JUDGMENT
Kamlesh Sharma, J.
1. These three appeals, F.A.O. (WCA) Nos. 106 and 107 of 1993 and 337 of 1995 are being disposed of by a common judgment as the same question of law is involved in all of them. The question of law is:
Whether the insurance company is liable to indemnify the insured for the penalty and interest awarded against him under Sub-section (3) of Section 4-A of the Workmen’s Compensation Act, 1923 (hereinafter called ‘the Act’)?
2. In F.A.O. (WCA) No. 106 of 1993 the claimants-respondents are parents of the deceased Shafiq Mohammad, who was employed as driver on Swaraj Mazda truck No. HPS 7486 owned by respondent No. 3, Pradeep Kumar. The said truck met with an accident in the early hours on 6.12.1989 at a place called Uli, near Sunni, Tehsil Sunni, District Shimla, when it was transporting bricks from Chandigarh to Sunni, in which Shafiq Mohammad driver and one labourer Prem Lal died. In F.A.O. (WCA) No. 107 of 1993 parents of the deceased Prem Lal are the respondents-claimants. On the evidence on record the Commissioner under the Workmen’s Compensation Act, has granted Rs. 88,548/- as compensation with interest at the rate of 6 per cent per annum from the date of accident, i.e., 6.12.1989 and penalty at the rate of 30 per cent on the award money amounting to Rs. 26,562/- to the parents of Shafiq Mohammad payable by respondent Pradeep Kumar, the owner of the truck and United India Insurance Co. Ltd., the appellant. Similarly, in F.A.O. No. 107 of 1993, on the basis of evidence of age and wages, the parents of deceased Prem Lal have been awarded compensation of Rs. 76,885/- with interest at the rate of 6 per cent per annum from the date of accident and penalty at the rate of 30 per cent of the award amount which comes to Rs. 23,064/- against respondent Pradeep Kumar, the owner of the truck and United India Insurance Co. Ltd., the appellant.
3. In F.A.O. (WCA) No. 337 of 1995 the widow and minor daughters are the respondents-claimants, whose husband/father deceased Ramesh Chand was driver of truck No. HP-07-1187, which met with an accident and fell down in a nala on 21.10.1992 while being driven on Sunni-Tattapani road near a place known as Bahal, as a result of which said Ramesh Chand died. On the material on record produced by the parties, an amount of Rs. 87,400/- has been awarded as compensation with interest at the rate of 6 per cent per annum and 20 per cent penalty on the award amount amounting to Rs. 17,480/-.
4. In F.A.O. (WCA) Nos. 106 and 107 of 1993 the claim petitions were filed on 21.5.1990, whereas the accident had taken place on 6.12.1989, and there is no material on record whether respondent Pradeep Kumar, the owner of the truck had made any payment in discharge of his liability before filing of the claim petitions or thereafter. Rather his stand in the reply to the claim petition is that he is not liable to pay any compensation to the petitioners as claimed and it is United India Insurance Co. Ltd. which is liable to pay as the truck was insured with it, though he has admitted that deceased Shafiq Mohammad and Prem Lai were his employees as driver and conductor on truck No. HPS 7486 and he had received the intimation of accident and of their death immediately after the accident. The United India Insurance Co. Ltd. took number of preliminary objections and denied its liability in the absence of particulars of insurance policy.
5. So far F.A.O. (WCA) No. 337 of 1995 is concerned, respondent Bhagat Ram, the owner of truck No. HP-07-1187 also took the similar stand that the claim petition is not maintainable against him because the truck was insured with the Oriental Insurance Co. Ltd. but he has admitted that deceased Ramesh Chand was employed as driver on the truck at monthly salary of Rs. 1,500/- plus Rs. 30 as daily allowance. He had also received the intimation of the death of Ramesh Chand after the accident. In this case claim petition was filed on 7.1.1994, whereas the accident had taken place on 20.10.1992.
6. The impugned awards in respect of the amount of compensation have become final between the parties as these are not challenged by the owners of the vehicles as well as the insurance companies. The only challenge laid in these appeals by the insurance companies is in respect of their liability to pay interest and penalty but learned Counsel appearing for respondents-claimants and owners of the vehicles have urged that in view of Division Bench judgment of this Court in Dromati Devi v. Sohan Singh 1995 ACJ 1019 (HP), the challenge is not available to the appellants.
7. Before we deal with the various authorities cited by the learned Counsel for the parties on the point in issue, we advert to the relevant Section 4-A of the Workmen ‘s Compensation Act, which provides for payment of compensation, interest and penalty. Section 4-A is:
4-A. 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 may direct that, in addition to the amount of the arrears, simple interest at the rate of six per cent per annum on the amount due together with, if in the opinion of the Commissioner there is no justification for the delay, a further sum not exceeding fifty per cent of such amount, shall be recovered from the employer by way of penalty.
8. The perusal of Sub-section (1) of Section 4-A of the Act shows that liability to pay compensation arises as soon as the workman dies or suffers injury. Under Sub-section (2) of Section 4-A of the Act it is further provided that the employer should make provisional payment to the extent he accepts liability for compensation either to the workman or by depositing it with the Commissioner without prejudice to the right of workman to make any further claim, if he does not accept the liability to the extent claimed. Further, first part of Sub-section (3) of Section 4-A of the Act deals with payment of interest at the rate of 6 per cent per annum if the employer fails to pay the compensation due under the Act within one month from the date it fell due and second part of this sub-section deals with levy of penalty not exceeding 50 per cent of the compensation amount, if in the opinion of the Commissioner there is no justification for delay in making payment of compensation due under the Act.
9. From this section as well as the scheme of the Act it is clear that it is a social legislation and the object is speedy and expeditious settlement of the claim arising out of employment injuries and death. When an accident takes place during the course of employment and injury or death is caused to the workman, his employer simultaneously becomes statutorily liable for payment of compensation, which he should pay within a period of one month from the date of accident. On the failure of the employer to make even provisional payment to the extent he accepts his liability, and to contest the claim of the workman for any reason, makes him liable to pay interest and penalty. In fact, the provisions for payment of interest and penalty have been enacted with a view to deter the employer from taking false pleas and unreasonable defence for avoiding his statutory liability of payment of compensation. The object of the Act is clear from other provisions also which provide that the compensation received under the Act is not liable to any assessment, charge or attachment. The amount awarded under the Act is recoverable as arrears of land revenue. Any contract or agreement whereby workman relinquishes his right of compensation from the employer for personal injury in so far as it purports to removing or reducing the liability of any person to pay compensation under the Act is also prohibited. Any such contract is null and void under Section 17 of the Act. Thus, though the genesis of the liability under the Act is in the law of Torts, yet by making such provisions substantial, a noble improvement has been made. Therefore, in the context of scheme of the Act the purpose of Section 4-A is to give full security to workman that loss suffered during the course of employment will be made good by his employer without any delay.
10. Adverting to the real question posed in the present case, there can be no two opinions that the liability of the insurance company can be limited either by the statute or by the contract of insurance. In the case of death of or bodily injury to any employee/workman compensation is payable under the provisions of the Act or contract as mentioned in Section 95 of the Motor Vehicles Act. The provision for interest and penalty under the Act has an entirely different setting and purpose unknown to normal insurance law embodied in the contract between the parties. Limits of liability in certain cases can be limited by a contract between the parties under the Motor Vehicles Act but any such contract is null and void under the Workmen’s Compensation Act. In view of the divergent setting and the provisions under the said enactments, the word ‘liability’ occurring in Section 95 under the Motor Vehicles Act has to be understood only as the normal compensation and not to include special interest and penalty awarded under Section 4-A (3) of the Act.
11. Moreover, from the word ’employer’ used in Section 4-A of the Act it is clear that the liability of payment of interest and compensation (Sic. penalty) cannot be of insurance company unless it is specifically provided in the insurance policy by way of contract. In the normal course the employer is supposed to immediately know that his employee/workman has met with an accident during the course of employment and has suffered injury or death, still if he fails to discharge his liability as fixed under the Act, it is he who is to pay interest and penalty. In other words, the liability of interest and penalty is for failure to carry out the statutory obligations and is in the nature of quasi criminal proceedings. For imposing interest and penalty, the Commissioner must come to the conclusion that the employer has deliberately and in defiance of law, not discharged his statutory obligation. Though, it is the discretion of the Commissioner to impose interest and penalty but to exercise this discretion judicially there should be material on record to show that the employer has not even made provisional payment of the compensation based on the accepted liability and has delayed the payment without any legal and valid reason. The interest and penalty cannot be imposed merely as a matter of course but on consideration of relevant facts and circumstances on record. This also pre-supposes an opportunity to the employer to explain the circumstances for the delay, which entails interest and penalty.
12. By no stretch of imagination, the insurance company can be termed as the employer, therefore, in the absence of any contract to pay the interest and penalty between the employer and the insurance company, no responsibility can be fastened on the insurance company. Since it is a contract between the employer and the insurance company only, in the event of failure of employer to intimate the insurance company in respect of the accident and the consequential liability incurred by him, no liability can be fastened on insurance company to make payment of compensation within a period of one month, failing which also to pay interest and penalty, as envisaged under Sub-sections (2) & (3) of Section 4-A of the Act. Therefore, this Court subscribes to the view taken by a Division Bench of this Court in the case of Dromati Devi v. Sohan Singh 1995 ACJ 1019 (HP), that the liability of interest and penalty cannot be passed on to the insurance company by the employer unless there is a contract between the employer and the insurance company in this regard. Also see: Oriental Insurance Co. Ltd. v. Jevaramma 1988 ACJ 671 (Karnataka), Oriental Fire & Genl. Ins. Co. Ltd. v. Matias Burla 1986 ACJ 732 (Orissa); Oriental Insurance Co. Ltd. v. Hasmat Khatoon 1989 ACJ 862 (Delhi) and Jayantilal & Co. v. Garasia Rajvirba Udesinh 1992 ACJ 286 (Gujarat). This court respectfully disagrees with the judgments in Oriental Fire & Genl. Ins. Co. Ltd. v. Nani Bala Devi 1987 ACJ 655 (Gauhati); Khirod Nayak v. Commissioner for Workmen’s Compensation 1992 ACJ 76 (Orissa) and New India Assurance Co. Ltd. v. Guddi 1994 ACJ 1134 (MP), wherein the learned Judges have enlarged the definition of ’employer’. Further, no doubt, under Section 96 of Motor Vehicles Act, it is the duty of insurer to satisfy the judgment against persons insured, but this principle cannot be invoked in the case of liability of insured’s employee under the Workmen’s Compensation Act.
13. The result of above discussion is that we do find merit in these appeals and these are allowed to the extent that the insurance companies, the appellants are not liable to pay the interest and penalty imposed on them by the impugned award. There is no order as to costs.
14. Before parting with the judgment, we direct that out of the award amount already disbursed in favour of respondents-claimants, the amount of interest and penalty, if any, will be recoverable from the respondent owner as well as the driver of the vehicle in question. However, the amount which has not been disbursed in favour of the respondents-claimants in respect of interest and penalty will be refunded to the appellant insurance company along with up-to-date interest accrued thereon.