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PETITIONER:

VED PRAKASH GARG

Vs.

RESPONDENT:

PREMI DEVI & ORS.

DATE OF JUDGMENT: 25/09/1997

BENCH:

S.B. MAJMUDAR, V.N. KHARE

ACT:

HEADNOTE:

JUDGMENT:

WITH

[Civil Appeal No. 15700 of 1996]

J U D G M E N T

S.B.Majmudar.J.

In these three appeals by special leave, a short ut

ticklish question arises for consideration. It runs as

under :

"Where an employee receives a

personal injury in a motor accident

arising out of and in the motor

vehicle of the employer, whether

the insurance company, which has

insured the employer-owner of the

vehicle against third party

accident claims under Motor

Vehicles Act, 1988 (hereinafter

referred to as 'the Motor Vehicles

Act') and against claims for

compensation arising out of

proceedings under the Workmen's

Compensation Act, 1923 (hereinafter

referred to as 'the Compensation

Act') in connection with such motor

accidents, is liable to meet the

awards of Workmen's Commissioner

imposing penalty and interest

against the insured employer under

Section 4A(3) of the Compensation

Act."

The High Court of Himachal Pradesh in the impugned

judgments has answered this question in the negative and

against the insured employer. For coming to that conclusion

reliance is placed by the said High Court in a decision of a

Division Bench of Karnataka High Court in the case of

Oriental Insurance Co. Ltd. v. Raju & Ors. 1994 ACJ 191 and

the judgment of a learned Single Judge of the Gujarat High

Court in the case of Jayantilal & Co. v. Garasia Ravirba

udesinh & Ors. 1992 ACJ 286. Identical view is taken by a

Division Bench of the Gujarat High Court in the case of

Gautam Transport, Bhavnagar v. Jiluben Huseinbhai & Ors.

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1989 ACJ 587. The decision of a learned Single Judge of the

Delhi High Court in the case of Oriental Insurance Co. Ltd.

v. Hasmat Khatoon & Ors. 1989 ACJ 862 has also fallen in

line. While on the other hand a learned Single Judge of

Gauhati High Court in the case of Oriental Fire and General

Ins. Co. Ltd. V. Nani Bala Devi & Anr. 1987 ACJ 655; a

Division Bench of the Orissa High Court in the case of

Khirod Nayak v. Commissioner for Workmen's Compensation &

Ors. 1992 ACJ 76; a learned Single Judge of the Madhya

Pradesh High Court in the case of New India Assurance Co.

Ltd. v. Guddi & Ors. 1994 ACJ 1134 and a learned Single

Judge of the Rajasthan High Court in the case of United

India Insurance Co. Ltd. v. Roop Kanwar & Ors. 1991 ACJ 74

have answered this question in the affirmative against the

insurance company. There is another judgment of a Division

Bench of the Gujarat High Court in the case of Radhabehn &

Ors. Mulji Kanji Dhord & Ors. 1994 ACJ 404 which has adopted

middle course and has answered the question partly in the

affirmative so far as the imposition of interest

contemplated by Section 4A(3)(a) of the Compensation Act is

concerned and partly in the negative so far as the

imposition of penalty on the owner-employer under Section

44(3)(b) is concerned. before we proceed to resolve the

aforesaid conflict of decisions it will be profitable to

note a few background facts leading to these appeals.

Civil Appeal Nos. 15698-15699 of 1996

These two appeals arise out of a motor accident wherein

the owner of a motor truck, appellant in these appeals, had

entrusted the said trust for driving to one Pritam Singh and

has employed one Hem Raj to be a cleaner attached to the

said truck. The said truck met with an accident on 15th

February 1992 near Village Pulwahai on Kumarsain Dhamla Road

in the State of Himachal Pradesh. In the said accident

driver Pritam Singh and cleaner Hem Raj died on spot. It is

the case of the appellant, owner of the truck, that having

come to know about the accident on 16th February 1992 he

immediately informed the Branch Manager of respondent no.9-

insurance company about the accident. According to the

appellant, respondent no.9-insurance company had insured the

appellant comprehensively against all the risks arising out

of the use of the said motor vehicle.

That still the insurance company though bound to pay the

heirs of the deceased-employees appropriate compensation as

per the insurance cover, did not carry out the said

obligation.

The two claim petitions came to be filed by the heirs

and legal representatives of deceased driver and cleaner

under the Compensation Act before the Commissioner for

Workmen's Compensation, Rajgarh district, Sirmur, Himachal

Pradesh. The said applications wee moved presumably by

exercising option available under Section 167 of the Motor

Vehicles Act which lays down that 'notwithstanding anything

contained in the Workmen's Compensation Act, 1923 where the

death of, or bodily injury to, any person gives rise to a

claim for compensation under this Act and also under the

Workmen's Compensation Act, 1923, the person entitled to

compensation may without prejudice to the provisions of

Chapter X claim such compensation under either of those Acts

but not under both' - Thus these two applications wee in

substitution and in place of otherwise legally permissible

claims before the Motor Accidents Claims Tribunal

functioning under the Motor Vehicles Act. In the said claim

applications, the claimants joined the appellant-employer as

well as respondent no.9-insurance company as respondents.

The Workmen's Commissioner after hearing the parties

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concerned computed the compensation available to the

claimant-dependents of the deceased employees. So far as

the claim put forward by the heirs of the deceased driver

was concerned the Commissioner awarded a sum of Rs. 88,968/-

as compensation. But as the compensation due was not paid

either by the appellant-employer or by the insurance company

as and when it fell due the Commissioner awarded a penalty

of Rs. 41,984/- with interest at the rate of 6% per annum

from the date of the accident till the date of payment under

Section 4A(3)(a) and (b) of the Compensation Act. The

entire amount of Rs. 88,968/- with penalty of Rs.41,984/-

and interest thereon was held payable by the insurance

company to the claimants jointly and severally with the

appellant-employer. The said amount was made payable by

respondent no.9-insurance company on the basis that the

insurance company had insured the appellant against his

liability to meet the claims for compensation for the death

of employee dying in harness giving rise to proceedings

against the insured employer under the Compensation Act.

Similarly the Commissioner awarded a sum of Rs. 88,548/- to

the claimants being legal representatives of the deceased

cleaner. In addition to the said amount, penalty of Rs.

44,274/- with interest from the date of the accident till

the date of payment was also made payable by respondent

no.9-insurance company.

The claimants were satisfied with the said awards.

Similarly the appellant-owner was also satisfied with the

said awards. However, the insurance company carried the

matter in appeals before the High Court and contended that

the insurance company would be liable under the contract of

insurance only to make good the claims for compensation so

far as the principal amounts were concerned. But it could

not have been made liable to pay the amounts of penalties

with interest thereon as ordered by the Workmen's

Commissioner as these amounts of penal nature were awarded

against the insured owner on account of his personal default

as per Section 4A(3) of the Compensation Act and for such

default on the part of the insured the insurance company was

not liable to reimburse the insured. As noted earlier, the

said contention of respondent no.9-insurance company

appealed to the High Court. The appeals wee allowed and the

awards of the Commissioner under the Compensation Act in so

far as they fastened the liability to pay the penalty and

interest on the insurance company were set aside. The

amounts deposited in excess by the insurance company were

ordered to be refunded to it while the remaining amounts

were ordered to be paid to the claimants. it was, however,

clarified that the claimants shall be at liberty to recover

the amount of penalty and interest in accordance with law

from the employer, appellant herein.

Civil Appeal No.15700 of 1996

The appellant is the owner of a motor truck on which

deceased Prakash Chand was working as a driver, is the sole

heir and claimant for compensation. Between 20th and 21st

August 1992 the said truck met with a accident on Kalka-

Simla national highway in the State of Himachal Pradesh. it

resulted in instantaneous death of driver Prakash Chand. It

is the case of the appellant insured owner of the truck,

that he informed respondent no.2-insurance company which had

insured the appellant against risks arising out of the use

of the insured motor vehicle. That he was insured

comprehensively for all risks and the insurance company was

supposed to have immediately contracted the legal

representatives of the deceased driver and should have paid

the compensation to the bereaved family which it failed to

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do.

Respondent no.1, widow of the deceased driver, filed a

Claim Petition before the Commissioner for Workmen's

Compensation exercising her option under Section 167 of the

Motor Vehicles act. The Workmen's Commissioner after

hearing the parties awarded a sum of Rs. 81,540/- as

compensation along with interest and further directed that

in the event of failure to pay the said amount within one

month the penalty at the rate of 30% per annum on the

principal amount was to be paid by respondent no.2-insurance

company. The award obviously was passed jointly and

severally against the appellant-owner as well as respondent

no.2-insurance company. The said award was challenged only

on behalf of respondent no.2-insurance company before the

High Court. The High Court took the very same view which it

took in the companion matters and exonerated respondent

no.2-insurance company from its liability to make good award

of penalty amount as well as interest amount on the

principal amount of Rs.81,540/-. Identical order in these

terms was passed in this case as it was passed in common in

the other two appeals as stated earlier.

Rival Contentions

Learned counsel for the appellant-owners of the motor

vehicles who were admittedly employers of deceased workmen

contended before us that the view taken by the High Court of

Himachal Pradesh in the impugned judgments and identical

view taken in the decisions of the High Court referred to

earlier exonerating the insurance company of its liability

for making good the claim for compensation flowing out of

the orders of additional interest and penalty as imposed by

the Workmen's Commissioner under Section 4a(3) of the

Compensation Act were not justified on the scheme of the

Compensation Act read with the Motor Vehicles Act. That on

the contrary the decisions of High Courts representing the

contrary view laid down correct law. It was alteratively

contended that in any view of the matter at least the middle

course adopted by the Division Bench of the Gujarat High

Court in the case of Radhabehn (supra) deserved to be

uphled.

On the other hand learned counsel for respondent-

insurance companies submitted that on the schemes of the

Compensation Act and the Motor Vehicles Act the insurance

companies would be liable to meet the liability of the

insured employer-owners of the respective vehicles to the

extent of the principal amounts of compensation which were

made payable to the claimants by the insured employers by

the Workmen's Commissioner. So far as penalty amounts by

way of additional interest and additional compensation as

contemplated by Section 4A(3) were concerned they were made

payable by the insured employers for their own default and

for such default on the part of the insured, the insurance

companies would not be liable and consequently they could

not be made to reimburse the said amounts to the insured.

That such claims would be dehors the contractual liability

flowing from the insurance policy as well as it would be

against the relevant statutory scheme of the Motor Vehicles

Act read with the Compensation Act. It was, therefore,

contended that the view taken by the Himachal Pradesh High

Court in the impugned judgments in favour of the insurance

companies and identical view taken by the other High Courts

falling in line represented the correct legal position and

deserved to be upheld.

Schemes of the Acts

Before we deal with the rival contentions and have a

look at the divergent viewpoints expressed by the different

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High Courts on this question, it will be necessary to keep

in view the relevant statutory schemes in the light of which

this controversy has to be resolved. The Compensation Act

deals with the provisions for payment by certain classes of

employers to their workmen of compensation for employment

injuries caused by accident. There is no dispute between

the parties that the deceased drivers and cleaner in these

cases were workmen employed by the appellant-employers.

Section 3 of the compensation Act deals with 'Employer's

liability for compensation'. sub-section (1) thereof lays

down that '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 Chapter II'. It is also

not in dispute that fatal personal injuries were caused to

the workmen by accidents which arose out of and in the

course of their employment because of which they were

working on the motor vehicles of the appellant-employers

when they met their ends on account of motor accidents.

Section 4 of the Compensation Act deals with 'Amount of

compensation'. It lays down the statutory scheme for

computing the compensation payable in cases of the types of

accidental injuries suffered by the workmen concerned. The

employer, on a conjoint reading of Sections 3(1) and 4(1) of

the insured workmen under circumstances contemplated by

these provisions. Then follows Section 4A of the

Compensation Act with which we are directly concerned. It

is, therefore, necessary to extract it in extenso. The said

Section during the relevant time, in 1992, when the

accidents were caused read as under :

"4-A, Compensation to e 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 cases

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 six per cent per annum on the

amount due together with, if in the

opinion of the Commissioner there

is no justification for delay, a

further sum not exceeding fifty per

cent of such amount, shall be

recovered from the employer by way

of penalty."

The said Section was further amended by Act 30 of 1995

with effect from 15.9.1995 and in the amended form it now

reads as under :

"4A, Compensation to be paid when

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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 to 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 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

hat 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.

A mere look at the aforesaid provision shows that

Section 4A deals with the time for payment of compensation

as required to be computed under Section 4. Sub-section (1)

thereof mandates that 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 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 4A 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 of

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 4A would not arise and his

liability would depend upon the final adjudication by the

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Workmen's Commissioner at the end of the trial. in that

light when sub-section (3) of Section 4A is seen it becomes

obvious that once the compensation due under the Act becomes

ascertained either provisionally under sub-section 92) or

finally on adjudication by the Commissioner and if the

employer does not pay the same within one months from the

date it thus falls due, the Commissioner can direct under

sub-clause (a) of Section 4a(3) interest at the rate

provided therein and also penalty as contemplated by sub-

clause (b) thereof as per the amended Section 4A(3) of the

Compensation Act but even under the unamended Section 4A(3)

which applied at the relevant time a clear distinction is

made by the Legislature between the imposition of penalty by

way of a further sum not exceeding fifty per cent of

compensation found payable when it is not paid within the

requisite time as and when it fell due.

Thus even in the scheme of unamended Section 4A(3) or

as per the amended Section 4A(3) read with clauses (a) and

(b) thereof, it becomes clear that additional amount of

compensation can be levied against the defaulting employer

by way penalty if it is shown that there is no justification

for the delay on his part in making good the compensation

amount to the claimant. Interest payable on the principal

amount, if not paid when it fell due, is not considered by

the Legislature to be a penalty. This is further

highlighted by the proviso to Section 4A(3) as substituted

by Act 30 of 1995 which clearly indicates that a penalty

amount under clause (b) cannot be imposed against the

employer without giving him reasonable opportunity to show

cause. No such show cause notice is comtemplated while

imposing interest on default of payment of the principal

amount on the part of the employer as per Section 4A(3)(a).

Absence of this provision is obviously based on the

legislative intent that interest on principal amount is not

by way of penalty. Therefore, the employer need not be

heard in this connection. A simplicity default in payment

of compensation within the time of one month from the date

it fell due would automatically attract the provision of

simple interest under Section 4A(3) as per the rate

prescribed therein and for such imposition of interest no

question of justification for the delay is countenanced by

the Legislature. But while imposing penalty justification

for delay would b a good defence for the employer for

meeting such claim for penalty. The same aspect is further

highlighted by Section 4A(3)(a) of the Compensation Act as

existing on the Statute book at present which shows that the

interest payable under sub-section (3A) is to be paid to the

workman or his dependant while the penalty imposed is to be

credited to the State Government. It is in the light of the

aforesaid statutory Government. It is in the light of the

aforesaid statutory scheme of Section 4A that the question

posed for our consideration has to be resolved.

Section 19 of the Compensation Act also deserves to be

noted at this stage. Sub-section (1) thereof lays down that

'if any question arises in any proceedings under this Act as

to the liability of any person to pay compensation

(including any question as to whether a person injured is or

is not a workman) or as to the amount or duration of

compensation (including any question as to the nature or

extent of disablement), the question shall, in default of

agreement, be settled by a Commissioner'. Sub-section (2)

of Section 19 bars the jurisdiction of Civil Court to

settle, decide or deal with any question which is by or

under this Act required to be settled, decided or dealt with

by a Commissioner, or to enforce any liability incurred

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under this Act. As per the aforesaid provisions any dispute

between the employer-insured on the one hand and the

insurance company, that is said to have insured the employer

against such claims for compensation under the Compensation

Act, on the other has to be resolved in default of agreement

between them by the Commissioner functioning under the

Compensation Act and not by any Civil Court. It may be

mentioned at this state that learned counsel for the

contesting respondent-insurance companies made it clear

before use that it is not their contention that the

insurance companies which have insured the employers against

such risks and claims are not liable to make good the

principal amounts of compensation as awarded by the

Commissioner o the claimants and that the insurance

companies under the said claims. But their only grievance

is against the liability sought to be enforced against them

for reimbursing the claims for additional compensation by

way of penalty and interest as imposed on the insured

employers under section 4A(3) of the Compensation Act.

We may now turn to the relevant provisions of the Motor

Vehicles Act. Reference to these provisions becomes

necessary because the workmen concerned suffered personal

injuries of fatal nature while they were working on motor

vehicles of their employers. if they had suffered from any

personal injuries during the course of and arising out of

the employment while working the factory premises of the

employers or while carrying on their service obligations as

employees at any other place under the instructions of the

employers, the question of interaction of the Compensation

Act and the Motor Vehicles Act would not arise and such

claims for compensation would have squarely been governed

only by the Compensation Act.

Hence it becomes necessary for us to turn to the scheme

of Motor Vehicles Act foisting liability on the insurance

companies which have insured such vehicles against third

party risks undertaken by the insured. Chapter XI of the

Motor Vehicles Act deals with 'Insurance of motor vehicles

against third party risks'-Section 146 lays down the

necessity for insurance against third party risk and

provides that 'no person shall use, except as a passenger,

or cause or allow any other person to use, a motor vehicle

in a public place, unless there is in force i relation to

the use of the vehicle by that person or that other person,

as the case may be, a policy of insurance complying with the

requirements of this Chapter'- Section 147 deals with

'Requirements of policies and limits of liability'-Sub-

section (1) or Section 147 along with its proviso is

relevant for our present purpose. Hence it is extracted as

under:

"147. Requirements of policies and

limits of liability.-(1) In order

to comply with the requirements of

this Chapter, a policy of insurance

must be a policy which-

(A) is issued by a person who is an

authorised insurer; and

(b) insures the person of classes

of persons specified in the policy

to the extent specified in sub-

section (2)-

(i) against any liability which may

be incurred by him in respect of

the death of or bodily injury to

any person, including owner of the

goods or his authorised

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representative carried in the

vehicle or damage to any property

of a third party caused by or

arising out of the use of the

vehicle in a public place;

(ii) against the death of or bodily

injury to any passenger of a public

service vehicle caused by or

arising out of the use of the

vehicle in a public place;

Provided that a policy shall not be

required-

(i) to cover liability in respect

of the death, arising out of and in

the course person insured by the

policy or in respect of bodily

injury sustained by such an

employee arising out of and in the

course of his employment other than

a liability arising under the

Workmen's Compensation Act, 1923 (8

of 1923), in respect of the death

or, or bodily injury to, any such

employee-

(a) engaged in driving the vehicle

or

(b) if it is a public service

vehicle engaged as a conductor of

the vehicle or in examining tickets

on the vehicle, or

(c) if it is a goods carriage,

being carried in the vehicle, or

(ii) to cover any contractual

liability."

Sub-clause (b) of Section 147(1) read with the proviso

lays down a statutory scheme of compulsory coverage of

liability incurred by the employer vis-a-vis his employees

when they sustain injuries by the use of motor vehicles

during their employment and on account of motor accidents

arising out of and in the course of their employment and on

account of motor accidents arising out of and in the course

of their employment. But the statutory coverage for such

liability would be limited t the extent of liability of the

insured employer arising under the Workmen's Compensation

Act in respect of death or bodily injury to such employees.

As the motor accidents resulted in fetal injuries to the

employees who were either driving or were being carried in

the goods carriage as cleaner whatever liability was

incurred by insured owners of the goods vehicles in

connection with proceedings arising out of the Compensation

Act was covered by the statutory liability of the

respondent-insurance companies. The very same result would

follow when we turn to the relevant clause of the insurance

policies to which our attention was invited by learned

counsel to the appellants. Section II in the Insurance

Policy of respondent no.9-insurance company which had

insured the appellant, dealt with 'liability to third

parties'-Relevant clause of sub-section (1) of Section II of

the said Policy reads as under:

"1. Subject to the Limits of

Liability the Company will

indemnify the Insured against all

sums including claimant's cost and

expenses which the Insured shall

become legally liable to pay in

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respect of

(i) Death of or bodily injury to

any person caused by or arising out

of the use (including the loading

and/or unloading) of the Motor

Vehicle.

(ii)..... .... .... ....

PROVIDED ALWAYS that:-

(a)...... .... .... ....

(b) Except so far as necessary to

meet the requirements of Section

92A and Section 95 of the Motor

Vehicles Act, 1939, the Company

shall not be liable in respect of

death of or bodily injury to any

person in the employment of the

Insured arising out of and in the

course of such employment.

(c) Except so far as is necessary

to meet the requirements of section

95 of the Motor Vehicles Act, 1939,

in relation to liability under the

Workmen's Compensation Act, 1923,

the Company shall not be liable in

respect of death of or bodily

injury to any person (other than a

passenger carried by reason of or

in pursuance of a contract of

employment) being carried in or

upon or entering or mounting or

alighting from the Motor Vehicle at

the time of the occurrence of the

event out of which any claim

arises."

A conjoint reading of these provisions in the Insurance

Policy shows that the insurance company insured the

employer-owners of the insured motor vehicles against all

liabilities arising under the Workmen's Compensation act for

which statutory coverage was required under Section 95 of

the Motor Vehicle Act, 1939 which is analogous to Section

147 of the present Motor Vehicles Act noted earlier.

Section 149 deals with 'Duty of insurers to satisfy

judgments and awards against persons insured in respect f

third party risks'. The moot question is whether the

insurance coverage as available to the insured employer-

owners of the motor vehicles in relation to their

liabilities under the Workmen's Compensation Act of account

of motor accident injuries caused to their workmen would

include additional statutory liability foisted on the

insured employers under Section 4A(3) of the Compensation

Act.

Consideration of the question

The question posed of our consideration is required to

be resolved in the light of the aforesaid statutory schemes

of the two interacting Acts. It is not in dispute and

cannot be disputed that the respndent-insurance companies

concerned will be statutorily as well as contractually

liable to make good the claims for compensation arising out

of the employers' liability computed as per the provisions

of the Compensation Act. The short question is whether he

phrase 'liability arising under the Compensation Act' as

employed by the proviso to sub-section (1) of Section 247 of

the Motor Vehicles Act and as found in proviso to clause (i)

of sub-section (1) of Section II of the Insurance Policy,

would cover only the principal amount of compensation as

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computed by the Workmen's Commissioner under the

Compensation Act and made payable by the insured employer or

whether it could also include interest and penalty as

imposed on the insured employer under contingencies

contemplated by Section 4A(3)(a) and (b) of the Compensation

Act.

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 made the

insurance company liable to cover all such claims for

compensation for which statutory liability is imposed on the

employer under Section 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 follows. 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

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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 f the insured

liability of the employer. No question of justification by

the insured employer for the delay in such circumstances

would arise for consideration. It is of course true that

one month's period as contemplated under section 4A(3) may

start running for the purpose of attracting interest under

sub-clause (a) thereof in case where provisional payment

becomes due. But when the employer does not accept his

liability as a whole under circumstances enumerated by us

earlier then section 4A(2) would not get attracted and one

month's period would start running from the date on which

due compensation payable by the employer is adjudicated upon

by the Commissioner and in either case the Commissioner

would be justified in directing payment of interest in such

contingencies not only from the date of the award but also

from the date of the accident concerned. Such an order

passed by the Commissioner would remain perfectly justified

on the scheme of Section 4A(3)(a) of the Compensation Act.

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 n 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 the penalty would get imposed on him. That would add

a further sum upto 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 Vehicle 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 tow

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 Section 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 contigencies 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

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proportionate interest thereon if imposed by the Workmen's

Commissioner.

Consideration of the judgments of the High Courts

It is now time for us to have a look at the judgments

of the different High Courts which have reflected different

viewpoints on this question. We shall first deal with those

judgements of the high Courts wherein a view is taken that

the insurance company would be fully exonerated from the

obligation to meet the claims for interest and the penalty

amounts imposed on the insured employer as per Section

4A(3)(a) and (b) of the Compensation Act. For taking the

aforesaid view in the impugned judgments the High Court of

Himachal Pradesh has strongly relied upon two decision

Karnataka High Court and the Gujarat High Court. We will,

therefore, in the first instance deal with these judgments.

In the case of Oriental Insurance Co. Ltd. v. Raju &

Ors. (supra) a Bench of two learned Judges of the Karnakata

High Court on the express terms of the Insurance Policy in

that case took the view that the Policy did not extend to

indemnify the insured in respect of any interest and/or

penalty which may be imposed on the insured on account of

his failure to comply with the requirements of the Workmen's

Compensation Act. There was an express exclusion clause qua

this liability under the Insurance Policy and consequently

the Karnataka High Court rightly came to the conclusion on

the facts of that case that liability arising under Section

4A(3) of the Compensation Act to pay interest on the

principal amount as imposed on the insured was not required

to be met by the insurance company. Said judgment proceeds

on its own facts. it is of no real assistance of resolving

the present controversy. The second judgment relied upon by

the Himachal Pradesh High Court is rendered by a learned

Single Judge of the High Court of Gujarat in the case of

Jayantialal & Co. (supra). It has laid down that penalty

under Section 4A(3) of the Workmen's Compensation Act is

imposed on the owner of the offending truck for remaining

indifferent to his statutory liability to make payment in

time. Such a liability arising out of personal fault of the

insured employer is not required to be met by the insurance

company. The aforesaid view of the learned Single Judge of

the Gujarat High Court is in consonance with the scheme of

the Compensation Act as well as the Motor Vehicles Act as

discussed by us earlier. Therefore, in our view, it lays

down the correct legal position so far as the penalty claims

are concerned. However in so far as the aforesaid decision

takes the view that the insurance company would not be

liable even to meet the claim of interest at the rate of 6%

per annum on the amount of compensation as imposed upon the

insured employer under Section 4A(3) of the Compensation

Act, the same is not borne out from the scheme of the

aforesaid two Acts and to that extent the said decision has

to be overruled. We may in this connection refer to a

latter Division Bench judgment of the Gujarat High Court in

the case of Radhabehn (supra) wherein the Division Bench of

the High Court has taken the view that when penalty is

imposed on the employer under Section 4A(3) it is on account

of the default and negligence of the employer for which he

is personally reasonable and the legislature would never be

said to have intended that there should be a compulsory

insurance covering the liability of an employer of payment

of penalty. So far as the interest in concerned the

Division Bench took the view that such liability was a

natural corollary of the liability to make payment of

Compensation and, therefore, it would be covered by the

scheme of statutory coverage and consequently the insurance

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company would be required to make good that claim and

reimburse the amount of liability to that extent imposed on

the insured employer. The aforesaid extent imposed on the

insured employer. The aforesaid decision of the Gujarat

High Court has impliedly overruled the contrary view

expressed by the impliedly overruled the contrary view

expressed by the learned Single Judge of that Court in

Jayantilal & Co. (supra) so far as the liability of the

insurance company to meet the interest claim is concerned.

In the schemes of the Compensation Act and the Motor

Vehicles Act as discussed by us earlier the conclusion to

which the Division Bench of the High Court of Gujarat

reached in Radhabehn's case (supra) is the correct

conclusion. The said decision of the Division Bench rightly

takes the middle course and answers the correct conclusion.

The said decision of the Division Bench rightly takes the

middle course and answers the question for consideration

partly in favour of the insurance company so far as the

penalty claims are concerned and partly against the

insurance company so far as the claims for interest are

concerned.

We may now refer to another Division Bench judgment of

the Gujarat High Court in the case of Gautam Transport,

Bhavnagar (supra) wherein it is held that the insurance

company would not be liable to meet the claim arising out of

penalty imposed on the insured employer under Section 4A(3)

of the Compensation Act as the penalty arose on account of

clear violation of statutory provisions of the Compensation

Act by the employer and that could never be said to have

been contemplated by the insurance company while offering

contractual coverage as the said penalty would be the result

of the negligence on the part of the insured. In our view,

the said decision is in consonance with the schemes of the

Compensation Act and the Motor Vehicles Act as discussed by

us earlier. W may in this connection refer to a decision of

the High Court of Delhi in the case of Oriental Insurance

Co. Ltd. v. Hasmat Khatoon & Ors. (supra). A learned Single

Judge of the Delhi High Court on the schemes of the

Workmen's Compensation Act and the Motor Vehicles act has

taken the view that the liability covered by the statutory

coverage of insurance is to make good the claim for

compensation and that liability would not include interest

and penalty. in our view, the said decision lays down the

correct legal position so far as award of penalty against

the insured employer is concerned. But in so far as it

holds that even for the claim of interest on the principal

amount of compensation, as imposed on the insured, the

insurance company would not remain liable, it has to be

overruled.

We may now refer to the other set of judgments, on

which reliance was placed learned counsel for the

appellants. In the case of Oriental Fire and General Ins.

Co. Ltd. v. Nani Bala & Amt. (supra) a learned Single Judge

B.L.Hansaria, J. (as he then was) speaking for the High

Court of Judicature at Gauhati had to consider the question

whether any liability could be imposed upon the insurer of

the offending vehicle which had caused accidental injury o

the employees of the insured employer. It was decided in

the said case on a conjoint operation of the Motor Vehicles

Act and the Compensation Act that the provisions o the

Compensation act cannot be viewed in isolation when the

Motor Vehicles Act has specifically stated that a policy of

insurance cannot exclude the liability arising under the

Compensation Act and that the expression 'any person' has to

cover an insurer also. The aforesaid decision was rendered

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entirely in a different context and was not concerned with

the question whether the insurance company would be liable

to meet the claim of penalty amount and interest as awarded

under Section 4A(3) of the Compensation Act against the

insured employer. It is, therefore, of no assistance in the

present cases. However the same learned Judge speaking on

behalf of a Division Bench of the Orissa High Court in the

case of Khirod Nayak v. Commissioner for Workmen's

Compensation & ors. (supra) has taken the view that when any

penalty is imposed on the insured employer under Section

4A(3) of the Compensation Act along with interest the

insurance company would be liable to make good the entire

claim. In the light of the scheme of both the relevant Acts

as discussed by us earlier it has to be held that the

aforesaid view of the Division Bench of the Orissa High

Court in so far as it holds that the insurance company would

be liable to meet the claim of penalty to the tune of 50% of

the amount of compensation as imposed on the insured

employer is not correct. But so far as it is held that the

insurance company would be liable to meet the claim of

interest at the rate of 6% per annum as granted under

Section 4A(3) of the Compensation Act, the same is justified

on the scheme of the Act. Aforesaid decision of the Orissa

High Court has to be partly overruled to the aforesaid

extent. We may now turn to a decision of the Madhya Pradesh

High Court in the case of New India Assurance Co. Ltd. v.

Guddi & Ors. (supra). A learned Single Judge in the said

case took the view that on the scheme of Section 4A(3) of

the Compensation Act the insurance company will have to make

good the claim of interest and penalty as imposed upon the

insured employer. In the light of what we have discussed

earlier it must be held that the said view is partly correct

in so far as it is held that the insurance company would be

liable to pay the amount of interest imposed upon the

insured employer by the Workmen's Commissioner under Section

4A(3). But to the extent it seeks to cover even the penalty

amount and makes obligatory on the insurer to meet the said

claim of penalty imposed upon the insured employer it must

be held that the same is not correct and is not borne out

from the scheme of the Acts discussed by us. To that extent

the said decision of the learned Single Judge would stand

partly overruled. In the case of United India Insurance Co.

Ltd. v. Roop Kanwar & ors. (supra) a learned Single Judge of

the Rajasthan High Court had to consider a situation where

on payment of additional premium the insurance company had

agreed in the light of endorsement no.16 of the Policy to

cover all liabilities incurred by the insured under

Workmen's Compensation Act. In view of this contractual

coverage of liability the insurance company in that case was

held liable to meet the claim of penalty and interest as

imposed upon the insured under Section 4A(3) of the

Compensation Act. This judgment proceeded on its own facts

and was concerned with a situation converse to the one as

was examined by the Karnataka High Court in Oriental

Insurance Co. Ltd. v. Raju & Ors. (supra). In the case

decided by the Karnataka High Court, as seen earlier, there

was an express exclusion of such liability of the insurance

company. In the aforesaid case decided by the Rajasthan

High Court there was an expression inclusion of such

liability for the insurance company which had taken

additional premium. This judgment also, therefore, is of no

assistance to either side.

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

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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 the Workmen's

Commissioner under the Compensation Act on the conjoint

operation of Section 3 and Section Act on the conjoint

operation of Section 3 and Section 4A sub-additional amount

of compensation y way of penalty imposed on the insured

employer by the Workmen's Commissioner under Section 4(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 conclusion of ours the present

appeals will have to be partly allowed, The impugned

judgments 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 4A(3)

of the Compensation Act. But the impugned judgments 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 o the insured

in paying up the compensation amount within the period

contemplated by Section 4A(3) of the Compensation Act.

Accordingly it must be held that the respondent insurance

company will be 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 of from the date of

accident till the date of payment. But the redpondent-

insurance company will not be liable to meet the claim of

penalty of Rs.44,274/- imposed on the appellant-insured

along with the interest of 6% per annum on the said amount

of Rs. 44,274/-. To that extent the award of the

Commissioner will stand modified. So far as the Claim No.3

of 1992 is concerned the respondent-insurance company will

be liable to reimburse the compensation amount of Rs.

88,968/- with interest at the rate of 6% p.a. thereon from

the date of the accident till the date of payment. But it

will stand exonerated of its liability of reimbursement so

far as the penalty amount of Rs.41,984/- and amount of

interest at 6% p.a. thereon are concerned. To that extent

the award of the Workmen's Commissioner in Claim Case No.3

of 1992 will stand modified. Similarly in Civil Appeal No.

15700 of 1996 the impugned judgment of the High Court will

stand partly set aside s far as the claim for interest as

imposed on appellant-insured is concerned and the award of

the Workmen's Commissioner in so far as his award of Rs.

81,540/- as compensation along with interest will stand

confirmed. But the further part of the award to the extent

it directs that in the event of failure to pay the said

amount within one month a penalty of 30% p.a. shall be

payable by the insurance company, will stand set aside.

Consequently the respondent-insurance company in this case

will be liable to pay Rs.81,540/- by way of compensation

with interest at 6% per annum thereon from the date of the

accident till the date of payment to the claimants. The

awards of the Commissioner will stand modified accordingly.

They will obviously remain untouched so far as they are

against the employers. It will be open to the claimants to

enforce their claims of penalty amounts with proportionate

interest thereon against employers concerned.

In the result all these three appeals are partly

allowed as aforesaid. In the facts and circumstances of

these cases there will be no order as to costs.

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