JUDGMENT
D.G. Karnik, J.
1. This appeal filed by the insurance company is directed against the judgment and order dated 14.7.1993, passed by the learned 2nd Labour Court and Commissioner under the Workmen’s Compensation Act, 1923, directing the respondent No. 8, the owner of the vehicle, and the appellant insurance company to pay the compensation of Rs. 81,540 with interest and penalty of Rs. 40,770.
2. The brief facts leading to this appeal are stated below:
The respondent No. 8 is the owner of motor vehicle, a truck bearing registration No. MHQ-6297 (for short ‘the truck’) which was insured with the appellant insurance company. One Shaikh Mohammad Gaus Raffuddin (hereinafter referred to as ‘the deceased’), was an employee of the respondent No. 8 and at the relevant time was driving the truck. The respondent Nos. 1 to 7 are the heirs of the deceased. On 11.7.1991, the deceased was driving the truck from Bombay to Nasik, when it met with an accident in which the deceased died on the spot. Respondent Nos. 1 to 7 filed an application against the respondent No. 8, the owner of the truck, for compensation under the Workmen’s Compensation Act (for short, ‘the Act’). Appellant being the insurer of the truck, was joined as respondent No. 2 in the said application. The respondent No. 8 and appellant opposed the claim application on several grounds. The Commissioner held that respondent Nos. 1 to 7 were the dependants of the deceased and also held that deceased died in an accident arising out of and in the course of his employment with respondent No. 8. Therefore, the respondent Nos. 1 to 7 were held to be entitled to the compensation under the Act. Taking into consideration the salary and the allowances payable by the respondent No. 8 to the deceased, the Commissioner computed the compensation in accordance with the Act and ordered payment of compensation of-Rs. 81,540 with interest at the rate of 6 per cent per annum in accordance with Clause (a) of Sub-section (3) of Section 4A of the Act. As the respondent No. 8 had failed and neglected to pay the compensation within a period of one month without any reasonable cause the Commissioner imposed a penalty of Rs. 40,770 being 50 per cent of the amount of compensation under Clause (b) of Sub-section (3) of Section 4A of the Act.
Being aggrieved, the appellant insurance company has filed the present appeal.
3. At the outset, it may be stated that the respondent No. 8, who is primarily liable to pay the compensation, interest and penalty, has not challenged the order of the Commissioner and the order has become final against respondent No. 8. In the narration below the title of the appeal memo as well as in the note No. 3 below the appeal memo, the appellant insurance company has specifically stated that the appeal is restricted to the imposition of penalty of Rs. 40,770 and the interest awarded on the amount of compensation. At the stage of hearing of the appeal, learned counsel for the appellant, however, sought leave of the court to challenge even the computation of the amount of compensation. The appeal had been filed 11 years ago and no explanation is offered for not challenging the computation of the compensation in the appeal for 11 years. Learned counsel for respondent Nos. 1 to 7 objects for the leave being granted and submits that appellant should not be allowed to challenge the computation of the amount of compensation after lapse of 11 years without there being any justification for the delay and when the appellant has specifically restricted the appeal to the award of interest and the penalty. The submission of the learned counsel for the respondent Nos. 1 to 7 is accepted. The appeal is restricted only to the challenge made in the appeal memo.
4. Respondent No. 8 employer is stat-utorily liable to pay compensation as well as penalty in case of default. No statutory provision was shown about the liability of an insurance company. Insurance is a matter of contract between an insurance company and the insured. Insurer undertakes a liability only to indemnify the insured to the extent provided in the policy of Insurance or under any statute like the Motor Vehicles Act. The liability of an insurance company is thus limited by a contract and by a statute, if any. No statutory provision was pointed out to me to show that an insurance company is statutorily liable to pay any penalty which may be required to be paid by an employer on account of his failure to pay and deposit the amount of compensation within the statutory period of 30 days as provided by the Act. Under the Act, an employer is liable to pay the compensation for the injury or the death arising out of and in the course of employment of a workman. The amount of compensation is determined in accordance with Section 4 and the Schedule IV of the Act. Section 4A(3) of the Act provides that the compensation shall be paid as soon as it falls due. Clause (a) of Sub-section (3) of Section 4A provides that if compensation is not paid within a period of one month from the date on which it falls due the employer shall be liable, in addition to the amount of compensation, to pay interest thereon. At the relevant time, statutory rate of interest was six per cent per annum, which has been amended from time to time and increased to 12 per cent per annum or the lending rate of scheduled banks, as may be notified. Clause (b) of Sub-section(3) of Section 4A of the Act provides that where the compensation is not paid in time and there is no justification for the delay, the Commissioner would, in addition to the amount of arrears and interest, direct payment of further sum not exceeding fifty per cent of such amount by way of penalty. The amount payable to the workman or his dependant can be classified under three heads:
(i) Amount of compensation in accordance with Section 4 and Schedule IV of the Act;
(ii) Interest on the delayed payment;
(iii) Penalty to be determined by the Commissioner, if there is no justification for the delay in the payment.
It is not disputed by appellant that it had undertaken the obligation to indemnify the respondent No. 8 of the amount of the compensation payable Under Section 4 read with Schedule IV of the Act. What is, however, disputed is the liability to indemnify the owner of the truck (respondent No. 8) for the interest and the penalty payable under Sub-section (3) of Section 4A of the Act.
5. Previously there was a conflict of opinion between different High Courts as to whether an insurance company is liable to pay the penalty payable under Clause (b) of Sub-section (3) of Section 4A of the Act. The said controversy has, however, been resolved by the decision of the Apex Court in Ved Prakash Garg v. Premi Devi, . The Supreme Court has held that the primary liability of payment of the penalty Under Section 4A(3)(b) of the Act is that of an employer. The liability to pay penalty is due to the personal fault of the employer in not making the payment in time and without justifiable delay. Insurance company, therefore, cannot be held to be liable to reimburse that amount. Burden of penalty is required to be borne by the employer and not by insurance company. In view of this decision, it is clear that the appellant insurance company is not liable to pay the amount of the penalty. There is no clause in the policy under which appellant insurance company had undertaken to pay the amount of penalty. In the absence of a clause in the insurance policy, the insurance company is not liable to pay the amount of penalty payable Under Section 4A(3)(b) of the Act.
6. Relying upon the decision of Karnataka High Court in United India Insurance Co. Ltd. v. Nagarathna, , the learned counsel for the appellant submits that the appellant insurance company is also not liable to pay the amount of interest payable Under Section 4A(3)(a) of the Act. In that case, the policy of insurance contained a specific clause, which reads as under:
“The company shall not be liable to pay interest and penalty, if any, awarded by Workmen’s Compensation Commissioner for failure to comply with provisions of the Workmen’s Compensation Act by the insured.”
In view of the specific clause in the insurance policy, it was held by Karnataka High Court that the insurance company was not liable to pay interest payable Under Section 4A(3)(a) of the Act. This decision is, therefore, not an authority for the proposition that an insurance company is never liable to pay interest payable Under Section 4A(3)(a) of the Act. In the present case, there is no clause in the insurance policy similar to one which existed in the case of United India Insurance Co. Ltd. v. Nagarathna, (supra). Hence, it cannot be said that the appellant insurance company is not liable to pay the amount of interest. Interest and penalty stand on a different footing. Interest is ordinarily awarded by a court or Tribunal not by way of penalty but Under Section 34 of the Civil Procedure Code or principles analogous thereto to neutralise the diminution in the value of money caused by passage of time which often is on account of inability of the courts to deliver instant or quick justice. Penalty is often imposed by way of punishment in default of performing a duty or breach of a statute. Therefore, while an insurance company would not be liable to pay the penalty it would be liable to pay interest which only neutralises diminution in value of money.
7. In the result, appeal is partly allowed.
The order for payment passed against the respondent No. 8 is maintained in toto.
As regards the order for payment by the appellant insurance company is concerned, it is held and declared that the appellant insurance company is not liable to pay the amount of Rs. 40,770 towards penalty. If the appellant has already made payment of penalty, it would be entitled to recover the same from respondent No. 8, the owner of the truck. Rest of the judgment and order passed against the appellant is maintained.
In the circumstances, the parties shall bear and pay their own costs.