Case: Ved Prakash Garg Vs. Premi Devi

Motor Vehicles Act as discussed by us earlier. We may in this connection refer to a decision of the High Court of Delhi in the case of Oriental Insurance Co. Ltd. v. Hasmat Khatoon and Ors., (supra). A learned Single Judge of the Delhi High Court on the schemes of the Workmens Compensation Act and the Motor Vehicles Act has taken the view that the liability covered by the statutory coverage of insurance is to make good the claim for compensation and that liability would not include interest and penalty. In our view, the said decision lays down the correct legal position so far as award of penalty against the insured employer is concerned. But in so far as it holds that even for the claim of interest on the principal amount of compensation, as imposed on the insured, the insurance company would not remain liable, it has to be overruled. 18. We may now refer to the other set of judgments, on which reliance was placed by learned counsel for the appellants. In the case of Oriental Fire and General Ins. Co. Ltd. v. Nani Bala and Anr. (supra) a learned Single Judge B.L. Hansaria, J. (as he then was) speaking for the High Court of Judicature at Gauhati had to consider the question whether any liability could be imposed upon the insurer of the offending vehicle which had caused accidental injury to the employees of the insured employer. It was decided in the said case on a conjoint operation of the Motor Vehicles Act and the Compensation Act that the provisions of the Compensation Act cannot be viewed in isolation when the Motor Vehicles Act had specifically stated that a policy of insurance cannot exclude the liability arising under the Compensation Act and that the expression `any person has to cover an insurer also. The aforesaid decision was rendered entirely in a different context and was not concerned with the question whether the insurance company would be liable to meet the claim of penalty amount and interest as awarded under Section 4-A(3) of the Compensation Act against the insured employer. It is, therefore, of no assistance in the present cases. However, the same learned judge speaking on behalf of a Division Bench of the Orissa High Court in the case of Khirod Nayak v. Commissioner for Workmens Compensation & Ors. (supra) has taken the view that when any penalty is imposed on the insured employer under Section 4-A(3) of the Compensation Act along with interest the insurance company would be liable to make good the entire claim. In the light of the scheme of both the relevant Acts as discussed by us earlier it has to be held that the aforesaid view of the Division Bench of the Orissa High Court insofar as it holds that the insurance company would be liable to make good the entire claim. In the light of the scheme of both the relevant Acts as discussed by us earlier it has to be held that the aforesaid view of the Division Bench of the Orissa High Court in so far as it holds that the insurance company would be liable to meet the claim of penalty to the tune of 50% of the amount of compensation as imposed on the insured employer is not correct. But so far as it is held that the insurance company would be liable to meet the claim of interest at the rate of 6% per annum as granted under Section 4-A(3) of the Compensation Act, the same is justified on the scheme of the Act. Aforesaid decision of the Orissa High Court has to be partly overruled to the aforesaid extent. We may now turn to a decision of the Madhya Pradesh High Court in the case of New India Assurance Co. Ltd. v. Guddi and Ors. (supra). A learned Single Judge in the said case took the view that on the scheme of Section 4- A(3) of the Compensation Act the insurance company will have to make good the claim of interest and penalty as imposed upon the insured employer. In the light of what we have discussed earlier it must be held that the said view is partly correct in so far as it is held that the insurance company would be liable to pay the amount of interest imposed upon the insured employer by the Workmens Commissioner under Section 4-A(3). But to the extent it seeks to cover even the penalty amount and makes obligatory on the insurer to meet the said claim of penalty imposed upon the insured employer it must be held that the same is not correct and is not borne out from the scheme of the Acts discussed by us. To that extent the said decision of the learned Single judge would stand partly overruled. In the case of United India Insurance Co. Ltd. v. Roop Kanwar and others (supra) a learned Single Judge of the Rajasthan High Court had to consider a situation where on payment of additional premium the insurance company had agreed in the light of endorsement No. 16 of the Policy to cover all liabilities incurred by the insured under Workmens Compensation Act. In view of this contractual coverage of liability the insurance company in that case was held liable to meet the claim for penalty and interest as imposed upon the insured under Section 4-A(3) of the Compensation Act. This judgment proceeded on its own facts and was concerned with a situation converse to the one as was examined by the Karnataka High Court in Oriental Insurance Co. Ltd. v. Raju and Ors. (supra). In the case decided by the Karnataka High Court, as seen earlier, there was an express exclusion of such liability of the insurance company. In the aforesaid case decided by the Rajasthan High Court there was expression inclusion of such liability for the insurance company which had taken additional premium. This judgment also, therefore, is of no assistance to either side.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 1

Reasoning from the judgment:
1[ds]14. On a conjoint operation of the relevant schemes of the aforesaid twin Acts, in our view, there is no escape from the conclusion that the insurance companies will be liable to make good not only the principal amounts of compensation payable by insured employers but also interest thereon, if ordered by the Commissioner to be paid by the insured employers. Reason for this conclusion is obvious. As we have noted earlier, the liability to pay compensation under the Workmens Compensation Act gets foisted on the employer provided it is shown that the workman concerned suffered from personal injury, fatal or otherwise, by any motor accident arising out of and in the course of his employment. Such an accident is also covered by the statutory coverage contemplated by Section 147 of the Motor Vehicles Act read with the identical provisions under the very contracts of insurance reflected by the Policy which would make the insurance company liable to cover all such claims for compensation for which statutory liability is imposed on the employer under Section 3 read with Section 4-A of the Compensation Act. All these provisions represent a well-knit scheme for computing the statutory liability of the employers in cases of such accidents to theirwe have seen earlier while discussing the scheme of Section 4-A of the Compensation Act the legislative intent is clearly discernible that once compensation falls due and within one month it is not paid by the employer then as per Section 4-A(3)(a) interest at the permissible rate gets added to the said principal amount of compensation as the claimants would stand deprived of their legally due compensation for a period beyond one month which is statutorily granted to the employer concerned to make good his liability for the benefit of the claimants whose bread-winner might have lost his life. Thus so far as interest is concerned it is almost automatic once default, on the part of the employer in paying the compensation due, takes place beyond the permissible limit of one month. No element of penalty is involved therein. It is a statutory elongation of the liability of the employer to make good the principal amount of compensation within permissible time limit during which interest may not run but otherwise liability of paying interest on delayed compensation will ipso facto follow. Even though the Commissioner under these circumstances can impose a further liability on the employer under circumstances and within limits contemplated by Section 4-A(3)(a) still the liability to pay interest on the principal amount under the said provision remains a part and parcel of the statutory liability which is legally liable to be discharged by the insured employer. Consequently such imposition of interest on the principal amount would certainly partake the character of the legal liability of the insured employer to pay the compensation amount with due interest as imposed upon him under the Compensation Act. Thus the principal amount as well as the interest made payable thereon would remain part and parcel of the legal liability of the insured to be discharged under the Compensation Act and not de hors it. It, therefore, cannot be said by the insurance company that when it is statutorily and even contractually liable to reimburse the employer qua his statutory liability to pay compensation to the claimants in case of such motor accidents to his workmen, the interest on the principal amount which almost automatically gets foisted upon him once the compensation amount is not paid within one month from the date it fell due, would not be a part of the insured liability of the employer. No question of justification by the insured employer for the delay in such circumstances would arise for consideration. It is of course true that one months period as contemplated under Section 4-A(3) may start running for the purpose of attracting interest under sub-clause (a) thereof in case where provisional payment has to be made by the insured employer as per Section 4-A(2) of the Compensation Act from the date such provisional payment becomes due. But when the employer does not accept his liability as a whole under circumstances enumerated by us earlier then Section 4-A(2) would not get attracted and one months period would start running from the date on which due compensation payable by the employer is adjudicated upon by the Commissioner and in either case the Commissioner would be justified in directing payment of interest in such contingencies not only from the date of the award but also from the date of the accident concerned. Such an order passed by the Commissioner would remain perfectly justified on the scheme of Section 4-A(3)(a) of the Compensation Act.But similar consequence will not follow in case where additional amount is added to the principal amount of compensation by way of penalty to be levied on the employer under circumstances contemplated by Section 4-A(3)(b) of the Compensation Act after issuing show cause notice to the employer concerned who will have reasonable opportunity to show cause why on account of some justification on his part for the delay in payment of the compensation amount he is not liable for this penalty. However if ultimately the Commissioner after giving reasonable opportunity to the employer to show cause takes the view that there is no justification for such delay on the part of the insured employer and because of his unjustified delay and due to his own personal fault he is held responsible for the delay, then the penalty would get imposed on him. That would add a further sum upto 50% on the principal amount by way of penalty to be made good by the defaulting employer. So far as this penalty amount is concerned it cannot be said that it automatically flows from the main liability incurred by the insured employer under the Workmens Compensation Act. To that extent such penalty amount as imposed upon the insured employer would get out of the sweep of the term `liability incurred by the insured employer as contemplated by the proviso to Section 147(1)(b) of the Motor Vehicles Act as well as by the terms of the Insurance Policy found in provisos (b) and (c) to sub-section (1) of Section II thereof. On the aforesaid interpretation of these two statutory schemes, therefore, the conclusion becomes inevitable that when an employee suffers from a motor accident injury while on duty on the motor vehicle belonging to the insured employer, the claim for compensation payable under the Compensation Act along with interest thereon, if any, as imposed by the Commissioner Sections 3 and 4-A(3) (a) of the Compensation Act will have to be made good by the insurance company jointly with the insured employer. But so far as the amount of penalty imposed on the insured employer under contingencies contemplated by Section 4-A(3) (b) is concerned as that is on account of personal fault of the insured not backed up by any justifiable cause, the insurance company cannot be made liable to reimburse that part of the penalty amount imposed on the employer. The latter because of his own fault and negligence will have to bear the entire burden of the said penalty amount with proportionate interest thereon if imposed by the Workmens Commissioner.