Gujarat High Court
The New India Assurance Company Ltd vs Jamnaben Bharatbhai Rathod on 24 July, 2025
NEUTRAL CITATION
C/FA/4098/2024 ORDER DATED: 24/07/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/FIRST APPEAL NO. 4098 of 2024
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2024
In R/FIRST APPEAL NO. 4098 of 2024
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THE NEW INDIA ASSURANCE COMPANY LTD.
Versus
JAMNABEN BHARATBHAI RATHOD & ORS.
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Appearance:
MR KV GADHIA(319) for the Appellant(s) No. 1
MR YOGIN A BHAMBHANI(6444) for the Defendant(s) No. 1,2,3
PARTY IN PERSON(5000) for the Defendant(s) No. 4
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CORAM:HONOURABLE MR. JUSTICE DEVAN M. DESAI
Date : 24/07/2025
ORAL ORDER
1. By way of this appeal, the appellant has prayed to quash and set aside the order dated 5.12.2023 passed in Workman Compensation (Fatal) Application No.2 of 2019 by the learned Workman Compensation Commissioner, Anand.
2. Heard learned advocate Mr. K. V. Gadhia for the appellant and learned advocate Mr. Yogin A. Bhambhani for the respondents. Perused the record.
3. The short facts of the case are as under: Page 1 of 10 Uploaded by VATSAL S. KOTECHA(HC00352) on Wed Jul 30 2025 Downloaded on : Wed Jul 30 21:34:15 IST 2025
NEUTRAL CITATION C/FA/4098/2024 ORDER DATED: 24/07/2025 undefined * The deceased Bharatbhai Raisingbhai Rathod was an employee, working as a labourer, with the original opponent No.1. On 3.4.2019, during the employment, one car bearing registration No.GJ-6-DG-9354 came and dashed with the deceased. Resultantly, deceased expired.
The employer did not pay the compensation under the Workmen Compensation Act and also did not deposit it before the learned Commissioner, the claimants filed Workmen Compensation before the learned Ex-Officio Commissioner for Workmen Compensation Act, Labour Court, Anand. Issues were framed by learned Commissioner at Exh.16. Claimant No.1 widow of deceased examined herself at Exh.21 and also produced documentary evidence.
* The opponent No.1 and present respondent No.2 examined witness Dakshesh J. Trivedi at Exh.44. The Insurance Company produced copy of the insurance policy.Page 2 of 10 Uploaded by VATSAL S. KOTECHA(HC00352) on Wed Jul 30 2025 Downloaded on : Wed Jul 30 21:34:15 IST 2025
NEUTRAL CITATION C/FA/4098/2024 ORDER DATED: 24/07/2025 undefined After considering the oral as well as documentary evidence, the learned Commissioner, partly allowed the claim application and further held present appellant -
Insurance Company liable to pay amount of compensation with interest @ 9% alongwith opponent No.1 to the claimants.
* Being aggrieved and dissatisfied with the impugned judgment and award, the appellant - Insurance Company preferred present appeal.
4. Learned advocate for the appellant submitted that the appeal is filed only on a limited ground of challenging the award of interest passed against the Insurance Company. It is submitted that admittedly policy Exhibit 56 is a workman compensation policy and copy of terms and conditions of workman compensation policy is produced during the course of hearing which is taken on record. It is contended that the Insurance Company shall be liable for compensation to the employee who has sustained injury by Page 3 of 10 Uploaded by VATSAL S. KOTECHA(HC00352) on Wed Jul 30 2025 Downloaded on : Wed Jul 30 21:34:15 IST 2025 NEUTRAL CITATION C/FA/4098/2024 ORDER DATED: 24/07/2025 undefined accident or has died during the course of employment. It is further submitted that the policy does not extend to include any interest and / or penalty imposed on the insured on account of its failure to comply with the requirements laid down in the Act. A reliance has been placed upon a decision in the case of Harshadbhai Amrutbhai Modhiya v. New India Assurance Company Limited reported in 2006(5) SCC 192 (Paragraph Nos.14 and 15 thereof were pressed into service). It is submitted that the law is settled that the Insurance Company is not liable to pay any interest where a policy in question is a workman compensation policy. It is further pointed out by learned advocate for the Appellant that Section 3 of the Workman's Compensation Act provides for the employer's liability for compensation. The duty is cast upon the employer for the payment of compensation in case of an injury is caused to a workman by an accident arising out of and in the course of employment. It is further contended that the Appellant - Insurance Company has deposited the amount of Page 4 of 10 Uploaded by VATSAL S. KOTECHA(HC00352) on Wed Jul 30 2025 Downloaded on : Wed Jul 30 21:34:15 IST 2025 NEUTRAL CITATION C/FA/4098/2024 ORDER DATED: 24/07/2025 undefined compensation before the learned Commissioner. It is submitted that learned Commissioner has committed a grave error of law by imposing interest upon the Insurance Company. It is also contended that penalty has rightly been imposed by the employer for non compliance of the provisions as contained in Section 3 of the Act. As per the aforesaid provision, the employer is liable for the interest in addition to the amount of arrears in case employer commits default in paying compensation within a period of one month from the date it felt due to the employee / dependents.
5. Per contra, learned advocate for the respondent - original claimant has supported the impugned judgment and award and submitted that benefits under the Act may not be curtailed due to a dispute between the insured and insurer. However, learned advocate for the respondent could not contradict the settled position of law that under the Workman Compensation Policy, the liability of interest and penalty is on the employer in case the employer defaults in Page 5 of 10 Uploaded by VATSAL S. KOTECHA(HC00352) on Wed Jul 30 2025 Downloaded on : Wed Jul 30 21:34:15 IST 2025 NEUTRAL CITATION C/FA/4098/2024 ORDER DATED: 24/07/2025 undefined paying compensation within one month as contemplated under Section 4(A)(3)(a) of the Act. The respondent No.2 - herein has submitted written reply dated 1.4.2025. In paragraph No.10 of the reply, it is stated by respondent No.4 that an intimation about the accident was submitted to the Insurance Company as well as to the labour department within the time and there is no dispute with regard to relationship of employee - employer between respondent No.4 and deceased respectively. It is further stated that since respondent No.4 is insured with the appellant, it is the responsibility of the Insurance Company to pay compensation and indemnify respondent No.4.
6. I have considered the submissions of learned advocates for the respective parties and also perused the reply filed by respondent No.4. Also perused the Record and Proceedings.
7. The record reveals that there is no dispute with regard to relationship of employer and employee between the Page 6 of 10 Uploaded by VATSAL S. KOTECHA(HC00352) on Wed Jul 30 2025 Downloaded on : Wed Jul 30 21:34:15 IST 2025 NEUTRAL CITATION C/FA/4098/2024 ORDER DATED: 24/07/2025 undefined deceased and respondent No.4 herein. There is no dispute with regard to the fact that the respondent No.4 was insured with the present appellant, however, the policy is workman compensation policy and as per the terms and conditions of the policy, the policy Exh.56 is not extending to the liability of payment of interest and / or penalty which is imposed upon the insured on account of failure to comply with the mandatory provisions of the Act. Section 3 of the Act mandates the liability for compensation. The employer under Section 3 of the Act is liable to pay compensation to workman who has sustained injury by any accident arising out of and in course of employment. The employer, in the present case, is covered under the policy and the employer has been rightly indemnified by the Insurance Company. However, Section 4(A)(3(a) of the Act deals with liability of payment of penalty and interest in failure of non compliance of the mandatory provisions of the Act. The said provision empowers the Commissioner to impose interest in addition to the amount of arrears in case the employer is in default in paying compensation due Page 7 of 10 Uploaded by VATSAL S. KOTECHA(HC00352) on Wed Jul 30 2025 Downloaded on : Wed Jul 30 21:34:15 IST 2025 NEUTRAL CITATION C/FA/4098/2024 ORDER DATED: 24/07/2025 undefined under the Act within a period of one month from the date it fell due. There is no much quarrel on the question of fastening a liability of interest and penalty upon the Insurance Company. This issue is no more res integra in the case of Harshadbhai Amrutbhai Modhia (Supra) in paragraph Nos.14 & 15. Both the paragraphs of the said decision are reproduced hereunder:
"14. By reason of the provisions of the Act, an employer is not statutorily liable to enter into a contract of insurance. Where, however, a contract of insurance is entered into by and between the employer and the insurer, the insurer shall be liable to indemnify the employer. The insurer, however, unlike under the provisions of the Motor Vehicles Act does not have a statutory liability. Section 17 of the Act does not provide for any restriction in the matter of contracting out by the employer vis-a-vis the insurer.
15. The terms of a contract of insurance would depend upon the volition of the parties. A contract of insurance is governed by the provisions of the Insurance Act. In terms of the provisions of the Insurance Act, an insured is bound to pay premium which is to be calculated in the manner provided for therein. With a view to minimize his liability, an employer can contract out so as to make the insurer not liable as regards indemnifying him in relation to certain matters which do not strictly arise out of the mandatory provisions of any statute. Contracting out, as regards payment of interest by an employer, therefore, is not prohibited in law."
8. In the present case, the claimants are entitled to Page 8 of 10 Uploaded by VATSAL S. KOTECHA(HC00352) on Wed Jul 30 2025 Downloaded on : Wed Jul 30 21:34:15 IST 2025 NEUTRAL CITATION C/FA/4098/2024 ORDER DATED: 24/07/2025 undefined compensation with interest and penalty. However, since the contract of insurance does not extend to cover the risk of payment of interest, the appellant cannot be saddled with the liability to pay interest and in absence of a specific contract, the coverage of the insurance cannot be extended to the interest part.
9. In the background of the aforesaid facts and circumstances and in view of the settled position of law, I am of the opinion that the learned Commissioner has committed an error of law by holding Insurance Company - present appellant liable for interest along with the employer. Resultantly, the impugned judgment and award is required to be set aside so far as liability of interest is concerned. The Insurance Company - appellant is exonerated from the liability of interest. The impugned judgment and award is modified to the effect that the employer - respondent No.4
- original opponent No.2 is liable for interest @ 9% p.a..
10. The first appeal is allowed in above terms. The learned Page 9 of 10 Uploaded by VATSAL S. KOTECHA(HC00352) on Wed Jul 30 2025 Downloaded on : Wed Jul 30 21:34:15 IST 2025 NEUTRAL CITATION C/FA/4098/2024 ORDER DATED: 24/07/2025 undefined Commissioner shall refund the amount of interest with accrued interest thereon to the Insurance Company after due verification and the procedure under law. After refunding the interest amount to the Insurance Company, the remaining amount of compensation is ordered to be disbursed to the claimants after due verification and the procedure under law. The employer is directed to deposit the interest component and claimants shall be entitled to disbursement thereof too as per procedure available under law.
11. Record and Proceedings, if any, be sent back to the concerned Court, forthwith. Interim Relief, if any, stands vacated forthwith. No order as to costs.
12. In view of allowing of the main matter, connected Civil Application will no longer survive and the same stands disposed of accordingly.
(D. M. DESAI,J) vk Page 10 of 10 Uploaded by VATSAL S. KOTECHA(HC00352) on Wed Jul 30 2025 Downloaded on : Wed Jul 30 21:34:15 IST 2025