Seema And Anr vs Harish And Anr

Heard Mr. A.J.Pathak, learned Counsel for the appellants.

Admit. With the consent of both parties, heard finally.

Since a very short issue is involved in this appeal, the appeal was fixed for final hearing as per Order dated 17.7.2019 passed by this Court.

Mr.A.J.Pathak, learned Counsel for the appellant submitted that the Labour Court, Nagpur/Commissioner under Employee’s Compensation Act,

1923 wrongly fastened liability on the employer to pay interest @ 12 % p.a. from the date of accident till the date of order. Learned Counsel has

pointed out decision of the Apex Court in the case of Ved Prakash Garg .vs. Premi Devi and Others reported in AIR 1997 SC 385.4 He has

submitted that it is the liability of the Insurance Company to pay principal amount as well as interest.

Mr.Joshi, learned Counsel for the respondents has pointed out para no.15 of the impugned Judgment and submitted that the claimants have not

issued any notice to the Insurance Company. The employer has also not informed the Insurance Company about the accident and therefore, the

Insurance Company is not liable to pay any interest on the amount of compensation.

Hon’ble Apex Court in the above cited Judgment has held in para no.14 as under:

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 Workmen's 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 made 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 4A 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 their workmen. As we have

seen earlier while discussing the scheme of Section 4A 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 4A(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 either been

seriously injured or 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 follows. Even though the Commissioner under these

circumstances can impose a further liability on the employer under circumstances and within limits contemplated by Section 4A(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 dehors 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 f 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 month's period as contemplated under section 4A(3) may start running for

the purpose of attracting interest under sub-clause (a) thereof in case where provisional payment becomes due. But when the employer does not

accept his liability as a whole under circumstances enumerated by us earlier then section 4A(2) would not get attracted and one month's 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 4A(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 4A(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 n

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 Workmen's 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 Vehicle 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 tow 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

Section 3 and 4A(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 contigencies contemplated by Section 4A(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 Workmen's Commissioner.

In view of Judgment of Hon’ble Apex Court, the Insurance Company is liable to pay principal amount of compensation and interest levied under

Section 4A (3) (a) of the Act, but not penalty levied under Sections 4A and B. There is no dispute about penalty. The dispute is only in respect of

payment of interest. Hence, the Insurance Company is liable to pay interest on the amount of compensation from the date of accident till the order of

Commissioner under Employee’s Compensation Act, 1923, dt.17.11.2016. In that view of the matter, the appeal is allowed. The Judgment

dt.17.11.2016 delivered by the Labour Court, Nagpur/ Commissioner under Employee’s Compensation Act, 1923 is quashed and set aside in

respect of interest. The Insurance Company/respondent no.2 herein shall pay interest @ 12 % p.a. on the amount of compensation from the date of

accident till the order of Commissioner under Employee’s Compensation Act, 1923.