Gujarat High Court
Manjudevi Wd/O Rajeshkumar Shivkant ... vs Shri Sai Corporation Kamlesh K Patel on 14 November, 2025
NEUTRAL CITATION
C/FA/2736/2025 JUDGMENT DATED: 14/11/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/FIRST APPEAL NO. 2736 of 2025
FOR APPROVAL AND SIGNATURE:
HONOURABLE MRS. JUSTICE M. K. THAKKER
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Approved for Reporting Yes No
yes
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MANJUDEVI WD/O RAJESHKUMAR SHIVKANT VARMA & ORS.
Versus
SHRI SAI CORPORATION KAMLESH K PATEL & ANR.
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Appearance:
MR MOHSIN M HAKIM(5396) for the Appellant(s) No. 1,2,3,4,5,6,7
MR KRUNAL R SAKSENA(5915) for the Defendant(s) No. 2
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CORAM:HONOURABLE MRS. JUSTICE M. K. THAKKER
Date : 14/11/2025
ORAL JUDGMENT
1 This appeal is filed by the appellants-claimants challenging the judgment and award dated 21.10.2022 passed by the learned Ex-Officio Commissioner under the Workmen Compensation Act in Workmen Compensation (Non-Fatal) Case No.4 of 2015. The appellants are aggrieved by the directions issued by the learned Commissioner holding them liable to pay compensation of Rs.8,52,160/- to the employer as well as the insurance company, and Page 1 of 18 Uploaded by M.M.MIRZA(HC01407) on Thu Nov 20 2025 Downloaded on : Thu Nov 20 21:28:02 IST 2025 NEUTRAL CITATION C/FA/2736/2025 JUDGMENT DATED: 14/11/2025 undefined further awarding simple interest at the rate of 9% from the date of accident till the date of award, and compound interest at the rate of 7% from the date of award till realization.
2 It is the case of the present appellants that the claim petition was filed before the learned Commissioner seeking compensation on account of the death of the employee, namely, Rajeshkumar Shivakant Verma, to the tune of Rs.8,52,160/- with 12% interest and penalty. It was alleged in the claim petition that the husband of appellant No.1 was working as a driver with defendant No.1 and that he met with an accident on 18.05.2014, which resulted in his death. The appellants, being the wife, children and parents of the deceased, filed the claim under the Workmen Compensation Act. The learned Commissioner, while allowing the claim, instead of directing the insurance company to pay the entire compensation of Rs.8,52,160/- with 12% interest, held the employer and the insurance company jointly and severally liable, which finding has aggrieved the appellants and is challenged before this Court.
3 Heard the learned advocate Mr.Mohsin Hakim for the appellants and the learned advocate Mr.Krunal Saksena for the defendant.
Page 2 of 18 Uploaded by M.M.MIRZA(HC01407) on Thu Nov 20 2025 Downloaded on : Thu Nov 20 21:28:02 IST 2025NEUTRAL CITATION C/FA/2736/2025 JUDGMENT DATED: 14/11/2025 undefined 4 Learned advocate Mr. Hakim submits that it is not in dispute that the deceased was an employee of defendant No.1 and that he died during the course of and arising out of employment. It is also undisputed that defendant No.1 had taken an insurance policy with defendant No.2 under the Workmen Compensation Act, which covered the risk of the driver. Learned advocate Mr. Hakim further submits that, in view of the decisions of the Apex Court in Ved Prakash Garg vs. Premi Devi and others, reported in (1997) 8 SCC 1; Kamla Chaturvedi vs. National Insurance Company and others, reported in (2009) 1 SCC 487 and New India Insurance Company Ltd. vs. Harshadbhai Amrutbhai Modhiya, reported in (2006) 5 SCC 192, the insurance company is liable to pay the compensation along with interest at the rate of 12%. However, instead of directing defendant No.2- insurance company to pay the same, the learned Commissioner has held the employer and the insurance company jointly and severally liable and has awarded a lesser rate of interest. In this background, learned advocate Mr. Hakim submits that the appeal deserves to be allowed and the impugned judgment requires modification.
5 Per contra, learned advocate Mr. Saksena for the Page 3 of 18 Uploaded by M.M.MIRZA(HC01407) on Thu Nov 20 2025 Downloaded on : Thu Nov 20 21:28:02 IST 2025 NEUTRAL CITATION C/FA/2736/2025 JUDGMENT DATED: 14/11/2025 undefined defendant submits that the learned Commissioner, after considering several judgments, has directed defendant No.1 and defendant No.2 to pay the amount of compensation with different rates of interest. Therefore, no interference is required, and the appeal deserves to be dismissed.
6 Having considered the arguments advanced by the learned advocates for the respective parties, the moot question that arises for consideration before this Court is whether the learned Commissioner has committed an error in directing defendant Nos.1 and 2 jointly to pay compensation to the tune of Rs. 8,52,160/-, as well as to pay simple interest at the rate of 9% from the date of the accident till the date of the award, and compound interest at the rate of 7% from the date of the award till realization.
7 This Court has referred the decisions relied by the learned advocate Mr.Hakim for the appellants more particularly Ved Prakash Garg (supra). The Apex Court in detail has examined the scheme of acts, the provisions containing section 4A prior to 1992 and after amendment i.e. after 1995 and has held as under:
"9. Before we deal with the rival contentions and have a look at the divergent viewpoints expressed by the different High Courts on this question, it will be necessary to keep in view the relevant statutory schemes in the light of which this controversy has to be Page 4 of 18 Uploaded by M.M.MIRZA(HC01407) on Thu Nov 20 2025 Downloaded on : Thu Nov 20 21:28:02 IST 2025 NEUTRAL CITATION C/FA/2736/2025 JUDGMENT DATED: 14/11/2025 undefined resolved. The Compensation Act deals with the provisions for payment by certain classes of employers to their workmen of compensation for employment injuries caused by accident. There is no dispute between the parties that the deceased drivers and cleaner in these cases were workmen employed by the appellant- employers. Section 3 of the compensation Act deals with 'Employer's liability for compensation'. sub-section (1) thereof lays down that 'if personal injury is caused to a workman by accident arising out of and in the course of his employment, his employer shall be liable to pay compensation in accordance with the provisions of Chapter II'. It is also not in dispute that fatal personal injuries were caused to the workmen by accidents which arose out of and in the course of their employment because of which they were working on the motor vehicles of the appellant- employers when they met their ends on account of motor accidents. Section 4 of the Compensation Act deals with 'Amount of compensation'. It lays down the statutory scheme for computing the compensation payable in cases of the types of accidental injuries suffered by the workmen concerned. The employer, on a conjoint reading of Sections 3(1) and 4(1) of the insured workmen under circumstances contemplated by these provisions. Then follows Section 4A of the Compensation Act with which we are directly concerned. It is, therefore, necessary to extract it in extenso. The said Section during the relevant time, in 1992, when the accidents were caused read as under:
"4-A, Compensation to e 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 cases 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 six per cent per annum on the amount due together with, if in the opinion of the Commissioner Page 5 of 18 Uploaded by M.M.MIRZA(HC01407) on Thu Nov 20 2025 Downloaded on : Thu Nov 20 21:28:02 IST 2025 NEUTRAL CITATION C/FA/2736/2025 JUDGMENT DATED: 14/11/2025 undefined there is no justification for delay, a further sum not exceeding fifty per cent of such amount, shall be recovered from the employer by way of penalty."
The said Section was further amended by Act 30 of 1995 with effect from 15.9.1995 and in the amended form it now reads as under :
"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. (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 to 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 shall-
(a) Direct that the employer shall, in addition to the amount of 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
(b) if, in his opinion, there is no justification for the delay, direct hat 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.
A mere look at the aforesaid provision shows that Section 4A deals with the time for payment of compensation as required to be computed under Section 4. Sub-section (1) thereof mandates that 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 compensation and in Page 6 of 18 Uploaded by M.M.MIRZA(HC01407) on Thu Nov 20 2025 Downloaded on : Thu Nov 20 21:28:02 IST 2025 NEUTRAL CITATION C/FA/2736/2025 JUDGMENT DATED: 14/11/2025 undefined 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 4A 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 of 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 4A would not arise and his liability would depend upon the final adjudication by the Workmen's Commissioner at the end of the trial. in that light when sub-section (3) of Section 4A is seen it becomes obvious that once the compensation due under the Act becomes ascertained either provisionally under sub-section 92) or finally on adjudication by the Commissioner and if the employer does not pay the same within one months from the date it thus falls due, the Commissioner can direct under sub-clause (a) of Section 4a(3) interest at the rate provided therein and also penalty as contemplated by sub- clause (b) thereof as per the amended Section 4A(3) of the Compensation Act but even under the unamended Section 4A(3) which applied at the relevant time a clear distinction is made by the Legislature between the imposition of penalty by way of a further sum not exceeding fifty per cent of compensation found payable when it is not paid within the requisite time as and when it fell due.
Thus even in the scheme of unamended Section 4A(3) or as per the amended Section 4A(3) read with clauses (a) and (b) thereof, it becomes clear that additional amount of compensation can be levied against the defaulting employer by way penalty if it is shown that there is no justification for the delay on his part in making good the compensation amount to the claimant. Interest payable on the principal amount, if not paid when it fell due, is not considered by the Legislature to be a penalty. This is further highlighted by the proviso to Section 4A(3) as substituted by Act 30 of 1995 which clearly indicates that a penalty amount under clause (b) cannot be imposed against the employer without giving him reasonable opportunity to show cause. No such show cause notice is comtemplated while imposing interest on default of payment of the principal amount on the part of the employer as per Section 4A(3)(a). Absence of this provision is obviously based on the legislative intent that interest on principal amount is Page 7 of 18 Uploaded by M.M.MIRZA(HC01407) on Thu Nov 20 2025 Downloaded on : Thu Nov 20 21:28:02 IST 2025 NEUTRAL CITATION C/FA/2736/2025 JUDGMENT DATED: 14/11/2025 undefined not by way of penalty. Therefore, the employer need not be heard in this connection. A simplicity default in payment of compensation within the time of one month from the date it fell due would automatically attract the provision of simple interest under Section 4A(3) as per the rate prescribed therein and for such imposition of interest no question of justification for the delay is countenanced by the Legislature. But while imposing penalty justification for delay would b a good defence for the employer for meeting such claim for penalty. The same aspect is further highlighted by Section 4A(3)(a) of the Compensation Act as existing on the Statute book at present which shows that the interest payable under sub-section (3A) is to be paid to the workman or his dependant while the penalty imposed is to be credited to the State Government. It is in the light of the aforesaid statutory Government. It is in the light of the aforesaid statutory scheme of Section 4A that the question posed for our consideration has to be resolved.
10. Section 19 of the Compensation Act also deserves to be noted at this stage. Sub-section (1) thereof lays down that 'if any question arises in any proceedings under this Act as to the liability of any person to pay compensation (including any question as to whether a person injured is or is not a workman) or as to the amount or duration of compensation (including any question as to the nature or extent of disablement), the question shall, in default of agreement, be settled by a Commissioner'.
Sub-section (2) of Section 19 bars the jurisdiction of Civil Court to settle, decide or deal with any question which is by or under this Act required to be settled, decided or dealt with by a Commissioner, or to enforce any liability incurred under this Act. As per the aforesaid provisions any dispute between the employer-insured on the one hand and the insurance company, that is said to have insured the employer against such claims for compensation under the Compensation Act, on the other has to be resolved in default of agreement between them by the Commissioner functioning under the Compensation Act and not by any Civil Court. It may be mentioned at this state that learned counsel for the contesting respondent-insurance companies made it clear before use that it is not their contention that the insurance companies which have insured the employers against such risks and claims are not liable to make good the principal amounts of compensation as awarded by the Commissioner o the claimants and that the insurance companies under the said claims. But their Page 8 of 18 Uploaded by M.M.MIRZA(HC01407) on Thu Nov 20 2025 Downloaded on : Thu Nov 20 21:28:02 IST 2025 NEUTRAL CITATION C/FA/2736/2025 JUDGMENT DATED: 14/11/2025 undefined only grievance is against the liability sought to be enforced against them for reimbursing the claims for additional compensation by way of penalty and interest as imposed on the insured employers under section 4A(3) of the Compensation Act.
11. We may now turn to the relevant provisions of the Motor Vehicles Act. Reference to these provisions becomes necessary because the workmen concerned suffered personal injuries of fatal nature while they were working on motor vehicles of their employers. if they had suffered from any personal injuries during the course of and arising out of the employment while working the factory premises of the employers or while carrying on their service obligations as employees at any other place under the instructions of the employers, the question of interaction of the Compensation Act and the Motor Vehicles Act would not arise and such claims for compensation would have squarely been governed only by the Compensation Act.
12.Hence it becomes necessary for us to turn to the scheme of Motor Vehicles Act foisting liability on the insurance companies which have insured such vehicles against third-party risks undertaken by the insured. Chapter XI of the Motor Vehicles Act deals with "Insurance of motor vehicles against third-party risks". Section 146(1) lays down the necessity for insurance against third-party risk and provides that:
"146. (1) No person shall use, except as a passenger, or cause or allow any other person to use, a motor vehicle in a public place, unless there is in force in relation to the use of the vehicle by that person or that other person, as the case may be, a policy of insurance complying with the requirements of this Chapter;"
Section 147 deals with "Requirements of policies and limits of liability". Sub-section (1) of Section 147 along with its proviso is relevant for our present purpose. Hence it is extracted as under:
"147. Requirements of policies and limits of liability. (1) In order to comply with the requirements of this Chapter, a policy of insurance must be a policy which-
(a) is issued by a person who is an authorised insurer; and
(b) insures the person or classes of persons specified in the policy to the extent specified in sub-section (2)-Page 9 of 18 Uploaded by M.M.MIRZA(HC01407) on Thu Nov 20 2025 Downloaded on : Thu Nov 20 21:28:02 IST 2025
NEUTRAL CITATION C/FA/2736/2025 JUDGMENT DATED: 14/11/2025 undefined
(i) against any liability which may be incurred by him in respect of the death of or bodily injury to any person, including owner of the goods or his authorised representative carried in the vehicle or damage to any property of a third party caused by or arising out of the use of the vehicle in a public place;
(ii) against the death of or bodily injury to any passenger of a public service vehicle caused by or arising out of the use of the vehicle in a public place;
Provided that a policy shall not be required-
(i) to cover liability in respect of the death, arising out of and in the course of his employment, of the employee of a person insured by the policy or in respect of bodily injury sustained by such an employee arising out of and in the course of his employment other than a liability arising under the Workmen's Compensation Act, 1923 (8 of 1923), in respect of the death of, or bodily injury to, any such employee-
(a) engaged in driving the vehicle, or
(b) if it is a public service vehicle engaged as a conductor of the vehicle or in examining tickets on the vehicle, or
(c) if it is a goods carriage, being carried in the vehicle, or
(ii) to cover any contractual liability."
Sub-clause (b) of Section 147(1) read with the proviso lays down a statutory scheme of compulsory coverage of liability incurred by the employer vis-a-vis his employees when they sustain injuries by the use of motor vehicles during their employment and on account of motor accidents arising out of and in the course of their employment. But the statutory coverage for such liability would be limited to the extent of liability of the insured employer arising under the Workmen's Compensation Act in respect of death or bodily injury to such employees. As the motor accidents resulted in fatal injuries to the employees who were either driving or were being carried in the goods carriage as cleaner whatever liability was incurred by insured owners of the goods vehicles in connection with proceedings arising out of the Compensation Act was covered by the statutory liability of the respondent-insurance companies. The very same result would follow when we turn to the relevant clause of the insurance policies to which our attention was invited by learned counsel for the appellants.
Page 10 of 18 Uploaded by M.M.MIRZA(HC01407) on Thu Nov 20 2025 Downloaded on : Thu Nov 20 21:28:02 IST 2025NEUTRAL CITATION C/FA/2736/2025 JUDGMENT DATED: 14/11/2025 undefined Section II in the Insurance Policy of respondent No. 9-insurance company which had insured the appellant, dealt with 'liability to third parties'. Relevant clause of sub-section (1) of Section II of the said Policy reads as under :
"1. Subject to the Limits of Liability the Company will indemnify the Insured against all sums including claimant's cost and expenses which the Insured shall become legally liable to pay in respect of
(i) death of or bodily injury to any person caused by or arising out of the use (including the loading and/or unloading) of the Motor Vehicle.
(ii) ... ... ... ...
PROVIDED ALWAYS that :-
(a) ... ... ... ...
(b) Except so far as necessary to meet the requirements of Section 92A and Section 95 of the Motor Vehicles Act, 1939, the Company shall not be liable in respect of death of or bodily injury to any person in the employment of the Insured arising out of and in the course of such employment.
(c) Except so far as is necessary to meet the requirements of Section 95 of the Motor Vehicles Act, 1939, in relation to liability under the Workmen's Compensation Act, 1923, the Company shall not be liable in respect of death of or bodily injury to any person (other than a passenger carried by reason of or in pursuance of a contract of employment) being carried in or upon or entering or mounting or alighting from the Motor Vehicle at the time of the occurrence of the event out of which any claim arises."
A conjoint reading of these provisions in the Insurance Policy shows that the insurance company insured the employer-owners of the insured motor vehicles against all liabilities arising under the Workmen's Compensation Act for which statutory coverage was required under Section 95 of the Motor Vehicles Act, 1939 which is analogous to Section 147 of the present Motor Vehicles Act noted earlier. Section 149 deals with 'Duty of insurers to satisfy judgments and awards against persons insured in respect of third party risks'. The moot question is whether the insurance Page 11 of 18 Uploaded by M.M.MIRZA(HC01407) on Thu Nov 20 2025 Downloaded on : Thu Nov 20 21:28:02 IST 2025 NEUTRAL CITATION C/FA/2736/2025 JUDGMENT DATED: 14/11/2025 undefined coverage as available to the insured employer-owners of the motor vehicles in relation to their liabilities under the Workmen's Compensation Act on account of motor accident injuries caused to their workmen would include additional statutory liability foisted on the insured employers under Section 4A(3) of the Compensation Act.
13.The question posed for our consideration is required to be resolved in the light of the aforesaid statutory schemes of the two interacting Acts. It is not in dispute and cannot be disputed that the respondent-insurance companies concerned will be statutorily as well as contractually liable to make good the claim for compensation arising out of the employers' liability computed as per the provisions of the Companies Act. The short question is whether the phrase 'liability arising under the Compensation Act' as employed by the proviso to sub-section (1) of Section 147 of the Motor Vehicles Act and as found in proviso to clause (i) of sub-section (1) of Section II of the Insurance Policy, would cover only the principal amount of compensation as computed by the Workmen's Commissioner under the Compensation Act and made payable by the insured employer or whether it could also include interest and penalty as imposed on the insured employer under contingencies contemplated by Section 4A(3)(a) and (b) of the Compensation Act.
14.On a conjoint operation of the relevant schemes of the aforesaid twin Acts, in our view, there is no escape from the conclusion that the insurance companies will be liable to make good not only the principal amounts of compensation payable by insured employers but also interest thereon, if ordered by the Commissioner to be paid by the insured employers. Reason for this conclusion is obvious. As we have noted earlier the liability to pay compensation under the Workmen's Compensation Act gets foisted on the employer provided it is shown that the workman concerned suffered from personal injury, fatal or otherwise, by any motor accident arising out of and in the course of his employment. Such an accident is also covered by the statutory coverage contemplated by Section 147 of the Motor Vehicles Act read with the identical provisions under the very contracts of insurance reflected by the Policy which would make the insurance company liable to cover all such claims for compensation for which statutory liability is imposed on the employer under Section 3 read with Section 4A of the Page 12 of 18 Uploaded by M.M.MIRZA(HC01407) on Thu Nov 20 2025 Downloaded on : Thu Nov 20 21:28:02 IST 2025 NEUTRAL CITATION C/FA/2736/2025 JUDGMENT DATED: 14/11/2025 undefined Compensation Act. All these provisions 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 concerned to make good his liability for the benefit of the claimants whose bread-winner might have either been seriously injured or might have lost his life. 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 not otherwise liability of paying interest on delayed compensation will ipso facto follows. Even though the Commissioner under these circumstances can impose a further liability on the employer under circumstances and within limits contemplated by Section 4A(3)(a) still the liability to pay interest on the principal amount under the said provision remains a part and parcel of the statutory liability which is legally liable to be discharged by the insured employer. 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 Act.
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. It, therefore, cannot be said by the insurance company that when it is statutorily and even contractually liable to reimburse the employer qua his statutory liability to pay compensation to the claimants in case of such motor accidents to his workmen, the interest on the principal amount which almost automatically gets foisted upon him once the compensation amount is not paid within one month from the date it fell due, would not be a part of the insured liability of the employer. No question of justification by the insured employer Page 13 of 18 Uploaded by M.M.MIRZA(HC01407) on Thu Nov 20 2025 Downloaded on : Thu Nov 20 21:28:02 IST 2025 NEUTRAL CITATION C/FA/2736/2025 JUDGMENT DATED: 14/11/2025 undefined for the delay in such circumstances would arise for consideration. It is of course true that one month's period as contemplated under Section 4A(3) may start running for the purpose of attracting interest under sub-clause (a) thereof in case where provisional payment has to be made by the insured employer as per Section 4A(2) of the Compensation Act from the date such provisional payment becomes due. But when the employer does not accept his liability as a whole under circumstances enumerated by us earlier then Section 4A(2) would not get attracted and one month's period would start running from the date on which due compensation payable by the employer is adjudicated upon by the Commissioner and in either case the Commissioner would be justified in directing payment of interest in such contingencies not only from the date of the award but also from the date of the accident concerned. Such an order passed by the Commissioner would remain perfectly justified on the scheme of Section 4A(3)
(a) of the Compensation Act. But similar consequence will not follow in 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 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. However, if ultimately the Commissioner after giving reasonable opportunity to the employer to show cause takes the view that there is no justification for such delay on the part of the insured employer and because of his unjustified delay and due to his own personal fault he is held responsible for the delay, then the penalty would get imposed on him. That would add a further sum up to 50% on the principal amount by way of penalty to be made good by the defaulting employer. So far as his 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 Motor Vehicles 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. On the aforesaid interpretation of these two statutory schemes, therefore, the conclusion becomes inevitable that when an employee suffers from a motor accident injury while on duty on the motor vehicle Page 14 of 18 Uploaded by M.M.MIRZA(HC01407) on Thu Nov 20 2025 Downloaded on : Thu Nov 20 21:28:02 IST 2025 NEUTRAL CITATION C/FA/2736/2025 JUDGMENT DATED: 14/11/2025 undefined belonging to the insured employer, the claim for compensation payable under the Compensation Act along with interest thereon, if any, as imposed by the Commissioner 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. The latter because of his own fault and negligence will have to bear the entire burden of the said penalty amount with proportionate interest thereon if imposed by the Workmen's Commissioner."
7.1 This decision was considered by the Apex Court in the case of New India Insurance Company Ltd. (supra), wherein the Court held that, in terms of the contract of insurance entered into between the employer and the insurer under the provisions of the Motor Vehicles Act which, in a given case, would also apply to a claim under the provisions of the Workmen's Compensation Act the insurer would also be liable to pay interest. The Apex Court further relied upon its earlier decision in the case of L.R. Ferro Alloys Ltd. v. Mahavir Mahto, reported in (2002) 9 SCC 450, and held that the liability to pay interest and the liability to pay penalty are two distinct liabilities arising under the Act. The liability to pay interest forms an integral part of the legal obligation to pay compensation upon default in making such Page 15 of 18 Uploaded by M.M.MIRZA(HC01407) on Thu Nov 20 2025 Downloaded on : Thu Nov 20 21:28:02 IST 2025 NEUTRAL CITATION C/FA/2736/2025 JUDGMENT DATED: 14/11/2025 undefined payment within one month. Consequently, the claim for compensation along with interest is required to be satisfied jointly by the insurance company together with the insured employer. However, the penalty imposed upon the employer is on account of his personal fault, and therefore, the insurance company cannot be made liable to reimburse the penalty imposed on the employer. Thus, while the insurer is liable to satisfy the compensation along with interest, it is not liable to pay the penalty.
7.2 This Court has also referred to the decision of the Apex Court in Kamla Chaturvedi (supra), wherein the Apex Court reiterated that, in the event of default in payment of compensation within the statutory period of one month, the liability to pay interest forms part of the insurer's responsibility under the contract of insurance. It has been clearly held that the insurance company is liable to pay both the compensation and the interest arising from such default. The relevant observations of the Apex Court are as under:
"6.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 and 4 of the judgment which read as follows :Page 16 of 18 Uploaded by M.M.MIRZA(HC01407) on Thu Nov 20 2025 Downloaded on : Thu Nov 20 21:28:02 IST 2025
NEUTRAL CITATION C/FA/2736/2025 JUDGMENT DATED: 14/11/2025 undefined "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 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 Page 17 of 18 Uploaded by M.M.MIRZA(HC01407) on Thu Nov 20 2025 Downloaded on : Thu Nov 20 21:28:02 IST 2025 NEUTRAL CITATION C/FA/2736/2025 JUDGMENT DATED: 14/11/2025 undefined 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 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."
8 In view of the above settled legal position, this Court is of the considered view that the direction issued by the learned Commissioner requires modification to the extent that respondent No.2-Insurance Company shall be liable to pay the amount of compensation, i.e. Rs.8,47,160/-, along with interest at the rate of 12%. The remaining part of the judgment and order shall remain unaltered 9 With the above direction, this appeal is allowed.
(M. K. THAKKER,J) M.M.MIRZA Page 18 of 18 Uploaded by M.M.MIRZA(HC01407) on Thu Nov 20 2025 Downloaded on : Thu Nov 20 21:28:02 IST 2025