Orissa High Court
Divisional Manager, New India ... vs Biswanath Barman And Anr. on 3 October, 1996
Equivalent citations: 1997ACJ78, [1996(74)FLR2710], (1997)ILLJ797ORI, 1997(I)OLR560
Bench: S.N. Phukan, A. Pasayat, C.R. Pal
JUDGMENT
S.N. Phukan, C.J,
1. In Misc Appeal No. 355 of 1992 a learned single Judge of this Court has referred the following two questions arising out of Workmen's Compensation Act, 1923 (for short 'the Act') for our decision:-
" (1) whether insurer (sic) can be made liable for interest and penalty under the Act not withstanding absence of specific provision therefor in the Act and stipulation in the policy issued by the insurer?
(2) Whether levy of penalty is automatic or the insurer is entitled to an opportunity to show that levy of penalty is not warranted, even if it is held that insurer is liable?"
In the other appeals, only the first question has been referred.
2. The necessity for making the present reference to this Full Bench arose as a learned single Judge of this Court in the Oriental Fire and Gen- eral Insurance Co., Ltd v Matias Burla 1986 ACJ 732 held that under Section 4A, the insurer is not liable to pay either penalty or interest; but the decision of the learned single Judge was not accepted by a Division Bench of this Court in O.J.C. No 4880 of 1990 (Khirod Nayak v. Commissioner for W.C) decided on April 16, 1991-1986 ACJ 732.
3. Heard learned counsel for the parties.
4. We may now extract below the relevant sections of the Act before we consider the two question referred to us.
Sub-Clause (e) of Clause (1) of Section 2 of the Act defines the word 'employer' which runs as follows:-
"'employer' includes any body of persons whether incorporated or not and any managing agent of an employer and legal representative of a deceased employer, and, when the services of a workman are temporarily lent or let on hire to another person by the person with whom the workman has entered into a contract of service or apprenticeship means such other person while workman is working for him;
Section 4A runs as follows:
"Compensation to be 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 case 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 of 6 per cent per annum on the amount due together with, if in the opinion of Commissioner there is no justification for the delay, a further sum not exceeding fifty per cent of such amount, shall be recovered from the employer by way of penalty."
5. It is the settled law that where the language is plain and admits of but one meaning, the task of interpretation can hardly be said to arise. Where the legislature while enacting a statue used clear and unequivocal language capable of only one meaning, it must be enforced however harsh or absurd or contrary to common sense the result may be. (see Cartledge v. E. Jopling & Sons Ltd 1963 A.C. 758). Therefore, if the language of Section 4A of the Act is clear, it is the duty of this Court to expound the section as it stands.
6. Reading the definition of 'employer' with Section 4A of this Act, there can only be one interpretation that the employer is liable if there is any default in paying the compensation due under the Act within one month from the date it fell due. The interest and penalty shall be recoverable only from the employer as is clear from Sub-section (3) of Section 4A of the Act. If we hold that the insurer is liable for penalty or interest, it would amount to substituting the word 'employer' in Sub-section (3) of Section 4A of the Act with the word 'insurer'. Now let us consider the various decisions of different High Courts placed before us.
7. The decision of a learned single Judge of this Court in Bibhuti Bhusan Mukherjee v. Di-namani Dei (1982-I-LLJ-73) was relied upon at the Bar. This decision, in our opinion, is not applicable to the case in hand as the question that came up before the learned single Judge was liability of the insurance company under the Motor Vehicles Act, 1939 vis-a vis the Act as the cleaner of the vechile died in the accident. We are not concerned in the present references with the liability of the insurance company under the Motor vehicles Act. Similar is the position in respect of the Full Bench decision of the Gujarat High Court in National Insurance Co. Ltd v. Nathibai Chaturabhuai 1982 ACJ 153.
8. The next decision for consideration is the decision of a learned single Judge of this Court in Oriental Fire & General Insurance Co, Ltd v. Brajakishore Sahu 1986 ACJ 692. Though the learned single Judge while interpreting Section 95 of the Motor Vehicles Act, 1939 held that the insurer is liable for the entire amount awarded in view of the additional premium, paid yet specific question as regards liability of the insurance company on newly added Section 4A of the Act was not considered. Therefore, we are of the opinion that this decision is not applicable to the case in hand.
9. In Oriental Fire and General Insurance Co. Ltdv. Matias Burla (Supra), the learned Single Judge specifically considered Section 4A of the Act and we extract below paragraph 7 of the judgment which is relevant for our purpose:-
" A bare glance at Section 4A(3) is enough to show that it can be invoked against an employer. The use of the word, 'employer' in this provision as distinct from the phrase 'any person' in Section 31 of the Act, which deals with recovery of compensation, also further confirms the view that the provision can be invoked against an employer. Being a penal provision, it is to be construed rigidly. The insurer, who takes the liability to indemnify the employer, is not the employer. On this short ground only, the contention of Mr. Basu that the interest claimed and penalty imposed on the insurer is unauthorised becomes unassailable ."
10. As indicated above we are of the opinion that on a plain reading of the definition of the word 'employer' and Section 4A(3) of the Act it is sufficient for us to hold that under the provisions of the above Section 4A of the Act, the employer is liable to pay the interest and penalty. Therefore, we are in respectful agreement with the ratio laid down by the learned Single Judge. The decision in Khirod Nayak(Supra) which is the decision of a Division Bench of this court which did not accept the decision of the learned single Judge in Bibhuti Bhusan Mukherjee (supra) needs our careful consideration. The Division Bench of this Court after referring to the above paragraph 7 of the judgment of the learned Single Judge in Matias Burla (supra) considered the law laid down by the Madhya Pradesh High Court in New India Assurance Co. Ltd. v. Bhuk-kan 1989 ACJ 923, which is contrary to the above views expressed in Bibhuti Bhusan Mukherjee (supra), and was of the opinion that:-
"7. The question for our consideration is, which of the two views merits our acceptance. According to us, the mere mention about the liability being of the employer in Section 4A(3) of the Act is not enough to exonerate the insurer to indemnify the employer in this regard in cases of accident involving a motor vechile which requires compulsory insurance under the provisions of the Motor Vehicles Act, 1939. We have stated so because the primary liability of paying compensation is also fastened on the employer as would appear from Section 3(1) of the Act, If an insurer is liable to indemnify the employer for the latter's liability to pay compensation as visualised by Section 3(1) of the Act, we do not find any cogent reason to exonerate the insurer in paying the penalty fastened on the employer because of what is stated in Section 4A(3) of the Act. If the liability of the insurer arises for the principal amount, though the same is required to be paid by the employer as stated in Section 3(1) of the Act, by the same token, the insurer's liability would arise to pay penalty which is imposed on the employer because of the default in making the payment. If the employer commits the default in paying the compensation and if it was the liability of the insurer to pay the compensation in time, we are of the view that for the default in making payment the insurer is also to suffer. The mere fact that Section 4A(3) has spoken about 'employer' is, therefore, not enough to exonerate the in surer."
The Division Bench quoted the following portion from paragraph 9 of the judgment of the Madhya Pradesh High Court in New India Assurance Co. Ltd (supra):-
".......In accidents of motor vehicle the liability to pay compensation is upon the owner of the vehicle, but where the vechile is insured it is for the insurer to make good the compensation awarded in accordance with the terms and conditions of the policy. The said liability of the insurer is covered under the provisions of Section 96 of the Motor Vechiles Act Therefore, if the liability of the insurer arises for the principal amount and the same is not deposited or paid well in time within the meaning of the provisions of Section 4A(3) of the Act of 1923, i.e. within a month from the date of intimation, the insurer incurs liability to pay penalty."
From the above, it is clear that the Madhya Pradesh High Court gave emphasis on the terms and conditions of the policy. In other words, if the terms and conditions of the policy do not specifically provide for payment of interest and penalty the insurer cannot be fastened with the liability for payment of interest and penalty under the Act. With respect, we are unable to accept the ratio laid down by the Division Bench of this Court in Khirod Nayak (supra) inasmuch as under Sub-section (3) of Section 4A of the Act it is the primary liability of the employer to pay penalty and interest. If there is any insurance policy taken out by the employer, the amount of liability of the insurance company to indemnify the employer would depend upon the terms and conditions of the contract, namely, the insurance policy, and if it is not within terms of the policy, the insurance company cannot be saddled with the liability to pay the interest and penalty under the Act. Any contrary view will run counter to the contract of insurance.
11. The Division Bench in Khirod Nayak (supra) also relied on a decision of the Gauhati High Court in Oriental Fire and General Insurance Co. Ltd. v. Nani Bala Devi 1987 ACJ 555. In this case the question namely, Section 4A of the Act was not at all considered, The facts of the case were that an employee, namely, deceased Tarini was employed as handy man-cum-cleaner of a particular truck and the truck met with an accident and the employee died. The truck was insured and as per the provisions of the Act, the Commissioner for Workmen's Compensation directed the insurer to pay a sum of Rs 18,000/ as compensation. Feeling aggrieved, the insurance company filed an appeal before the High Court. On perusal of the Judgment, it does not appear that any penalty or interest was imposed. Therefore, this decision is also not relevant for our purpose. We may only point out that the learned single Judge of the Gauhati High Court held that the provisions of the Act cannot be viewed in isolation when the M.V. Act has specifically stated that a policy of insurance taken out under the provisions of the M.V. Act cannot exclude the liability arising under the Act. Therefore, this, decision, as stated above, is not applicable to the case in hand.
The Division Bench of this Court in Khirod Nayak (supra) also took note of the decision of this Court in Bibhuti Bhusan Mukherjee (supra). We have already stated that the above decision is not relevant for our purpose by giving reasons in paragraph 7 of this judgment.
12. We may now refer to the decisions of various High Courts taking the view that under Sub-section (3) of Section 4A of the Act employer is liable to pay interest and penalty.
In Oriental Insurance Co. Ltd v. Hasmat. Khatoon 1989 ACJ 862, a learned single Judge of Delhi High Court took the view that under Sub-section (3) of Section 4A of the Act the insurance company is not liable to pay interest and penalty. The learned single Judge accepted the -view expressed by this Court in Matias Burla (supra) and also the view expressed by the Karnataka High Court in Oriental Insurance Co. Ltd. v. Jeevaramma 1988 ACJ 671 The learned single Judge, however, did not, accept the view expressed by the Madhya Pradesh High Court in Om Prakash v. Ramkali 1987 ACJ 803.
The Gujarat High Court in Jayantilal & Coa v. Garasia Rajvirba Udesinh 1992 ACJ 286 took the same view that the insurance company could not be made liable for the penalty imposed under Section 4A(3) of the Act. In arriving at the above view, the learned single Judge considered the policy of insurance.
In the decision rendered by a learned single Judge of this Court in S.D. Sharma v Ramesh Mahakud 1993 ACJ 385, it was held that under the above Section 4A(3) of the Act, the insurance company is not liable for the interest and penalty.
We may now refer to the two decisions of the Himachal Pradesh High Court, namely Dromati Devi v. Sohan Singh 1995 ACJ 1019 and United India Insurance Co Ltd. v. Nako alias Naiku Devi 1996 ACJ 516. These two decisions were rendered by the same Division Bench in which one of us (S.N Phukan C.J.) was a member. Relying on the decisions in Oriental Fire & General Insurance Co. Ltd. v. Moola Singh 1970 ACJ 401(P&H); Kochu velu v. Purakkattu Joseph (1980-II-LLJ-220)(Ker); U.P. State Road Transport Corpn. v Abdul Hameed 1985 ACJ 832 (All); Jayantial & Co v. Garasia Rajvirba Udesinh (supra) and Oriental Insurance Co. Ltd. v. Raju 1994 ACJ 191 (Kant), it was held that the insurance company was not liable for payment of interest and penalty. Similar view was also expressed by the Bombay High Court (Nagpur Bench) in Divisional Manager, United India Insurance Co. Ltd. v. Sahah Bahadur 1996 ACJ 558.
We may also refer to the decision of the Division Bench of the Karnataka High Court in Oriental Insurance Co. Ltd. v Raju (supra) more particularly the relevant portion of paragraph 8, which runs as follows:-
"......... Therefore the authorities exercising Power under the Act must necessarily apply their mind to see whether under the policy covering the risk there arises liability to indemnify the payment of interest or penalty. To make it clear, in the event of the insured having entered into a contract with the insurer, the latter shall not be made liable to indemnify the insured as to payment of interest/penalty that may arise in a claim of this kind. In the instant case, we are satisfied that in view of the view of the exclusion of the liability to pay interest or penalty arising out of the claim petition, the appellant insurer shall not be liable to pay interest imposed in the instant case."
In our opinion this is the correct position of law.
13. Now let us consider the decisions on which reliance has been placed in support of the argument that the insurance company is liable both for interest and penalty.
A Division Bench of the Karnataka High Court in Oriental Insurance Co. Ltd v Jeevaramma (supra) held that under Section 4A(3) of the Act the insurance company is liable to meet all compensations including penalty and interest payable for the risk covered unless the policy does not exclude the liability of the Insurance company to pay penalty and interest. We have no dispute on this point. If under the insurance policy the insurance company on payment of additional premium or otherwise agrees to indemnify the owner for the penalty imposed and interest awarded, the insurance company shall be liable to indemnify the owner.
14. The Madhya Pradesh High Court in Om Prakash v. Ramkali (supra) held that under Section 4A(3) of the Act and under Sections 95(1) and 96 of the M.V. Act, 1939 the insurer is liable to pay interest and penalty. In paragraph 14 of the judgment, the learned single Judge observed that the statutory requirement envisaged under Section 95(1)(b) of the M.V. Act does not extend to all types of liabilities arising under the Act in respect of any accident and it would be open to an insurer to exclude, in the policy, any such li-ability which, though it arises under the Act is not a statutory liability envisaged under Section 95(1)(b) or under any provision of the M.V. Act, Thus, it appears, according to the learned Single Judge of Madhya Pradesh High Court that it is even open to an insurer to exclude in the policy any liability which is not statutory.
We may refer to another decision of the Madhya Pradesh High Court in New India Assurance Co. Ltd. v. Guddui, (1995-I-LLJ-971), wherein it was held that insurance company is liable for payment of penalty. This view was taken as there was no clause in the insurance policy exempting the insurance company against liability for penalty in case of default in making payment. On reading paragraph 2 of the judgment, we find that under Clause 17 of the insurance policy, the insurance company was liable in that case for all legal liabilities of the employer. Thus, the above view was taken by the learned single Judge not in view of the provisions in the section of the Act but because of the conditions in the insurance policy.
In another decision of the Gauhati High Court in United India Insurance Co. Ltd. v. Shri L N Tamuly 1995 (1) TAG 469, it was held that under Section 4A of the Act the insurance company is liable to pay penalty and interest. In paragraph 6 of the judgment, the learned single Judge has held that interest and penalty are not integral part of the compensation and that the same can be imposed only if the employer fails to settle the claim within one month when it is falling due. From the said paragraph, we find that insurance policy was not filed. Therefore, the learned Single Judge had no opportunity to find out that under the insurance policy the insurance company was liable to indemnify the owner for the penalty and interest. Thus, reading the Judgment as a whole, we find that the insurance company is liable to pay penalty and interest not because of Section 4A of the Act but because the whole insurance policy was not exhibited to support that the insurance company is not liable for such penalty and interest. Therefore, this decision supports our view as stated above.
Reference has been made to the decision in Untied India Insurance Co. Ltd. v. Roop Kanwar 1991 ACJ 74 (Raj), which in our view, needs no consideration, as this decision is not directly on the point.
15. Thus, the above decisions which have been cited before us in support of the contention that insurance company is liable to pay interest and penalty, are based mainly on insurance policy. We are of the opinion, as stated earlier, that if the insurance policy which is governed by the Indian Contract Act does not provide for payment of interest and penalty by the insurance company, the court cannot take the view that the word 'employer' in Section 4A(3) of the Act would include, 'insurer', as it would amount to substituting the word, 'employer', by the word, 'insurer', in Sub-section (3) of Section 4A of the Act.
16. Situated thus, we hold on a plain reading of the definition of 'employer' and Section 4A(3) of the Act that the insurer cannot be made liable for interest and penalty under the Act in the absence of any stipulation in the policy of insurance. The first question is answered accordingly. In view of our above answer to the first question, it is not necessary to answer the second question referred to us.
17. The references are disposed of accordingly. Let all the appeals be sent to the appropriate Bench for deciding the matter on merits. The appropriate Bench shall decide the appeals on the facts of each case and with reference to the policy of insurance.