Judgment:
1.This appeal arises out of the order dated 26.05.2001 passed by the Commissioner for Workmen's Compensation and Deputy Commissioner of Labour, Hyderabad (twin cities) in W.C.No.12 of 1998.
2.Mr. Harjan, first respondent filed a claim application before the Commissioner for Workmen's Compensation, Hyderabad (twin cities) seeking compensation in respect of the permanent disability sustained by him due to the crush injury to right leg suffered on 29.12.1992 while working on a truck bearing No. PBO-8C-9672 belonging to the second respondent, insured under a valid W.C policy with the third respondent-insurance company.
3.After making an enquiry into the claim application filed by the applicant, the learned Commissioner allowed the claim application and awarded compensation of Rs.86,764/- holding that the respondents 2 and 3 are jointly and severally liable to pay the same and directed the respondents 2 and 3 to deposit the compensation amount within 30 days from the date of the order. The third respondent deposited the award amount together with interest at 6% per annum on 24.08.2001 towards full and final settlement of the claim which fact is not in dispute. However, the first respondent filed an application before the learned Commissioner under Section 4-A of the Workmen's Compensation Act, 1923 seeking a direction charging simple interest at the rate of 6% on the compensation amount and to impose penalty of 50% on the compensation amount on the ground that the compensation amount was not deposited by the respondents within 30 days from the date of order as directed by the Commissioner on 30.10.2001.
4.Before the Commissioner as is evident from the order passed by him, notices were served on the appellant as well as the respondents 2 and 3. The appellant and the respondent No.2 have not filed any counter though, the respondent No.3 filed its counter contending, inter alia that they have deposited the award amount on 24.08.2001 towards full and final settlement of the claim and that they are not liable to indemnify the insured B.Seenaiah and Company the contractors, in respect of the interest as well as the penalty since it was not specifically provided in the policy of insurance and no additional premium being paid, it's burden does not exceed the statutory liability.
5.By his order dated 30.10.2001, the learned Commissioner held that the appellant-employer is duty bound to deposit the compensation amount immediately after notice of the accident, but having failed to deposit the same in spite of the direction issued by him, it would be appropriate to charge interest as well as to impose penalty and consequently issued a direction to pay interest at the rate of 6% per annum from the date falls 30 days after the accident till the date of deposit and also directed to pay penalty at the rate of 50% of the award amounting to Rs.43,382/-. The learned Commissioner, however, further held that the third respondent-insurance company could not be fastened with liability to pay penalty and accordingly directed the third respondent only to pay interest and directed the appellant to deposit the penalty of Rs.43,382/- within 30 days from the date of the order.
6.The appellant-employer challenges the said order on the ground that it is illegal and cannot be sustained.
7.I have heard Sri A.Chandraiah Naidu, learned counsel appearing for the appellant and Sri I.Mammuvani, learned counsel appearing for the respondent No.3-Insurance Company and Sri K.Narasimha Chari, learned counsel appearing for the respondent No. 1-workman.
8.I shall determine the question involved in the present appeal namely whether the employer or the insurance company are liable to pay the penalty imposed by the Commissioner for Workmen's Compensation in the light of the ratio laid down in the following decisions.
9.In VED PRAKASH GARG ETC v PREMI DEVI AND OTHERS ETC1 the Supreme Court held as follows: (a) "All these provisions (of Compensation Act) 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."
(b) "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 follow."
(c) "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 At. 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 de hors it."
(d) "Compensation payable under the Compensation Act along with interest thereon, if any, as imposed by the Commissioner as per Sections 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 contingencies 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."
10. From the above judgment, therefore, it is obvious that the compensation amount as well as the interest thereon shall have to be made good by the insurance company jointly with the insured employer, but the insurance company cannot be made liable to reimburse the penalty imposed on the employer.
11. The crucial question requires consideration for the purpose of disposing of the present appeal is as to when the compensation amount falls due.
12. In NATIONAL INSURANCE COMPANY LTD. V MUBASIR AMED2 the Supreme Courtdealing with the question as to when the amount falls due held as follows:
(a) "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.
(b) "Unless adjudication is done, question of compensation becoming due does not arise. "
(c) "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."
13. Similarly in ORIENTAL INSURANCE CO.LTD. v MOHD. NASIR3 the Supreme Court referring to the same question held as follows: "With regard to the payment of interest, there cannot be any doubt whatsoever that interest would be from the date of default and not from the date of award of compensation." " Only because in a given case, penalty may not be held to be leviable, by itself may not be a ground not to award reasonable interest." "The position becomes clearer on a reading of Sub-section (2) of 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 nor arise."
14. From the above two judgments rendered by the Apex Court, there is no doubt whatsoever that the compensation falls due not from the date of accident, but the starting point is on completion of one month period stipulated by the leaned Court below which passed the order.
15. Moreover, levying penalty arises only if the Commissioner is of the opinion that there is no justification for the delay in depositing the amount by the employer in which event in addition to the direction to pay interest, he also can levy penalty not exceeding 50% of the compensation amount, after affording opportunity of being heard to the employer to show cause why the penalty should not be levied. Therefore, for imposing penalty, not mere delay, but the conduct, which is not justifiable of the employer is relevant.
16. In the present case admittedly the risk of the first respondent/workman was covered under a valid policy with the third respondent-insurance company. Therefore, the appellant/employer might be under the genuine belief that the third respondent -insurance company would deposit the amount. It is not the case where the appellant deliberately avoiding to deposit the amount of compensation after it became due. As already noticed, the amount falls due after adjudication by the Commissioner and in such event in the instant case, it cannot be said that there is any willful delay or disobedience on the part of the appellant/employer in depositing the amount warranting levy of penalty. The finding of the learned Commissioner that amount becomes due soon after the appellant had notice of the accident is erroneous in view of the above referred judgments of the Apex Court. Admittedly, the third respondent-insurance company deposited the compensation amount with 6% interest on 24.08.2001. Therefore, the question of either the appellant or the third respondent-insurance company paying any further interest does not arise and the appellant is not liable to pay any penalty.
17. For the foregoing reasons, the appeal succeeds and the order passed by the learned Commissioner directing the appellant-employer to pay an amount of Rs.43,382/- being the 50% of the award amount as penalty is set aside. The appeal is allowed. There shall be no order as to costs.
1 II (1997) ACC 520 (SC)
2 2007(2) SCC 349
3 2009(6)SCC 280