U P
v. Ram Chandra Trivedi-AIR 1976 Supreme Court 2547, Union of India v.
K S Subramanian (Civil Appeal No. 212 of 1975 decided on July 30, 1976)
and Commissioner of Income Tax Bihar v. Trilok Nath Mehrotra-(1998) 2
Supreme Court Cases 289, followed the judgement rendered in the case of
Partap Narain Singh Deo v. Srinivas Sabata-(1976) 1 SCC 289, to hold that
the amount of compensation becomes due on expiry of one month from the
date of accident. Thus, interest becomes payable not from the date of
order/award of the Commissioner, but on expiry of one month from the date
of injuries sustained by the workmen and recorded the following finding in
para 9 of the judgement:-
“In view of the law laid down by the Hon’ble Apex Court
regarding the binding precedent under Article 141 of the
FAO No. 2084 of 2008 16Constitution of India, I am of the considered view that the
judgement in the case of Pratap Narain Singh Deo v. Srinivas
Sabata (supra) will create a binding precedent regarding the
interpretation of expression ‘falls due’ under Section 4A (1) of
the Act and amount of compensation becomes due on expiry
of one month from the date of accident. Thus, interest
becomes payable not from the date of order/award of the
Commissioner, but on expiry of one month from the date of
injuries sustained by the workmen. Accordingly, I uphold the
judgement of the Commissioner and dismiss this appeal with
no order as to costs.”
While meeting the different view expressed in judgement
rendered by the Apex Court in the case of Mubasir Ahmed’s (supra) which
was relied upon by the Apex Court in the case of Kamla Chaturvedi (Supra),
learned Single Judge held that the decision rendered by the larger Bench will
prevail upon the judgment rendered by the Bench of two Judges.
It may be noted that when the judgment in the case of Mubasir
Ahmed’s (supra) was delivered as also when the judgment of Kamla
Chaturvedi (Supra) was delivered, the judgment in the case of Pratap Narain
Singh Deo v. Srinivas Sabata (supra) was not brought to the notice of the
Hon’ble Supreme Court. The judgment in the case of Pratap Narain Singh
Deo v. Srinivas Sabata (supra) was rendered by the Bench of four Judges of
the Supreme Court. It is well settled law that when there is any conflict
between the views expressed by larger and smaller benches, the decision of
the larger bench will prevail.
FAO No. 2084 of 2008 17
Another Single Bench of this Court in the case of New India
Assurance Company Limited v. Smt. Luxmi Devi and others ( FAO No. 3218
of 2007, decided 17.11.2008) while relying on the various judgments of the
Apex Court also held that:-
“In view of the decision in the case of Pratap Narain Singh
Deo (supra), the compensation fell due on expiry of a period
of one month from the day when the claim petition was filed
and as the same was not paid, the claimants-respondents
were rightly held entitled to the grant of interest on the same
for a period starting after one month from the date it fell due
till the final adjudication.”
In another judgment in the case of Commissioner of Income
Tax, Bihar v. Trilok Nath Mehrotra, (1998) 2 Supreme Court Cases 289, the
Hon’ble Supreme Court has observed as under :-
“4. We do not find any conflict in the law laid
down in the case of R.M. Chidambaran Pillai with the
law laid down in the earlier two cases. The decision in the
case of Raj Kumar Singh Hukam Chandji was rendered
by a Bench of three Judges. Therefore, even assuming
that there was a conflict between that decision and the
decision rendered in Chidambaram Pillai case which was
rendered by a Bench of two Judges, the decision of the
larger Bench will prevail.”
In view of the above, there is no doubt that as per Section 4-
A (1) of 1923 Act, the amount of compensation becomes due on the
FAO No. 2084 of 2008 18
expiry of one month from the date of accident. Thus, interest becomes
payable not from the date of order/award of the Commissioner but on the
expiry of one month from the date of accident.
In some of these appeals, the question as to who is liable to
pay the penalty has been raised. However, the said dispute stand settled
by the Apex Court in the case of Ved Parkash Garg v. Premi Devi and
others– (1997) 8 SCC 1.
Thus, in view of the law laid down in Ved Parkash Garg’s case
(supra), the penalty shall now be recovered from the insured and not from the
insurer.
In view of the above discussion and in the absence of the
contract to the contrary, the appeals filed by the Insurance Company are
allowed by modifying the impugned order of the Commissioner to the extent
that the interest shall now be paid by the employer-respondent and the
Insurance Company shall have the right to recover the same from the
employer in case the same has already been paid.
Similarly, the appeal filed by the Claimants (FAO No. 320 of
2009) is partly allowed and the impugned order is modified to the extent that
the appellants are entitled to the interest on the amount of compensation from
one month after the date of accident at the rate of 9% per annum to be paid by
the employer.
Allowed in the aforesaid terms.
(Nirmaljit Kaur)
Judge
2nd December 2009
mohan