IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH F.A.O. No. 2496 of 2006 Date of Decision : October 21, 2008 New India Assurance Company Limited ....Appellant Versus Shanti Devi and others .....Respondents CORAM : HON’BLE MR. JUSTICE T.P.S. MANN Present : Mr. Vinod Gupta, Advocate for the appellant. Mr. Maninder Arora, Advocate for respondent No. 3. T.P.S. MANN, J. (Oral) The only relief sought by the appellant-Insurance Company in the present appeal is against the award of interest on the compensation amount. While accepting the claim application, learned Commissioner under Workmen’s Compensation Act, 1923, Hisar Circle granted a sum of Rs. 4,30,560/- to the claimants-respondents, as compensation along with interest at the rate of 9% per annum from the date of filing of the petition till the date of order. In the event of the entire amount not being paid within two months from the date of the order, the Insurance Company was made liable to pay interest at the rate of 12% per annum from the date of filing of the claim application till the date of the realization. F.A.O. No. 2496 of 2006 Learned counsel for the appellant-Insurance Company has submitted that the interest on the amount of compensation was due from the date of adjudication and not from the date of filing of the claim application. In this regard he has relied upon National Insurance Co. Ltd. v. Mubasir Ahmed and another, 2007(2) PLR 188 (SC) wherein it was held that the interest was required to be granted on the amount of compensation from the date of adjudication of the claim. The accident in which deceased Jagdish Chander received injuries, occurred on 24.6.2001. The claimants served a legal notice dated 2.8.2001 upon the appellant and respondent No. 2 but it was to no avail. Ultimately, they filed the petition for compensation on 5.9.2001. The appellant and respondent No. 2 were required to pay compensation as it had fallen due on expiry of a period of one month from the date of the legal notice in view of the provisions of Section 4A of the Workmen’s Compensation Act, 1923 (hereinafter referred to as ‘the Act’). Before proceeding further, the provisions of Section 4A of the Act may be examined. The same is reproduced herein-in-below :- “4A. Compensation to be paid when due and penalty for default.--(1) Compensation under Section 4 shall be paid as soon as it falls due. (2) In cases where the employer does not accept the -2- F.A.O. No. 2496 of 2006 liability for compensation to the extent claimed, he shall be bound to make provisional payment based on the extent of liability which he accepts, and, such payment shall be deposited with the Commissioner or made to the workman, as the case may be, without prejudice to the right of the workman to make any further claim. (3) Where any employer is in default in paying the compensation due under this Act within one month from the date it fell due, the Commissioner 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; -3- F.A.O. No. 2496 of 2006 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. Explanation – For the purposes of this sub- section, “scheduled bank” means a bank for the time being included in the Second Schedule to the Reserve Bank of India Act, 1934(2 of 1934). (3A)The interest and penalty payable under sub- Section (3) shall be paid to the workman or his dependent, as the case may be. It is, thus, clear that the compensation has to be paid as soon as it falls due. In case where the employer does not accept the liability for compensation, such an employer would be bound to make provisional payment, based on the extent of liability which he accepts. In the event of the employer not paying the compensation due under the Act within one month from the date it falls due, the Commissioner can also direct the employer to pay a further sum by way of penalty. Sub-section (3A) also requires the payment of interest and penalty to the workman or his dependent. However, no penalty can be imposed, without giving any reasonable opportunity to the employer to show cause against such an imposition. -4- F.A.O. No. 2496 of 2006 In National Insurance Company Limited's case (supra), the Hon'ble Supreme Court while interpreting Section 4A(1) of the Act explained the expression “falls due” by observing as under :- “9. Interest is payable under Section 4A(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 4A was dealt with by this Court in Maghar Singh v. Jaswant Singh, J.T. 1998(7) S.C. 544: 1998(9) S.C.C. 134. By amending Act 14 of 1995, Section 4A of the Act was amended, inter alia, fixing the minimum rate of interest to be simple interest @ 12%. In the instant case, the accident took place after the amendment and, therefore, the rate of 12% 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 it 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 4A(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 -5- F.A.O. No. 2496 of 2006 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 4A. 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.” However, way-back on December 04, 1975, a four-Judge Bench of the Hon'ble Supreme Court in the case of Pratap Narain Singh Deo v. Srinivas Sabata and another, (1976) 1 SCC 289, considered the expression “falls due” by observing as under :- “6. It has next been argued that the Commissioner committed a serious error of law in imposing a penalty on the appellant under Section 4A(3) of the Act as the compensation had not fallen due until it was 'settled' by the Commissioner under Section 19 by his impugned order dated May 06, 1969. There is, however, no force in this argument. 7. Section 3 of the Act deals with the employer's -6- F.A.O. No. 2496 of 2006 liability for compensation. Sub-section (1) of that section provides that the employer shall be liable to pay compensation if “personal injury is caused to a workman by accident arising out of and in the course of his employment”. It was not the case of the employer that the right to compensation was taken away under sub-Section(5) of Section 3 because of the institution of a suit in a civil Court for damages, in respect of the injury, against the employer or any other person. 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 06, 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 -7- F.A.O. No. 2496 of 2006 as the aforesaid personal injury was caused to the appellant, and there is no justification for the argument to the contrary. 8. It was the duty of the appellant, under Section 4A(1) of the Act, to pay the compensation at the rate provided by Section 4 as soon as the personal injury was caused to the respondent. He failed to do so. What is worse, he did not even make a provisional payment under sub-Section (2) of Section 4 for, as has been stated, he went to the extent of taking the false pleas that the respondent was a casual contractor and that the accident occurred solely because of his negligence. Then there is the further fact that he paid no heed to the respondent's personal approach for obtaining the compensation. It will be recalled that the respondent was driven to the necessity of making an application to the Commissioner for settling the claim, and even there the appellant raised a frivolous objection as to the jurisdiction of the Commissioner and prevailed on the respondent to file a memorandum of agreement settling the claim for a sum which was so grossly inadequate that it was rejected by the Commissioner. In these facts and circumstances, we have no doubt that the Commissioner was fully justified in making an order for the payment of interest and the penalty.” -8- F.A.O. No. 2496 of 2006 It appears that the judgment in the case of Pratap Narain Singh Deo (supra) was not brought to the notice of the Hon'ble Supreme Court when it was dealing with the case of National Insurance Company Limited (supra). While the judgment in the latter case was rendered by two Hon'ble Judges, it was a Bench of four Hon'ble Judges of the Supreme Court which dealt with the former matter and, that too, earlier in point of time. It is settled principle of law under Article 141 of the Constitution of India that the judgment of the Hon'ble Supreme Court is binding on all the Courts in the country. However, in the event of conflict between two judgments on any question of law or interpretation of statue, the later judgment needs to be followed provided both the judgments are rendered by Benches of equal strength. In the event of conflict between a judgment of a Constitution Bench rendered earlier and of a Division Bench delivered later in point of time, the former is to be followed, while applying the doctrine of stare decisis. Similarly, where the conflict is between a larger Bench judgment and a judgment by a Bench of lesser strength, opinion of the larger Bench is to be followed. In State of U.P. v. Ram Chandra Trivedi, AIR 1976 Supreme Court 2547, while considering the aforementioned issues, it was observed as follows :- “22.....It is also to be borne in mind that even in cases where a High Court finds any conflict between the views expressed by larger and smaller benches of this Court, it cannot disregard or skirt the views expressed -9- F.A.O. No. 2496 of 2006 by the larger benches. The proper course for a High Court in such a case, as observed by this Court in Union of India v. K.S.Subramanian (Civil Appeal No. 212 of 1975, decided on July 30, 1976) to which one of us was a party, is to try to find out and follow the opinion expressed by larger benches of this Court in preference to those expressed by smaller benches of the Court which practice, hardened as it has into a rule of law is followed by this Court itself.” In another judgment in the case of Commissioner of Income Tax, Bihar v. Trilok Nath Mehrotra, (1998) 2 Supreme Court Cases 289, the Hon'ble Supreme Court has observed as under :- “4. We do not find any conflict in the law laid down in the case of R.M. Chidambaran Pillai with the law laid down in the earlier two cases. The decision in the case of Raj Kumar Singh Hukam Chandji was rendered by a Bench of three Judges. Therefore, even assuming that there was a conflict between that decision and the decision rendered in Chidambaram Pillai case which was rendered by a Bench of two Judges, the decision of the larger Bench will prevail.” In New India Assurance Company Limited v. Manphool Singh and others, 2008(1) Punjab Law Reporter 706, while dealing with -10- F.A.O. No. 2496 of 2006 the issue of interest on compensation, it was held that the judgment in the case of Pratap Narain Singh Deo (supra) created a binding precedent regarding the interpretation of expression “falls due” under Section 4A(1) of the Act and the amount of compensation became due on expiry of one month from the date of injuries sustained by the workman. The relevant observation is as under :- “9. In view of the law laid down by the Hon'ble Apex Court regarding the binding precedent under Article 141 of the Constitution of India, I am of the considered view that the judgment in the case of Pratap Narain Singh Deo v. Srinivas Sabata (supra) will create a binding precedent regarding the interpretation of expression “falls due” under Section 4A(1) of the Act and amount of compensation becomes due on expiry of one month from the date of accident. Thus, interest becomes payable not from the date of order/award of the Commissioner, but on expiry of one month from the date of injuries sustained by the workmen.” In view of the decision in the case of Pratap Narain Singh Deo (supra), the compensation fell due on expiry of a period of one month from the service of legal notice dated 2.8.2001. The claim petition having been filed on 5.9.2001, a period of one month had already expired from the legal notice, therefore, the claimants-respondents were rightly held entitled to the grant of interest on the compensation amount from the -11- F.A.O. No. 2496 of 2006 date of filing of the claim petition till the final adjudication. Accordingly, there is no merit in the appeal. The same is, therefore, dismissed. In case the amount of interest has not been deposited by the appellant so far inspite of clear directions of this Court vide order dated February 11, 2008, it shall be deposited within three months from today, failing which it shall be liable to pay interest @ 12% per annum on the same from the date of the impugned order, i.e. 28.3.2006 till the actual realization. ( T.P.S. MANN ) October 21, 2008 JUDGE satish Whether to be referred to the Reporters : YES / NO -12-