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PETITIONER: VED PRAKASH GARG

       Vs.

RESPONDENT: PREMI DEVI & ORS.

DATE OF JUDGMENT:       25/09/1997

BENCH: S.B. MAJMUDAR, V.N. KHARE

ACT:

HEADNOTE:

JUDGMENT:                             WITH               [Civil Appeal No. 15700 of 1996]                       J U D G M E N T S.B.Majmudar.J.      In these  three appeals  by special  leave, a  short ut ticklish question  arises for  consideration.   It  runs  as under :      "Where  an   employee  receives   a      personal injury in a motor accident      arising out  of and  in  the  motor      vehicle of  the  employer,  whether      the insurance  company,  which  has      insured the  employer-owner of  the      vehicle   against    third    party      accident   claims    under    Motor      Vehicles  Act,   1988  (hereinafter      referred to  as ’the Motor Vehicles      Act’)  and   against   claims   for      compensation   arising    out    of      proceedings  under   the  Workmen’s      Compensation Act, 1923 (hereinafter      referred to  as  ’the  Compensation      Act’) in connection with such motor      accidents, is  liable to  meet  the      awards  of  Workmen’s  Commissioner      imposing   penalty   and   interest      against the  insured employer under      Section 4A(3)  of the  Compensation      Act."      The High  Court of  Himachal Pradesh  in  the  impugned judgments has  answered this  question in  the negative  and against the insured employer.  For coming to that conclusion reliance is placed by the said High Court in a decision of a Division Bench  of Karnataka  High  Court  in  the  case  of Oriental Insurance  Co. Ltd. v. Raju & Ors. 1994 ACJ 191 and the judgment  of a  learned Single Judge of the Gujarat High Court in  the case  of Jayantilal  & Co.  v. Garasia Ravirba udesinh &  Ors. 1992  ACJ 286.  Identical view is taken by a Division Bench  of the  Gujarat High  Court in  the case  of Gautam Transport,  Bhavnagar v.  Jiluben Huseinbhai  &  Ors.

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1989 ACJ 587.  The decision of a learned Single Judge of the Delhi High  Court in the case of Oriental Insurance Co. Ltd. v. Hasmat  Khatoon &  Ors. 1989  ACJ 862  has also fallen in line. While  on the  other hand  a learned  Single Judge  of Gauhati High  Court in the case of Oriental Fire and General Ins. Co.  Ltd. V.  Nani Bala  Devi &  Anr. 1987  ACJ 655;  a Division Bench  of the  Orissa High  Court in  the  case  of Khirod Nayak  v. Commissioner  for Workmen’s  Compensation & Ors. 1992  ACJ 76;  a learned  Single Judge  of  the  Madhya Pradesh High  Court in  the case  of New India Assurance Co. Ltd. v.  Guddi &  Ors. 1994  ACJ 1134  and a  learned Single Judge of  the Rajasthan  High Court  in the  case of  United India Insurance  Co. Ltd.  v. Roop Kanwar & Ors. 1991 ACJ 74 have answered  this question  in the affirmative against the insurance company.   There is another judgment of a Division Bench of  the Gujarat  High Court in the case of Radhabehn & Ors. Mulji Kanji Dhord & Ors. 1994 ACJ 404 which has adopted middle course  and has  answered the  question partly in the affirmative  so   far  as   the   imposition   of   interest contemplated by  Section 4A(3)(a) of the Compensation Act is concerned  and   partly  in  the  negative  so  far  as  the imposition of  penalty on  the owner-employer  under Section 44(3)(b) is  concerned.   before we  proceed to  resolve the aforesaid conflict  of decisions  it will  be profitable  to note a few background facts leading to these appeals.      Civil Appeal Nos. 15698-15699 of 1996      These two appeals arise out of a motor accident wherein the owner  of a motor truck, appellant in these appeals, had entrusted the said trust for driving to one Pritam Singh and has employed  one Hem  Raj to  be a  cleaner attached to the said truck.  The said  truck met  with an  accident on  15th February 1992 near Village Pulwahai on Kumarsain Dhamla Road in the  State of  Himachal Pradesh.   In  the said  accident driver Pritam  Singh and cleaner Hem Raj died on spot. It is the case  of the  appellant, owner of the truck, that having come to  know about  the accident  on 16th  February 1992 he immediately informed  the Branch Manager of respondent no.9- insurance company  about the  accident.   According  to  the appellant, respondent no.9-insurance company had insured the appellant comprehensively  against all the risks arising out of the use of the said motor vehicle. That still  the insurance  company though  bound to  pay the heirs of  the deceased-employees appropriate compensation as per  the  insurance  cover,  did  not  carry  out  the  said obligation.      The two  claim petitions  came to be filed by the heirs and legal  representatives of  deceased driver  and  cleaner under the  Compensation  Act  before  the  Commissioner  for Workmen’s Compensation,  Rajgarh district,  Sirmur, Himachal Pradesh.   The said  applications wee  moved  presumably  by exercising option  available under  Section 167 of the Motor Vehicles Act  which lays down that ’notwithstanding anything contained in  the Workmen’s Compensation Act, 1923 where the death of,  or bodily  injury to,  any person gives rise to a claim for  compensation under  this Act  and also  under the Workmen’s Compensation  Act, 1923,  the person  entitled  to compensation may  without prejudice  to  the  provisions  of Chapter X claim such compensation under either of those Acts but not  under both’  - Thus  these two  applications wee in substitution and  in place  of otherwise legally permissible claims  before   the   Motor   Accidents   Claims   Tribunal functioning under  the Motor Vehicles Act. In the said claim applications, the claimants joined the appellant-employer as well as  respondent no.9-insurance  company as  respondents. The  Workmen’s   Commissioner  after   hearing  the  parties

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concerned  computed   the  compensation   available  to  the claimant-dependents of  the deceased  employees.   So far as the claim  put forward  by the  heirs of the deceased driver was concerned the Commissioner awarded a sum of Rs. 88,968/- as compensation.   But  as the compensation due was not paid either by the appellant-employer or by the insurance company as and  when it  fell due the Commissioner awarded a penalty of Rs.  41,984/- with  interest at  the rate of 6% per annum from the date of the accident till the date of payment under Section 4A(3)(a)  and (b)  of the  Compensation  Act.    The entire amount  of Rs.  88,968/- with  penalty of Rs.41,984/- and interest  thereon was  held  payable  by  the  insurance company to  the claimants  jointly and  severally  with  the appellant-employer.   The said  amount was  made payable  by respondent no.9-insurance  company on  the  basis  that  the insurance company  had insured  the  appellant  against  his liability to  meet the claims for compensation for the death of employee  dying in  harness giving  rise  to  proceedings against the  insured employer  under the  Compensation  Act. Similarly the  Commissioner awarded a sum of Rs. 88,548/- to the claimants  being legal  representatives of  the deceased cleaner.   In addition  to the  said amount,  penalty of Rs. 44,274/- with  interest from  the date  of the accident till the date  of payment  was also  made payable  by  respondent no.9-insurance company.      The claimants  were satisfied  with  the  said  awards. Similarly the  appellant-owner was  also satisfied  with the said awards.   However,  the insurance  company carried  the matter in  appeals before  the High Court and contended that the insurance  company would be liable under the contract of insurance only  to make  good the claims for compensation so far as  the principal  amounts were concerned.  But it could not have  been made  liable to  pay the amounts of penalties with  interest   thereon  as   ordered  by   the   Workmen’s Commissioner as  these amounts  of penal nature were awarded against the insured owner on account of his personal default as per  Section 4A(3)  of the  Compensation Act and for such default on the part of the insured the insurance company was not liable  to reimburse the insured.  As noted earlier, the said  contention   of  respondent   no.9-insurance   company appealed to the High Court.  The appeals wee allowed and the awards of  the Commissioner under the Compensation Act in so far as  they fastened  the liability  to pay the penalty and interest on  the insurance  company were  set  aside.    The amounts deposited  in excess  by the  insurance company were ordered to  be refunded  to it  while the  remaining amounts were ordered  to be paid to the claimants.  it was, however, clarified that  the claimants shall be at liberty to recover the amount  of penalty  and interest  in accordance with law from the employer, appellant herein.      Civil Appeal No.15700 of 1996      The appellant  is the  owner of  a motor truck on which deceased Prakash  Chand was working as a driver, is the sole heir and  claimant for  compensation.  Between 20th and 21st August 1992  the said  truck met  with a  accident on Kalka- Simla national highway in the State of Himachal Pradesh.  it resulted in instantaneous death of driver Prakash Chand.  It is the  case of  the appellant  insured owner  of the truck, that he informed respondent no.2-insurance company which had insured the  appellant against  risks arising out of the use of  the   insured  motor  vehicle.    That  he  was  insured comprehensively for  all risks and the insurance company was supposed  to   have   immediately   contracted   the   legal representatives of  the deceased driver and should have paid the compensation  to the  bereaved family which it failed to

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do.      Respondent no.1,  widow of the deceased driver, filed a Claim  Petition   before  the   Commissioner  for  Workmen’s Compensation exercising  her option under Section 167 of the Motor  Vehicles  act.    The  Workmen’s  Commissioner  after hearing the  parties  awarded  a  sum  of  Rs.  81,540/-  as compensation along  with interest  and further directed that in the  event of  failure to  pay the said amount within one month the  penalty at  the rate  of 30%  per  annum  on  the principal amount was to be paid by respondent no.2-insurance company.    The  award  obviously  was  passed  jointly  and severally against  the appellant-owner as well as respondent no.2-insurance company.   The said award was challenged only on behalf  of respondent  no.2-insurance company  before the High Court.  The High Court took the very same view which it took in  the companion  matters  and  exonerated  respondent no.2-insurance company from its liability to make good award of  penalty  amount  as  well  as  interest  amount  on  the principal amount  of Rs.81,540/-.   Identical order in these terms was  passed in this case as it was passed in common in the other two appeals as stated earlier.      Rival Contentions      Learned counsel  for the  appellant-owners of the motor vehicles who  were admittedly  employers of deceased workmen contended before us that the view taken by the High Court of Himachal Pradesh  in the  impugned judgments  and  identical view taken  in the  decisions of  the High Court referred to earlier exonerating  the insurance  company of its liability for making  good the  claim for  compensation flowing out of the orders  of additional interest and penalty as imposed by the  Workmen’s  Commissioner  under  Section  4a(3)  of  the Compensation Act  were not  justified on  the scheme  of the Compensation Act  read with the Motor Vehicles Act.  That on the contrary  the decisions  of High Courts representing the contrary view  laid down  correct law.  It was  alteratively contended that in any view of the matter at least the middle course adopted  by the  Division Bench  of the  Gujarat High Court in  the case  of  Radhabehn  (supra)  deserved  to  be uphled.      On the  other  hand  learned  counsel  for  respondent- insurance companies  submitted that  on the  schemes of  the Compensation Act  and the  Motor Vehicles  Act the insurance companies would  be liable  to meet  the  liability  of  the insured employer-owners  of the  respective vehicles  to the extent of  the principal  amounts of compensation which were made payable  to the  claimants by  the insured employers by the Workmen’s  Commissioner.   So far  as penalty amounts by way of  additional interest  and additional  compensation as contemplated by  Section 4A(3) were concerned they were made payable by  the insured  employers for their own default and for such  default on  the part of the insured, the insurance companies would  not be  liable and  consequently they could not be  made to  reimburse the  said amounts to the insured. That such  claims would  be dehors the contractual liability flowing from  the insurance  policy as  well as  it would be against the  relevant statutory scheme of the Motor Vehicles Act read  with the  Compensation Act.   It  was,  therefore, contended that  the view  taken by the Himachal Pradesh High Court in  the impugned  judgments in favour of the insurance companies and  identical view taken by the other High Courts falling in  line represented  the correct legal position and deserved to be upheld.      Schemes of the Acts      Before we  deal with  the rival  contentions and have a look at  the divergent viewpoints expressed by the different

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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 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 e 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 cases      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 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

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    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  to 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      hat 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.      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

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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 92)  or finally on  adjudication by  the  Commissioner  and  if  the employer does  not pay  the same  within one months 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) 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 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 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  comtemplated  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 by way  of penalty.   Therefore,  the employer  need not  be heard in  this connection.   A simplicity default in payment of compensation  within the  time of one month from the date it fell  due would  automatically attract  the provision  of simple  interest   under  Section  4A(3)  as  per  the  rate prescribed therein  and for  such imposition  of interest no question of  justification for  the delay is countenanced by the Legislature.   But  while imposing penalty justification for delay  would b  a good  defence  for  the  employer  for meeting such  claim for penalty.  The same aspect is further highlighted by  Section 4A(3)(a)  of the Compensation Act as existing on the Statute book at present which shows that the interest payable under sub-section (3A) is to be paid to the workman or  his dependant while the penalty imposed is to be credited to the State Government.  It is in the light of the aforesaid statutory  Government.   It is in the light of the aforesaid statutory  scheme of  Section 4A that the question posed for our consideration has to be resolved.      Section 19  of the Compensation Act also deserves to be noted at this stage.  Sub-section (1) thereof lays down that ’if any question arises in any proceedings under this Act as to  the   liability  of   any  person  to  pay  compensation (including any question as to whether a person injured is or is not  a workman)  or as  to  the  amount  or  duration  of compensation (including  any question  as to  the nature  or extent of  disablement), the  question shall,  in default of agreement, be  settled by  a Commissioner’.  Sub-section (2) of Section  19 bars  the  jurisdiction  of  Civil  Court  to settle, decide  or deal  with any  question which  is by  or under this Act required to be settled, decided or dealt with by a  Commissioner, or  to enforce  any  liability  incurred

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under this Act.  As per the aforesaid provisions any dispute between  the  employer-insured  on  the  one  hand  and  the insurance company, that is said to have insured the employer against such  claims for compensation under the Compensation Act, on the other has to be resolved in default of agreement between them  by  the  Commissioner  functioning  under  the Compensation Act  and not  by any  Civil Court.   It  may be mentioned  at  this  state  that  learned  counsel  for  the contesting  respondent-insurance  companies  made  it  clear before  use  that  it  is  not  their  contention  that  the insurance companies which have insured the employers against such risks  and claims  are not  liable  to  make  good  the principal  amounts   of  compensation   as  awarded  by  the Commissioner  o   the  claimants   and  that  the  insurance companies under  the  said claims.  But their only grievance is against  the liability sought to be enforced against them for reimbursing  the claims  for additional  compensation by way of  penalty and  interest  as  imposed  on  the  insured employers under section 4A(3) of the Compensation Act.      We may now turn to the relevant provisions of the Motor Vehicles  Act.     Reference  to  these  provisions  becomes necessary because  the workmen  concerned suffered  personal injuries of  fatal nature  while they  were working on motor vehicles of  their employers.  if they had suffered from any personal injuries  during the  course of  and arising out of the employment  while working  the factory  premises of  the employers or  while carrying on their service obligations as employees at  any other  place under the instructions of the employers, the  question of  interaction of the Compensation Act and  the Motor  Vehicles Act  would not  arise and  such claims for  compensation would  have squarely  been governed only by the Compensation Act.      Hence it becomes necessary for us to turn to the scheme of Motor  Vehicles Act  foisting liability  on the insurance companies which  have insured  such vehicles  against  third party risks  undertaken by  the insured.  Chapter XI  of the Motor Vehicles  Act deals  with ’Insurance of motor vehicles against  third   party  risks’-Section  146  lays  down  the necessity  for   insurance  against  third  party  risk  and provides that  ’no person  shall use, except as a passenger, or cause  or allow  any other person to use, a motor vehicle in a  public place,  unless there  is in force i relation to the use  of the vehicle by that person or that other person, as the case may be, a policy of insurance complying with the requirements  of  this  Chapter’-  Section  147  deals  with ’Requirements of  policies  and  limits  of  liability’-Sub- section (1)  or  Section  147  along  with  its  proviso  is relevant for  our present purpose.  Hence it is extracted as under:      "147. Requirements  of policies and      limits of  liability.-(1) In  order      to comply  with the requirements of      this Chapter, a policy of insurance      must be a policy which-      (A) is issued by a person who is an      authorised insurer; and      (b) insures  the person  of classes      of persons  specified in the policy      to the  extent  specified  in  sub-      section (2)-      (i) against any liability which may      be incurred  by him  in respect  of      the death  of or  bodily injury  to      any person,  including owner of the      goods     or     his     authorised

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    representative   carried   in   the      vehicle or  damage to  any property      of  a  third  party  caused  by  or      arising  out  of  the  use  of  the      vehicle in a public place;      (ii) against the death of or bodily      injury to any passenger of a public      service  vehicle   caused   by   or      arising  out  of  the  use  of  the      vehicle in a public place;      Provided that a policy shall not be      required-      (i) to  cover liability  in respect      of the death, arising out of and in      the course  person insured  by  the      policy  or  in  respect  of  bodily      injury   sustained   by   such   an      employee arising  out of and in the      course of his employment other than      a  liability   arising  under   the      Workmen’s Compensation Act, 1923 (8      of 1923),  in respect  of the death      or, or  bodily injury  to, any such      employee-      (a) engaged  in driving the vehicle      or      (b)  if  it  is  a  public  service      vehicle engaged  as a  conductor of      the vehicle or in examining tickets      on the vehicle, or      (c) if  it  is  a  goods  carriage,      being carried in the vehicle, or      (ii)  to   cover  any   contractual      liability."      Sub-clause (b)  of Section 147(1) read with the proviso lays down  a statutory  scheme  of  compulsory  coverage  of liability incurred  by the  employer vis-a-vis his employees when they  sustain injuries  by the  use of  motor  vehicles during their  employment and  on account  of motor accidents arising out  of and in the course of their employment and on account of  motor accidents arising out of and in the course of their  employment.   But the  statutory coverage for such liability would  be limited t the extent of liability of the insured employer  arising under  the Workmen’s  Compensation Act in  respect of death or bodily injury to such employees. As the  motor accidents  resulted in  fetal injuries  to the employees who  were either  driving or were being carried in the  goods   carriage  as  cleaner  whatever  liability  was incurred  by   insured  owners  of  the  goods  vehicles  in connection with  proceedings arising out of the Compensation Act  was   covered  by   the  statutory   liability  of  the respondent-insurance companies.  The very  same result would follow when  we turn to the relevant clause of the insurance policies to  which our  attention  was  invited  by  learned counsel to  the appellants.   Section  II in  the  Insurance Policy  of   respondent  no.9-insurance  company  which  had insured  the  appellant,  dealt  with  ’liability  to  third parties’-Relevant clause of sub-section (1) of Section II of the said Policy reads as under:      "1.  Subject   to  the   Limits  of      Liability    the    Company    will      indemnify the  Insured against  all      sums including  claimant’s cost and      expenses which  the  Insured  shall      become legally  liable  to  pay  in

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    respect of      (i) Death  of or  bodily injury  to      any person caused by or arising out      of the  use (including  the loading      and/or  unloading)   of  the  Motor      Vehicle.      (ii)..... ....  ....  ....      PROVIDED ALWAYS that:-      (a)...... ....  ....  ....      (b) Except  so far  as necessary to      meet the  requirements  of  Section      92A and  Section 95  of  the  Motor      Vehicles  Act,  1939,  the  Company      shall not  be liable  in respect of      death of  or bodily  injury to  any      person in  the  employment  of  the      Insured arising  out of  and in the      course of such employment.      (c) Except  so far  as is necessary      to meet the requirements of section      95 of the Motor Vehicles Act, 1939,      in relation  to liability under the      Workmen’s Compensation  Act,  1923,      the Company  shall not be liable in      respect  of   death  of  or  bodily      injury to  any person (other than a      passenger carried  by reason  of or      in  pursuance   of  a  contract  of      employment)  being  carried  in  or      upon or  entering  or  mounting  or      alighting from the Motor Vehicle at      the time  of the  occurrence of the      event  out   of  which   any  claim      arises."      A conjoint reading of these provisions in the Insurance Policy  shows   that  the   insurance  company  insured  the employer-owners of  the insured  motor vehicles  against all liabilities arising under the Workmen’s Compensation act for which statutory  coverage was  required under  Section 95 of the Motor  Vehicle Act,  1939 which  is analogous to Section 147  of  the  present  Motor  Vehicles  Act  noted  earlier. Section  149   deals  with  ’Duty  of  insurers  to  satisfy judgments and  awards against  persons insured  in respect f third party  risks’.   The  moot  question  is  whether  the insurance coverage  as available  to the  insured  employer- owners  of   the  motor   vehicles  in   relation  to  their liabilities under  the Workmen’s Compensation Act of account of motor  accident injuries  caused to  their workmen  would include  additional   statutory  liability  foisted  on  the insured employers  under Section  4A(3) of  the Compensation Act.      Consideration of the question      The question  posed of our consideration is required to be resolved  in the light of the aforesaid statutory schemes of the  two interacting  Acts.   It is  not in  dispute  and cannot be  disputed that  the respndent-insurance  companies concerned will  be  statutorily  as  well  as  contractually liable to  make good the claims for compensation arising out of the  employers’ liability  computed as per the provisions of the  Compensation Act.   The short question is whether he phrase ’liability  arising under  the Compensation  Act’  as employed by the proviso to sub-section (1) of Section 247 of the Motor Vehicles Act and as found in proviso to clause (i) of sub-section  (1) of  Section II  of the Insurance Policy, would cover  only the  principal amount  of compensation  as

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computed   by   the   Workmen’s   Commissioner   under   the Compensation Act and made payable by the insured employer or whether it  could also  include interest  and  penalty    as imposed  on   the  insured   employer  under   contingencies contemplated by Section 4A(3)(a) and (b) of the Compensation Act.      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

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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

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proportionate interest  thereon if  imposed by the Workmen’s Commissioner. Consideration of the judgments of the High Courts      It is  now time  for us to have a look at the judgments of the  different High Courts which have reflected different viewpoints on  this question. We shall first deal with those judgements of  the high  Courts wherein a view is taken that the insurance  company would  be fully  exonerated from  the obligation to  meet the  claims for interest and the penalty amounts imposed  on the  insured  employer  as  per  Section 4A(3)(a) and  (b) of  the Compensation  Act. For  taking the aforesaid view  in the  impugned judgments the High Court of Himachal Pradesh  has  strongly  relied  upon  two  decision Karnataka High  Court and  the Gujarat High Court.  We will, therefore, in the first instance deal with these judgments.      In the  case of  Oriental Insurance  Co. Ltd. v. Raju & Ors. (supra)  a Bench of two learned Judges of the Karnakata High Court  on the  express terms of the Insurance Policy in that case  took the  view that  the Policy did not extend to indemnify the  insured in  respect of  any  interest  and/or penalty which  may be  imposed on  the insured on account of his failure to comply with the requirements of the Workmen’s Compensation Act.  There was an express exclusion clause qua this liability  under the  Insurance Policy and consequently the Karnataka  High Court  rightly came to the conclusion on the facts  of that case that liability arising under Section 4A(3) of  the  Compensation  Act  to  pay  interest  on  the principal amount  as imposed on the insured was not required to be  met by the insurance company.  Said judgment proceeds on its  own facts.  it is of no real assistance of resolving the present controversy.  The second judgment relied upon by the Himachal  Pradesh High  Court is  rendered by  a learned Single Judge  of the  High Court  of Gujarat  in the case of Jayantialal &  Co. (supra).   It  has laid down that penalty under Section  4A(3) of  the Workmen’s  Compensation Act  is imposed on  the owner  of the  offending truck for remaining indifferent to  his statutory  liability to  make payment in time.  Such a liability arising out of personal fault of the insured employer  is not required to be met by the insurance company.   The aforesaid view of the learned Single Judge of the Gujarat  High Court  is in consonance with the scheme of the Compensation  Act as  well as  the Motor Vehicles Act as discussed by  us earlier.   Therefore,  in our view, it lays down the correct legal position so far as the penalty claims are concerned.   However in so far as the aforesaid decision takes the  view that  the insurance  company  would  not  be liable even  to meet the claim of interest at the rate of 6% per annum  on the amount of compensation as imposed upon the insured employer  under Section  4A(3) of  the  Compensation Act, the  same is  not borne  out from  the  scheme  of  the aforesaid two  Acts and to that extent the said decision has to be  overruled.   We may  in this  connection refer  to  a latter Division  Bench judgment of the Gujarat High Court in the case  of Radhabehn (supra) wherein the Division Bench of the High  Court has  taken the  view that  when  penalty  is imposed on the employer under Section 4A(3) it is on account of the  default and  negligence of the employer for which he is personally  reasonable and the legislature would never be said to  have intended  that there  should be  a  compulsory insurance covering  the liability  of an employer of payment of penalty.   So  far  as  the  interest  in  concerned  the Division Bench  took the  view that  such  liability  was  a natural corollary   of  the liability  to  make  payment  of Compensation and,  therefore, it  would be  covered  by  the scheme of  statutory coverage and consequently the insurance

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company would  be required  to  make  good  that  claim  and reimburse the  amount of liability to that extent imposed on the insured  employer.   The aforesaid extent imposed on the insured employer.   The  aforesaid decision  of the  Gujarat High  Court   has  impliedly  overruled  the  contrary  view expressed by  the  impliedly  overruled  the  contrary  view expressed by  the learned  Single Judge  of  that  Court  in Jayantilal &  Co. (supra)  so far  as the  liability of  the insurance company  to meet  the interest claim is concerned. In the  schemes  of  the  Compensation  Act  and  the  Motor Vehicles Act  as discussed  by us  earlier the conclusion to which the  Division Bench  of  the  High  Court  of  Gujarat reached  in   Radhabehn’s  case   (supra)  is   the  correct conclusion.  The said decision of the Division Bench rightly takes the  middle course and answers the correct conclusion. The said  decision of  the Division  Bench rightly takes the middle course  and answers  the question  for  consideration partly in  favour of  the insurance  company so  far as  the penalty  claims   are  concerned   and  partly  against  the insurance company  so far  as the  claims for  interest  are concerned.      We may  now refer to another Division Bench judgment of the Gujarat  High Court  in the  case of  Gautam  Transport, Bhavnagar (supra)  wherein it  is held  that  the  insurance company would not be liable to meet the claim arising out of penalty imposed  on the insured employer under Section 4A(3) of the  Compensation Act  as the penalty arose on account of clear violation  of statutory provisions of the Compensation Act by  the employer  and that  could never  be said to have been contemplated  by the  insurance company  while offering contractual coverage as the said penalty would be the result of the  negligence on the part of the insured.  In our view, the said  decision is  in consonance with the schemes of the Compensation Act  and the Motor Vehicles Act as discussed by us earlier.  W 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 & Ors. (supra).  A learned Single Judge of  the  Delhi  High  Court  on  the  schemes  of  the Workmen’s 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.      We may  now refer  to the  other set  of judgments,  on which  reliance   was  placed   learned  counsel   for   the appellants.   In the  case of Oriental Fire and General Ins. Co. Ltd.  v. Nani Bala & Amt. (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 o 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  o  the Compensation act  cannot be  viewed in  isolation  when  the Motor Vehicles  Act has 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

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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  4A(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  Workmen’s Compensation & ors. (supra) has taken the view that when any penalty is  imposed on  the insured  employer under  Section 4A(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 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 4A(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 &  Ors. (supra).   A  learned Single Judge in the said case took  the view  that on  the scheme of Section 4A(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 Workmen’s Commissioner under Section 4A(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 & ors. (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 Workmen’s Compensation  Act. In  view  of  this  contractual coverage of liability the insurance company in that case was held liable  to meet  the claim  of penalty  and interest as imposed  upon   the  insured  under  Section  4A(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 &  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  an  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.      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

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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 the Workmen’s Commissioner under  the Compensation  Act  on  the  conjoint operation of  Section 3  and Section  Act  on  the  conjoint operation of  Section 3 and Section 4A sub-additional amount of compensation  y way  of penalty  imposed on  the  insured employer by  the Workmen’s  Commissioner under  Section 4(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.      In view of the aforesaid conclusion of ours the present appeals will  have to  be  partly  allowed,    The  impugned judgments of  the High  Court will  stand confirmed  to  the extent they  exonerate the respondent-insurance companies of the liability  to pay  the penalty  imposed on  the  insured employers by  the Workmen’s Commissioner under Section 4A(3) of the Compensation Act.  But the impugned judgments will be set aside  to the  extent to  which they  seek to  exonerate insurance companies  for  meeting  the  claims  of  interest awarded  on   the  principal  compensation  amounts  by  the Workmen’s Commissioner  on account  of default o the insured in paying  up the  compensation  amount  within  the  period contemplated by  Section  4A(3)  of  the  Compensation  Act. Accordingly it  must be  held that  the respondent insurance company will  be liable  to meet the claim of the appellant- insured in Appeals Nos. 15698-15699 of 1996 to the extent of Rs. 88,548/-  in Claim  Case  No.2  of  1992  with  interest thereon at  the rate  of 6%  per annum  of from  the date of accident till  the date  of payment.   But  the  redpondent- insurance company  will not  be liable  to meet the claim of penalty of  Rs.44,274/-  imposed  on  the  appellant-insured along with  the interest  of 6% per annum on the said amount of  Rs.   44,274/-.    To  that  extent  the  award  of  the Commissioner will  stand modified.  So far as the Claim No.3 of 1992  is concerned  the respondent-insurance company will be liable  to  reimburse  the  compensation  amount  of  Rs. 88,968/- with  interest at  the rate of 6% p.a. thereon from the date  of the  accident till the date of payment.  But it will stand  exonerated of  its liability of reimbursement so far as  the penalty  amount of  Rs.41,984/-  and  amount  of interest at  6% p.a.  thereon are concerned.  To that extent the award  of the Workmen’s Commissioner in Claim  Case No.3 of 1992  will stand modified.  Similarly in Civil Appeal No. 15700 of  1996 the  impugned judgment of the High Court will stand partly  set aside  s far  as the claim for interest as imposed on  appellant-insured is  concerned and the award of the Workmen’s  Commissioner in  so far  as his  award of Rs. 81,540/- as  compensation along  with  interest  will  stand confirmed. But  the further  part of the award to the extent it directs  that in  the event  of failure  to pay  the said amount within  one month  a penalty  of 30%  p.a.  shall  be payable by  the insurance  company, will  stand  set  aside. Consequently the  respondent-insurance company  in this case will be  liable to  pay Rs.81,540/-  by way  of compensation with interest  at 6%  per annum thereon from the date of the accident till  the date  of payment  to the  claimants.  The awards of  the Commissioner will stand modified accordingly. They will  obviously remain  untouched so  far as  they  are against the  employers.  It will be open to the claimants to enforce their  claims of  penalty amounts with proportionate interest thereon against employers concerned.      In the  result  all  these  three  appeals  are  partly allowed as  aforesaid. In  the facts  and  circumstances  of these cases there will be no order as to costs.

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