1 IN THE HIGH COURT OF JUDICATURE OF BOMBAY BENCH AT AURANGABAD FIRST APPEAL NO.1044 OF 2009 Udhav Rangnathrao Pawar, Age 53 years, Occ. Business, r/o Sambar, Tq. Parbhani, District Parbhani. ..Appellant Versus 1. Sheshrao Ramji Jogdand, Age 48 years, Occ. Labour, R/o Gour, Taluka Purna, District Parbhani. 2. The Branch Manager, New India Assurance Co.Ltd., Yashodeep Buioding, Nanalpeth, Parbhani. ..Respondents ... Advocates appearing for : Appellant: Shri Girish Rane, Respondent No.1 : Shri S.B.Ghatol Patil, Respondent No.2 : Served. ... CORAM : R.K.DESHPANDE, J. Reserved on : August 17, 2009 Pronounced on : September 2, 2009. 2 JUDGMENT :- 1. This appeal is filed by the original respondent No.1, who is the owner of the Tempo No. MH-22-2167, challenging the judgment and award dt. 7.2.2009 passed by the learned Civil Judge S.D. and Ex-officio Commissioner for Workmen's Compensation, at Parbhani in N.F.A. No.20 of 2007. By this award the appellant / owner is directed, along with respondent No.2 New India Assurance Company Ltd., to pay the amount of Rs.90,000/- jointly and severally to respondent No.1 claimant. It has further directed the appellant to pay simple interest at 12 per cent per annum on the decretal amount of Rs.90,000/- from the date of the incident i.e. . 12.2005 till its full liquidation. It has further directed the appellant to pay Rs.45,000/- towards penalty. 2. The appellant has challenged this award to the extent of directing the appellant to pay simple interest at the rate of 12 per cent per annum on the decretal sum from the date of incident i.e. 2.12.2005 and also to the extent it directs the appellant to pay penalty of Rs.45,000/-, which is 50% of the total amount of compensation. The order to the extent it holds the appellant and respondent No.2 jointly and severally liable to pay the compensation o the tune of Rs.90,000/- to respondent No.1, has not been challenged. 3. The facts, in brief, leading to the present appeal are as under:- Respondent No.1 / claimant filed a petition on 24.4.2007, 3 under Section 19 read with Section 22 of the Workmen's Compensation Act, 1923 (hereinafter, "the said Act", for brevity), registered as N.F.A.No. 20 of 2007 in which the appellant was added as respondent No.1 and the insurance company was added as respondent No.2. Respondent No.1, in his claim petition, alleged that the appellant is the owner of the Tempo bearing No. MH-22-2167, which was insured with respondent No.2 insurance company. Respondent No.1 alleged that he was employed by the appellant as a cleaner / labour on the said Tempo. While the said Tempo was proceeding towards Parbhani, one Balasaheb Pawar, who was driving the said Tempo, lost his control at 1.15 a.m. on 2.12.2005, near Deogaon Phata, as a result, the Tempo toppled down and respondent No.1, who was in Tempo, sustained injuries to his hand, ribs and spinal cord. It was alleged that the report was lodged at Police Station Jintoor, where the offences under sections 279 and 337 of the Indian Penal Code were registered against the driver Balasaheb, vide Cr.No. 218 of 2005. It was alleged that respondent no.1 was admitted at Civil Hospital Parbhani, for two days and thereafter, was shifted to Bhandari Hospital, Nanded. 4. The Respondent No.1 claimed that he was aged about 45 years on the day of the incident and was earning Rs.4,000/- per month. He claimed total compensation of Rs.4,06,656/- inclusive of Rs.50,000/- towards the medical expenses incurred by him. He alleged that he suffered an injury due to rash and negligent driving of said Balasaheb Pawar. He alleged that he suffered an injury, as a result of accident, which occurred out of and in the course of his employment with the appellant. Respondent No.1 further claimed an amount of interest at the rate of 12 4 per cent per annum on the amount of compensation, from the date of accident i.e. 2.12.2005 and also claimed penalty to the extent of 50 per cent of the total amount of compensation. 5. The appellant / owner filed his written statement and denied the claim. Appellant denied that the accident occurred out of and in the course of an employment of respondent No.1 as a Cleaner / Labour, as alleged. The appellant denied his liability and also disputed the relationship of master and servant or employer and employee between the appellant and respondent No.1. Alternatively, the appellant submitted that the tempo was insured with respondent No.2 insurance company and if at all any liability to pay compensation arises, it is respondent No.2 company, which is liable to pay the same in terms of the policy, in respect of the vehicle. 6. The Commissioner decided the claim of respondent No.1 by his judgment and award dt.7.2.2009. It was held that respondent No.1 was an employee of the appellant and he sustained injuries out of and during the course of the employment. It was also recorded that respondent No.1 suffered injuries due to rash and negligent act of the driver of the vehicle. The Commissioner, although assessed the compensation payable to the respondent No.1 at Rs.40,665/- directed to pay the compensation of Rs. 90000/- jointly and severally by the appellant and respondent No. 2, in view of the provisions of Section 4(1)(b) of the said Act, to respondent No.1. The Commissioner recorded a finding that the appellant and respondent No.2 have neglected to pay the said amount of compensation to the respondent 5 No.1 and no satisfactory explanation was offered by the appellant about non payment of compensation within one month from the date of incident. Hence, the appellant was held liable to pay 50 per cent penalty i.e. Rs. 45,000/- and also interest at the rate of 12 per cent per annum on decretal sum of Rs.90,000/- from the date of incident till its full liquidation. The aforesaid award is the subject matter of challenge in this appeal at the instance of the owner of the vehicle. 7. The factual position, which remains un-disputed, as a result of the findings recorded by the Commissioner is that the accident occurred on 2.12.2005, the claim petition was filed on 24.8.2007, the award was passed on 7.2.2009, one month's period specified in the award to pay the compensation expired on 7.3.2009, the amount of compensation of Rs. 90,000/- was deposited in terms of the award on 2.6.2009, the respondent No.1 claimed the interest at the rate of 12 per cent per annum as provided under clause (a) of sub-section (3) of section 4-A of the said Act @ 12 per cent per annum on the amount of compensation awarded from the date of accident i.e. 2.12.2005 and that the respondent No.1 also claimed the penalty of Rs.2,02,328/-, which is 50 per cent of the total compensation claimed in the petition. The relationship of the employer and employee between the appellant and respondent No.1 is established. It is also true that the accident arose out of and in the course of the employment of respondent No.1 with the appellant. The appellant was the owner of the Tempo and the Tribunal has recorded a finding that it was being driven in the rash and negligent manner by said Balasaheb, as a result of which the respondent No.1 sustained the injuries. 6 8. The learned counsel for the appellant relying upon the judgment of the Apex Court in the case of National Insurance Co.Ltd. Vs. Mubasir Ahmed and another [AIR 2007 SC 1208], urged that in cases, where the employer totally denies his liability to pay compensation, the expression "fell due" occurring in sub-section (3) of section 4-A of the said Act has to be construed in relation to the date of adjudication of claim or determination of liability by the Commissioner, under Section 19 of the said Act. It is urged that in the instant case, the employer has totally denied his liability to pay compensation. The Commissioner, for the first time, adjudicated the claim or determined the liability by the impugned award dated 7.2.2009 and hence the Commissioner was wrong in directing the payment of interest at the rate of 12 per cent per annum with retrospective effect from 2.12.2005 i.e. the date of incident, more particularly when claim petition itself is filed after about one year and eight months. According to learned counsel, at the most, the interest under sub clause (a) of sub-section (3) of section 4-A of the said Act could be levied only from the date of expiry of one month, from the date of passing of the award. In support of this plea learned counsel also relied upon the judgment of this Court delivered on 5.8.2009 in First Appeal No.1562 of 2009 in the case of The Nandi Sahakari Sakhar Karkhana Vs. Dnyanoba. Relying upon another judgment of the Apex Court in the case of Oriental Insurance Co. Ltd. Vs. Mohd. Nasir and another [2009 AIR SCW 3717], learned counsel for the appellant, alternatively urged that the provision regarding higher rate of interest as contemplated by sub-section (3) of section 4-A of the said Act would be attracted only from the date of passing 7 of the award and the Commissioner could, at the most, have levied interest at the rate of 7.5 per cent per annum from the date of filing of the application till the date of award. 9. So far as the challenge to imposition of penalty is concerned, it is the contention raised by the learned counsel for the appellant that no order imposing penalty could have been passed under sub-clause (b) of sub-section (2) of section 4-A of the said Act, without issuing a show cause notice and giving the appellant reasonable opportunity of being heard in the matter. According to the learned counsel, the appellant was entitled to have an opportunity to furnish an explanation to satisfy the Commissioner about the delay caused in making the payment and it is only upon the Commissioner finding the explanation to be un-satisfactory, the order imposing penalty could have been passed. In support of his contention, learned counsel for the appellant relies upon the decision of this Court delivered on 5.8.2009 in First Appeal No.1562 of 2009 - The Nandi Sahakari Sakhar Karkhana Limited Versus Dnyanoba Kashinath Aare and others. Learned counsel submitted that this Court has taken a view that it is only if the appellant fails to make the payment within the period of one month, a show cause notice calling upon the appellant to explain the delay, is required to be issued and thereafter, the Commissioner can pass an order imposing the penalty. Learned counsel also relies upon the decision of this Court in the case of State of Maharashtra Vs. Aarti Ashok Kapshikar and others reported in [2008(1) Bom. C.R. 919]. 10. On the contrary, learned counsel for respondent No.1 relying 8 upon the provisions of section 4-A read with sections 3 and 4 of the said Act, contended that the amount of compensation "falls due" on the date of an accident, which arises out of and in the course of employment. He further submitted that the mere adjudication of the claim by the Commissioner on a future date would not absolve the appellant from paying the amount of interest with effect from the date of incident (or even the penalty). According to learned counsel for respondent No.1 / claimant, the employer becomes liable to pay the compensation as soon as the personal injury is caused to the workman as a result of an accident which arises out of and in the course of an employment. Learned counsel, in support of his contention, relied upon the decisions of the Apex Court in the cases of Pratap Narain Singh Deo Vs. Shrinivas Sabata and another [AIR 1976 SC 222] and Ved Prakash Garg Vs. Premi Devi and others [AIR 1997 SC 3854]. Learned counsel urged that even in a cases where the employer totally disputes his liability to pay the compensation, upon determination of the compensation by the Commissioner, it should be deemed that the compensation so determined had "fallen due" on the date of accident and hence the interest was liable to be paid with effect from the date of the accident. Learned counsel further relied upon the unreported decision of the learned Single Judge of this Court delivered in First Appeal No.1030 of 2007 M/s Muley Brothers Pvt. Ltd. Vs. Samindrabai, dated 25.6.2002 and another judgment of the learned Single Judge of this Court in the case of Danial Nana Pathare Vs. M/s Tilaknagar Industries Ltd. [2009 (4) ALL MR 787. In support of his contention that no show cause notice was required to be given, the learned counsel relies upon the reported decision of this Court in the case of United Insurance Co. Ltd. Vs. Sarsabai Kishanrao 9 Sontakke and others [2006 (3) Mah.L.R.438]. 11. In order to deal with the rival submissions made by the parties, it is necessary to reproduce the provisions of section 4-A of the said Act, which reads as under:- "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 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 percent 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 as 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 bank for the time being included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934). (3A) The interest payable under sub-section (3) shall be paid to the workman or his dependent, as the case may be." 10 The first question, in this context, which arises is regarding the day/date on which, the compensation under section (1) of section 4-A of the said Act "falls due". The second question, which arises is the day/date on which the interest under clause (a) of sub-section (3) of section 4-A of the said Act would start running on the amount which fell due. The answer to both these questions are not simple and for that purpose the scheme of the relevant provisions of the said Act will have to be understood. 12. Section 3 of the said Act deals with the employers liability for compensation. Sub-section (1) of section 3 of the said Act states that if personal injury is caused to a workman by an accident arising out of and in the course of his employment, his employer shall be liable to pay the compensation in accordance with this chapter. What is the amount of compensation, which is required to be paid by the employer to the workman under sub-section (1) of section 3, is specified under section 4. Section 4-A of the said Act deals with the compensation to be paid when due and the penalty for default. Sub-section (1) of section 4-A states that the compensation shall be paid as soon as it "falls due". Sub-section (3) of section 4-A states that where any employer is in default in paying the compensation under this Act, within one month from the date it "fell due", the Commissioner can direct in terms of clause (a) that the employer shall, in addition to the amount of arrears, pay simple interest thereon, at the rate of 12 per cent per annum. Clause (b) further empowers the Commissioner to direct the employer to pay, in addition, a further sum not 11 exceeding 50 per cent of such an amount by way of penalty, if, in his opinion, there is no justification for delay in payment of arrears and interest. However, the only rider on imposition of penalty under clause (b) is that the employer has to be given a reasonable opportunity to show cause why the order imposing the penalty should not be passed. 13. In absence of section 4-A (1) of the said Act specifying the date on which the compensation under section 4 "falls due", what would be date when the compensation under section 4 would "fall due", is the question to be decided in this case. In this respect, the decision of the Apex Court in the case of Pratap Narain (supra) needs to be considered. It was an appeal preferred by the owner of the vehicle challenging the imposition of penalty as well as the interest on the amount of compensation determined by the Commissioner under section 19 of the said Act. The Apex Court found no force in the argument that the Commissioner committed a serious error of law in imposing the penalty on the appellant, under section 4-A(3) of the said Act for the reason that the compensation had "fallen due", only when it was settled by the Commissioner under section 19 of the said Act. It was held that the employer became liable to pay the compensation, as soon as the personal injury was caused to the workman by the accident, which admittedly arose out of and in the course of an employment. The Apex Court observed that it is, therefore, futile to contend that the compensation did not "fall due" until after Commissioner order. It was further held that there is nothing to justify the argument that the employers liability to pay the compensation under section 3 in respect of the injury sustained arises, only after the 12 settlement as contemplated by section 19 of the said Act. 14. The judgment of the Apex Court in Ved Prakash's case (supra) considered the provisions of sub-section (2) of section 4-A of the said Act. It was an appeal preferred by the owner of the vehicle, challenging the judgment and order of the High Court, exonerating the insurance company from payment of interest and penalty, under clauses (a) and (b) of sub-section (3) of section 4-A of the said Act, and holding the owner liable to pay the interest from the date of accident and also the penalty under clause (d) at the rate of 50 per cent on the compensation payable. It was held that the insurance company is liable to pay the interest, however, it was exonerated from payment of penalty, it being the liability only that of an employer. So far as the imposition of interest was concerned, the owner as well as the insurance company, both were held liable to pay the interest on the amount of compensation determined by the Commissioner under section 19 of the said Act, with effect from the date of occurrence of an accident. 15. While construing the provisions of sub-section (2) of section 4-A of the said Act, the Apex Court in Ved Prakash's case held that it contemplates a situation wherein the employer, though accepted his liability to pay the compensation to his injured workman, disputes the extent of claim of compensation and in such case, sub-section (2) enjoins him to make a provisional payment based on the extent of accepted liability by depositing it, with the Commissioner or paying it directly to the workman. It was observed that it is obvious that such an obligation of the 13 employer would not arise under section 4-A(2), if he totally disputes his liability to pay on the grounds like the injured person being not his employee or that the accident was caused to him at the time when he was not in the course of the employment. It was held that if such disputes are raised by the employer, then his obligation to make the provisional payment under sub-section (2) of section 4-A of the said Act would not arise and his liability would depend upon the final adjudication by the Workmen's Commissioner at the end of the trial. 16. It was further held in Ved Prakash's case 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 a case where the provisional payment becomes due. But when the employer does not accept his liability as a whole, under the circumstances enumerated earlier, then section 4-A(2) would not get attracted and one month's period would start running from the date on which the compensation payable by the employer is adjudicated upon by the Commissioner. Significantly, it was held by the Apex Court that in either case, the Commissioner would be justified in directing the payment of interest in such a contingency, not only from the date of the award but also from the date of accident concerned. It was held that such an order passed by the Commissioner would remain perfectly justified on the scheme of section 4-A(3)(a) of the said Act. 17. The learned counsel for the appellant has relied upon the judgment of the Division Bench of the Apex Court in the case of Mubasir Ahmed (supra). It was an appeal filed by the insurance company and the 14 Apex Court was considering the question of payment of interest under clause (a) of sub-section (3) of section 4-A of the said Act. It was held that, the compensation becomes due only on the basis of the adjudication of the claim and unless such adjudication is done, it was held that the question of compensation becoming due does not arise. It was further held that the Legislature has not used the expression "from the date of accident" but has used the expression "falls due", and in the light of this, it was held that obviously the interest cannot be charged from the date of accident but it has to be charged from the date of adjudication by the Commissioner. The Apex Court, therefore, set aside the date of accident, as the date, fixed by the High Court for charging the interest. This decision does not refer to the earlier judgments delivered by the Apex Court in cases of Pratap Narain and Ved Prakash cited supra. 18. The learned counsel for the appellant, thereafter, relied upon the latest decision of the Apex Court in the case of Oriental Insurance Co. Ltd. Vs. Mohd. Nasir and another [2009 AIR SCW 3717]. In this judgment, the Apex Court considered the question with regard to the payment of interest and it was held that there cannot be any doubt, whatsoever, that the interest would be from the date of default and not from the date of award of compensation It was held that the provision of interest, as it appears from the plain reading, is penal in nature. It has been held that the said Act does not prohibit grant of interest at a reasonable rate from the date of filing of the claim petition, till the order is passed. It has been held that only when sub-section (3) of section 4 would be attracted, an higher rate of interest would be payable, where