IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA FAO (WCA) No. 396 of 2004 Reserved on : 4th December, 2008 Date of Decision: 25th February, 2009 Smt. Sunita Devi Appellant Versus Smt. Shanti Devi and others Respondents Coram The Hon’ble Mr. Justice Sanjay Karol,J. Whether approved for reporting1? Yes. For the appellant: Mr.Harsh Khanna, Advocate. For respondent No.1 to 3: Mr.Ramakant Sharma, Advocate. For respondent No.4 : Mr.Deepak Bhasin, Advocate. Sanjay Karol, J. In the present appeal, award dated 22nd June, 2004 passed by Commissioner, under Workmen’s Compensation Act (S.D.M.), Nahan, District Sirmaur, H.P. in Case No.7/2001, titled as Smt. Shanty Devi and others vs. Smt. Sunita Devi and another, has been assailed by the owner, who has been directed to pay the penalty to the extent of 30% of the awarded amount to the claimants. Shri Devinder Singh was employed as driver by appellant Smt. Sunita Devi. On 26.6.2001 deceased was driving vehicle No.HP-14- 6275, which met with an accident in which he died. The mother, brother and sister being legal representatives of deceased Shri Devinder Singh filed Whether the reporters of Local Papers are allowed to see the Judgment? 2 a petition under Section 22 of the Workmen’s Compensation Act (hereinafter referred to as the Act), praying as under:- “It is therefore, prayed that this Hon’ble Court may kindly determine the status of the deceased as workman within the meaning of the Act and the amount of Rs.6,64,110.00 as compensation claim is due according to the Act and the same be ordered to be paid to the petitioners with interest and penalty or in the alternative any amount which falls due according to the Act.” In the petition it was so pleaded that Devinder Singh was being paid Rs.4500/- per month and Rs.100/- daily as and when he used to take the truck to a distant place. The owner filed its response, inter alia, admitting the factum of the employment, accident and the death of the deceased. The amount of salary was, however, disputed and it was so pleaded that deceased was paid Rs.1500/- per month alongwith Rs.50/- per day as diet money for out station tours. The vehicle being insured with M/s Oriental Insurance Company, the liability to pay the same was, however, pleaded to be that of respondent No.2. Based on the pleadings of the parties, the following issues were framed:- 1. Whether the deceased Shri Devinder Singh was a driver/workman with the respondent No.1 at the time of accident? OPP 2. Whether the petitioner/ legal heirs are entitled for compensation as prayed for? OPP 3 3. Whether the deceased died during the course of employment in an accident? OPP 4. Whether the respondent No.1 has informed by respondent No.2 within time? OPR Opportunity to lead evidence was afforded to the parties. Based on the material on record (oral and documentary), the Commissioner came to the conclusion that the owner had in fact not disputed the liability and taking the age of the deceased to be 21 years and income of the deceased to be Rs.3000- (half of which comes to Rs.1500/-), by applying the relevant factor of 222.71, the compensation of Rs.3,34,055/- was determined. Since the amount was not paid on the date it fell due, penalty @ 30% was also directed to be paid by the owner. The appeal was admitted on the following substantial questions of law:- “1. Whether the Court of Commissioner below was right in law in imposing penalty against the appellant without giving due and reasonable opportunity of being heard on the question of penalty? 2. Whether the order of the Ld. Commissioner can be sustained in law when it ignored the provisions of Section 4(a) of the Workmen’s Compensation Act and no show cause notice was served upon the appellant before the penalty was imposed upon the appellant. Mr.Khanna, learned counsel for the appellant has assailed the impugned award on limited ground that prior to imposition of penalty, notice to the owner ought to have been issued by the Commissioner. In the absence of any notice/sufficient opportunity to show cause, that part of the 4 award by which penalty has been imposed is bad in law. In his support, he has referred to and relied upon decisions in Ved Parkash Garg vs. Premi Devi and others, (1997) 8 SCC 1 and M/s ANS Earthmovers vs. Smt. Surto Devi & ors, Latest HLJ 2007 (HP) 878. In the present case the liability was never disputed by the owner. The provisions of Section 4 of the Act are amply clear that in case of undisputed liability the amount is to be paid within one month after the date of the accident. The Apex Court in Ved Parkash Garg (supra) has held as under:- 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 make 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 4-A 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. Sub-section (2) of Section 4-A of the Compensation Act 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 5 by depositing it with the Commissioner or to pay it directly to the workman. Such an obligation of the employer would not arise under Section 4-A sub-section (2) if he totally disputes his liability to pay on grounds like the injured person being not his employee or that the accident was caused to him at a time when he was not in the course 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 4-A would not arise and his liability would depend upon the final adjudication by the Workmen’s Commissioner at the end of the trial. In that light when sub-section (3) of Section 4-A is seen it becomes obvious that once the compensation due under the Act becomes ascertained either provisionally under sub-section (2) or finally on adjudication by the Commissioner and if the employer does not pay the same within one month from the date it thus falls due, the Commissioner can direct under sub-clause (a) of Section 4-A (3) interest at the rate provided therein and also penalty as contemplated by sub-clause (b) thereof as per the amended Section 4-A(3) of the Compensation Act. Even under the unamended Section 4-A(3) which applied at the relevant time a clear distinction was made by the legislature between the imposition of penalty by way of a further sum not exceeding fifty per cent of compensation amount and the imposition of interest on the amount of compensation found payable when it is not paid within the requisite time as and when it fell due. Once compensation falls due and within one month it is not paid by the employer then as per Section 4-A(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 6 employer concerned to make good his liability for the benefit of the claimants whose breadwinner 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 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 follow. Even though the Commissioner under these circumstances can impose a further liability on the employer under circumstances and within limits contemplated by Section 4-A(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 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 of the insured liability of the employer. No question of justification 7 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 4-A(3) may start running for the purpose of attracting interest under sub- clause (a) thereof in case where provisional payment has to be made by the insured employer as per Section 4_A(2) of the Compensation Act from the date such provisional payment becomes due. But when the employer does not accept his liability as a whole then Section 4-A(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 accident concerned. Such an order passed by the Commissioner would remain perfectly justified on the scheme of Section 4- A(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 4-A(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 in 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 up to 50% on the principal amount by way of 8 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 Vehicles Act as well as by the terms of the insurance policy found in provisos (b) and (c) to sub-section (1) of sub-section II thereof.” It is no doubt true that the Court has observed that the penalty can be levied under the circumstances contemplated under Section 4-A(3) of the 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 or delay in payment of the compensation amount he was not liability for this penalty. The question, however, was not an issue before the Court. The issue before the Court was as to whether the Insurer is liable to meet the liability of penalty and interest imposed by the Workmen’s Commissioner against the insured employee under Section 4- A(3) of the Act. In the present case, in the claim petition itself the claimants had asked for imposition of penalty as the amount was not paid on the due date. The accident took place on 26.6.2001 and the claim petition was filed on 1.12.2001. Even before the Commissioner, the owner in terms of its reply dated 4.1.2003 did not dispute the liability. The only defence taken was that it is the Insurer, who is liable to pay the compensation. The owner 9 did not step into the witness box. Hence, the appellant was fully aware of the claimants’ case including their prayer for imposition of penalty and, therefore, no separate show cause notice was required to be issued after determination of the amount due by the Commissioner. In this view of the matter, the reliance upon the decision of the Apex Court in Ved Parkash Garg (supra) is misplaced. Mr. Khanna has also referred to a decision of this Court in M/s ANS Earthmovers (supra). The ratio of law laid down in the said case is not applicable to the facts of the present Court. The Court was dealing with a case where after due determination of the sum due and payable to the claimants, the Commissioner had issued show cause notice to the owner for payment of penalty. It was sought to be argued that no such show cause notice could have been issued as the Commissioner had become functus officio. It is in these circumstances that the Court held that imposition of penalty is in continuation of earlier proceedings for the purpose of penalty, as the proceedings were not over on the date of adjudication of the sum due. These are not the facts here. No separate show cause notice was required to be issued by the Commissioner, Workmen’s Compensation Act, before imposing penalty as the owner was fully aware of the claimants’ case, particularly, when it had not disputed the liability at any point in time. Substantial questions of law are answered accordingly. For the foregoing reasons, the appeal is dismissed. February 25, 2009 (Sanjay Karol) (C) Judge. 10