Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 6691 OF 2008
(Arising out of SLP(C) No. 22634 of 2007)
Kamla Chaturvedi ...Appellant
Versus
National Insurance Co. & Ors. ...Respondents
J U D G M E N T
DR. ARIJIT PASAYAT, J.
1. Leave granted.
2. Challenge in this appeal is to the judgment of a learned Single Judge
of the Madhya Pradesh High Court, Jabalpur Bench, allowing the Misc.
Appeal filed by the respondent No.1 (hereinafter referred to as the
‘Insurance Company’). The controversy lies within a very narrow compass.
3. Challenge in the Misc. Appeal before the High Court was to the
Award made by the Commissioner for Workmen’s Compensation, Labour
Court No.1 Gwalior (in short the ‘Commissioner’). A sum of Rs.2,21,370/-
along with interest at the rate of 12% per annum was awarded. The liability
to make the payment was fixed on the Insurance company. In appeal the
only ground raised was that in a claim arising under the Workmen’s
Compansation Act, 1923 (in short the ‘Act’) interest is not payable by the
Insurance company as there was no contract by the insurer with the insured
with regard to the payment of interest. High Court accepted the stand
placing reliance on a judgment of this Court in New India Assurance Co.
Ltd. v. Harshadbhai Amrutbhai Modhiya [2006(5) SCC 192]. It was held
that the direction for payment of interest by the insurance company was not
sustainable and it was held that the insurance company was not liable to pay
any interest and if so advised the amount of interest could be recovered by
the claimant from the employer.
4. Learned counsel for the appellant submitted that the High Court has
erroneously held that the Insurance company had no liability to pay. On the
contrary learned counsel for the Insurance company has submitted that the
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decision in New India Assurance Co. Ltd.’s case (supra) has a clear
application to the facts of the case.
5. In New India Assurance Co.’s case (supra) this Court found as a
matter of fact that a contract itself provided that the interest and/or penalty
imposed on the insurer on account of his/her failure to make payment of
amount payable under the Act is not to be paid by the insurer. This position
is clear from the paragraphs 3&4 of the judgment which read as follows:
“3. The two claim petitions came to be filed by the
heirs and legal representatives of the deceased driver
and the cleaner under the Compensation Act before the
Commissioner for Workmen’s Compensation, Rajgarh
District, Sirmur, Himachal Pradesh. The said
applications were moved presumably by exercising
option available under Section 167 of the Motor
Vehicles Act which lays down that:
“167. Notwithstanding anything contained in
the Workmen’s Compensation Act, 1923 (8 of
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 were 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
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Respondent 9-insurance company as respondents. The
Workmen’s Commissioner after hearing the parties
concerned computed the compensation available to the
claimant-dependants 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 4-A(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 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 employees 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 9-
insurance company.
4. 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 4-A(3) of the Compensation Act and for such
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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 9-insurance
company appealed to the High Court. The appeals were
allowed and the awards of the Commissioner under the
Compensation Act insofar 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.”
6. In Ved Prakash Garg v. Premi Devi and others [1997(8) SCC 1] this
court observed that the Insurance Company is liable to pay not only the
principal amount of compensation payable by the insurer employer but also
interest thereon if ordered by the Commissioner to be paid by the insured,
employee. Insurance company is liable to meet claim for compensation
along with interest as imposed on insurer employer by the Act on conjoint
operation of Section 3 and 4(A)(3)(a) of the Act. It was, however, held that
it was the liability of the insured employer alone in respect of additional
amount of compensation by way of penalty under Section 4(A)(3)(b) of the
Act. In New India Assurance Co.’s case (supra) and Ved Prakash Garg’s
case (supra) was distinguished on facts. It was observed that in the said
case the court was not concerned with a case where an accident had
occurred by use of motor vehicle in respect whereof the Contract of
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Insurance will be governed by the provisions of the Motor Vehicles Act,
1988 (in short the ‘M.V. Act’). A contract of Insurance is governed by the
provisions of the Insurance Act, 1938 (in short the ‘Insurance Act’), unless
the said contract is governed by the provisions of a statute. The parties are
free to enter into a contract as per their own volition. The Act does not
contain a provision like Section 148 of the MV Act where a statute does not
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 and others [2006 (5) SCC 200]. In the instant case the
position is different. The accident in question arose on account of vehicular
accident and provisions of MV Act are clearly applicable. We have gone
through the policy of insurance and we find that no such exception as was
the case in New India Assurance Co.’s case was stipulated in the policy of
insurance. Therefore, the Insurance Company is liable to pay the interest.
7. The further question arises as to from which date it would be paid.
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8. In National Insurance co. Ltd. v. Mubasir Ahmed & Anr. [2007(2)
SCC 349] it was, inter alia, held as follows:
“Interest is payable under Section 4-A(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 4-A was dealt with by this
Court in Maghar Singh v. Jashwant Singh [(1998) 9
SCC 134] . By amending Act 30 of 1995, Section 4-A 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 to 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 4-A(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 Section 4-A. 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.
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9. In view of what has been stated in Mubasir Ahmed’s case (supra) the
liability for interest would be in terms of what has been stated in paragraph
9 of the judgment.
10. The appeal is allowed to the aforesaid extent. There shall be no order
as to costs.
…………......................................J.
(Dr. ARIJIT PASAYAT)
……………..................................J.
(Dr. MUKUNDAKAM SHARMA)
New Delhi,
November 18, 2008
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