IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA FAO (WCA) No. 419 of 2012 .
Decided on: 22.3.2021
The New India Assurance Co. Ltd. .....Appellant.
Versus
Sh. Lachhman Thapa & ors. .....Respondents.
Coram
Ms. Justice Jyotsna Rewal Dua, Judge.
Whether approved for reporting?1 Yes.
For the appellant : Mr. B.M. Chauhan, Senior
Advocate with Mr. M.S. Katoch,
r Advocate.
For the respondents : Ms. Ritta Goswami and Ms.
Komal Chaudhary, Advocates, for
respondent No. 1.
Mr. Naveen K. Bhardwaj,
Advocate, for respondent No. 2.
Nemo for respondents No. 3 & 4.
Jyotsna Rewal Dua, Judge
The appellant-Assurance Company has assailed the order passed by Employee's Compensation Commissioner on the ground that liability of payment of interest could not have been fastened upon it in view of specific terms of the Insurance Policy.
2. Bare Minimum factual position.
2(i) Learned Employee's Compensation Commissioner in its judgment dated 25.5.2012 held that deceased Dil Bahadur Thapa was working as a labourer with respondent No.2/Dot Ram.
1Whether the reporters of the local papers may be allowed to see the Judgment?
::: Downloaded on - 22/03/2021 19:55:52 :::HCHP 2He died on 26.8.2007 during the course of his employment at the work site of respondent No. 2 at RD 1820 Malana Phase-II, Tehsil .
Manali, District Kullu. Respondent No.2/Dot Ram was given the work contract by respondents No. 3 and 4. Age of the deceased at the time of accident was determined as 20 years. Income of the deceased at the time of his death was assessed at Rs. 75/-
per day. As per Section 4 Schedule IV of the Employees r to Compensation Act, factor of 224 was applied to work out the payable compensation. The claimants were accordingly held entitled to compensation of Rs. 2,52,000/- [224(factor)X1125(half salary of the deceased)] alongwith interest @ 12% per annum from the date it fell due till its payment. In the facts and circumstances of the case, the claimants were also held entitled to penalty to the extent of 50% on the compensation amount.
2(ii) Liability to pay the compensation amount of Rs. 2,52,000/- alongwith 12% interest per annum from the due date was fastened upon the appellant-Assurance company whereas liability to pay the penalty was upon respondent No. 2/Dot Ram/employer of the deceased.
3. Heard learned counsel for the parties.
3(i) The short contention of the appellant is that it is only liable to pay the compensation amount determined by the Employee's Compensation Commissioner and that the liability to ::: Downloaded on - 22/03/2021 19:55:52 :::HCHP 3 pay interest in view of the unambiguous terms of the policy executed between the appellant and the employer Dot .
Ram/respondent No. 2 cannot be foisted upon the Assurance Company.
3(ii) Learned counsel for the respondents by placing reliance upon following para of Ved Prakash Garg v. Premi Devi, reported in (1997) 8 SCC 1 submits that Assurance "19.
Company is bound to make good the claim for compensation alongwith interest:
As a result of the aforesaid discussion it must be held that the question posed for our consideration must be answered partly in the affirmative and partly in the negative. In other words the insurance company will be liable to meet the claim for compensation along with interest as imposed on the insured employer the Workmen's Commissioner under the Compensation Act on the conjoint operation of Section 3 and Section 4-A sub Section (3)(a) of the Compensation Act. So far as additional amount of compensation by way of penalty imposed on the insured employer by the Workmen's Commissioner under Section 4-A (3)(b) is concerned, however, the insurance company would not remain liable to reimburse the said claim and it would be the liability of the insured employer alone."
4. Observations.
4(i) Before venturing into the contentions raised by the parties, it will be appropriate to first refer to the provisions of Workmen's Compensation Policy executed between the employer and the appellant. This policy is Ex.R-1 and was valid from 21.2.2007 to 20.2.2008. The clause relevant for the purpose of ::: Downloaded on - 22/03/2021 19:55:52 :::HCHP 4 considering the point raised by the appellant is extracted hereinafter:
.
"Provided always that in the event of any changes in the law(s) or the substitution of other legislation thereof this policy shall remain in force but the liability of the Company shall be limited to such sum as the Company would have been liable to pay if the Law (s) had remained unaltered. Law(s):
1. The Workman's Compensation Act, 1923 and subsequent amendments of the said Act, prior to the date of the issue of Policy.
2. The Fatal Accidents Act, 1855.
It is hereby understood and agreed that the Workmen's Compensation (Amendment) Act of 1959 (8 of 1959, and 1962 (64 of 1962) and 1976 (65 of 1976) and 1984 (22 of 1984) and 1995 (30 of 1995) and 2000 (46 of 2000) and deemed to be added to the Laws set out in the Schedule to the Policy. Provided that the insurance granted hereunder is not extended to include:
(i) any interest and/or penalty imposed on the insured on account of his/her failure to comply with the requirements laid down under the W.C. Act, 1923 and
(ii) any compensation payable on account of occupational diseases listed in part 'C' of schedule III of the W.C. Act, 1923."
Relying upon the emphasized portion of the terms of policy (extracted above), learned counsel for the appellant contends that it is not liable to pay the interest awarded by the learned Employee's Compensation Commissioner as the policy specifically excludes the liability of payment of interest.
4(ii)(a) In Ved Prakash Garg's case supra the Hon'ble Apex Counsel was considering the question as to whether the insurance coverage as available to the insured employers-owners ::: Downloaded on - 22/03/2021 19:55:52 :::HCHP 5 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 4-A(3) of the Compensation Act. The precise question framed therein runs as under:
"Where an employee receives a personal injury in a motor accident arising out of and in the course of his employment while working on the motor vehicle of the employer, whether the insurance company, which has insured the employer-owner of the vehicle against third party accident claims under Motor Vehicles Act, 1988 (hereinafter referred to as 'the Motor Vehicles Act') and against claims for compensation arising out of proceedings under the Workmen's Compensation Act, 1923 (hereinafter referred to as 'the Compensation Act') in connection with such motor accidents, is liable to meet the awards of Workmen's Commissioner imposing penalty and interest against the insured employer under Section 4A(3) of the Compensation Act."
4(ii)(b) Judgment in Ved Prakash Garg's case supra as well as the judgment in L.R. Ferro Alloys Ltd. vs. Mahavir Mahto, reported in (2002) 9 SCC 450 came up for consideration before the Apex Court in New India Assurance Co. Ltd. Vs. Harshadbhai Amrutbhai Modhiya, (2006) 5 SCC 192.
The question involved in Harshadbhai's case was whether interest was payable by an insurer while indemnifying the insured the amount of compensation awarded against him under the Workmen's Compensation Act. The policy involved ::: Downloaded on - 22/03/2021 19:55:52 :::HCHP 6 therein contained a proviso that "the insurance granted is not extended to include any interest and/or penalty imposed on the .
insured on account of his/her failure to comply with the requirements laid down under the WC Act." While answering the question the judgment passed in Ved Prakash Garg was also noticed. It was observed that in Ved Prakash Garg's case it was held 'in terms of the contract of insurance entered into by and between the employer and the insurer under the provisions of the Motor Vehicles Act, 1988 which would also apply in a given case to the claim under the provisions of the Workmen's Compensation Act, the insurer would also be liable for payment of interest.' The court also took note of the judgment rendered in LR. Ferro Aloys Ltd. Supra wherein it was observed that if the amount of compensation is not deposited within a period of one month, then the insurance company would be liable to reimburse the owner the amount of compensation with interest but not the penalty. Taking note of the above judgments, the Apex Court in Harshadbhai's case held as under:
"13. Section 12 of the Act provides for the mode and manner of payment of compensation by a principal employer and/or his contractor. Section 17 of the Act nullifies contracting out in the following terms:
"17.Contracting out.- Any contract or agreement whether made before or after the commencement of this Act, whereby a workman relinquishes any right of compensation from the employer for personal injury arising out of or in the course of the employment, shall be null and ::: Downloaded on - 22/03/2021 19:55:52 :::HCHP 7 void in so far as it purports to remove or reduce the liability of any person to pay compensation under this Act."
.
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.
19. As indicated hereinbefore, a contract of insurance is governed by the provisions of 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 for their own volition. The Act does not contain a provision like Section 147 of the Motor Vehicles Act. Where a statute does not provide for a compulsory insurance or the extent thereof, it will bear repetition to state that the parties are free to choose their own terms of contract. In that view of the matter, contracting out, so far as reimbursement of amount of interest is concerned, in our opinion, is not prohibited by a statute."::: Downloaded on - 22/03/2021 19:55:52 :::HCHP 8
Hon'ble Justice P.K. Balasurbramanayan while concurring and supplementing the above judgment of Hon'ble .
Justice S.B. Sinha also held as under:
"24. Section 17 of the Workmen's Compensation Act voids only a contract or agreement whereby a workman relinquishes any right of compensation from the employer for personal injury arising out of or in the course of the employment and insofar as it purports to remove or reduce the liability of any person to pay compensation under the Act. As my learned brother has noticed, in the Workmen's Compensation Act, there are no provisions corresponding to those in the Motor Vehicles Act, insisting on the insurer covering the entire liability arising out of an award towards compensation to a third party arising out of a motor accident. It is not brought to our notice that there is any other law enacted which stands in the way of an insurance company and the insured entering into a contract confining the obligation of the insurance company to indemnify to a particular head or to a particular amount when it relates to a claim for compensation to a third party arising under the Workmen's Compensation Act. In this situation, the obligation of the insurance company clearly stands limited and the relevant proviso providing for exclusion of liability for interest or penalty has to be given effect to. Unlike the scheme of the Motor Vehicles Act the Workmen's Compensation Act, does not confer a right on the claimant for compensation under that Act to claim the payment of compensation in its entirety from the insurer himself. The entitlement of the claimant under the Workmen's Compensation Act is to claim the compensation from the employer. As between the employer and the insurer, the rights and obligations would depend upon the terms of the insurance contract. Construing the contract involved here it is clear that the insurer has specifically excluded any liability for interest or penalty under the Workmen's Compensation Act and confined its liability to indemnify the employer only against the amount of compensation ordered to be paid under the Workmen's Compensation Act. The High Court was, therefore, not correct in holding that the appellant ::: Downloaded on - 22/03/2021 19:55:52 :::HCHP 9 insurance company, is also liable to pay the interest on the amount of compensation awarded by the Commissioner. The workman has to recover it from the .
employer."
4(ii)(c) It has thus been clearly held in Harshadbhai's case that the judgment rendered in Ved Parkash Garg's case was in context of the liability of the insurance company in respect of a contract of Insurance under the Motor Vehicles Act, which would also apply in a given case to a claim under Workman's Compensation Act. The Apex Court has clearly held in Harshadbhai's case supra that the Employee's Compensation Act does not contain a provision like Section 147 of the Motor Vehicles Act. Employee's Compensation Act does not provide for compulsory compensation. Therefore, the contracting parties are free to choose their own terms of the contract. Instant also is not a case where an accident had occurred by use of a motor vehicle governed by provision of Motor Vehicles Act. The terms of the insurance policy involved in the case (extracted earlier) are not much different to the terms of the policy interpreted by the Apex Court in Harshadbhai's case. The appellant- Assurance company has clearly contracted out any liability to pay interest on account of employer's failure to comply with the requirement under the Worksmen's/Employee's Compensation Act. The insurance policy is not in dispute. Its terms are not in dispute. In light of the law ::: Downloaded on - 22/03/2021 19:55:52 :::HCHP 10 laid down by Hon'ble Apex Court, the contention of the appellant-Assurance company that it is not liable to pay interest .
upon the compensation amount awarded by the Employees Compensation Commissioner, is justified. Learned Counsel for the respondent has cited various authorities to show that in many cases insurance companies have been fastened upon the liability to pay the interest on the compensation amount. Suffice to note that each case under the Employee's Compensation Act has to be determined in terms of the insurance policy executed between the contracting parties. In the instant case there is no dispute that the contracting parties had excluded foisting the liability for paying interest upon the insurance company.
Accordingly, I find merit in the appeal and the same is allowed.
Impugned judgment passed by Employee's Compensation Commissioner, to the extent it fastens the liability to pay interest on the compensation amount upon the appellant-Assurance Company, is quashed and set aside. It is ordered that the liability to pay the interest awarded by learned Employee's Compensation Commissioner shall be borne by employer/respondent No. 2/Dot Ram. Pending application(s), if any, shall also disposed of.
Jyotsna Rewal Dua Judge 22nd March, 2021 (vs) ::: Downloaded on - 22/03/2021 19:55:52 :::HCHP