Suman Kumar Kohli vs Naru Devi & Another

Manoj K. Tiwari, J

Heard learned counsel for the parties.

This is employer's appeal under Section 30 of Workmen Compensation Act challenging the order dated 30.09.2011 passed by Workman Compensation Commissioner/ District Magistrate, Pithoragarh in W.C. Case No. 03 of 2009. This appeal was admitted on the following substantial question of law:-

(i) Whether the Workmen Compensation Commissioner has committed illegality in awarding the interest against the contractor whereof award has been against the Insurance Company?

Deceased (Mohan Singh Dhami) was employed as supervisor with M/s Super Traders and Engineers, Sah Market, Pithoragarh, which is a proprietorship firm belonging to the appellant. Mohan Singh Dhami died in an accident on 25.11.2006. His widowed mother filed an application under Workmen Compensation Act claiming Rs.3,66,000/- as compensation and Rs.83,000/- as penalty alongwith interest @ 12% per annum.

Since the employer had taken insurance cover for injury/ death caused to his workmen, therefore, the Insurance Company also contested the claim made by mother of the deceased.

Learned Commissioner vide order dated 30.09.2011 allowed the claim petition and directed the Insurance Company to pay compensation amounting to Rs.3,29,925/- to the claimant within two months. Learned Commissioner further held that the employer (appellant herein) would be liable to pay interest from the date of death till date of actual payment at the rate of 12% per annum. Thus, feeling aggrieved by the liability to pay interest fastened upon him, employer has approached this Court.

Learned counsel for the appellant submits that appellant has paid a sum of Rs.1,98,389/- towards interest through cheque dated 29.11.2011 drawn at State Bank of India.

Thus, the only question, which falls for consideration in this appeal, is whether the employer is liable to pay interest on the amount of compensation when the liability to pay compensation has been fastened upon the Insurance Company. Hon'ble Supreme Court in the case of Ved Prakash Garg v. Premi Devi and others reported in (1997) 8 SCC 1 has held that Insurance Company will not only be liable to pay the principal amount of compensation but also interest thereon, if any, imposed by the Commissioner on the insured employer under Section 3 & 4-A (3) (a) of the Workmen Compensation Act. However, it was clarified that Insurance Company will not be liable to pay the penalty imposed by the Commissioner on the insured employer. Paragraph nos. 19 of the said judgment is extracted below:-

"19. As a result of the aforesaid discussion it must be held that the question posed for our consideration must be answered partly in the affirmative and partly in the negative. In other words the insurance company will be liable to meet the claim for compensation along with interest as imposed on the insured employer by the Workmen's Commissioner under the Compensation Act on the conjoint operation of Section 3 and Section 4-A sub-section (3)(a) of the Compensation Act. So far as additional amount of compensation by way of penalty imposed on the insured employer by the Workmen's Commissioner under Section 4-A(3)(b) is concerned, however, the insurance company would not remain liable to reimburse the said claim and it would be the liability of the insured employer alone."

View taken by Hon'ble Supreme Court in the case of Ved Prakash Garg (Supra) was reiterated in the case of L.R. Ferro Alloys Ltd. v. Mahavir Mahto and another reported in (2002) 9 SCC 450. Paragraph no. 5 of the said judgment is extracted below:-

"5. The only contention put forth before us is that the entire liability including penalty and interest will have to be reimbursed by the insurance company and this aspect has not been examined by the learned Single Judge in the High Court and needs examination at our hands. In Ved Prakash Garg v. Premi Devi this Court after examining the entire scheme of the Act held that payment of interest and penalty are two distinct liabilities arising under the Act, while liability to pay interest is part and parcel of legal liability to pay compensation upon default of payment of that amount within one month. Therefore, claim for compensation along with interest will have to be made good jointly by the insurance company with the insured employer. But, so far as the penalty imposed on the insured employer is on account of his personal fault the insurance company cannot be made liable to reimburse penalty imposed on the employer. Hence the compensation with interest is payable by the insurance company but not penalty. Following the said decision and for the reasons stated therein, we modify the order made by the High Court to that extent. The appeal is allowed in part accordingly."

Admittedly, the employer had taken an insurance cover for any injury caused to his employees in any accident arising out of and in the course of employment. The liability to pay interest on the principal amount under Section 4-A(3)(a) of the Act is part and parcel of the statutory liability, therefore the insurance company cannot contend that it is liable to pay compensation only and not interest. Thus, the Insurance Company was liable to pay interest also. Learned Commissioner erred in relying upon the judgment rendered in the case of P.J. Narayan v. Union of India reported in (2006) 5 SCC 200 where it was held that insurance is a matter of contract between the Insurance Company and the insured and in the absence of any statute to the contrary, Insurance Company cannot be forced by the Courts to take on liabilities, which they do not want to take on.

Accordingly, the Appeal is allowed and the impugned order dated 30.09.2011 passed by learned Workmen Compensation Commissioner, Pithoragarh is modified and it is provided that the Insurance Company shall be liable to pay the amount of interest also. Since the employer has paid Rs.1,98,389/- as interest to the claimant, therefore, Insurance Company (respondent no. 2) shall reimburse the amount so paid by the employer by depositing it before the Workmen Compensation Commissioner, Pithoragarh within six weeks from today.