IN THE HIGH COURT OF JUDICATURE OF ANDHRA PRADESH : HYDERABAD FRIDAY, THE TWENTY NINETH [29TH] DAY OF JANUARY, TWO THOUSAND AND TEN Present: HON’BLE SRI JUSTICE G.V.SEETHAPATHY, C.M.A.No.666 of 2005 Between: Mohd. Aminu & others … Appellants And: Sk. Gulam Musthafa & others … Respondents HON’BLE SRI JUSTICE G.V.SEETHAPATHY C.M.A.No.666 of 2005 JUDGMENT: This appeal is directed against the order dated 30.10.2002 in W.C.No.136 of 2003 on the file of the Commissioner for Workmen’s Compensation Act, Nalgonda, wherein, the claim of the appellants herein was allowed in part awarding compensation of Rs.2,44,272/- with direction to the opposite parties to pay the said amount within 30 days from the date of receipt of the order and in the event of failure to pay the same, the opposite parties has to pay interest at 9% per annum, from the date of application i.e., 30.08.2003 till the date of final realization of the entire compensation. 2. Heard the learned counsel for both parties. Perused the record. 3. The appellants who are the applicants filed claim application seeking compensation of Rs.2,50,000/- for the death of the deceased Mohd. Jani, who died in a motor vehicle accident that occurred on 02.05.2003 in the course of his employment as cleaner on the van bearing Registration No.AP 20 T 5182. The applicants 1 and 2 are the parents and the applicants 3 and 4 are minor brothers of the deceased. According to them, the deceased was employed as a cleaner of the van belonging to the first respondent (since died, represented by 2nd respondent herein being the legal heir of first respondent) on a salary of Rs.4,000/- per month and that while he was proceeding in the said vehicle as cleaner from Hyderabad to Khamma, when the van reached the outskirts of Lingojigudem, a lorry bearing No.AP 20 T 9266 came in a rash and negligent manner from Vijayawada side and collided with the van, resulting in death of the deceased on the spot. Choutuppal Police registered a case in Cr.No.63 of 2003 against the driver of the lorry. 4. The first respondent herein-owner of the van filed counter admitting the death of the deceased in the accident and the relationship of the deceased as workman. The 3rd respondent-insurer filed counter opposing the claim and denying their liability to pay the compensation. 5. During enquiry, first applicant was examined as AW.1 and Exs.A.1 to A.6 were marked on their behalf. No oral evidence was adduced on behalf of the opposite parties but Ex.B.1 copy of the policy was marked. 6. On a consideration of the evidence available on record, the learned Commissioner held that the deceased was employed as cleaner in the van and he died in the accident, which occurred in the course of such employment. It was further held that the applicants are entitled for total compensation of Rs.2,44,272/- by taking the wages of the deceased at Rs.2,181/- per month as per G.O.Ms.No.30 dated 27.07.2000 and applying the multiplying factor 224.00 suitable to the deceased, who was aged 20 years. The learned Commissioner further directed the opposite parties to deposit the said amount within 30 days from the date of receipt of the order and in the event of their failure to deposit the same, the opposite parties have to deposit the said amount with interest at 9% per annum. Not satisfying with the order of the Tribunal in not awarding the interest from the date of application, till the date of realization, the applicants filed the present appeal. 7. The appellants have not disputed the compensation awarded by the learned Commissioner but the only contention of the appellants is that the learned Commissioner ought to have award interest on the compensation amount from the date of petition, till the date of realization. Admittedly, the insurance company has not preferred any appeal. 8. The main contention of the learned counsel for the insurer is that the insurer is not liable to pay interest 30 days after the accident, till the date of deposit as awarded by the learned Commissioner and that too at the rate of 9% per annum. 9. The question which then arises for consideration is - as to from what date the interest is payable and at what rate and by whom? 10. The learned counsel appearing for the applicants would contend that the interest is payable at a minimum rate of 12% p.a., as provided under Section 4-A (3) of the Act and from the date of the accident, which according to him is the date on which the compensation payable fell due and the interest is payable along with the principal amount of compensation by the insured employer and the insurance company jointly and severally. 11. The learned counsel appearing for the insurer would contend that the rate of interest prescribed under Section 4-A (3) of the Act is payable only in the event of default in payment of the compensation amount within the period of 30 days from the date of adjudication and in such event of default, the interest is payable at the minimum prescribed rate of 12% from the due date i.e., the date on which the period of 30 days expired. He would further contend that the insurer is not liable for payment of interest for any period prior to the date of adjudication. 12. Both the learned counsel have relied on certain decisions of the Apex Court and other High Courts and this Court as well in support of their respective contentions which are referred to herein below. 13. It would be useful to extract Section 4-A of the Act which deals with “compensation to be paid when due and penalty for default” which states as follows:- “(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 accept, 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 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;’’ 14. A plain reading of the above provision would disclose that under sub-section (1), the amount of compensation, which is determined in accordance with Section 4, shall be paid as soon as it falls due. Sub-section (2) stipulates that in case where the employer does not accept the liability for the compensation, as claimed, he would make provisional payment of such amount as admitted by him and deposit the same with the Commissioner or make the payment to the workman without prejudice to the right of the workman to make any further claim. Sub-section (3) states that where the employer is in default in paying the compensation due under the 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 twelve per cent per annum on the amount due shall be recovered from the employer. Sub-section (3) also empowers the Commissioner to direct that a further sum not exceeding fifty per cent of such amount shall be recovered from the employer by way of penalty, if in the opinion of the Commissioner there is no justification for the delay. It is, however, not disputed and is established by a catena of decisions that the liability to pay any such penalty imposed in a given case is that of the employer alone and such liability for payment of penalty cannot be fastened on the insurer. 15. The words “falls due” occurring in sub-section (1) and the expression “fell due” occurring in sub-section (3) are significant. 16. The learned counsel for the applicants would contend that the said expression signifies the date of accident itself because the amount is payable by the employer the moment the workman suffers personal injuries arising out of the accident in the course of employment. 17. The learned counsel for the insurer, on the other hand, would contend that in the event of the employer not admitting his liability, for any reason, the amount of compensation has to be necessarily ascertained only upon adjudication and it is only on such adjudication and in the event of default in payment of such amount within the period of 30 days from the date of adjudication that interest becomes payable from the date of adjudication and not before. 18. In ‘PRATAP NARAIN SINGH DEO V. SRINIVAS SABATA AND ANOTHER’[1], a four Judge Bench of the Apex Court held as follows: “The employer therefore became liable to pay the compensation as soon as the aforesaid personal injury was caused to the workman by the accident which admittedly arose out of and in the course of the employment. It is therefore futile to contend that the compensation did not fall due until after the Commissioner’s order dated May 6, 1969 under Section 19. What the section provides is that if any question arises in any proceeding under the Act as to the liability of any person to pay compensation or as to the amount or duration of the compensation it shall, in default of agreement, be settled by the Commissioner. There is therefore nothing to justify the argument that the employer’s liability to pay compensation under Section 3, in respect of the injury, was suspended until after the settlement contemplated by Section 19. The appellant was thus liable to pay compensation as soon as the aforesaid personal injury was caused to the appellant, and there is no justification for the argument to the contrary”. In the facts and circumstances of the above case, the Apex Court upheld the order passed by the Commissioner awarding penalty to the extent of fifty per cent and interest at six per cent. 19. In ‘MAGHAR SINGH V. JASHWANT SINGH’[2], a three Judge Bench of the Apex Court awarded interest at 9 % per annum from the date of accident i.e., 26-07-1984 till the date of recovery or actual payment under the provisions of the Act. 20. In ‘P.J.NARAYAN V. UNION OF INDIA AND OTHERS’[3], the Apex Court held that “insurance is a matter of contract between insurance company and the insured. It is always open to the insurance company to refuse to insure. Similarly, they are entitled to provide by contract that they will not take on liability for interest. In the absence of any statute to that effect, insurance company cannot be forced by courts to take on liabilities which they do not want to take on.” In the above case, a direction was sought to the insurance company to delete the clause in the policy, which provides that in case of compensation under the Workmen’s Compensation Act, 1923, the insurance company will not be liable to pay interest. The Apex Court held that there was no substance in the writ petition and there was no statutory liability on the insurance company and the statutory liability under the Workmen’s Act was on the employer and the writ petition was dismissed. 21. In ‘VED PRAKASH GARG V. PREMI DEVI AND OTHERS’[4], the question which arose before the Apex Court was as follows: “Where an employee receives a personal injury in a motor vehicle accident arising out of and in the course of his employment while working on 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.” After reviewing the case law on the subject, the Apex Court held as under:- “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 4A 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 4A(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 the above case, the Apex Court set aside the impugned judgments to the extent to which they exonerated the insurance companies from payment 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 prescribed under Section 4-A(3) and accordingly held that the insurance company would be liable to pay interest at 6% per annum from the date of accident till the date of payment. 22. In ‘KAMALA CHATURVEDI V. NATIONAL INSURANCE CO. LTD. AND OTHERS’[5], the insurance company sought to avoid its liability to pay interest on the ground that there was no contract by the insured for payment of interest. However, there was no exception stipulated in the policy regarding payment of interest by the insurance company. It was, therefore, held following Ved Prakash Garg’s case (4 supra) that the insurance company was liable to pay interest along with compensation. 23. In ‘L.R.FERROR ALLOYS LTD. V. MAHAVIR MAHTO AND ANOTHER’[6], the Apex Court, following the decision in Ved Prakash Garg’s case (4 supra), held that payment of interest and penalty are two distinct liabilities arising under the Act, while liability to pay interest is part and parcel of legal liability to pay compensation upon default of payment of that amount within one month. Therefore, claim for compensation along with interest will have to be made good jointly by the insurance company with the insured employer. But, so far as the penalty imposed on the insured employer is on account of his personal fault, insurance company cannot be made liable to reimburse penalty imposed on the employer. Hence, the compensation with interest is payable by the insurance company but not penalty. 24. In ‘KERALA STATE ELECTRICITY BOARD AND ANOTHER VV. VALSALA K. AND ANOTHER’’[7], while upholding the view taken by a Full Bench of the Kerala High Court in UNITED INDIA INSURANCE COMPANY LTD. V. ALAVI (1998(1) KERALA LAW TIMES 951), the Apex Court held as follows: “Our attention has also been drawn to a judgment of the Full Bench of the Kerala HighCourt in United India Insurance Co. Ltd. V. Alavi (1998(1) Ker LT 951) wherein the Full Bench precisely considered the same question and examined both the above noted judgments. It took the view that the injured workman becomes entitled to get compensation the moment he suffers personal injuries of the types contemplated by the provisions of the Workmen’s Compensation Act and it is the amount of compensation payable on the date of the accident and not the amount of compensation payable on account of the amendment made in 1995, which is relevant. The decision of the Full Bench of the Kerala High Court, to the extent it is in accord with the judgment of the larger bench of this Court in Pratap Singh Narain Singh Deo v. Srinivas Sabata (AIR 1976 SC 222: 1976 Lab IC 222) (supra) lays down the correct law and we approve it.” The question, which arose for consideration in the above decision, was whether the amendment of Sections 4 and 4-A of the Act made by Act 30/95 w.e.f. 15-09-1995 enhancing the amount of compensation and rate of interest would be attracted to cases where the claims arose from the accidents that occurred prior to 15-09-1995. It was observed by the Apex Court that various High Courts in the country have uniformly taken the view that the relevant date for determining the rights and liabilities of the parties is the date of the accident. The above decision referred to the four Judge Bench decision of the Apex Court in Pratap Narain Singh Deo’s case (1 supra) where it was held that the relevant date for determination of the rate of compensation is the date of accident and not the date of adjudication of the claim. Reference was made to a two Judge Bench decision of the Apex Court in ‘THE NEW INDIA ASSURANCE COMPANY LIMITED V. V.K.NEELAKANDAN’ in Civil Appeal Nos.16904 to 16906 of 1996, decided on 06-11-1996, wherein a contrary view was taken to the effect that the Act being a special legislation for the benefit of the workmen, the benefit as available on the date of adjudication should be extended to the workmen and not the compensation which was payable on the date of the accident. It was observed that the two Judge Bench in Neelakandan’s case (referred above) did not take notice of the larger Bench decision in Pratap Narain Singh Deo’s case (1 supra) as it presumably was not brought to the notice of the Court and in view of the categorical law laid down by the larger Bench in Pratap Narain Singh Deo’s case (1 supra), the view expressed by the two Judge Bench in Neelakandan’s case is not correct. 25. In ‘GOTTUMUKKALA APPALA NARASIMHA RAJU AND OTHERS V. NATIONAL INSURANCE CO. LTD’.[8], the Apex Court held as follows: “The ingredients for maintaining a proceeding under 1988 Act and 1923 Act are different. The purpose for which a contract of insurance is entered into may be different, whereas 1988 Act, it will bear repetition to state, a contract of insurance would be mandatory; for the purpose of applicability of the 1923 Act, it will be optional and as indicated hereinbefore in Harshadbhai Amrutbhai Modhiya’s case (2006 AIR SCW 2352), even contracting out is permissible, as under the 1923 Act, the liability of the insurer is limited to the claim of the workman. The liability under Section 147(2)(b) of the 1988 Act, on the other hand, extends to third party.” 26. In ‘NEW INDIA ASSURANCE CO. LTD. V. HARSHADBHAI AMRUTBHAI MODHIYA AND ANOTHER’[9], it was held as follows:- “It is, therefore, clear from the above decisions that it is open to the insurance company to contract out insofar their liability for payment of interest by making necessary stipulation in the terms of the agreement i.e., policy of insurance. It is, however, not a case of the insurer in the present case that there was any such stipulation made in the contract of insurance entered into with the employer, whereby their liability for payment of interest is excluded.” 27. In ‘NATIONAL INSURANCE CO. LTD. V. MUBASIR AHMED AND ANOTHER’[10], the Apex Court held as follows:- “Interest is payable under Section 4-A (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 4-A was dealt with by this Court in Maghar Singh v. Jashwant Singh (1997 ACJ 517 (SC). By Amending Act 30 of 1995, section 4-A of the Act was amended, inter alia, fixing the minimum rate of interest to be simple interest at the rate of 12 per cent. In the instant case, the accident took place after the amendment and, therefore, the rate of 12 per cent 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 if 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 4-A (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 section 4-A. 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.” The above decision was reiterated by the Apex Court in Kamala Chaturvedi’s ca​se (5 supra). 28. The learned counsel for the insurance company would seek to rely upon the above decision and contend that as the amount of compensation fell due only upon adjudication, the interest under Section 4-A (3) of the Act is payable only in the event of default in payment of the amount within 30 days from the date of adjudication and the interest becomes payable at 12% per annum only on expiry of said period of 30 days and not before. 29. The learned counsel for the applicants would, on the other hand, seek to rely on the four Judge Bench decision of the Apex Court in Pratap Narain Singh Deo’s case (1 supra) and would contend that the crucial date is the date of the accident as the amount becomes payable the moment the workman suffers personal injuries in the accident that arises out of and in the course of employment. He would further contend that the decision in Pratap Narain Singh Deo’s case (1 supra) having been rendered by a bench of larger strength of four judges, the same takes precedence over the decision in Mubasir Ahmed’s case (9 supra) which was rendered by a bench of two judges. In that connection, he relied on a decision of High Court of Gujarat in ‘UNITED INDIA INSURANCE CO. LTD. V. SHAKURA ISHAQ BHAYA AND ANOTHER’[11] wherein a learned Single after referring to the above two decisions of the Apex Court and reviewing the case law as to what constitutes a binding precedent, held as follows:- “In view of the aforesaid discussion, this Court is of considered view that when there is conflict between the judgments of the Hon’ble Apex Court in Pratap Narain Singh Deo’s case, 1976 ACJ 141 (SC), (decided by four-Judge Bench) and Mubasir Ahmed’s case (supra) (decided by two- Judge Bench) and, therefore, this court is bound to follow the decision of larger Bench judgment of the Hon’ble Supreme Court i.e., Pratap Narain Singh Deo’s case”. Accordingly, the learned Single Judge directed both the defendants i.e., insurance company and the owner to pay compensation and also 6% interest from the date of application. 30. It is to be