Rajesh Balia, J.
1. The S.B. Civil Misc. Appeal No. 768 of 2005 has been referred to be considered by a Division Bench of this Court by learned single Judge hearing the appeal. The learned single Judge after referring the catena of decisions had observed that the matter may be considered by Division Bench.
2. Issue raised in this case is whether the insurance company with whom the vehicle is insured and has undertaken liability to indemnify the insured against the liability arising under Workmen's Compensation Act is liable for penalty leviable under the Workmen's Compensation Act for default in payment of compensation in terms of the statutory provisions by the employer of the workman. Though, it has not been specifically mentioned in the order about the dichotomy existing between the different decisions of the courts necessitating such reference.
3. It is stated by the learned Counsel for the parties, who had argued before the learned single Judge that reference has been made of the aforesaid issue to the Division Bench considering prima facie it to be a case of difference of opinion between two decisions of this court. On the one hand, the decisions rendered in Oriental Insurance Co. Ltd. v. Vilas Devi ; Oriental Insurance Co. Ltd. v. Momina Begum ; National Insurance Co. Ltd. v. Nema D.B. Civil Special Appeal No. 47 of 2002 (Civil); decided on 25.4.2003, National Insurance Co. Ltd. v. Deva Ram D.B. Civil Special Appeal No. 48 of 2002 (Civil); decided on 22.5.2003 and Oriental Insurance Co. Ltd. v. Kaki Bai 2005 RAR 494 (Rajasthan), holding that the penalty leviable upon the employer in breach of statutory provision cannot be considered to be part of compensation under Workmen's Compensation Act. Following the decision of the Hon'ble Supreme Court in Ved Prakash Garg v. Premi Devi : AIR1997SC3854 and on the other hand the decision of the Division Bench in United India Insurance Co. Ltd. v. Roop Kanwar , wherein the court sustained the liability of insurance company to indemnify the employer in respect of penalty imposed under Workmen's Compensation Act for delayed payment.
4. Having perused the aforesaid judgments and heard learned Counsel for the parties we are of the opinion that no such dichotomy exists between two sets of judgments referred to by learned single Judge in the order of reference. The principle was clearly enunciated by the Supreme Court in Ved Prakash Garg's case : AIR1997SC3854 . In the said case, the Supreme Court distinguished the liability arising on account of interest payable on delayed payment of compensation and liability to the penalty levied under Section 4A(3)(b) of the Workmen's Compensation Act as under:
(14) ...But similar consequence will not follow in a 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 Workmen's Compensation Act after issuing show-cause notice to the employer concerned who will have reasonable opportunity to show cause why on account of some justification on his part for the delay in payment of the compensation amount he is not liable for this penalty.... 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 M.V. 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....
5. In coming to this decision the Apex Court also referred to the decision of Rajasthan High Court rendered in United India Insurance Co. Ltd. v. Roop Kanwar . The said judgment was referred by the learned single Judge of this Court and the appeal has not been decided till then. While considering the case of Roop Kanwar, the Supreme Court observed as under:
(18) ...In the case of United India Insurance Co. Ltd. v. Roop Kanwar , a learned single Judge of 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 for penalty and interest as imposed upon the insured under Section 4A(3) of the Workmen's Compensation Act. This judgment proceeded on its own facts and was concerned with a situation converse to the one as was examined by Karnataka High Court in Oriental Insurance Co. Ltd. v. Raju : (1994)IILLJ1038Kant . In the case decided by Karnataka High Court, as seen earlier, there was an express exclusion of such liability of the insurance company. In the aforesaid case decided by Rajasthan High Court there was an express inclusion of such liability for the insurance company which had taken additional premium....
6. It is on the anvil of the aforesaid observation made by the Supreme Court distinguishing the judgment rendered by learned single Judge of this Court in Roop Kanwar's case , the Division Bench dismissed the special appeal filed against the judgment of learned single Judge and upheld the liability of the insurance company to indemnify the employer of the entire sum payable with penalty including the penalty levied for delayed payrnent of compensation.
7. The Apex Court having decided the legal liability in respect of compensation payable under the Workmen's Compensation Act that is to say the principal amount of compensation interest paid thereon and any other payment which become payable under the Workmen's Compensation Act towards the penalty leviable thereunder on account of default of the employer is not a part-of legal liability to uphold the right of parties to contract in respect of the liability which has accrued to be indemnified by the insurance company. The parties can agree to exclude any part of the liability from the insurance like taking other additional liability arising under the Workmen's Compensation Act though it may not fall in the ambit of the legal liability. The Roop Kanwar's case, has been decided by Division Bench on the basis of finding recorded by the Hon'ble Supreme Court, while distinguishing the Roop Kanwar's case in laying down the principle, that in case decided by Rajasthan High Court there was an express inclusion of such liability for insurance company which had taken additional premium. Thus, what liability actually the insurance company is liable to indemnify the insured depend on the obligation taken under the policy of insurance. In all cases, therefore, it becomes necessary to look at the relevant clause of the insurance policy which provides a clue to the liability undertaken by the insurance company and the liability excluded out of contract of insurance.
8. On principle, we do not find any dichotomy in any of the judgments above referred and noticed by the learned single Judge in all cases, ultimately it depended on the interpretation of the relevant clause of the insurance policy determining the scope of the liability undertaken by the insurance company for indemnifying the insured. This question was discussed in detail by Division Bench of this Court in Vilas Devi's case , referring to Roop Kanwar's case and the observations of the Supreme Court noticed by us above, this Court said that:
(19) The above passage is clear in its indication that case was distinguished on assumption that 'there was express inclusion of such liability for the insurance company which had taken additional premium'.
9. With this distinction in mind, court has referred to IMT-18 of the insurance policy which was in consideration in Vilas Devi's case (Rajasthan). The court said that (para 20):
From clause IMT-18 it is apparent that the insurer has undertaken on payment of additional premium only 'legal liability' arising under Workmen's Compensation Act and no more.
10. The matter was again considered by the Division Bench in National Insurance Co. Ltd. v. Nema D.B. Civil Special Appeal No. 47 of 2002 (Civil); decided on 25.4.2003, which is an unreported judgment of this court. The relevant condition in the insurance policy which was before the Division Bench was IMT-17, which read as under:
In consideration of the payment of an additional premium it is hereby understood and agreed that notwithstanding anything contained herein to the controversy the company shall indemnify the insured against his legal liability under the Workmen's Compensation Act, 1923 and subsequent amendment of the Act prior to the date of the endorsement, the Fatal Accidents Act, 1855 or at common law in respect of personal injury to any paid driver or cleaner or persons employed in loading or unloading but in any case not exceeding seven in number including driver and cleaner whilst engaged in the service of the insured in such occupation in connection with the goods carrying commercial vehicle and will in addition be responsible for the costs and expenses incurred with its written consent.
Considering the above claim, it was held that what has been accepted by the insurance company is its legal liability under the Workmen's Compensation Act.
11. The insurance policy in the present case on record of the Commissioner under the Workmen's Compensation Act shows that the liability undertaken in respect of Workmen's Compensation Act has been in identical terms referred to in Nema's case (supra), also under IMT-17, viz., legal liability to persons in connection with operation and maintaining or unloading of goods carrier commercial vehicles.
In view thereof, it must be held that the insurance company cannot be held liable to indemnify the owner of the vehicle in respect of penalty payable on default of timely payment of compensation which does not fall within the ambit of 'legal liability' in view of the decision rendered in Ved Prakash's case : AIR1997SC3854 , by the Supreme Court.
12. Consequently, the appeal of the insurance company to the extent it joins issue on its liability towards penalty leviable under Workmen's Compensation Act is concerned is allowed and to that extent the directions of the Commissioner, Workmen's Compensation that insurance company is liable for the penalty levied under Workmen's Compensation Act is quashed. There shall be no order as to costs.