Partly allowed

Icici Lombard General Insurance Co. Ltd. v. Sanjida and Ors.

Punjab & Haryana HC1 Jul 2009FAO/2084/2008

Case brief

AI extract

What is this about?

Pond contested compensation appeals where insurers challenged liability for interest and penalty awarded under the Workmen's Compensation Act, 1923. The court held insurers are not liable for statutory penalty but may recover interest paid from employers, setting interest start date at one month post-accident.

What did the court decide?

Appeals by insurers allowed to the extent they are not liable for penalty; interest recoverable from employers. Claimants' appeal partly allowed with interest payable from one month post-accident.

Icici Lombard General Insurance Co. Ltd. Vs Sanjida and Ors. — Punjab & Haryana HC (2009) — LawSathi Research

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FAO No. 2084 of 2008 1

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IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

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FAO No. 2084 of 2008 Date of decision: 2^nd December 2009

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ICICI Lombard General Insurance Company Limited

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........ Appellant

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Versus

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Smt. Sanjida and another .......Respondent(s)

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Coram: Hon'ble Ms Justice Nirmaljit Kaur

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-.-

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Present: (In FAO No.2084 of 2008) Mr.Ashwani Talwar, Advocate for the appellant. Mr.Sandeep Jasuja, Advocate for respondents 1 to 3 Mr. Parshant Bhardwaj, Advocate for respondent No. 4

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(In FAO No.1023 of 2009)

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Mr. Vinod Chaudhari, Advocate for the appellant.

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(In FAO No.320 of 2009)

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Mr. Munish Mittal, Advocate for the appellant. Mr. Suneet Jain, Advocate for respondent No.1. Mr. Gopal Mittal, Advocate for respondent No.2.

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(In FAO No.4131 of 2005)

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Mr. N.K. Khosla, Advocate for the appellant. Mr. N.S. Dhillon, Advocate for respondents No.1 and 2. Mr. Sanjiv Pandit, Advocate for respondent No.3.

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FAO No. 2084 of 2008 2

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(In FAO No.3004 of 2005)

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Mr. Neeraj Khanna, Advocate for the appellant. Mr. Nikhil Sharma, Advocate for respondent No.1. (In FAO No.755 of 2009)

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Mr. Gopal Mittal, Advocate for the appellant. Mr. Rajesh Kumar, Advocate for Mr. Pritam Saini, Advocate for respondent No.1. Mr. Sanjay Jain, Advocate for respondents No.2 to 4.

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(In FAO No.1025 of 2009) Mr. Gopal Mittal, Advocate for the appellant. Mr. Rajesh Kumar, Advocate for Mr. Pritam Saini, Advocate for respondents No.1 to 4. Mr. J.S. Cooner, Advocate for respondent No.6.

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(In FAO No.2718 of 2008) Mr. Ashwani Talwar, Advocate for the appellant. (In FAO Nos.176 and 177 of 1989)

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Mr. Neeraj Khanna, Advocate for the appellant. Mr. R.A. Yadav, Advocate for the respondent.

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(In FAO No.4693 of 2009)

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Mr. Paul S. Saini, Advocate for the appellant.

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(In FAO No.800 of 2008)

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Mr. Neeraj Khanna, Advocate for the appellant. Mr. Amit Rawal, Advocate for respondent No.2.

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(In FAO No.801 of 2008)

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Mr. Neeraj Khanna, Advocate for the appellant. Mr. Amit Rawal, Advocate for respondent No.4.

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(In FAO No.2451 of 2008) Mr. D.P. Gupta, Advocate for the appellant. Mr. K.S. Chahal, Advocate for respondents No.1 to 3. Mr. R.S. Dhaliwal, Advocate for respondent No.4.

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FAO No. 2084 of 2008 3

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(In FAO No.2573 of 2009)

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Mr. Paul S. Saini, Advocate for the appellant.

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Mr. R.S. Malik, Advocate for the respondents.

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-.-

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Whether Reporters of local papers may be allowed to see the judgement?

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To be referred to the Reporter or not?

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Whether the judgement should be reported in the Digest?

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Nirmaljit Kaur, J.

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This order shall dispose of all the connected appeals bearing FAO Nos. 176, 177 of 1989, 3004, 4131of 2005, 800, 801, 2451, 2718 of 2008, 320, 755, 1023, 1025, 2573, 4693 of 2009 as common question of law is involved. However, for the sake of reference, the facts are being taken from FAO No. 2084 of 2008 and FAO No. 320 of 2009.

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The award is challenged as a whole. However, in view of the findings of the Commissioner and law applicable, learned counsel for the parties restrict the relief to the grant of interest only. Hence, the following questions are required to be determined:-

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a) Party liable to pay the interest;

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b) Party liable to pay the penalty; and

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c) The date of interest.

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FAO No. 2084 of 2008 has been filed by the Insurance Company against the award dated 26.03.2008 passed by the Commissioner, under the Workmen's Compensation Act, 1923.

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Deceased-Mubin died on 16.02.2007 in the accident which

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FAO No. 2084 of 2008 4

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occurred on the same day. Yet no compensation was paid to the claimants despite the lapse of more than one year. Under Section 4-A of the Workmen's Compensation Act, 1923 (in short the 1923 Act), the compensation has to be paid as soon as it falls due. Where the employer does not pay the same within one month from the date of it falls due, the Commissioner is empowered to direct under Sub Section (a) of Section 4-A (i) of 1923 Act, to pay interest at the rate provided therein and also penalty as contemplated by sub clause (b) thereof.

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After taking into consideration the pleadings of the case as well as the evidence, the Commissioner, under the Workmen's Compensation Act, 1923 vide order dated 26.03.2008 disposed of the claim petition filed by the claimants by holding that:-

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“In view of the findings of above case law, this case law (FAO No. 5582/2004) is fit to rely upon in the present case because there was not any such clause in the insurance cover note EX A/1 and in the absence of such material available on record file in my opinion the insurance company is also liable to pay interest @ 12% per annum from the date of death i.e. 12.02.2007 till the date of this order in view of the observations made in 2008 TAC (1) page 184. Accordingly, this issue is decided in favour of the applicants and against respondent No. 2.”

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Feeling aggrieved by the aforesaid order, the present appeal has been filed by the Insurance Company submitting that the appellant-Company is not liable to pay any interest as there is no direct relationship with the

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FAO No. 2084 of 2008 5

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claimants and the Company has to indemnify the insured to the extent of compensation provided as per the Workmen's Compensation Act, 1923 only. The liability under Section 4-A of the 1923 Act is on the owner of the vehicle. As such, the interest component added in the compensation is against the terms and conditions of the Insurance Policy. Reliance has also been placed on the judgements rendered by the Hon'ble Supreme Court in the cases of P J Narayan v. Union of India- 2004 (1), PLR Page 3 , New India Assurance Co. Ltd. v. Harshadbhai Amrutbhai Modhiva- 2006 RCR (Civil) 814 , wherein the earlier judgement rendered by Hon'ble Supreme Court in the case of Ved Parkash Garg was duly considered .

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Section 4-A of the 1923 Act reads as under:-

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“ 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.

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(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.

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(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 -

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(a) direct that the employer shall, in addition to the amount of

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FAO No. 2084 of 2008 6

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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

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(b) if, in his opinion, there is no justification for the delay, direct that 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.

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Explanation – For the purposes of this subsection, “scheduled bank” means a bank for the time being included in the Second Schedule to the Reserve Bank of India Act, 1934(2 of 1934). (3A) The interest and penalty payable under sub-Section (3) shall be paid to the workman or his dependent, as the case may be.

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A mere look at the aforesaid provision shows that Section 4-A deals with the time for payment of compensation as required to be computed under Section 4. Sub section (1) thereof mandates that the 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

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FAO No. 2084 of 2008 7

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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 4-A 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 or 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 4-A would not arise and his liability would depend upon the final adjudication by the Workmen's Commissioner at the end of the trial. In para 19 and 20 of Ved Prakash Garg's case, the Apex Court held as

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under:-

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“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

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FAO No. 2084 of 2008 8

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reimburse the said claim and it would be the liability of the insured employer alone.

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In view of the aforesaid conclusion of ours the present appeals will have to be partly allowed. The impugned judgements 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 4- A (3) of the compensation Act. But the impugned judgements 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 of the insured in paying up the compensation amount within the period contemplated by Section 4-A (3) of the Compensation Act. Accordingly, it must be held that the respondent-insurance company will by liable to meet the claim of the appellantinsured 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 from the date of accident till the date of payment.

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Thus, holding that the Insurance company was not liable to pay the penalty but held the Insurance company liable to pay the interest awarded on the principle amount of compensation by the Workmen's Commissioner on account of default of the insured in paying up the compensation amount

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FAO No. 2084 of 2008 9

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within the period contemplated by Section 4-A (3) of the 1923 Act. Thereafter, Hon'ble the Supreme Court in the case of New India Assurance Co. Ltd. v. Harshadbhai Amrutbhai Modhiya (supra) after taking into consideration the judgement rendered in the cases of Ved Parkash Garg and P.J.Narayan (supra) in para 19 of the judgement, held as under:-

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“19. As indicated hereinbefore, a contract of insurance is governed by the provisions of the Insurance Act. Unless the said contract is governed by the provisions of a statue, the parties are free to enter into a contract as for their own volition. The Act does not contain a provision like Section 147 of Motor Vehicles Act. Where a statue does not provide for a compulsory insurance or the extent thereof, it will bear repetition of State, the parties are free to choose their own terms of contract. In that view of the matter, contracting out, so far as reimbursement of amount of interest is concerned, in our opinion, is not prohibited by a statute.

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Accordingly, the appeal was allowed and the Insurance Company was held not liable for the interest and the liability was fastened on the employers. However, it was left open to the contract parties to choose their own terms of contract. Meaning thereby, until and unless, there was a specific clause in the Insurance Policy for payment of interest by the Insurance Company, the Company shall not be liable for the same.

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Thereafter, Hon'ble the Supreme Court in the case of Kamla Chaturvedi v. National Insurance Co Ltd. and others, 2009 ACJ 115 after taking into consideration various judgements rendered in the cases of

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FAO No. 2084 of 2008 10

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Maghar Singh v. Jashwant Singh, 1997 ACJ 517 (SC) , National Insurance Co. Ltd. v. Mubasir Ahmed, 2007 ACJ 845 (SC) , New India Assurance Co. Ltd. V Harshadbhai Amrutbhai Modhiya 2006 ACJ 1699 (SC) , P J Narayan v. Union of India 2004 ACJ 452 (SC) and Ved Prakash Garg v Premi Devi 1998 ACJ 1 (SC), observed as under :-.

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“....The act does not contain a provision like Section 146 of the M.V. Act where a statute does provide for a compulsory insurance or accident thereof. The parties are free to choose their terms of contract. In that view of the matter contracting out so far as the reimbursement of amount of interest is concerned is not prohibited by a statute. This position have been reiterated in P.J. Narayan v. Union of India, 2004 ACJ 452 (SC). In the instant case the position is different. The accident in question arose on account of vehicular accident and provisions of M.V. Act are clearly applicable. We have gone the policy of insurance and we find that no such exception as was the case in Harshadbhai Amrutbhai Modhiya's case (supra) was stipulated in the policy of insurance. Therefore, the insurance company is liable to pay the interest.”

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Thus, it is evident that there is no statutory liability under the provisions of the 1923 Act to pay interest. Hence, the Insurance Company is not liable for the same. This Court in its own decision dated 07.04.2008 rendered in FAO No. 3071 of 2005 titled as New India Insurance Company Limited v. Mahabir Singh and others after relying on the judgements rendered

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FAO No. 2084 of 2008 11

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by the Hon'ble Supreme Court in the cases of 'P.J.Narayan and Harshadbhai Amrutbhai Modhiya (supra), came to the following conclusion:-

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“ In view of the dictum of the aforementioned judgements of

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the Apex Court, the appellant has no liability to pay the interest. The award to the extent it directs the Insurance Company to satisfy the interest component and costs of the award is hereby set aside. However, the respondent-claimant Nos.1 and 2 are at liberty to recover the interest and costs from the employers i.e. respondent Nos. 3 and 4. The award is modified to the extent indicated above.”

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From the reading of the aforesaid judgement, following conclusion is arrived at:-

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As there is no statutory liability under the 1923 Act as envisaged under the Motor Vehicles Act, the Insurance Company is not liable to pay the interest under the Workmen's Compensation Act, 1923 unless there is a specific clause or provision in the Insurance Policy.

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FAO No. 320 of 2009

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The aforesaid appeal has been filed by the Claimants, in which, neither the interest nor the penalty was granted. While challenging the order dated 15.09.2008 passed by the Commissioner, under the Workmen's Compensation Act, 1923, a prayer was made to grant the interest on the awarded amount of compensation from the date of accident as well as the penalty under Section 4-A (3) of the 1923 Act.

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FAO No. 2084 of 2008 12

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In this appeal, the accident occurred on 23.06.2007 and the injured succumbed to his injuries on the same day i.e. 23.06.2007. DeceasedRaj Pal was 20 years of age. The minimum wages were taken into consideration as there was no documentary evidence of the earning of the deceased. However, it was admitted by respondent No. 1, the owner of Canter No. HR 58C-2777, that the deceased was his employee and driver of the Canter. Accordingly, the amount of compensation to the tune of Rs.3,48,721 was granted to the claimants without interest and penalty vide order dated 15.09.2008. The aforesaid order has been challenged by the learned counsel for the appellants on the ground that the appellants were entitled to penalty and interest from the date of the accident.

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Although no ground for the payment of penalty has been made out, there is merit in the submission of the learned counsel for the appellants with respect to the grant of interest from the date of accident till the payment. In order to substantiate that the appellants were entitled to the grant of interest from the date of the accident, reliance has been placed on the judgement of a Larger Bench of the Apex Court in the case of Pratap Narain Singh Deo v. Shrinivas Sabata and another- 1976 ACJ 141, wherein, it was held as under:-

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“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

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FAO No. 2084 of 2008 13

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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 justified in making an order for the payment of interest and the penalty.”

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Learned counsel for the Insurance Company, however, disputed the same and referred to the judgement rendered in the case of Kamla Chaturvedi (supra), wherein the Apex Court after relying on the judgement rendered in the case of ' National Insurance Co. Lt. v. Mubasir Ahmed ,' 2007 ACJ 845 (SC) , held that under the crucial expression is 'falls due'. Significantly, legislature has not used the express 'from the date of accident'. Unless there is an adjudication, the question of an amount falling due does not arise. Thus, in para 9 of Kamla Chaturvedi's case, it is held that:-

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“In view of what has been stated in Mubasir Ahmed's case, 2007 ACJ 845 (SC), the liability for interest would be in terms of what has been stated in para 9 of the judgement.”

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Hon'ble Supreme Court while interpreting Section 4-A (1) of the

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FAO No. 2084 of 2008 14

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Act explained the expression “falls due” in para 9 of Mubasir Ahmed's case, 2007 ACJ 845 (SC), observed as under :-

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“9. Interest is payable under Section 4A(3) if there is default in paying the compensation due under this Act within one month from the date it fell due. The question of liability under Section 4A was dealt with by this Court in Maghar Singh v. Jashwant Singh, J.T. 1998(7) S.C. 544: 1998(9) S.C.C. 134. By amending Act 14 of 1995, Section 4A of the Act was amended, inter alia , fixing the minimum rate of interest to be simple interest @ 12%. In the instant case, the accident took place after the amendment and, therefore, the rate of 12% as fixed by the High Court cannot be faulted. But the period as fixed by it is wrong. The starting point is on completion of one month from the date on which it fell due. Obviously it cannot be the date of accident. Since no indication is there as when it becomes due, it has to be taken to be the date of adjudication of the claim. This appears to be so because Section 4A(1) prescribes that compensation under Section 4 shall be paid as soon as it falls due. The compensation becomes due on the basis of adjudication of the claim made. The adjudication under Section 4 in some cases involves the assessment of loss of earning capacity by a qualified medical practitioner. Unless adjudication is done, question of compensation becoming due does not arise. The position becomes clearer on a reading of sub-Section (2) of

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FAO No. 2084 of 2008 15

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Section 4A. It provides that provisional payment to the extent of admitted liability has to be made when employer does not accept the liability for compensation to the extent claimed. The crucial expression is “falls due”. Significantly, legislature has not used the expression “from the date of accident”. Unless there is an adjudication, the question of an amount falling due does not arise.”

¶103

Learned Single Bench of this Court in the case of New India Assurance Company Limited. v. Manphool Singh and others , 2008 (1) PLR 706 after considering the various judgements of the Hon'ble Supreme Court rendered in the cases of National Insurance Co. Ltd. v Mubasir Ahmed- (20072) 147 PLR (SC) , Maghar Singh v Jashwant Singh- JT 1998 (7) SC 544 , Partap Narain Singh Deo v. Srinivas Sabata- (1976) 1 SCC 289 , State of U P v. Ram Chandra Trivedi- AIR 1976 Supreme Court 2547 , Union of India v. K S Subramanian (Civil Appeal No. 212 of 1975 decided on July 30, 1976) and Commissioner of Income Tax Bihar v. Trilok Nath Mehrotra- (1998) 2 Supreme Court Cases 289, followed the judgement rendered in the case of Partap Narain Singh Deo v. Srinivas Sabata- (1976) 1 SCC 289, to hold that the amount of compensation becomes due on expiry of one month from the date of accident. Thus, interest becomes payable not from the date of order/award of the Commissioner, but on expiry of one month from the date of injuries sustained by the workmen and recorded the following finding in para 9 of the judgement:-

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“In view of the law laid down by the Hon'ble Apex Court

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regarding the binding precedent under Article 141 of the

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FAO No. 2084 of 2008 16

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Constitution of India, I am of the considered view that the judgement in the case of Pratap Narain Singh Deo v. Srinivas Sabata (supra) will create a binding precedent regarding the interpretation of expression 'falls due' under Section 4A (1) of the Act and amount of compensation becomes due on expiry of one month from the date of accident. Thus, interest becomes payable not from the date of order/award of the Commissioner, but on expiry of one month from the date of injuries sustained by the workmen. Accordingly, I uphold the judgement of the Commissioner and dismiss this appeal with no order as to costs.”

¶108

While meeting the different view expressed in judgement rendered by the Apex Court in the case of Mubasir Ahmed's (supra) which was relied upon by the Apex Court in the case of Kamla Chaturvedi (Supra) , learned Single Judge held that the decision rendered by the larger Bench will prevail upon the judgment rendered by the Bench of two Judges.

¶109

It may be noted that when the judgment in the case of Mubasir Ahmed's (supra) was delivered as also when the judgment of Kamla Chaturvedi (Supra) was delivered, the judgment in the case of Pratap Narain Singh Deo v. Srinivas Sabata (supra) was not brought to the notice of the Hon'ble Supreme Court. The judgment in the case of Pratap Narain Singh Deo v. Srinivas Sabata (supra) was rendered by the Bench of four Judges of the Supreme Court. It is well settled law that when there is any conflict between the views expressed by larger and smaller benches, the decision of the larger bench will prevail.

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FAO No. 2084 of 2008 17

¶111

Another Single Bench of this Court in the case of New India Assurance Company Limited v. Smt. Luxmi Devi and others ( FAO No. 3218 of 2007, decided 17.11.2008) while relying on the various judgments of the Apex Court also held that:-

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“In view of the decision in the case of Pratap Narain Singh Deo (supra), the compensation fell due on expiry of a period of one month from the day when the claim petition was filed and as the same was not paid, the claimants-respondents were rightly held entitled to the grant of interest on the same for a period starting after one month from the date it fell due till the final adjudication.”

¶113

In another judgment in the case of Commissioner of Income

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Tax, Bihar v. Trilok Nath Mehrotra , (1998) 2 Supreme Court Cases 289, the Hon'ble Supreme Court has observed as under :-

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“4. We do not find any conflict in the law laid down in the case of R.M. Chidambaran Pillai with the law laid down in the earlier two cases. The decision in the case of Raj Kumar Singh Hukam Chandji was rendered by a Bench of three Judges. Therefore, even assuming that there was a conflict between that decision and the decision rendered in Chidambaram Pillai case which was rendered by a Bench of two Judges, the decision of the larger Bench will prevail.”

¶116

In view of the above, there is no doubt that as per Section 4- A (1) of 1923 Act, the amount of compensation becomes due on the

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FAO No. 2084 of 2008 18

¶118

expiry of one month from the date of accident. Thus, interest becomes payable not from the date of order/award of the Commissioner but on the expiry of one month from the date of accident.

¶119

In some of these appeals, the question as to who is liable to pay the penalty has been raised. However, the said dispute stand settled by the Apex Court in the case of Ved Parkash Garg v. Premi Devi and others - (1997) 8 SCC 1.

¶120

Thus, in view of the law laid down in Ved Parkash Garg's case (supra), the penalty shall now be recovered from the insured and not from the insurer.

¶121

In view of the above discussion and in the absence of the contract to the contrary, the appeals filed by the Insurance Company are allowed by modifying the impugned order of the Commissioner to the extent that the interest shall now be paid by the employer-respondent and the Insurance Company shall have the right to recover the same from the employer in case the same has already been paid.

¶122

Similarly, the appeal filed by the Claimants (FAO No. 320 of 2009 ) is partly allowed and the impugned order is modified to the extent that the appellants are entitled to the interest on the amount of compensation from one month after the date of accident at the rate of 9% per annum to be paid by the employer.

¶123

Allowed in the aforesaid terms.

¶124

Judge

¶125

2^nd December 2009 mohan

Icici Lombard General Insurance Co. Ltd. v. Sanjida and Ors.

Case brief

What is this about?

What did the court decide?

Icici Lombard General Insurance Co. Ltd. v. Sanjida and Ors.

Case brief

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