HIGH COURT OF MADHYA PRADESH : JABALPUR SINGLE BENCH : HON'BLE SHRI JUSTICE J.K.MAHESHWARI MISC. APPEAL NO.4871/2010 National Insurance Company Limited Vs. Ramesh Kumar Burman and another Shri D.N. Shukla, learned counsel for the appellant. Shri Ashish Agrawal, learned counsel for respondent No.1. Shri Rajendra Puranik, learned counsel for respondent No.2. MISC. APPEAL NO.493/2011 Ramesh Kumar Barman Vs. Mahajan Wood Industries and another Shri Ashish Agrawal, learned counsel for the appellant. Shri Rajendra Puranik learned counsel for respondent No.1. Shri Gulab Sohane, learned counsel for respondent No.2. O R D E R (29/8/2011) Both the appeals are arising out of Award passed by Commissioner, Workmen's Compensation dated 26/10/2010, however, they are being disposed of by the common order. 2. M.A. No.4871/2010 filed by the Insurance Company has been admitted by this Court on 14/12/2010, without framing the substantial questions of law by the said order. But, the substantial questions of law as available in the memo of appeal, this Court is proceeding to decide those questions, which are as under : “(i) Whether the finding given by the learned 2 M.A. No.4871/2010 M.A. No.493/2011 Commissioner, Workmen's Compensation about the permanent partial disablement i.e. 40% is not correct considering the schedule-II of the Workmen's Compensation Act ? (ii) Whether the interest has been awarded contrary to the Section 4A of the Workmen's Compensation Act and the judgment of the Apex Court in case of Palraj Vs. Divisional Controller, Part-3, 2010 ACC, page 915 ? “ 3. In M.A. No.493/2011 the question of law with respect to grant of interest from the date of accident has been pressed, however, looking to the IInd question of law as framed in M.A. No.4871/2010, the issue of payment of interest may be considered simultaneously. 4. Undisputedly, the injured was working as labourer in the Saw Mill since 2002. On 15/4/2003 at about 12.30 p.m. when the appellant was working on the saw machine, his left thumb was amputated and received severe injury in the index finger of left hand. The claim form was submitted to the Insurance Company through the employer. At the time of incident, he was aged about 45 years and getting salary of Rs.2,880/- per month. Immediately FIR was lodged MLC and other formalities were also performed on the same day which are available on record. It is claimed that on account of disability an amount of Rs.4,87,987/- may be awarded along with interest @ 12% per annum. 5. The defendants have filed their separate written statements. In the written statement of defendant No.2-Insurance Company, it is stated that defendant No.1 has not given any intimation regarding the incident. More so it was the negligence of the applicant, however, the insurance company is not liable to pay any amount of compensation and the interest thereon. The defendant No.1 by filing written statement admitted the incident and injury received to injured. It is also admitted that the applicant was a workman under his employment and getting salary of Rs.2880/- per 3 M.A. No.4871/2010 M.A. No.493/2011 month. It is further stated that the claim form was submitted to the insurance company, however, the payment is to be made by the insurance company indemnifying the liability as per policy, therefore, the compensation may be awarded against the insurance company along with interest. 6. The Commissioner, Workmen's Compensation accepted the salary Rs.2880/- considering the certificate produced before him and looking to the fact that the injuries as received to the injured falls under Section 4(c)(i) Part-II of Schedule-I of the Workmen's Compensation Act, 1923 (hereinafter it be called as 'the Act'), however, accepting the disability to the extent of 40% awarded a sum of Rs.1,12,713/- and interest @ 12% per annum if the award is not satisfied within 45 days from the date of order. 7. Shri D.N. Shukla, learned counsel representing Insurance Company in M.A. No.4871/2010, contends that the finding with respect to partial permanent disablement, without the statement of doctor as recorded by the trial Court is improper. It is urged that looking to the injuries received by the injured, the statement of the medical practitioner ought to be recorded, because the injuries received to him falls under the Explanation-II of Section 4(c)(ii) of the Act. It is submitted by him that the percentage of disability may hardly be to the extent of 30% instead of 40% as accepted by the Commissioner, therefore, award of compensation without the statement of medical practitioner is against the law and also on higher side. It is further submitted that the interest as awarded by the Commissioner fastening the liability on the insurance company is improper in view of the decision of the Apex Court in the case of Pal Raj Vs. Divisional Controller, Part-3, 2010 ACC, page 915. 8. Shri Gulab Sohane, learned counsel appearing on behalf of Insurance Company in M.A. No.493/2011, contends that the Commissioner committed an error in awarding compensation 4 M.A. No.4871/2010 M.A. No.493/2011 accepting 40% disability, in fact, the disability may not be accepted until the statement of the medical practitioner in regard to the percentage of loss of earning capacity comparable to injuries as apparent from Explanation II of Section 4(c) of the Act is recorded, however, the compensation as awarded is on higher side. On the point of award of interest, it is urged that the employer ought to pay, and Insurance Company may not be held liable to pay interest. In view of the forgoing, it is prayed that the appeal filed by claimant seeking enhanced rate of interest from the date of accident may be dismissed. 9. Per contra, in counter to the arguments of learned counsel of the Insurance Company, in both the appeals, Shri Ashish Agrawal, learned counsel for the claimant, contends that left thumb of injured is amputated and also lost his index finger and middle finger of left hand, however, he is unable to perform the work. As per his contention the said injuries are of Schedule I Part II at serial No.6, and the loss of index finger is at serial No.27, thereby total percentage of disablement comes to 54%. It is further submitted that such permanent partial disablement does not fall under Explanation-II of sub Section (ii) of Section-4 (c) of the Act. It is submitted that if Commissioner has awarded compensation accepting the disability to the extent of 40% , it is not on higher side, in fact the compensation as awarded is meager looking to the percentage of disability. On the point of interest, it is said that on the date of accident FIR was lodged, MLC was performed, intimation to the Insurance Company was given by submitting claim form through employer as apparent from the record, however, the interest ought to have been awarded from the date of incident against the Insurance Company who has indemnified the liability of the owner as per policy, and even on having knowledge of the accident failed to pay the amount of compensation fell due. In view of forgoing, it is urged that interest @ 12% per annum from 5 M.A. No.4871/2010 M.A. No.493/2011 the date of accident, ought to have been awarded, modify the direction as issued by the Commissioner by the impugned award. 10. After having heard learned counsel for both the parties and also the injured present in the Court and on perusal of the record, it is apparent that there is a amputation of left thumb and due to injuries received to index finger of left hand, it is not in a workable condition. The injuries received to the injured is akin to the certificate of permanent disability which is accepted by the Commissioner by the impugned award, however, there is no reason to disbelieve such certificate. Looking to the injuries of injured, present in Court and the certificate of permanent disability, in the opinion of this Court, such injuries falls at serial No.5 and 27 of Part-II of Schedule-I of the Act. Serial No.5 is the amputation of thumb, to which disability is to the extent of 30%, and serial No.27, if the index finger is wholly affected then the percentage of the disability comes to 14%. Accordingly, total disability received by the injured is 44% comparable to loss of earning capacity. The Commissioner accepted the disability to the extent of 40% and granted compensation for loss of earning to such extent appears to be just and reasonable. In view of the foregoing discussion and looking to the injuries the arguments as advanced by learned counsel of the Insurance Company is not acceptable and is repealed. It is to be observed that the statement of the medical practitioner to record a finding with respect to loss of earning capacity comparable to injuries is necessary only when the injuries of the injured falls under Section 4 (c) (ii), Explanation-II of the Act. In case of permanent partial disablement resulted from the injury under Section 4 (C) (1) of the Act the statement of medical practitioner assessing the loss of earning capacity is not required. In the opinion of this Court, the finding of loss of earning due to 40% disability as recorded by the Commissioner is in accordance to law, the substantial question of law No.1 is hereby 6 M.A. No.4871/2010 M.A. No.493/2011 answered accordingly. 11. By the impugned award the Commissioner directed to pay interest @ 7.5% from the date of filing of the application till passing the award. It is further directed that if the said amount is not deposited within 45 days, then interest @ 12% per annum from the date of award shall be payable. The Insurance Company relying upon the judgment of Pal Raj Vs. Divisional Controller, (2010) 10 SCC 347, submitted that the award of interest against insurance company from the date of application is contrary to law laid down in the said judgment. On the other hand claimant, in his appeal, contended that issuance of direction to pay interest 7.5% from the date of application and if compensation settled and not paid within 45 days from the date of award is not in accordance to law, in fact the interest must be paid if the compensation has not paid within 30 days from the date of accident and the rate thereof must be 12% per annum as specified under Section 4A (3)(a) of the Act. 12. As the issue posed for answer by the insurance company and the demand made by the claimant relates to grant of interest on the amount of legally payable compensation and what would be date on which it fall due. Prior to dealing with the said question, the law laid down by the Apex Court in various judgments is required to be analysed to crystallize the legal position emerges up till now. Long back the question of payment of interest and from which date it shall be payable by the employer has come up for consideration before the Bench consisting of four Judges of the Hon'ble Supreme Court in the case of Pratap Narain Singh Deo V. Shrinivas Sabata and another, 1976 A.C.J.141, in the light of Section 3, & 4 A of the Workmen's Compensation Act the Apex Court in para-7 and 8 has held as under : “7. Section 3 of the Act deals with the employer's 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 7 M.A. No.4871/2010 M.A. No.493/2011 workman by accident arising out of and in the course of his employment”. It was not the case of the employer that the right of compensation was taken away under-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 6, 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 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 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 4- A(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 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 8 M.A. No.4871/2010 M.A. No.493/2011 justified in making an order for the payment of interest and the penalty.” 13. In the case of Maghar Singh V. Jashwant Singh, 1997 ACJ 517, three Judges Bench of Hon'ble the Apex Court has considered the issue of payment of interest and directed to pay from the date of accident which was prior to the date of amendment. The relevant paras are as thus : “5. The accident occurred way back in 1984 and, therefore, we must decide the rate of interest keeping that factor in mind. We think it would be appropriate to grant interest at the rate of 9 per cent per annum. 6. In the result, we allow this appeal, set aside the orders of the courts below and hold that the appellant is entitled to compensation of Rs.24,0000/- with interest at the rate of 9 per cent per annum from the date of the accident, i.e. 26.7.1984 till the date of recovery or actual payment. We direct the respondent to deposit the amount in the Court of Senior Sub Judge, Sangrur, within three months from today, failing which the appellant will be entitled to recover the same in accordance with law. There will be no order as to costs.” 14. In the case of Ved Prakash Garg V. Premi Devi and others, 1998 ACJ 1, the question regarding liability of payment of interest and penalty against the insurance company and with effect from which date came for consideration before the two Judges Bench of the Hon'ble the Apex Court and in the said case Considering the scheme of the Workmen's Compensation Act and the Scheme of Motor Vehicle Act, 1988 particularly Section-146 which specifies necessity for insurance against third party risk and Section-147 which specifies requirement of policy and limits of liability of the insurance company held as under : “Scheme of the Act: Before we deal with the 9 M.A. No.4871/2010 M.A. No.493/2011 rival contentions and have a look at the divergent view-points expressed by the different High Courts on this question, it will be necessary to keep in view the relevant statutory schemes in the light of which this controversy has to be resolved. The Compensation Act deals with the provisions for payment by certain classes of employers to their workmen of compensation for employment injuries caused by accident. There is no dispute between the parties that the deceased drivers and cleaner in these cases were workmen employed by the appellant-employers. Section 3 of the Compensation Act deals with 'Employer's liability for compensation'. Sub-section (1) thereof lays down that 'if personal injury is caused to a workman by accident arising out of and in the course of his employment, his employer shall be liable to pay compensation in accordance with the provisions of Chapter II'. It is also not in dispute that fatal personal injuries were caused to the workmen by accidents which arose out of and in the course of their employment because of which they were working on the motor vehicles of the appellant-employers when they met their ends on account of motor accidents. Section 4 of the Compensation Act deals with 'Amount of compensation'. It lays down the statutory scheme for computing the compensation payable in cases of the types of accidental injuries suffered by the workmen concerned. The employer, on a conjoint reading of Sections 3(1) and 4(1) of the Compensation Act, would be liable to make good the liability for paying compensation to the insured workmen under circumstances contemplated by these provisions. Then follows Section 4A of the Compensation Act with which we are directly concerned. It is, therefore, necessary to extract it in extenso. The said Section during the relevant time, in 1992, when the accidents were caused read as under : "4-A. 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 10 M.A. No.4871/2010 M.A. No.493/2011 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 may direct that, in addition to the amount of the arrears, simple interest at the rate of six per cent per annum on the amount due together with, if in the opinion of the Commissioner there is no justification for delay, a further sum not exceeding fifty per cent of such amount, shall be recovered from the employer by way of penalty." The said Section was further amended by Act 30 of 1995 with effect from 15-9-1995 and in the amended form it now 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 11 M.A. No.4871/2010 M.A. No.493/2011 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." A mere look at the aforesaid provision shows that Section 4A deals with the time for payment of compensation as required to be computed under Section 4. Sub-section (1) thereof mandates that compensation shall be paid as soon as it falls due. Sub-section (2) thereof 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 by depositing it with the Commissioner or to pay it directly to the workman. It is obvious that such an obligation of the employer would not arise under Section 4A 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 4A 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 4A 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 4A(3) interest at the rate provided therein and also penalty as contemplated by sub-clause (b) thereof as per the amended Section 4A (3) of the Compensation Act but even under the unamended Section 4A (3) 12 M.A. No.4871/2010 M.A. No.493/2011 which applied at the relevant time a clear distinction is 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. Thus even in the scheme of unamended Section 4A (3) or as per the amended Section 4A (3) read with clauses (a) and (b) thereof, it becomes clear that additional amount of compensation can be levied against the defaulting employer by way of penalty if it is shown that there is no justification for the delay on his part in making good the compensation amount to the claimant. Interest payable on the principal amount, if not paid when it fell due, is not considered by the Legislature to be a penalty. This is further highlighted by the proviso to Section 4A (3) as substituted by Act 30 of 1995 which clearly indicates that a penalty amount under clause (b) cannot be imposed against the employer without giving him reasonable opportunity to show cause. No such show cause notice is contemplated while imposing interest on default of payment of the principal amount on the part of the employer as per Section 4A (3) (a). Absence of this provision is obviously based on the legislative intent that interest on principal amount is not