FAO No.1479 of 1997 -1- IN THE HIGH COURT FOR THE STATES OF PUNJAB AND HARYANA AT CHANDIGARH FAO No.1479 of 1997 Date of Decision. 08.07.2010 The New India Assurance Co. Ltd., Regional Office, through Shri K.B. Jindal, Legal Officer, its duly constituted Attorney Regional Office, Sector 17-A, Chandigarh ........Appellant Versus Smt. Sharmila wd/o Vikram Singh s/o Kanwal Jeet @ Kanwal Singh and others ...Respondents Present: Mr. Inderjit Sharma, Advocate for Mr. Pardeep Bedi, Advocate for the appellant. None for the respondents. CORAM:HON'BLE MR. JUSTICE K. KANNAN 1. Whether Reporters of local papers may be allowed to see the judgment ? Yes 2. To be referred to the Reporters or not ? Yes 3. Whether the judgment should be reported in the Digest?Yes -.- K. KANNAN J. 1. The subject of challenge in appeal by the insurer is against the award of the workmen's Compensation Commissioner in awarding Rs.12349/- as interest on the amount determined by him and Rs.22,137/- as penalty. The claim of the appellant is that the liability to pay interest and penalty shall be cast only on the employer and the liability cannot be fastened on the insurance company. The case arises out of the death of the workman who was a driver driving the tanker owned by the employer. It must be noticed that at the trial, the income of the deceased, the employer- employee status and the cause of death as resulting in the course of FAO No.1479 of 1997 -2- employment had all been admitted. It was also brought out in evidence that there has been a legal notice sent to the employer and the insurer before the filing of petition but there had been no response. On assessing the compensation at Rs.1,00,000/- as per the schedule prescribed under the Act, the Tribunal had added 25% penalty be paid on compensation and also directed interest @6% for the period from 27.10.1994 to 26.02.1997, the date when the order was passed. In all, an amount of Rs.1,23,082/- was awarded. 2. The contention on behalf of the insurance company is that the liability to make the payment is assessed only under the award and there is no scope for awarding interest prior to the date of the application before the Commissioner or impose penalty for non- compliance of the notice issued. The learned counsel appearing for the insurance company relies on the judgment of Hon'ble Supreme Court in Ved Praksah Garg Vs. Premi Devi and others (1997) 8 SCC 1, which dealt with the relevant provisions relating to award of penalty and interest under the Workmen's Compensation Act and whether the insurer shall be liable to meet the award of the Workmen's Compensation Commissioner imposing penalty and interest against the insured. The facts of the case detailed in Ved Prakash Garg's case would show that the insured himself had immediately informed the insurer about the accident and though the insurance company was bound to pay to the heirs of the deceased employee, it did not carry out the obligation. It was a case where the legal representatives pursued the remedy under the Workmen's Compensation Act by filing a petition before the Workmen's FAO No.1479 of 1997 -3- Compensation Commissioner against the employer as well as the insurer. The Commissioner awarded a penalty, apart from ascertaining the compensation payable under the scale provided under the Act and had also provided for payment of interest @6% from the date of the accident by reference to Sections 4-A(3)(a) & (b) under the Workmen's Compensation Act. The Commissioner had found both the employer and the insurer to be jointly and severally liable. While the claimants and the employer were satisfied with the award, the insurer alone was in appeal contending that while a liability could be fastened for interest or penalty against the employer, it could not be co-terminus with the liability of the insurer, for the insurer could not be made liable for a period before the filing of the petition for interest or for penalty without following the procedure set out under Section 4-A of the Act. The Hon'ble Supreme Court held that claim of penalty could ot be made against the insurer for the delay in paying up the compensation amount within the period contemplated under Section 4-A(3) of the Workmen's Compensation Act. In the light of the judgment of the Hon'ble Supreme Court in Ved Prakash Garg's case, I hold that the direction for payment of penalty against the insurer at the first instance even while passing the award, without a show cause notice under circumstances of default as contemplated under the Act is not legally tenable. 3. As regards the direction for payment of interest from the date of the accident till the date of the award against an insurer, the matter has come for consideration before the Hon'ble Supreme FAO No.1479 of 1997 -4- Court in National Insurance Company Limited Vs. Mubasir Ahmed and another (2007) 2 SCC 349. The Hon'ble Supreme Court held that direction for payment of interest under Section 4-A(3) and (1) shall start on completion of one month from the date on which the compensation fell due. The date when compensation becomes due, the Hon'ble Supreme Court held could not be on the date of the accident but only the date of adjudication of claim. The Hon'ble Supreme Court took note of the language under Section 4-A(1), which is employed only the expression of the date when the compensation “falls due” and not “from the date of accident.” It, therefore, held that unless there is an adjudication, the question of the amount falling due does not arise. This direction of the Hon'ble Supreme Court was in the context of when there was a claim for compensation for certain injuries and when the Commissioner had to make an adjudication relating to the assessment of disability, percentage of loss of earning power, the factor to be applied etc., which are invariably contentious issues. This judgment must, therefore, be understood as applicable in cases where without an assessment by the Commissioner, the liability of the employer could not have been said to be ascertained and the liability as falling due. 4. Cases of death where the employer and the insurer have details of the age and the salary drawn by him, the ascertainment of compensation payable to the legal representatives is a mere mechanical exercise. There the liability arises on the date when the death takes place and the employer and the insurer have knowledge of the death as arising on account of employment. If there was a FAO No.1479 of 1997 -5- bona fide dispute as regards the employer's status or the cause of death and the dispute has been raised by the employer, the liability may arise only on the date when the Commissioner determines the death as arising out of the accident or when the employment status is ascertained. On the other hand, if there is no dispute with regard to the employment status or the cause of death as arising in the course of or out of employment, then the liability must be taken as having arisen even when the death occurs and when a notice of claim is received by the employer and the insurer. It should again be noted that in every case where a dispute is taken up by the employer regarding the employment status or the cause of accident, it can not be said that the liability could arise only when it is determined by the Commissioner. It all depends again on the factual considerations. If it were not to be so, it will cast a premium on the employer taking up irresponsible defences deliberately denying the employment status and the cause of death as arising out of or in the course of employment. If there are no bona fides and the Commissioner finds so, the liability would start even from the date of the death. On the other hand, if there was a bona fide dispute, then the liability would commence only from the date when an adjudication is made. Learned counsel appearing for the appellant relies on a Division Bench ruling of this Hon'ble Court in United India Insurance Company, Rohtak Vs. Shanti Devi and another in LPA No.265 of 1997 where both as regards penalty and interest, the insurer was exonerated following the decision of the Hon'ble Supreme Court in Ved Prakash Garg's case and Mubasir Ahmed's FAO No.1479 of 1997 -6- case (supra). The decision of the Hon'ble Division Bench was not in that case dealing with an issue whether the liability in case of death, was contentious or not with regard to either the employment status or his salary or the cause of death as resulting in the course of employment, or whether it was required to be adjudicated by the Workmen's Compensation Commissioner or not. It cannot be, therefore, taken as an authority for laying down a general proposition that in all cases, the liability for payment of interest will arise only from the date of the award even when the insurer had been informed by means of a notice alongside a notice issued to the insured about the accident and death. 5. In this case, factually the cause of death and the employment status had never been denied either by the employer or by the insurer when the notice had been sent immediately after the death prior to the filing of the petition. There had been no response by the insurer. 6. The award of the workmen's Compensation Commissioner is, therefore, set aside only in so far as it cast liability for payment of penalty against the insurer. The insurer shall stand exonerated of such liability. As regards the payment of interest @6% for the period from 27.10.1994 to 26.02.1997 amounting to Rs.12,349/-, the award stands confirmed. The appeal is, therefore, partly allowed in the manner indicated above. (K. KANNAN) JUDGE July 08, 2010 Pankaj*