Hansaria, C.J:— An important point of law needs determination in this application under Arts. 226 and 227 of the Constitution. The same relates to the liability of insurer to pay penalty visualised by S. 4-A(3) of the Workmen's Compensation Act, 1923 (for short the Act).

2. The question arises on these facts. The petitioner was an employee of opposite party 2. He was engaged as a helper in tanker. He was involved in an accident in which he suffered severe bodily injuries. He claimed compensation as permitted by the Act. The Commissioner for Work men's Compensation, after a full-fledged hearing, by his award, dated 3 November, 1987, determined the amount of compensation payable at Rs. 54,460.35. He, thereafter stated as below:

“As the vehicle in question of the O.P 1 was validly insured with the Oriental Insurance Company, Ltd, vide Policy No. 31511.MB/233/86-Comp. covering the date of accident, the insurance company stated above is to pay the amount of compensation of Rs. 54,460 35 immediately.

As the said amount of compensation has not been deposited within one month from the date of accident by the employer, a further sum of Rs. 32,897.02 is imposed as penalty to the tune of 50 per cent of the amount of compensation together with interest at 6 per cent as required under S. 18-A (S. 4-A sic) of the Workmen's Compensation Act.”

3. The sum of Rs. 54,460.35 was paid by the insurer, but the penalty amount was not deposited either by the employer or by the insurer. The petitioner thereafter made several representations before the Commissioner for Workmen's Compensation to realise the penalty, but no steps having been taken, this petition has been filed.

4. The question for determination is whether the insurer can be asked to pay the penalty in question.

5. Sri A.K Mohanty appearing for the insurer contends that the amount of penalty cannot be realised from this opposite party. In this connection he refers to Oriental Fire and General Insurance Company, Ltd. v. Matias Durla [1986 A.C.J 733], in which a learned Single Judge of this Court took the view that the amount awarded as penalty under S. 4-A(3) of the Act being payable by the employer, the insurance company is under no liability to indemnify the employer in this regard. This view was taken by referring to the language of S. 4-A(3) which is as below:

“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 six per cent per annum on the amount due together with, if in the opinion of the 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.”

The learned Judge stated in Para. 7:

“A bare glance at S. 4-A(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 S. 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 employee, is not the employer.”

6. As against the aforesaid decision, Sri U.B Mohanty appearing for the petitioner has brought to our notice the judgment of a learned Single Judge of the Madhya Pradesh High Court in New India Assurance Company, Ltd. v. Shukhan [1989 A.C.J 923], in which the order of the Commissioner for Workmen's Compensation asking the insurer to pay the penalty was upheld. The learned Judge stated in this connection as below the Para. 9:

“… in accidents of motor vehicle, the liability to any compensation is upon the owner of the vehicle, but where the vehicle 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 S. 96 of the Motor Vehicles 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 S. 4-A(3) of the Act of 1923, i.e, within a month from the date of intimation, the insurer incurs liability to pay penalty.”

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 S. 4-A(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 vehicle 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 S. 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 S. 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 S. 4-A(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 S. 3(1) of the Act, by the same token, the insurer's liability would arise to pay the 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 S. 4-A(3) has spoken about “employer” is, therefore, not enough to exonerate the insurer.

8. In this connection we may refer with profit to the provisions of S. 96 of the Motor Vehicles Act, 1939, as per which it is the duty of the insurer to satisfy judgments against persons insured. As to the operation of S. 96 of the Motor Vehicles Act in a case of the present nature, we have no doubt in view of what was stated by a learned Single Judge of this Court (Misra, C.J, as he then was), in Bibhuti Bhusan v. Dinamani [1982 A.C.J 338). This decision dealt with the liability of the insurer arising out of a case under the provisions of the Act following the death of a cleaner of a vehicle. The dependants of the deceased filed a case against the employer and also impleaded the insurance company. The Commissioner set up by the Act was approached for compensation. The question was whether the Commissioner could pass a decree against the insurance company. Referring to Ss. 95 and 96 of the Motor Vehicles Act, it was held that the award had to be against the insurer with a declaration that the liability had to be satisfied by the insurance company. The same view was taken in Oriental Fire and General Insurance Company v. Nani Bala Debt [A.I.R 1988 Gau. 40]. So, even if the penalty be imposed on the owner of the vehicle who happens to be the employer of the concerned workman, the insurer has to indemnify the employer.

9. Because of all that is stated above, we are satisfied that the insurer is liable to pay the penalty also which is imposed under S. 4-A(3) of the Act. We would, therefore, ask opposite party 3 to pay the amount of penalty as awarded within a period of one month from today, failing which the amount shall bear interest at the rate of 12 per cent from today till recovery. The petition is allowed accordingly.

10. Patnaik, J.:— I agree.