FAO No.5312 of 2009 (O&M) -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH FAO No.5312 of 2009 (O&M) Date of Decision: 11.2.2010 Navdeep Agro Board, Ram Nagar, Sirsa ..Appellant. Vs. National Insurance Co.Ltd., Sirsa and others ..Respondents. CORAM : HON'BLE MR.JUSTICE RAKESH KUMAR JAIN Present: Mr.B.S.Mittal, Advocate for the appellant. Mr.Dhiraj Narula, Advocate for the respondents. Rakesh Kumar Jain, J. The employer is in appeal against the order of learned Commissioner under the Workmen's Compensation Act, Sirsa dated 4.6.2009 who has awarded compensation to the tune of Rs.4,15,960/-, interest to the tune of Rs.2,08,603 and penalty to the tune of Rs.1,03,990/- to respondents No.2 to 7. The only grievance that has been raised by learned counsel for the appellant is with regard to penalty to which he has submitted that before imposing the penalty, the learned Commissioner has not issued a notice affording a reasonable opportunity to the appellant to show cause as to why he is not liable to pay the penalty. In this regard, he has referred to Section 4 (a)(3)(b) of Workmen's Compensation Act, 1923 (for short `the Act') and also relied upon a decision of the Himachal Pradesh High Court in the case of New India Assurance Co. Versus Maya Devi and others 2005 LIC FAO No.5312 of 2009 (O&M) -2- 4018. On the other hand, learned counsel for the claimants, who have already received amount of compensation and interest, has supported the order of the learned Commissioner alleging that once the appellant was appearing before the Commissioner in the same proceedings, he is not required to be served with another notice at the time of imposition of penalty. He has relied upon a decision of Bombay High Court in the case of Ramalu Balkrishna Sagar Vs. Rambhau Tukaram Shendre & Others 2006-IV-LLJ (Suppl)-NOC-15. I have heard learned counsel for the parties and have gone through the record with their assistance. The dispute in this case is only with regard to the penalty. Before adverting to the rival contentions, it would be relevant to refer to the basic provisions of law much less Section 4A of the Act which reads as under : “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 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 FAO No.5312 of 2009 (O&M) -3- 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: 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 the penalty payable under sub-section (3) shall be paid to the workman or his dependent, as the case may be.” As per Scheme of the Act, amount of compensation is assessed under Section 4 of the Act whereas amount of penalty is assessed and ordered to be paid under Section 4A of the Act. The main application in which the compensation is assessed, is filed under Section 4 of the Act which was contested by the appellant and compensation has been assessed but insofar as the penalty is concerned, it is guided by the provisions of Section 4A which provides that before imposition of penalty, the respondent on whom, the penalty is going to be imposed, has to be given a show cause notice and a reasonable opportunity of being heard. In the judgment cited by learned counsel for the appellant in the case of New India Assurance Co. FAO No.5312 of 2009 (O&M) -4- (supra), the Hon'ble Himachal Pradesh High Court has held that the provision is mandatory and at the time of imposition of penalty, show cause notice has to be given. The observations in this regard, are contained in para 8 of the judgment, which reads as under : “As regard the challenge to the order regarding payment of penalty, I feel that the order is bad on account of the Commissioner having not afforded any opportunity, leave alone a reasonable opportunity, to the insured, i.e. the employer of the deceased to show cause against the proposed order for the payment of penalty, as per requirement of proviso to clause (b) of sub-section (3) of Section 4A of Workmen's Compensation Act, 1923. It is true that the employer was proceeded ex parte but that was only in respect of petition for award of compensation. In respect of the proposed order for payment of penalty, a fresh notice was required to be issued to the employer, especially when he was ex parte in the proceedings for award of compensation, in view of the aforesaid provision of law. The opportunity having not been granted to the employer to show cause against the proposed order for payment of penalty, the order of the Commissioner to that extent can also not be sustained.” Insofar as the observation made by the Bombay High Court is concerned, it dwells upon a situation where there was a specific issue of penalty framed by the Commission, therefore, the said party/employer was not held entitled to another opportunity to contest that issue. In that situation, the Bombay High Court has held that once there is a notice in the main petition i.e. under Section 4 of the Act then it would also enure for proceedings under Section 4A of the Act. After hearing both learned counsel for the parties, I am of the view that in the present case, there is no issue with regard to penalty and in FAO No.5312 of 2009 (O&M) -5- case penalty is to be imposed, the mandate of Section 4(a)(3)(b) of the Act is to be abide by and a show cause notice has to be issued to the respondent on whom penalty is going to be imposed. Thus, I agree with the observations made by the Himachal Pradesh High Court in the case of New India Assurance Company Ltd. (supra) and hold that the impugned order is illegal and erroneous as no opportunity of hearing much less a show cause notice was given to the appellant at the time when penalty was imposed. In view of the above, the present appeal is allowed only to the extent that order of imposition of penalty without giving show cause notice and opportunity of hearing is illegal and thus imposition of penalty is set aside. However, the matter is remanded back to the Commissioner under the Workmen's Compensation Act, Sirsa to decide the question of penalty in compliance of Section 4 (a)(3)(b) of the Act by serving a show cause notice by giving an opportunity of hearing to the appellant. In view of the above, the present appeal is disposed of and the parties are directed to appear before the Commissioner under the Workmen's Compensation Act on 26.2.2010. (Rakesh Kumar Jain) 11.2.2010 Judge Meenu